WATANIYA PALESTINE MOBILE TELECOMMUNICATIONS PUBLIC SHAREHOLDING COMPANY

Transcription

1 Public Offer for Subscription of Shares in Palestine WATANIYA PALESTINE MOBILE TELECOMMUNICATIONS PUBLIC SHAREHOLDING COMPANY Initial Public Offer of 38,700,000 shares representing 15% of the authorised share capital of Wataniya Palestine Mobile Telecommunications Public Shareholding Company at an Offer Price of US$1.30 per Share Sole Global Coordinator and Sole Bookrunner HSBC Bank Middle East Limited Regional Coordinator Al-Arabi Investment Group (a wholly-owned subsidiary of Arab Bank plc) Receiving Banks HSBC Bank Middle East Limited Arab Bank plc Bank of Palestine Palestine Commercial Bank Qatar National Bank Palestine Islamic Bank Quds Bank

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3 IMPORTANT NOTICE TO INVESTORS Public Offer for Subscription of Shares in Palestine in accordance with the Palestine Securities Law No. (12) of 2004 and its regulations and instructions Wataniya Palestine Mobile Telecommunications Public Shareholding Company Registered as a public shareholding company with the Controller of Companies in Palestine under No. ( ) on 25 October 2010 with an authorised share capital of 258 million (258,000,000) Shares of US$1.00 each Subscription Period From 7 November 2010 until 2 December 2010 (inclusive) This Prospectus is issued in connection with the initial public offering of 38.7 million (38,700,000) Shares each at a nominal value of US$1.00 per Share at the Offer Price of US$1.30 per Share, representing 15% of the total authorised share capital of the Company amounting to an aggregate nominal value of US$258 million (US$258,000,000). The Founders have subscribed for 85% of the total authorised share capital of the Company (representing million (219,300,000) Shares and US$219.3 million (US$219,300,000) in aggregate nominal value) in the Offer and each Founder has fully paid the nominal value of each of the Shares it has subscribed for. The Founders had originally subscribed for US$170 million (US$170,000,000) in equity. In addition, they had also provided shareholder loans equivalent to US$49.3 million (US$49,300,000) (until the conversion of these shareholder loans prior to the Offering). Approval of the Competent Authorities The Capital Market Authority in Palestine (the PCMA ) has approved the Offer and an Arabic version of this Prospectus, the Supplement and the Subscription Form in accordance with the provisions of the Securities Law No. (12) of 2004 (the Securities Law ) under Decision No. (CMA/DG/130/2010) on 28 October The Controller of Companies in the Ministry of National Economy of the Palestinian National Authority approved the incorporation of the Company as a public shareholding company under number ( ) on 25 October In accordance with the Decision of the PCMA approving this Prospectus, the effective date of this Prospectus is 29 October Statement of Responsibility This Prospectus has been prepared so as to provide the necessary information to enable prospective investors to decide whether or not to subscribe for Shares pursuant to the Offer subject to the terms and conditions described in this Prospectus, the Subscription Form and the Supplement to this Prospectus, which includes the Company s Memorandum of Incorporation and Articles of Association. Prospective investors should review the contents of this Prospectus, the Supplement and the Subscription Form in their entirety. An application for subscription for Shares requires completing a Subscription Form and any prospective investor undertakes to accept the provisions of the Company s Memorandum of Incorporation and Articles of Association. The text of the Memorandum of Incorporation and Articles of Association of the Company is set out in full as a Supplement to this Prospectus. The Company and each member of the Founders Committee of the Company whose name is set out on page 41 of this Prospectus, accepts responsibility for the contents of this Prospectus. The Company and each member of the Founders Committee confirms that, as at the date of this Prospectus, to the best of their knowledge and belief and having made reasonable inquiries, the information contained in this Prospectus is in all material respects in accordance with the facts and does not omit anything likely to affect the import of such information in any material respect. Each prospective investor should carefully review the risks associated with subscribing for Shares in the Company, which are set out in Part IV of this Prospectus entitled Risk Factors. This Prospectus does not contain any legal, tax or investment advice. If you are in any doubt as to the action you should take or the contents of this Prospectus, the Supplement or the Subscription Form, you should immediately consult appropriate professional advisers regarding the acquisition, holding, or Disposal of Shares. 2

4 No person receiving a copy of this Prospectus and/or a Subscription Form in any territory other than Palestine may treat the same as constituting an invitation or offer to subscribe for Shares, nor should such person in any event use a Subscription Form, unless such invitation or offer could lawfully be made without the fulfilment of or compliance with any registration or other legal or regulatory requirement in the relevant territory. It is the responsibility of any person outside Palestine receiving a copy of this Prospectus and/or a Subscription Form wishing to subscribe for Shares to satisfy themselves as to full observance of the laws of the relevant territory in connection therewith. Any subscription for Shares is subject to the provisions of the Securities Law and Companies Law, its amendments and the procedures set out in this Prospectus. The Founders reserve the right to reject any application that does not conform to these procedures, in their absolute discretion. The PCMA bears no responsibility for the omission of any information in this Prospectus that is considered to be material by any investor. Moreover, the PCMA bears no responsibility for the inclusion of any information that is false or inaccurate. The PCMA does not express any view as to compliance by this Prospectus with foreign securities laws or regulations and bears no responsibility for the information contained in this Prospectus relating to foreign securities laws or regulations. Such responsibility shall rest with the Company. The Company and its advisers listed on pages 91 to 92 of this Prospectus take no responsibility for the English translation of the Prospectus, the Supplement or the Subscription Form and make no representation or guarantee that the English translation of these documents are an accurate translation and identical to the original documents in the Arabic language, which is the official and final version of the documents for distribution to prospective investors. The English language versions of the aforementioned documents are representative of the Arabic language documents in all material respects. Overseas Securities Laws and Regulations The distribution of this Prospectus and the Offer of Shares are restricted by law in certain jurisdictions, and this Prospectus does not constitute, and may not be used in connection with, any offer or solicitation in any such jurisdiction or to any person to whom it is unlawful to make such offer or solicitation. Other than in Palestine, no action has been or will be taken in any jurisdiction that would permit a public offering of the Shares or possession or distribution of a Prospectus in any jurisdiction where action for that purpose would be required. Persons into whose possession this Prospectus may come are required to inform themselves about and to observe the restrictions contained in this Prospectus. Neither the Company nor the Receiving Banks accept any responsibility for any violation by any person, whether or not it is a prospective investor in the Company s Shares, of any of these restrictions. For further details of legal and regulatory issues affecting the Offer, please see Part V of this Prospectus. The Shares will not, for the time being, be listed in any securities market other than the PEX. Statistical Data and Other Information The purpose of this Prospectus, the Supplement and the Subscription Form is to provide prospective investors with the necessary information to assist them in making an informed decision whether to subscribe for Shares pursuant to the terms and conditions contained in this Prospectus, the Supplement and the Subscription Form. Prospective investors should exclusively rely on the information contained in this Prospectus. Neither the Company nor the Receiving Banks have authorised anyone to provide prospective investors with information other than that contained in this Prospectus, the Supplement and the Subscription Form. The Company and the Receiving Banks make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Prospectus, the Supplement and the Subscription Form and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Company and the Receiving Banks or their affiliates or advisers. The information contained in this Prospectus, the Supplement and the Subscription Form is accurate only as at the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any subscription of Shares. Prospective investors should, prior to subscribing for Shares, ensure that they have read the entire contents of this Prospectus, the Supplement and the Subscription Form. Subscription for Shares shall confirm an investor s acceptance of the terms of the Memorandum of Incorporation and the Articles of Association of the Company. 3

5 This Prospectus includes statistical data and projections. The Company and Receiving Banks believe that the statistical data and projections included in this Prospectus may help prospective investors understand the major trends in the telecommunications industry and the parameters of the markets in which the Company operates. However, neither the Company nor the Receiving Banks have independently verified these figures. Prospective investors should not place undue reliance on the statistical data included in this Prospectus. Similarly, third-party projections included in this Prospectus are subject to significant assumptions and uncertainties that could cause actual data to differ materially from the projected figures. No assurances can be given that the estimated figures will be achieved, and prospective investors should not place undue reliance on the projections included in this Prospectus. In particular, prospective investors should not interpret any financial information or estimates as a promise of the performance of the Company. The Founders cannot guarantee the performance or success of the Company. Forward Looking Statements This Prospectus includes forward-looking statements. The words anticipate, believe, expect, plan, intend, estimate, project, will, would, may, could and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact included in this Prospectus, including, without limitation, those regarding the Company s financial position, business strategy, management plans, and objectives for future operations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Company s actual results, performance or achievements, or industry results, to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company expects to operate in the future. Important factors that could cause the Company s actual results, performance, or achievements to differ materially from those in the forward-looking statements include, among other factors referenced in this Prospectus, changes in the economy, changes in the competitive landscape, changes in laws, regulations and tax rates, changes in the Company s ability to maintain investment costs and expenses within expectations, and changes in the Company s ability to attract and retain well-trained and experienced managers to help it achieve its results. 4

6 TABLE OF CONTENTS PART I PROSPECTUS SUMMARY... 8 PART II PALESTINIAN TELECOMMUNICATIONS MARKET OVERVIEW PART III INFORMATION ON WATANIYA MOBILE COMPANY OVERVIEW WATANIYA MOBILE S KEY STRENGTHS COMPANY STRATEGY SUBSCRIBERS TARIFFS AND ARPU PRODUCTS AND SERVICES SALES AND DISTRIBUTION NETWORK SPECTRUM MARKETING AND BRAND RECOGNITION BILLING, COLLECTION AND CUSTOMER MANAGEMENT FRAUD PREVENTION BUSINESS CONTINUITY AND DISASTER RECOVERY SYSTEM COMPETITION LICENCE WATANIYA MOBILE SENIOR MANAGEMENT THE OFFER USE OF PROCEEDS PART IV RISK FACTORS PART V OVERSEAS OFFERING RESTRICTIONS PART VI ADDITIONAL INFORMATION PART VII FINANCIAL INFORMATION PART VIII DEFINITIONS AND GLOSSARY SUPPLEMENT: MEMORANDUM OF INCORPORATION AND ARTICLES OF ASSOCIATION OF THE COMPANY... S-1 Page 5

7 Terms of the Offer OFFER STATISTICS AND EXPECTED TIMETABLE The following is a summary of the key terms of the Offer: Company... Wataniya Palestine Mobile Telecommunications Public Shareholding Company. Authorised Share Capital... Offer Price... Capital subscribed for by Founders million (258,000,000) Shares with an aggregate nominal value of US$258 million (US$258,000,000). US$1.30 per Share (par value of US$1.00 per Share). US$219.3 million (US$219,300,000) representing in aggregate 85% of the Company s authorised share capital. The Founders have subscribed for these shares and paid the nominal value in full. Shares available for public subscription million (38,700,000) Shares representing in aggregate 15% of the Company s authorised share capital. Minimum Subscription... Size of the Offer... Additional Offering... Allotment policy... Eligibility for Subscription... Lead Receiving Bank... Subscription Form Shares per investor at the Offer Price of US$1.30 per Share. 15% of the authorised share capital of the Company is being offered in the form of new Shares to be issued by the Company. TheFounders are under an obligation to offer 15% of the Shares in the future with the goal of raising the public s Shares to 30% in accordance with the Licence obligations issued to the Company by the MTIT and in accordance with the approval of the Minister of National Economy and the approval that was issued by the Minister of Telecommunications with this regard. The Founders will ensure that any Shares offered by them will not be offered at a price per share below the Offer Price. Any such offer will be subject to market conditions and will seek to avoid any offer that will have a materially adversely affect on the market price of the Shares. In the event of over-subscription of offered Shares, the Company and/or the Receiving Banks will apply a proportionate allotment policy for all investors to allocate the available Shares on a prorata basis (in accordance with the Companies Law and the Securities Issuance Instructions applicable in Palestine). The Company and/or the Receiving Banks shall refund all amounts paid on un-allotted shares. The Offer is open to Palestinian and foreign nationals. However, the Offer is not a retail offer in any jurisdiction other than Palestine. Arab Bank plc. During the Offer Period, any investor may apply for Shares by completing the Subscription Form and complying with the instructions set out in the Subscription Form and this Prospectus. The Subscription Form should be returned by applicants to a branch of any of the Receiving Banks in Palestine. 6

8 Offer Timetable Subscription Starting Date... 7November Subscription Closing Date... 2December Allotment and Refund of Oversubscription Fund... Date of Founding General Assembly First Meeting... Date of Founding General Assembly Second Meeting (If quorum not achieved in first meeting)... Listing of the Shares on the Palestine Exchange... Within 30 days following the Closing Date. Within 2 months following the Closing Date. One week following the date of the first (adjourned) Founding General Assembly. Within 30 days following the Closing Date. 7

9 PART I PROSPECTUS SUMMARY This summary must be read as an introduction to this Prospectus and any decision to subscribe for Shares should be based on a consideration of the Prospectus, the Supplement and the Subscription Form as a whole, including Part IV entitled Risk Factors. Introduction Wataniya Mobile is the second mobile telecommunications company to have been licensed in Palestine and aims to bring the latest mobile technologies to Palestinian consumers. Wataniya Mobile successfully launched its operations on 1 November of 2009, three years after winning a competitive bid for its Licence. Wataniya Mobile s Licence authorises the Company to build and operate a GSM telecommunications network and provide public mobile voice and data telecommunications services in the West Bank and Gaza. It also gives the Company the right to establish and operate a 3G network and to provide international telecommunication services through its own international gateway. Wataniya Mobile s network currently covers 95% of the Palestinian population in the West Bank. The Palestinian telecommunications market presents attractive fundamentals due to its growing population, which is young and highly literate, low Mobile Penetration Rate and an appealing market structure characterised by two market players with Wataniya Mobile being the second and dynamic new entrant. Palestine s demographics present Wataniya Mobile with a strong growth opportunity. As at 31 December 2009, the proportion of the population under 19 years of age, at 52%, was the highest in the Middle East. Palestine also has the highest adult literacy rate in the Arab Middle East and North Africa ( MENA ). Palestine s population of 3.9 million is expected to continue to grow at a healthy rate. There is also considerable scope for increase in Mobile Penetration Rate. In comparison with other countries and territories in the region, Palestine has low Mobile Penetration Rates. Wataniya Mobile s total subscriber figures reached 110,835 subscribers as at 31 December 2009, within just six weeks of launching its operations in November In the same period, Wataniya Mobile generated revenues of US$2,074,951. By 30 September 2010, Wataniya Mobile s total subscriber figures reached 302,404 subscribers, representing a market share in the West Bank of approximately 19%. In the nine month period to 30 September 2010, Wataniya Mobile generated revenues of US$24,702,793(Q3 figures in this Prospectus are unaudited interim figures), with revenues growing by 26% from US$9,149,532 in Q to US$11,547,976 in Q (unaudited interim figures). Wataniya Mobile s management estimates that overall Mobile Penetration Rate in Palestine was 49% as at 31 December Key Strengths Wataniya Mobile s management believes that the Company has certain advantages which will enable it to effectively compete in the Palestinian telecommunications market. These key strengths include the following: Wataniya Mobile has a high growth opportunity. The Mobile Penetration Rate in Palestine is currently low at 49% as at 31 December 2009, while population growth rates are relatively high. Wataniya Mobile is the first new entrant into the buoyant Palestinian telecommunications market. The Palestinian telecommunications market has recently been liberalised which presents the Company, as the new entrant, with the potential to tap into growth areas that were not previously targeted by the existing monopoly telecommunications provider. Wataniya Mobile benefits from the strong support of its Shareholders, who have relevant experience both internationally and locally. Wataniya Mobile leverages existing relationships established by its Shareholders, PIF, a local investment fund that operates strategic business in Palestine, and Qtel, an international telecommunications operator. Qtel, which is listed on the Qatar Exchange, holds its interest in Wataniya Mobile through a chain of subsidiary companies, which includes NMTC. NMTC is a leading international telecommunications operator in its own right and is listed on the Kuwait Stock Exchange. 8

10 Wataniya Mobile has a strong management team. Wataniya Mobile s senior management team have previously launched mobile telecommunications operations in other Middle Eastern countries and emerging markets. Wataniya Mobile has a strong and recognisable brand. Wataniya Mobile has differentiated itself from the incumbent mobile telecommunications provider in Palestine, being seen as the fresh and innovative alternative, a clear benefit of being the newcomer in a previous monopoly. Wataniya Mobile operates an advanced network. The Company operates a network which was designed and built as a turnkey project by Ericsson to a specification particular to the Palestinian market using the latest possible technology. Wataniya Mobile is able to offer innovative products and tariffs as a result of its billing system. Wataniya Mobile has installed an advanced converged billing system offering real time billing which allows the Company to offer innovative and tailored billing solutions to the Palestinian market. Wataniya Mobile has an extensive and targeted distribution network. Wataniya Mobile distributes its products through direct and indirect sales channels that provide it with a wide potential customer base. Strategies The Company s goal is to become the telecommunications provider of choice in Palestine. In order to accomplish this goal, the Company has devised the following strategies: Maximise market share by emphasising competitive strengths. Wataniya Mobile seeks to increase its market share by offering its customers market-leading telecommunications services. Continue to develop the Wataniya Mobile network. Wataniya Mobile will continually seek to maintain its technological edge by making investments in network upgrades and other infrastructure upgrades as necessary. Continue to increase brand awareness and build brand loyalty. Wataniya Mobile will continue to reinforce the image of its brand as one that is associated with youthfulness, innovation and vitality. Increase postpaid subscribers. The Company s sales team will focus on building a larger subscriber base of postpaid customers. Expand distribution network. Wataniya Mobile will seek to establish more distribution centres in the future and will also expand its indirect distribution network. Provide market leading customer care. Wataniya Mobile will focus on providing top of the market customer care. Invest in customer loyalty and retention programs. Wataniya Mobile will invest in customer loyalty and retention programs that will ensure that the customer s service requirements are always met quickly and reliably. 9

11 Ownership Structure The following table sets forth the ownership structure of the Company immediately after the Offer with the remaining 15% of the Company being owned by public investors. Names Nationality Number of Shares* Percentage of share capital Wataniya International FZ LLC... UAE 125,001, % Palestine Investment Fund Public Shareholding Company... Palestine 94,298, % Grand Park Hotel Public Shareholding Company*... Palestine 1 nominal Sama Real Estate Private Shareholding Company*... Palestine 1 nominal Palestine Commercial Service Private Shareholding Company*... Palestine 1 nominal Al Rehyan Real Estate Investment Private Shareholding Company*... Palestine 1 nominal Ammar Real Estate Group Private Shareholding Company*... Palestine 1 nominal TOTAL ,300,000 85% * Subsidiary of PIF Summary of the Offer The Offer constitutes an offer of 38.7 million (38,700,000) new Shares in the Company of par value US$1.00 per Share at the Offer Price of $1.30 per Share. The Shares are available to certain investors, being those to whom it is lawful to offer such Shares. The Offer will be open for acceptance from 7 November to 2 December 2010 and subscriptions must be in writing by completion of a Subscription Form in full. Full details of the Offer and how to participate in it are set out on pages 29 to 32 of this Prospectus. Summary Financial Information In the six weeks from launch until 31 December 2009, Wataniya Mobile generated revenues of US$2,074,951. In the six month period to 30 June 2010, Wataniya Mobile generated revenues of US$13,154,817. In the nine month period to 30 September 2010, Wataniya Mobile generated revenues of US$24,702,793 (Q3 figures in this Prospectus are unaudited interim figures), with revenues growing by 26% from US$9,149,532 in Q to US$11,547,976 in Q (unaudited interim figures). For more detailed financial information relating to the Company, please see Part VII of this Prospectus. 10

12 PART II PALESTINIAN TELECOMMUNICATIONS MARKET OVERVIEW The Nature of the Palestinian Territory The Palestine Liberation Organisation ( PLO ) and Israel embarked upon peace negotiations in 1993 and together entered into a number of agreements. The first was a declaration of principles, which set the framework and agenda for a series of negotiations culminating in the Israeli-Palestinian Interim Agreement on the West Bank and Gaza Strip (the Oslo II Agreement ). The Oslo II Agreement separated the territory of the West Bank into three distinct administrative areas labelled A, B and C. In Area A, which constitutes approximately 18% of the land mass of the West Bank, the Palestinian National Authority ( PNA ) maintains full control. In area B, which constitutes approximately 21% of the land mass of the West Bank, the PNA controls civil affairs and the Israeli authorities control security. Area A and B are where the vast majority of the Palestinian population are situated, and constitute approximately 96% of the Palestinian population. In Area C, which constitutes approximately 61% of the land mass of the West Bank, but only 4% of the population of Palestine, the Israeli authorities maintain civil and security control. The Oslo II Agreement did not divide the Gaza Strip into separate administrative areas, however, and the whole of the Gaza strip was placed under the PNA s administration and deemed to be part of Area A. Moreover, under the disengagement plan adopted by the Israeli Government on 6 June 2004, Israeli forces unilaterally pulled out of Gaza after dismantling all settlement blocks. Israel maintains its control over international borders, however, despite the fact that the PNA has full control over Gaza. The following map shows the administrative division of Palestine into its respective three sectors. The Status of the Palestinian Telecommunication Sector after Oslo II Annex III of the Oslo II Agreement, entitled Civil Affairs, deals with the telecommunications sector in the Palestinian territories. Article 36, entitled Telecommunication, addresses the PNA s jurisdiction over the telecommunications sector. The PNA has the right to build and operate separate and independent communication systems and infrastructure which includes telecommunication networks, a television network and a radio network. The Oslo II Agreement, however, provided Israel with certain administrative rights over the Palestinian telecommunications market, which include the management and monitoring of the use of the radio frequency spectrum and the use of the geostationary satellite orbit. In addition to management rights, Israel retains certain administrative rights related to the planning, formulation and implementation of telecommunications policies in Area C of the West Bank. In particular, Israel has required the rollout of telecommunication equipment in Area C of the West Bank to be subject to approvals from the Israeli Civil Administration. 11

13 The management of these telecommunications matters is administered through a Joint Technical Committee ( JTC ), which consists of technical experts representing Israel and Palestine. The JTC has the capacity to address any issues arising there from, including the growing future needs of Palestine. The JTC must hold meetings on a regular basis to address all relevant problems, and as necessary in order to solve any urgent issues which may arise from time to time. Palestinian mobile market overview The Palestinian market currently has two licensed telecommunications operators and presents attractive fundamentals due to its growing population, which is young and highly literate, low Mobile Penetration Rate and an appealing market structure characterised by two market players with Wataniya Mobile being the second and dynamic new entrant. The population of Palestine stood at 3.9 million individuals as at 31 December 2009 and is expected to continue to grow at a healthy CAGR of 3.2% between 2009 and In addition, Palestine has attractive demographics. As at 31 December 2009, approximately 52% of the population was under the age of 19, which is the highest proportion in the Middle East region. Palestine also has one of the highest literacy rates in the MENA region with an adult literacy rate of 93%. Despite a rapid increase in Mobile Penetration Rates, Palestine s Mobile Penetration Rate remained low at only 49% in 2009 and provides a high growth opportunity. This currently constitutes one of the lowest Mobile Penetration Rates among other regional and emerging markets. For example, Jordan s Mobile Penetration Rate was 101% in Population of Palestine The population of Palestine was approximately 3.9 million as at 31 December 2009 and is estimated to continue to grow at a CAGR of 3.2% between 2009 and The size of the mobile telecommunications market in terms of number of subscribers is primarily driven by population size, and the growth in population and Mobile Penetration Rates. Expected growth in the Palestinian population over the short to medium term is therefore an attractive feature of the telecommunications market. Demographics Palestine has attractive demographics for the mobile telecommunications industry. As at 31 December 2009, approximately 52% of the population of Palestine was under the age of 19, which is the highest proportion in the Middle East region. The youth oriented demographics of the market represent a significant growth opportunity and could drive significant increases in Mobile Penetration Rates in the short to medium term. As the population ages and enters the work force, mobile usage is expected to increase. 12

14 Palestinian population demographics (2009) % % % % % % % 2.8% 3.9% 4.8% 29 years old = 69% 19 years old = 52% % % % % % % % % 0% 2% 4% 6% 8% 10% 12% 14% 16% Source: US Census Bureau % Population under 19 years of age for regional countries (2009) 60% 50% 52% 49% 48% 47% 47% 40% 43% 43% 42% 38% 36% 36% 35% 33% 33% 32% 30% 26% 20% 10% 0% Palestine Iraq Syria Jordan Saudi Egypt Oman Libya Morocco Turkey Algeria Bahrain Lebanon Iran Tunisia UAE Arabia Source: US Census Bureau Palestine also had the highest literacy rate in MENA as at 31 December 2009, achieving a 93% adult literacy rate. Literacy rates in MENA (2009) 100% 90% 80% 70% 93% 93% 90% 89% 89% 87% 85% 85% 84% 83% 78% 75% 74% 72% 60% 56% 50% 40% 30% 20% 10% 0% Palestine Jordan UAE Bahrain Turkey Libya Iran Saudi Oman Syria Tunisia Algeria Iraq Egypt Morocco Arabia Source: United Nations, 2009 World Almanac and the Economist 13

15 Mobile Penetration Rates Palestine has enjoyed a rapid increase in Mobile Penetration Rates in recent years, with penetration more than trebling from 16% in 2005 to 49% in However despite this, Palestine s overall Mobile Penetration Rate remains low in comparison to other regional and emerging markets. In 2009, Palestine s Mobile Penetration Rate was at the lower end of the range for regional and emerging markets, thus presenting significant growth potential. Mobile penetration rates in Palestine 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 49% 34% 27% 23% 16% Source: Paltel annual report and Palestinian Central Bureau of Statistics Mobile penetration in emerging markets (2009) 220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 196% 159% 131% 129% 122% 112% 101% 93% 80% 78% 72% 68% 59% 49% Bahrain Qatar Israel KSA Oman Kuwait Jordan Tunisia Morocco Algeria Egypt Iraq Lebanon Palestine Source: BofAML Wireless Matrix, Paltel annual report, Qtel and Zain Group reporting. Competitive landscape Palestine s telecommunications industry is primarily a two player market consisting of: Jawwal is the incumbent mobile operator in Palestine. Jawwal launched its services in 1999 and is a wholly owned subsidiary of the Paltel Group, which is the incumbent fixed line operator in Palestine. Wataniya Mobile the second Palestinian mobile telecommunications operator, which launched services in November of Wataniya Mobile s entrance into a previously monopolistic market has increased competition and provided greater consumer choice. 14

16 Two player markets are inherently attractive due to potential for higher margins and strong growth enjoyed by new entrants. The market share development for comparable start-up mobile operators in the region is provided in the table below. Country of Market share after starting operations Name of the second licensee operation Year 1 Year 2 Year 3 Mobily... Saudi Arabia 20.1% 31.6% 42.0% Zain Bahrain... Bahrain 16.6% 25.2% 27.0% Nawras... Oman 18.3% 31.4% 40.7% Du... UAE 18.8% 25.3% 31.0% Source: Publicly available information from the above companies. In addition to Jawwal and Wataniya Mobile, unlicensed Israeli mobile operators also offer products and services in Palestine. The PNA is considering the introduction of a third mobile license in 2013, although this will be contingent upon the availability of adequate spectrum, and could be subject to delays from Israeli authorities. 15

17 PART III INFORMATION ON WATANIYA MOBILE 1. COMPANY OVERVIEW Wataniya Mobile is the second mobile telecommunications company to have been licensed in Palestine and aims to bring the latest mobile technologies to Palestinian consumers. This development marks the first time that competition has been introduced to a major industry in Palestine. Wataniya Mobile successfully launched its operations on 1 November 2009, three years after winning a competitive bid for its Licence, having overcome several challenges during this period, and with extensive support from Qtel, PIF, the PNA, the MTIT, the Quartet and other international agencies. Wataniya Mobile s Licence authorises the Company to build and operate a GSM telecommunications network and provide public mobile voice and data telecommunications services in the West Bank and Gaza. It also gives the Company the right to establish and operate a 3G network and to provide international telecommunication services through its own international gateway. Following the allocation of frequencies, Wataniya Mobile launched commercial mobile telephony services within the West Bank in November Wataniya Mobile s network currently covers 95% of the Palestinian population in the West Bank. Wataniya Mobile s total subscriber figures reached 110,835 subscribers as at 31 December 2009 within just six weeks of launching its operations in November 2009, and has subsequently reached 302,404 subscribers as at 30 September This represents a mobile market share in the West Bank of approximately 19%. Wataniya Mobile s management estimates that overall Mobile Penetration Rate in Palestine was 49% as at 31 December In the six weeks from launch until 31 December 2009, Wataniya Mobile generated revenues of US$2,074,951. In the six month period to 30 June 2010, Wataniya Mobile generated revenues of US$13,154,817. In the nine month period to 30 September 2010, Wataniya Mobile generated revenues of US$24,702,793 with revenues growing by 26% from US$9,149,532 in Q to US$11,547,976 in Q (Q figures in this Prospectus are unaudited interim figures). For further details regarding financial information, please see Part VII of this Prospectus. Wataniya Mobile is licensed to operate in Gaza, but due to the existing political situation, Wataniya Mobile has not currently commenced operations there. It is the intention of Wataniya Mobile s management to launch in Gaza as soon as practicable. Further details of the Licence are set out on page 27 of this Prospectus. Wataniya Mobile Significant Events 16 September 2006 Wataniya Mobile wins Licence 6 August 2008 Spectrum assigned 31 December ,835 subscribers 30 June ,509 subscribers March 2007 Licence Agreement signed November 2009 Launch of operations of Wataniya Mobile 31 March ,649 subscribers 30 September ,404 subscribers Wataniya Mobile currently offers both prepaid and postpaid product lines. Dahab is a postpaid offering to enterprise customers and consumers and Kalimate is a prepaid offering to consumers. Kalimate accounted for approximately 90% of Wataniya Mobile subscribers and 82% of Wataniya Mobile s revenue as at 30 September Wataniya Mobile operates a network that was specifically designed and built by Ericsson to provide a high quality of service to its customers, after a careful study of the population and geography of the West Bank. 16

18 Wataniya Mobile launched commercial telecommunications services with a network consisting of 353 base stations, concentrated in the major cities of Ramallah, Hebron and Nablus. As at 30 September 2010, Wataniya Mobile s network had 400 base stations in the West Bank. In addition to its high quality network, Wataniya Mobile operates an advanced billing system developed specifically for Wataniya Mobile by CBOSS Oy, which interacts with and is customised to be compatible with, the Company s network. Wataniya Mobile s billing system enables a great degree of flexibility that allows the Company to offer innovative products and services to meet the needs of Wataniya Mobile s customers. Wataniya Mobile was assigned a total frequency of 4.8 MHz as a result of the frequency agreement signed between Israel and the PNA on 6 August Wataniya Mobile is in discussions with a view to acquiring the rights to additional frequency in the future. In the period up to the launch of the Company s services, Wataniya Mobile invested considerable management time and financial resources into building awareness of its brand and focusing on the unique strengths that Wataniya Mobile brings to the market. As a result of this, Wataniya Mobile had particularly strong brand recognition at launch and continues to invest strongly in its brand. Wataniya Mobile gains significant local and international advantages from its close relationships with its ultimate Shareholders, Qtel and PIF. The shareholding structure of Wataniya Mobile post-ipo is shown graphically below: * Note that the entire PIF shareholding in the Company is held directly by PIF with the exception of one share each held by the following PIF subsidiaries: (i) Grand Park Hotel Public Shareholding Company, (ii) Sama Real Estate Private Shareholding Company, (iii) Palestine Commercial Service Private Shareholding Company, (iv) Al Rehyan Real Estate Investment Private Shareholding Company, and (v) Ammar Real Estate Group Private Shareholding Company. Qtel is a leading operator in the Middle Eastern and Asian telecommunications markets and offers Wataniya Mobile access to international know-how acquired from operating telecommunications companies in sixteen other markets, including some in which the competitive position of Qtel s operating companies is similar to that of Wataniya Mobile (as well as its competitors). Wataniya Mobile can also benefit from access to Qtel s key relationships with suppliers, vendors and financing banks. As at 30 June 2010, Qtel had 66,597,000 subscribers across the 16 countries and territories in which it has telecommunications operations. Qtel is listed on the Qatar Exchange. As the above diagram shows, Qtel holds its interest in Wataniya Mobile through a chain of subsidiary companies, which includes NMTC. NMTC is a leading international telecommunications company in its own right and is listed on the Kuwait Stock Exchange. PIF is a Public Shareholding Company incorporated under the laws of the PNA and expressed by its constitutional documents to be owned by the Palestinian people. PIF aims to develop the Palestinian 17

19 economy through diversified strategic investments in vital economic sectors, such as telecommunications, energy, trade and industry, real estate, finance and small and medium enterprises. With strong presence in the Palestinian economy across multiple sectors, deep experience and knowledge of the local market and a strong business network inside and outside Palestine, PIF is able to offer the Company invaluable local support and deep local knowledge of the Palestinian market. 2. WATANIYA MOBILE S KEY STRENGTHS There are several aspects to Wataniya Mobile s Business that give it key advantages in the Palestinian telecommunications market including the following: Wataniya Mobile has a high growth opportunity. Palestine is currently experiencing relatively high population growth compared to other countries in the Middle East region and 52% of the Palestinian population is under 19 years of age. The Mobile Penetration Rate in Palestine was 49% as at 31 December 2009, which is considerably lower than in other regional countries and provides Wataniya Mobile with an opportunity to expand its subscriber base. Wataniya Mobile is the first new entrant into the buoyant Palestinian telecommunications market which was previously dominated by a monopoly provider. Newly liberalised markets are inherently attractive due to potential for higher margins and often provide significant potential to tap into growth areas that were not previously targeted by the existing monopoly telecommunications provider. Wataniya Mobile benefits from strong support, and international and local experience, provided by its ultimate Shareholders, Qtel and PIF. Wataniya Mobile leverages Qtel s existing relationships with suppliers, industry vendors and financing banks. Qtel also enhances Wataniya Mobile s ability to access global products, services, people and know-how and offers time, expertise and resources to Wataniya Mobile s management as and when needed. Wataniya Mobile benefits from PIF s local knowledge and its expertise in operating several key businesses in Palestine and its extensive connections throughout the West Bank and Gaza. Wataniya Mobile has a strong management team with a blend of international and local experience, including experience of managing new market entrants. Key members of Wataniya Mobile s senior management team have experience of launching mobile telecommunications operations in challenging Middle Eastern countries and other emerging markets. Wataniya Mobile has a strong and recognisable brand. Wataniya Mobile has successfully differentiated itself from the incumbent mobile telecommunications provider in Palestine, being seen as the fresh and innovative alternative, a clear benefit of being the newcomer in a previous monopoly. Wataniya Mobile operates an advanced network. The Company operates a network which was designed and built as a turnkey project by Ericsson to a specification particular to the Palestinian market using the latest possible technology. This allows Wataniya Mobile to grow its subscriber base whilst also allowing for high minutes usage, which enables Wataniya Mobile to be flexible in its marketing strategy and offer differentiated and more competitive products and tariffs as a result. Wataniya Mobile s ability to react to customer needs and innovative product offerings is largely a function of its high quality network. More information on Wataniya Mobile s network can be found on page 22 of this Prospectus. Wataniya Mobile is able to offer innovative products and tariffs as a result of its billing system. Wataniya Mobile has installed an advanced converged billing system offering real time billing which allows the Company to offer innovative and tailored billing solutions to the Palestinian market. More information on Wataniya Mobile s billing system can be found on pages 24 to 25 of this Prospectus. Wataniya Mobile has an extensive and targeted distribution network. Wataniya Mobile distributes its products through direct and indirect sales channels. Wataniya Mobile s direct sales channel is built around its operation of six owned shops in the West Bank that act as distribution centres. In addition, Wataniya Mobile has a direct sales force which focuses on sales to enterprise customers. With respect to its indirect sales channel, the Company distributes its products to over 60 preferred dealers across the West Bank, over 400 non-preferred dealers, and has over 4,500 points of sale (including gas stations and supermarkets) where Wataniya Mobile scratch cards, e-vouchers and other top up products can be obtained by its customers. 18

20 3. COMPANY STRATEGY The Company s vision is to be the telecommunications provider of choice in Palestine by pursuing the following strategies: Maximise market share by emphasising competitive strengths. Wataniya Mobile seeks to increase its market share principally by offering its customers attractive, innovative, affordable and high quality telecommunications services. Wataniya Mobile seeks to provide reliable and high quality network services to all Palestinians across the country by providing tailored products and services to meet their specific needs. Continue to develop the Wataniya Mobile network. Wataniya Mobile will continually seek to maintain its technological edge by making investments in network upgrades and other infrastructure upgrades as necessary. Continue to increase brand awareness and build brand loyalty including investing in corporate social responsibility programs aimed at enhancing the welfare of the Palestinian people. Wataniya Mobile will continue to reinforce the image of its brand as one that is associated with youthfulness, innovation and vitality and will continue to engage in widespread advertising campaigns which build even greater recognition of its brand. Wataniya Mobile will continue to support corporate social responsibility programs, both to give back to Palestinian communities and to build increased brand loyalty. Increase postpaid subscribers. The Company s sales team will focus on building a larger subscriber base of postpaid customers. Expand distribution network. While Wataniya Mobile currently has six distribution centres, it will seek to continue to establish more in the future. With respect to Wataniya Mobile s indirect distribution strategy, Wataniya Mobile will increase the number of these relationships. Provide market leading customer care. Wataniya Mobile focuses on four key elements of customer care: (i) quality of care, which emphasises high standards when interacting with the customer, (ii) availability, based on operating call centres that are open twenty-four hours a day, seven days a week, (iii) efficiency, which revolves around the provision and delivery of the latest technologies, and (iv) credibility, which focuses on ensuring that all means of customer care are equally effective, thereby reinforcing consistency. Invest in customer loyalty and retention programs. Wataniya Mobile will invest in customer loyalty and retention programs that will ensure that the customer s service requirements are always met quickly and reliably. By offering flexible, simple packages and offers to target the different segments of the Palestinian market, Wataniya Mobile intends to minimise churn. 4. SUBSCRIBERS The following table sets out the Company s performance in attracting new customers: Q Q Q Q Prepaid Subscribers , , , ,636 Postpaid Subscribers... 1,602 6, ,768 Total Subscribers , , , ,404 Total Market Share % 12.5% 16.7% 19.2% As the above table demonstrates, Wataniya Mobile s postpaid subscriber base has grown by over 18 times since the end of 2009, whilst, during the same period, the prepaid subscriber base has grown significantly by 150%. Total subscriber growth was approximately 173% during this period, while total market share grew by approximately 10% to approximately 19% according to Wataniya Mobile s estimates. The population of the West Bank is estimated at approximately 2.6 million people. However, there is a wider marketplace in the region, with nearly 9 million Palestinians living in diaspora across the Middle East region (including Palestine). Wataniya Mobile s management intends to leverage the large expatriate Palestinian community across the Middle East region, by offering competitive calls to and from the West Bank to capture a significant proportion of this large market. 19

21 5. TARIFFS AND ARPU Wataniya Mobile offers customers a simplified tariff structure, on the basis of per-second billing. The Company launched its services at a discount to its competitor s tariffs, in anticipation of a reactive tariff reduction by the incumbent operator during the first few months from Wataniya Mobile s launch. Wataniya Mobile s blended ARPU increased from US$6.6 in Q to US$11.2 in Q and the following table sets out in more detail Wataniya Mobile s ARPU numbers for its postpaid and prepaid customers. Further details on tariffs can be found in the Products and Services section below. (in US$) Q Q Q Q3 2010* Postpaid ARPU Prepaid ARPU Blended ARPU * Q figures are unaudited interim figures. 6. PRODUCTS AND SERVICES Wataniya Mobile offers high quality, innovative, and value for money products and services built around its advanced billing platform and network. The Company has developed flexible, competitive and simple to understand packages and offers which target all sectors of the Palestinian population. Currently, Wataniya Mobile offers two primary voice products, Kalimate and Dahab, and has the ability to offer hybrid products which it is currently developing. Kalimate is a prepaid product that comprised approximately 90% of Wataniya Mobile s subscriber base as at 30 September Kalimate prepaid scratch cards are offered in denominations of 15 NIS, 25 NIS, 50 NIS and 100 NIS. This product also offers certain free and pre-activated services, including call hold and call waiting, caller identification, conference calling and call forwarding services. The regular tariff applied to Kalimate product is 0.49 NIS per minute. However, Kalimate customers are able to opt in to Wataniya Mobile s Sawa service, which enables customers to choose up to six individuals whom they can call at reduced tariff rates. Dahab is Wataniya Mobile s postpaid product which comprised approximately 10% of Wataniya Mobile s subscriber base as of 30 September Dahab offers a certain number of pre-purchased minutes which can be used for calls to all Palestinian mobile or fixed lines at a flat rate in exchange for a certain fixed monthly fee. Currently, Wataniya Mobile s Dahab product offers two attractive billing structures one for individual customers and one for enterprises. Details of the Company s charges can be found at Wataniya Mobile currently also offers SMS services, which allow subscribers to send short text messages to other mobile users handsets. In addition to the prepaid and postpaid products, Wataniya Mobile currently offers the following value added services: MMS: allows subscribers to send pictures, text, and sound/voice in a single message. Voic enables subscribers to retrieve audio message recordings left by callers. There are no monthly or activation fees for voic service. Danden: enables customers to change the standard tone that callers hear to a special ring tone for an additional fee. Credit transfer: enables customers to transfer credit to the accounts of friends and family members. There are no registration or monthly fees for credit transfer services, but there is a 1 NIS transaction fee per credit transfer initiated by a customer. 20

22 Sawa: a service that enables customers to choose up to six favourite numbers that they can call at reduced tariff rates. This service is only applicable to Kalimate customers in exchange for a fixed monthly fee of 6 NIS. Location information: enables customers to display geographic information for certain coverage areas. This service is offered to all Wataniya Mobile customers for free. Push enables customers to access as it is received by a particular customer. Internet access: enables customers to access the world wide web from mobile devices. Wataniya Mobile allows its subscribers to use the voice and data networks of operators with whom it has entered into roaming agreements, and also allows customers of those operators to use Wataniya Mobile s network. Wataniya Mobile offers its subscribers the ability to roam on networks in ten Middle Eastern countries, including Jordan, Egypt, UAE, Qatar, Saudi Arabia, and Kuwait. Wataniya Mobile also currently has arrangements in place that allow its subscribers to roam in seventy other countries around the world. While Wataniya Mobile is currently developing new voice and non-voice products, the Company s strategy is not to be involved in the handset business as a distributor and Wataniya Mobile does not generally provide handsets to customers, except to corporate customers. More details about Wataniya Mobile s products and services can be found online at 7. SALES AND DISTRIBUTION The following chart provides a description of the overall sales and distribution strategy and model operated by Wataniya Mobile, and highlights Wataniya Mobile s two major distribution components, direct and retail sales: WPT Direct Enterprise Sales Retail Sales Government NGOs Private Sector WPT Service Centers Preferred Dealers Authorized Distributors Telecom Shops Non-traditional Channel Non-Preferred Dealers FMCG Retail Sales to enterprise customers are made through Wataniya Mobile s highly trained and specialised direct sales force which is located in regional offices across the West Bank. The direct sales force targets medium to large customers in the private sector, government and non-governmental organisations. The majority of sales to enterprise customers are postpaid products Wataniya Mobile s retail distribution channel consists of the following elements: a. six owned and operated sales and service centres located in major cities across the West Bank; b. a comprehensive network of over 60 preferred dealers who sell Wataniya Mobile s SIMs and airtime directly to retail customers (preferred dealers sell both prepaid and postpaid products); and c. authorised distributors who distribute Wataniya Mobile s SIMs and airtime directly to non-preferred dealers who in turn sell to retail customers. There are currently over 400 non-preferred dealers. The majority of these dealers are telecommunications shops and currently only sell prepaid products. Authorised distributors manage the distribution of Wataniya Mobile prepaid airtime products through 70 highly visible points of sale across the West Bank, including supermarkets, telecommunications shops and gas stations. With respect to the prepaid segment, Wataniya Mobile intends to maintain a tight control over activations, and thus uses the preferred dealer network as well as its own service centres, in order to directly control approximately 84% of prepaid line activations, while the other 16% are supplied through Wataniya Mobile s 21

23 authorised distributors. Wataniya Mobile s sales strategy also targets areas of the population which it believes are underserved by the incumbent mobile telecommunications operator, such as the residents of villages in the West Bank and has established points of sale in numerous locations in the West Bank. Postpaid products are distributed to individual consumers through Wataniya Mobile s own service centres and direct sales to customers, and the intention is to provide such products through preferred dealers in the future. 8. NETWORK Wataniya Mobile has built a new generation network, with core and radio subsystems provided by Ericsson. As at 30 September 2010 Wataniya Mobile s network covered 95% of the Palestinian population in the West Bank and 83% of the surface area of the West Bank, which exceed the coverage obligations that Wataniya Mobile is required to meet in its Licence. In order to maximise coverage for its subscribers, Wataniya Mobile has built its network in Areas A and B and intends also to position towers on the borders with Area C, thus ensuring that there is maximum coverage on all roads in the West Bank. Please see page 11 of this Prospectus for more information regarding the administrative division of Palestine into areas A, B and C. Wataniya Mobile s network comprises Base Transceiver Stations, each connected to a Base Station Controller, and in turn each co-ordinated by a Mobile Switching Centre ( MSC ), which routes the calls to the required destinations. Transmission facilities are used to link the multiple MSCs to each other. Wataniya Mobile s network enables its customers mobile phones to communicate with the Base Station Subsystem which comprises numerous base stations positioned all around the West Bank. Such base stations contain transmitters, transceivers and other equipment that communicate by radio signals with the subscribers handsets within the range of each base station. Wataniya Mobile has installed its base stations in accordance with regulatory and environmental requirements, with some base stations in rural locations, with the remainder mounted on rooftops in urban areas. Wataniya Mobile launched its commercial services with 353 base stations and will continue to increase the number of base stations as part of its overall build-out of its network. Wataniya Mobile, like the incumbent mobile telecommunications provider, supplements its own coverage with a roaming agreement with an Israeli operator in areas where Wataniya Mobile is unable to build its own towers. Wataniya Mobile has a management services contract with Ericsson for certain agreed aspects of the maintenance and operation of the network (see page 47 of this Prospectus for further details). In addition, Ericsson provides software maintenance. 9. SPECTRUM After the signing of the Licence on 14 March 2007, the PNA requested Israel to release the necessary frequency for use by Wataniya Mobile. The necessary frequency for the launch of Wataniya Mobile commercial services was assigned on 10 September 2009 and the Company launched its commercial services on 1 November MARKETING AND BRAND RECOGNITION Marketing Wataniya Mobile s marketing strategy has been developed based on the following marketing principles: (i) products, (ii) price, (iii) promotions and (iv) place. Products: Wataniya Mobile has introduced a variety of supporting technologies that enable the Company s subscribers to benefit from up to date products and services that meet their needs and expectations. Price: Wataniya Mobile offers per second billing, convergence and unified rates with a competitive offering base. Promotion: Wataniya Mobile uses the most effective communication media to inform the Company s customers about its services. Prior to launch, Wataniya Mobile implemented the Anta Alrawi advertising campaign using a variety of mediums, which tapped into Palestinian community values and encouraged potential customers to subscribe and begin communicating in their own words by using Wataniya Mobile products that were tailored to meet their needs. Place: Wataniya Mobile ensures that its products and services are easily available to the Company s customers wherever they are located in Palestine. 22

24 Key elements of Wataniya Mobile s advertising campaign since launch have included the following: In the first quarter of 2010, Wataniya Mobile conducted a road show targeted at influential groups in all Palestinian governorates across the West Bank, and met with governors, mayors and local chambers of commerce. Wataniya Mobile implemented a subscriber acquisition campaign that targeted a number of distinct audiences including universities, villages and refugee camps. Wataniya Mobile utilised a variety of media, including television, internet and radio advertisements to educate the market with its brand and message. In addition, Wataniya Mobile uses a combination of signage in high traffic prime locations, window displays and points of sales materials aimed at maximising visibility, including signage on its own brand shops. In addition, the Anta Alrawi advertising campaign broadcasts a unique message that encourages customers to share their experiences and their stories by communicating using tailored Wataniya Mobile products that are direct, simple and align with customer needs. The Anta Alrawi slogan supports the core values and strategic direction of Wataniya Mobile and directly translates to You are the Storyteller. The Anta Alrawi slogan captures the Palestinian tradition of storytelling and is equally relevant to the youth of Palestine, as well as individual customers and businesses. Brand Wataniya Mobile launched commercial operations under the Wataniya brand name, an Arabic word which means National in English. Wataniya Mobile significantly benefits from the Wataniya brand which enjoys widespread recognition throughout Palestine. Building on this, Wataniya Mobile developed its own brand values after focus group meetings that were held in different cities of the West Bank. As a result, Wataniya Mobile has attempted to reinforce the image of its brand as one that is associated with youthfulness, vitality, innovation and creativity. In addition, due to the Anta Alrawi advertising campaign, Wataniya Mobile s products are associated with Palestinian community values and the idea of sharing stories, which is a key brand message that Wataniya Mobile seeks to reiterate. Since launch, Wataniya Mobile s brand has quickly gained traction and prestige in the Palestinian market. A preliminary brand review was conducted by Wataniya Mobile in December 2009, six weeks after launch. This review generated certain key findings, including that: (i) the market acknowledged Wataniya Mobile as a leader in innovation and pricing, (ii) customer experience with Wataniya Mobile had been very positive, and (iii) customers identified Wataniya Mobile as a company that was particularly attractive to the youth market. Wataniya Mobile plans to conduct brand reviews twice a year going forward in order to track changes in the perception of its brand and to ensure that these initial positive traits associated with its brand continue to remain within the public consciousness. 23

25 In addition to Wataniya Mobile s own-brand shops, which provide the brand with greater visibility, 35 out of the total Company s preferred dealers have rebranded their own non-exclusive dealer stores in Wataniya Mobile s colours and shop fittings, an example of which appears below. This trend demonstrates the strong appeal and legitimacy that the Wataniya Mobile brand already enjoys in the market. As part of its brand campaign, Wataniya Mobile has used its corporate social responsibility ( CSR ) programme to augment its brand value and recognition by sponsoring a variety of sporting, educational and cultural events, particularly events that appeal to the younger population of Palestine. Some examples of Wataniya Mobile s CSR efforts include the Company s sponsorship of pop concerts in Palestine, the Palestinian Women s Football League and the annual Filistin Ashaba Literacy Awards throughout the West Bank. In addition to making a valuable contribution to Palestinian society, Wataniya Mobile s CSR activities have achieved the objective of raising national awareness of the Company s name and logo as indicated by a brand recognition survey conducted by Wataniya Mobile. 11. BILLING, COLLECTION AND CUSTOMER MANAGEMENT Billing and Collection The Company operates an advanced converged Intelligent Network (IN) billing system from CBOSS Oy which is fully integrated with the Company s network, which was designed and constructed by Ericsson. Being able to monitor and analyse information on a real time basis allows Wataniya Mobile s management to make quick and well informed decisions that provide it with a competitive advantage, enabling it to quickly launch targeted new products and promotions. Wataniya Mobile is capable of offering and managing prepaid services and postpaid services as well as hybrid products, due to its convergent billing system. The system also provides real time charging to subscribers for all services that are provided to roaming partners while roaming abroad. Customers can also manage their accounts, update personal information, transfer credit to other Wataniya Mobile subscribers, order bill itemisation and view their usage records through a web-based self care system, or via the 24 hour a day call centre offering personalised person to person service supplemented by an interactive voice response ( IVR ) system. Customers can pay their bills using a variety of methods, including payment online for prepaid customers only, through certain banks in Palestine or directly at customer care centres. Customer Management Wataniya Mobile s customer management service focuses on four key values: Quality high standards when interacting with customer, constant monitoring and training; Availability Call centres (open 24 hours-a-day, 7 days a week) and service centres in key cities across the country; 24

26 Efficiency first call resolution, latest technology; and Credibility consistency through all touch points. In terms of customer management availability, the Company houses its 24 hours-a-day contact centre in its headquarters, located in Ramallah. This centre is responsible for dealing with inbound queries such as re-charging prepaid phones, dealing with technical issues, billing, roaming, service activation and any other issues. Queries from corporate account holders are dealt with on a high priority basis, with such calls forwarded to a dedicated team. Wataniya Mobile s management ensures that the Company s employees are adequately trained and that its staff members follow standardised industry policies and procedures in settling all customer claims and complaints. This helps to minimise both customer complaints and consumer dissatisfaction. Wataniya Mobile has six service centres, with more service centres planned for The location of each of the six service centres is set out below. Wataniya Mobile s service centres focus on sales, activations, and customer services such as bill payments, activating value added services and SIM card changes. Regional offices focus predominantly on enterprise sales targeting government, non-governmental and private sector customers, as well as field maintenance and customer care. Customer management efforts have focused on customer segmentation, promoting self-service support in service centres and through the IVR system, as well as promoting e-services. Moreover, the call centre and service centres have become more pro-active in outbound calling and support, thus becoming customer retention tools as well as revenue generating lines. Wataniya Mobile has moved from a reactive to a proactive retention strategy as it now has significant customer usage history. Wataniya Mobile intends to have a special customer retention team to focus on retaining its high value customer base. 12. FRAUD PREVENTION Similar to any other telecommunications business, the Company can incur costs and revenue losses associated with the unauthorised use of its network. Wataniya Mobile currently has in place a fraud prevention policy and system that identifies any revenue leakages and areas that are susceptible to fraud. Wataniya Mobile s fraud prevention policy and system was implemented and is monitored by Qtel. Wataniya Mobile conducts tests to ensure that subscribers are charged the relevant tariff for any product or service prior to its launch. In addition, Wataniya Mobile conducts stock reconciliation which enables it to establish oversight of its inventory, and conducts network analysis to check if any discrepancies exist at 25

27 different network nodes. Through these measures, and others, Wataniya Mobile ensures that it does not suffer from leakage, unintended bonus airtime for subscribers, or other revenue losses. Wataniya Mobile operates in accordance with a revenue assurance maturity model. This model is intended to assess the maturity of business activities to deliver revenue assurance objectives in an organisation. The primary objective of the Revenue Assurance & Fraud Management ( RA&FM ) capability programme is to identify, minimise or eliminate revenue leakage. The Qtel group has a dual vendor strategy for RA & FM solutions. The first solution is being used by Qtel in Qatar, while the second solution is being implemented by Wataniya International in Kuwait and will be operational by Wataniya Mobile later in BUSINESS CONTINUITY AND DISASTER RECOVERY SYSTEM The business continuity and disaster recovery strategy for Wataniya Mobile includes detailed plans for providing redundancy of critical network components in consideration of possible failure events. The network architecture and topology are designed to minimise single points of failure and provide redundant equipment and alternative transmission paths to address potential failure of core network and critical transmission network nodes. Disaster recovery and business continuity considerations are taken into account in the design specifications and dimensioning of existing and future network and IT systems to ensure that required network capacity is available to address a disaster scenario. Every effort has been made to achieve a cost/benefit balance in the network design and implementation while providing a suitable level of risk mitigation. All hardware, software features, and mission critical hosted site locations have been scrutinised for security and reliability, and are constantly monitored to ensure adherence to best practice industry standards for network resilience. 14. COMPETITION Competition in the mobile telecommunications market in Palestine, as elsewhere, is dictated by pricing, quality of services, coverage, tariffs and promotions. The mobile telecommunications market in Palestine is currently a two operator market with respect to the licensed providers. Jawwal, which also offers prepaid and postpaid products, was the monopoly service provider for telecommunications services in Palestine (including Gaza) until Wataniya Mobile s commercial launch. Jawwal is a wholly owned subsidiary of the Paltel Group, which is listed on the Palestine Exchange, and which operates fixed line, mobile and internet businesses. According to the Paltel Group s second quarter report, as at 30 June 2010, Jawwal had a total of 2,071,551 subscribers. In addition to Jawwal, Wataniya Mobile competes with unlicensed Israeli operators who offer their SIM cards and scratch cards via dealers in the Palestinian market. Israeli providers are unable to openly advertise their products in the Palestinian market, are restricted to offering prepaid services and are not able to offer customer services to customers in Palestine. The MTIT has taken and continues to take actions to curb the availability of Israeli SIM cards within the West Bank and Gaza. On 28 April 2010 the MTIT issued a decision criminalising the sale of SIMs, scratch cards and other products of the Israeli unlicensed operators in the West Bank. There are currently no publicly available official statistics as to the number of Israeli SIMs in the Palestinian market. However, as at 30 September 2010, Wataniya Mobile s management estimates that Israeli operators have between 150,000 and 250,000 subscribers in Palestine. Currently in Palestine there is no system established for mobile number portability, although it is scheduled for introduction in This change in the regulatory structure of the telecommunications market is expected to have the effect of bolstering competition, in particular by making it easier for customers of Wataniya Mobile s competitor to switch over to Wataniya Mobile s services. In February 2010, the MTIT announced in its Telecom Policy Statement that it intends to offer a third licence for mobile telecommunications services in Palestine. The MTIT states that the third license will not be issued prior to The recipient of the third licence will also require the allocation of sufficient frequency in order to operate effectively. 26

28 15. LICENCE Wataniya Mobile s Licence authorises the Company to build and operate 2G and 3G networks and an international gateway in the West Bank and Gaza. The Licence has a fifteen year term and is renewable for a further term of five years provided that the Company pays a renewal fee in an amount that shall be determined in accordance with international best practices and appropriate benchmarking findings for similar licenses in comparable markets. The effective date of the Licence is 10 September 2009 and its term began from that date. The MTIT granted Wataniya Mobile a four year exclusivity period up to 10 September 2013 during which time no additional 2G or 3G licenses will be issued by the MTIT. The Licence grants Wataniya Mobile the right to install, operate and maintain facilities and equipment necessary for the provision of GSM, 2G and 3G services, including voice, data, fax, SMS and other value added services. The Licence is tied to certain service coverage targets which require Wataniya Mobile to achieve coverage of over 100% of the cities and 97% of the population of the West Bank and Gaza at the end of three years being November Wataniya Mobile was awarded the Licence on the basis of a total fee of 251,000,000 Jordanian Dinars, which amounts to approximately US$354,000,000, to be paid in three instalments. The first payment of US$140,000,000 was paid to the MTIT on 6 August Assuming, in each case that, the MTIT has fulfilled its obligations related to the assignment of each of the relevant frequencies (2G and 3G) and the Company is able to provide services in both the West Bank and Gaza, a second payment of US$80,000,000 must be paid to the MTIT once Wataniya Mobile has reached 700,000 subscribers, and a third and final payment of US$134,000,000 must be made to the MTIT once Wataniya Mobile has reached 1,000,000 subscribers. Due to circumstances outside the control of Wataniya Mobile and its management, the Company was unable to launch commercial services in accordance with the original timeline for such launch. As a result, the Company has entered into discussions with the MTIT for the purpose of obtaining a partial rebate of the first instalment of the Licence payment or, alternatively, to obtain a corresponding reduction in the remaining Licence payments. 16. WATANIYA MOBILE SENIOR MANAGEMENT Pending the appointment of a permanent Board of Directors, the Company s management is vested in the Founders Committee of Wataniya Mobile. The members of the Founders Committee are listed on page 41 of this Prospectus. Subsequent to the Offer, Wataniya Mobile will be required to have seven directors in accordance with its Articles of Association and the Company will convene a general assembly during which the new shareholders will collectively elect the requisite seven directors. The individuals listed below have previously served as members of the board of directors of Wataniya Palestine Mobile Telecommunications Limited and will be nominated to serve in such capacity by Qtel and PIF, in addition to the three other nominees. The sections below entitled Members of the Board and Senior Management contain brief descriptions of the qualifications and experience of the individuals who currently serve in key positions within the Company and who will continue to do so subsequent to the Offer. References below to Members of the Board or to an individual being a Director of the Company are a reference to that person being nominated to serve as a Director and Member of the Board subsequent to the Offer. Members of the Board Dr. Mohammad Mustafa, Chairman Dr. Mohammad Mustafa is the Chairman and Chief Executive Officer of PIF and the Economic Adviser to the President, Mahmoud Abbas. In addition to his role as Chairman of Wataniya Mobile, Dr. Mustafa serves as the Chairman of Amaar Real Estate Group and of the Palestine Commercial Services Company. Prior to joining PIF, Dr. Mustafa has held senior positions at the World Bank for more than fifteen years, where his work covered various countries and different sectors, including Private Sector Development, Energy and Industry, Infrastructure and ICT. He also served as Senior Adviser to the Saudi Public Investment Fund ( ), and as an adviser on economic reform to the Government of Kuwait (2000). Dr. Mustafa was the founding CEO of the Palestinian Telecommunications Company-Paltel ( ). Dr. Mustafa has a Ph.D. and Master s degrees in Management and Economics from George Washington University, and holds a B.Sc. in Engineering from Baghdad University. 27

29 Dr. Nasser Marafih, Vice Chairman Dr. Nasser Marafih is the Group Chief Executive Officer of Qtel, is a member of the Board of directors of NMTC and is Chief Executive Officer of Wataniya International FZ LLC. Dr. Marafih is also a board member of numerous other Qtel subsidiaries and affiliates. He has been a member of the Institute of Electrical and Electronics Engineers Incorporated for over ten years. Dr. Marafih holds a Bachelor of Science in Electrical Engineering, a Master of Science and a Ph.D. in Communications, all from George Washington University, USA. Sheikh Mohammed Bin Suhaim Al Thani, Board Member Sheikh Mohammed Bin Suhaim Al Thani was appointed as Vice Chairman of Qtel in 1999 and is also the Chairman of Qtel International LLC ( Qtel International ). In addition, Sheikh Mohammed has held a number of other senior board-level positions, namely Founding Chairman of M-Holding Qatar, Chairman of Evolvence Capital which is based in Dubai, UAE, and is a member of the Board of Directors of Naeem Holding. Richard Seney, Board Member Mr. Seney joined Qtel in May 2007 and was later named Chief Operating Officer of Qtel International. He previously served as President and Chief Executive Officer of US-based MCT Corp. Mr. Seney s operating experience in the mobile industry began in 1985 when he served as Executive Vice President and Chief Financial Officer of Charisma Communications. He also served for many years as Vice President and General Manager of the General Partner of MCT Investor, L.P. ( MCTI ). He has served as a director of several MCTI portfolio companies, including as Vice Chairman of the Board of American Telecasting, Inc. He graduated from the University of Virginia s McIntire School of Commerce in Senior Management Dr. Bassam Hannoun Chief Executive Officer 47, joined Wataniya Mobile in May 2010 Dr. Bassam is the Chief Executive Officer of Wataniya Mobile. Prior to joining Wataniya Mobile, Dr. Bassam served as the CEO of Jordan s leading WiMAX operator, Wi-tribe Limited Jordan P.S.C., a subsidiary of the Qtel Group. Dr. Bassam has worked extensively in Europe where he was responsible for the planning and optimisation of GSM networks across several different countries. Prior to joining Wi-tribe, Dr. Bassam was the Chief Sales Officer for Orange Jordan. Dr. Bassam holds a PhD in Telecommunications Engineering and a Masters of Business Administration with a focus on Strategic Marketing. Ausrius Banaitis: Chief Financial Officer 46, joined Wataniya Mobile in October 2009 Ausrius Banaitis is a financial professional with international experience in the telecommunications, retail, distribution and FMCG industries. Prior to joining Wataniya Mobile, Mr. Banaitis served as the Chief Financial Officer for Azerbaijani start-up mobile operator Azerfon LLC. Prior to joining Azerfon, Mr. Banaitis was the Regional Financial Controller for Cable & Wireless International in the Asia Pacific region. Mr. Banaitis is a UK associated chartered accountant (CIMA Qualified). Jamal Yaseen: Chief Operations Officer 49, joined Wataniya Mobile in April 2007 Jamal Yaseen is the Chief Operations Officer of Wataniya Mobile and has over twenty years of experience in the US and international markets. Prior to joining Wataniya Mobile, Mr. Yaseen was employed by Nortel Networks in New York. Mr. Yaseen has held several executive positions with Zain, Paltel, Jawwal and Wataniya Mobile and also managed a consulting business for four years. Dr. Samer Fares: General Counsel 38, joined Wataniya Mobile in August 2007 Prior to joining Wataniya Mobile, Dr. Fares was the Director of the Institute of Law at Birzeit University, which is a high profile institute responsible for the development of the Palestinian legal infrastructure. Dr. Fares has extensive knowledge of and experience in the telecommunications regulatory sector in Palestine and has been counselling the Palestinian Ministry of Telecommunication and Information Technology and international organisations such as the World Bank and the EU Commission on major projects to develop the Palestinian telecommunication sector. Dr. Fares holds a B.A. from Amman National University in Amman, Jordan, an M.A. from Birzeit University in Palestine and a Ph.D. from Ghent University in Belgium, each of which are in the field of law. 28

30 David Skinnell: Chief Technical Officer 56, joined Wataniya Mobile in February 2010 David Skinnell has over 35 years of experience in the industry. Prior to joining Wataniya Mobile, Mr. Skinnell was Program Management Consultant of Seacom. He has previously worked with CDMA and GSM mobile network operating companies, telecommunications equipment vendors and traditional fixed line operators in many countries throughout Europe, Africa, the Middle East, Asia/Pacific and the Americas. His experience includes working with Alcatel-Lucent, Cingular Wireless, AT&T International and Zain Group. At Wataniya Mobile, Mr. Skinnell is responsible for developing and leading technical strategy, operations, engineering and program management activities that enable the company to achieve and maintain a leadership role in the country s communications sector. Fadi Abdellatif: Financial Controller 33, joined Wataniya Mobile in March 2007 Prior to joining Wataniya Mobile, Mr. Abdellatif worked for Hulul Business Solutions. Mr. Abdellatif has previously been employed as an auditor at Arthur Andersen, during which time he was responsible for several major clients in Palestine, including those in the telecommunications sector. Mr. Abdellatif has also served in various positions with Oracle and Arab Technology Systems. Mr. Abdellatif holds a B.A. in Accounting from Bethlehem University, an MBA from the University of Haifa and has successfully completed the American CPA examinations. Employees As at 31 March 2010, Wataniya Mobile had 313 employees across its entire business, consisting of 297 Palestinians, 6 expatriates and 10 who are contracted as consultants. Employee compensation is based on employee and corporate performance and is designed to achieve the following objectives: Develop a compensation strategy that emphasises a Pay for Performance culture. Maintain salaries that are competitive with the marketplace and specifically with other technology industries. Provide a level of compensation that will allow Wataniya Mobile to attract and retain its talents. Provide flexibility to react and support Wataniya Mobile s changing needs, as its role and scope are continually defined and re-defined. Closely relate compensation to individual performance. Share the results of corporate performance with employees. Provide recognition for significant individual achievements. Provide a salary framework to allow proper differentiation between the various skills and responsibility levels required within Wataniya Mobile. Salary adjustments have been designed to encourage individual performance. Employees are eligible for salary bonuses from the individual exceptional contribution award program and also a company-wide bonus based on the Company s overall performance. Wataniya Mobile is currently working on developing career development and succession plans for its employees. These plans aim to specify the competencies, functional and behavioural needs for the employees to progress in their careers. It also identifies the training needs that are incorporated with career development and succession planning. 17. THE OFFER Shares The Company s authorised share capital is US$258 million (US$258,000,000) and is comprised of 258 million (258,000,000) Shares of a nominal value of US$1.00 each. The Company s authorised share capital before the Offer is million (219,300,000) Shares. All Shares are ordinary shares and are in registered form. The Founders have subscribed and fully paid in cash for million (219,300,000) Shares at US$1.00 each for a total amount of US$219.3 million (US$219,300,000), 29

31 representing 85% of the authorised share capital of the Company. The Founders had originally subscribed for US$170 million (US$170,000,000) in equity. In addition, they had also provided shareholder loans equivalent to US$49.3 million (US$49,300,000) (until the conversion of these shareholder loans prior to the Offering). The remaining 38.7 million (38,700,000) Shares, representing 15% of the authorised share capital of the Company, are offered for public subscription in accordance with this Prospectus and the Subscription Form. Offer Price The Shares are offered at an Offer Price of US$1.30 per Share. Investors Multiple subscriptions in the name of the same investor are prohibited. In the event of multiple subscriptions being received from the same investor, the Company, the Regional Co-ordinator and/or the Receiving Banks shall accept only the Subscription Form relating to the highest number of Shares and discard all other Subscription Forms submitted by that investor. Minimum Subscription The minimum subscription by an investor is 300 Shares at the Offer Price. No subscription for less than this minimum subscription amount shall be accepted. Any subscription exceeding the minimum subscription amount shall be in multiples of 50 Shares. Allocation of Shares Shares will be allocated on a pro rata basis. The actual number of Shares allocated to investors may be subject to review and reduction in accordance with the number of Shares in respect of which applications to subscribe have been received. Fractional Entitlements Allocations will be made in whole numbers of Shares only. No fractional allocations will be made. According to the applicable laws and regulations, any factional entitlements will be aggregated in an account known as the Fractions of Shares Account to be sold in following the listing of the Company s Shares on the PEX. Offer Period The Offer Period will be open from the Subscription Starting Date to the Closing Date (inclusive). Receiving Banks The only persons authorised to distribute Subscription Forms on behalf of the Company are the Receiving Banks. Distribution and collection of all Subscription Forms and orders and collection of proceeds during the Offer Period shall be solely performed by and processed through the Receiving Banks. Notification of the final allocation for Shares and refunds of proceeds for unallocated Shares (if any) to investors shall be solely performed by, and processed through, the Receiving Banks. The Receiving Banks are those banks named as the Receiving Banks whose names appear on the front of this Prospectus. Subscription Forms will be available, together with this Prospectus, at branches of the Receiving Banks throughout Palestine. Subscription Procedures During the Offer Period, investors may apply for Shares by completing the Subscription Form and complying with the instructions set out in the Subscription Form and this Prospectus. Any Subscription Form in connection with Shares that is completed without fully complying with the requirements indicated in such Subscription Form may be rejected without any right to damages or any other recourse. In this event, each investor waives any right to take any action against any of the Company or the Receiving Banks. 30

32 Multiple subscriptions in the name of the same investor are prohibited. It is the sole responsibility of each investor to ensure that their Subscription Form is duly completed in all respects and submitted to a branch of a Receiving Bank in Palestine before the close of business on the Closing Date. The Receiving Banks will not accept any Subscription Forms submitted to them after the close of business on the Closing Date. To the extent permitted by applicable law and regulations (including the Securities Issuance Instructions applicable in Palestine), the Company may extend the Closing Date, after obtaining the approval of the PCMA (if required). Full payment for Shares will be required upon submission of Subscription Forms. Payment must be made in accordance with the instructions set out in the Subscription Form and, accordingly, can only be accepted by way of manager s cheque/demand draft, bank remittance or direct debit from a personal bank account. Each investor shall be required to attach such identification materials as are listed on the Subscription Form. For an individual investor, these are as follows: ONE OF (a) a true copy of the investor s valid passport; and (b) a true copy of the investor s valid Palestinian ID card. In the case of an individual investor who is a minor (i.e. under the age of 18 years), the Subscription Form must be accompanied by a true copy of the minor s birth certificate showing the personal number in addition to a true copy of the valid passport or Palestinian ID card of the parent or legal guardian and a true copy of a document evidencing his or her relationship to, or appointment as legal guardian of, the relevant minor. In the case of an investor who is not a minor but whose application is being submitted by a third party, the Subscription Form must be accompanied by a true copy of a duly notarised power of attorney evidencing the authority of the person signing the Subscription Form on behalf of the investor together with a true copy of the valid passport or Palestinian ID card of the investor. For an investor that is a corporate entity, the documents required are: (a) a true copy of the entity s certificate of registration; and (b) a true copy of document evidencing the authority of the individual to sign on behalf of the entity AND ONE OF (c) a true copy of the Passport or Palestinian ID card of the authorised representative. Investors should note that true copies of documents must be verified by presentation of the original or by written certification by a regulated professional institution or individual (e.g., a notary public, embassy, bank, lawyer, or accountant). The Company and/or the Receiving Bank reserves the right (in their absolute discretion) to determine whether a document is a true copy of the original. The original document should be readily available in the event the Company or Receiving Bank wishes to inspect it. However, investors should not send original passports, birth certificates or other identity documents along with their Subscription Form. Neither the Company nor the Receiving Bank dealing with a Subscription Form can accept any liability whatsoever for any loss or damage to such documents and will not be responsible for returning such documents to investors. Subscription Forms must be fully completed and clear, legible and accurate, and must comply with all of the requirements and instructions set out in this Prospectus and in the Subscription Form, and must include all specified supporting documents. The Company and each of the Receiving Banks reserves the right to reject any Subscription Form that does not fully comply with all such requirements and instructions without any right to damages against any of the Company or the Receiving Banks. By subscribing or seeking to subscribe for Shares, each investor undertakes on their own behalf and on behalf of their heirs (as the case may be) to indemnify the Company and its advisers (including the Receiving Banks) against all and any losses which result or which may result from any non-compliance with the terms of, or instructions contained in, this Prospectus or the Subscription Form and/or any failure or omission on the part of an investor to fulfill the requirements set out in the Subscription Form or this Prospectus. With regard to each minor individual investor (a minor being a person who has not yet attained the age of 18 years), the parent or legal guardian of such minor shall apply for Shares on behalf of the minor. A subscription by a parent or legal guardian on behalf of a minor does not prevent the parent or legal guardian from also subscribing for Shares in his or her own name under a separate Subscription Form. The Company and/or the Receiving Bank dealing with an application reserves the right (in its absolute discretion) to determine whether a document is a true copy of the original. Copies of this Prospectus and Subscription Forms are available for inspection at branches of the Receiving Banks in Palestine. The text of the Memorandum of Incorporation and Articles of Association of the Company is set out in full as a Supplement to this Prospectus. 31

33 Allocation of Shares and Refund of Over-subscription amounts Investors who have duly completed and submitted their Subscription Forms and deposited the corresponding funds with the Receiving Banks during the Offer Period will obtain information with regard to their allocations within 30 days after the Closing Date. Such notification shall be in writing. Any additional funds in respect of Shares not so allocated will be refunded, by credit to the account from which the payment was made, within 30 days after the Closing Date. Listing and trading of the Shares After the Closing Date, and following commencement of trading in the Shares on the PEX, all institutions and individuals will be allowed to purchase and sell Shares on the secondary market in accordance with applicable laws and regulations. The Founders are under an obligation to offer 15% of the Shares in the future with the goal of raising the public s Shares to 30% in accordance with the Licence obligations issued to the Company by the MTIT and in accordance with the approval of the Minister of National Economy and the approval that was issued by the Minister of Telecommunications with this regard. The Founders will ensure that any Shares offered by them will not be offered at a price per share below the Offer Price. Any such offer will be subject to market conditions and will seek to avoid any offer that will have a materially adversely affect on the market price of the Shares. 18. USE OF PROCEEDS The proceeds from the Offer are expected to amount to US$50.31 million (US$50,310,000) and will be used by the Company to assist the funding of the balance of the fees payable under the Licence and for general business and operational purposes, including in particular contributing to the costs of maintaining and expanding the Company s network and repayment of the Company s short term indebtedness. 32

34 PART IV RISK FACTORS Before deciding whether to subscribe for Shares, prospective investors should carefully consider the risk factors described below which could materially and adversely affect the Business or financial performance and operations of the Company, and consequently the value of the Shares. Additional risks and uncertainties not presently known to Wataniya Mobile or that Wataniya Mobile currently deems immaterial, may also have a material and adverse affect on the Company or the Shares. This Prospectus also contains forward-looking statements that involve risks and uncertainties. Wataniya Mobile s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by Wataniya Mobile as described below. RISKS RELATING TO WATANIYA MOBILE S BUSINESS OPERATIONS The role of the Company s ultimate Shareholders, Qtel and PIF, may change over time. At present, the Company is managed in accordance with a Shareholders Agreement (as defined below) entered into between Qtel and PIF, which includes the Technical Services and Management Agreement (as defined below) in which Qtel is committed to (i) manage the ongoing operations of the Company, (ii) develop the Company s Business Plan, and (iii) provide retail services, such as managing the retail implementation of new product offerings, for an initial term of ten years from Following the Offer, the Founders will own 85% of the Company s authorised share capital between them. The Founders will, therefore, be able to influence all matters requiring Shareholder approval, including significant corporate expenditures and the appointment of Directors. As a result, the Founders could exercise their ability in a manner that may not be in the best interests of other Shareholders or that could have a significant effect on the Company s Business, financial condition and results of operations including significant corporate transactions and capital adjustments. Accordingly, the proper management of the Company and its performance depends, amongst other things, on the continuation of the healthy relationship between Qtel and PIF, the ability of Qtel to perform its obligations under the Technical Services and Management Agreement and the general goodwill of Qtel and PIF towards the Company. The Company s Licence fee includes payment for the provision of 3G services, but the Company has been unable to actually offer 3G services to date. This could increase the cost burden of the Company without corresponding revenue generation. The Licence was priced to include the grant of permission to offer 3G services. The Company has nonetheless been unable to launch 3G services because the PNA has not so far secured the necessary 3G frequency from Israel. As such, it has not generated any 3G revenues to offset its 3G costs. If the Company remains unable to offer 3G services for an extended period of time, the Company intends to enter into discussions with the MTIT to determine a mutual acceptable solution to compensate the Company for this delay. Currently, no Palestinian operator offers 3G services in the Palestinian telecommunications market. The Company faces competition from the previously monopoly telecommunications operator in Palestine and possible future market entrants. Jawwal, a subsidiary of Paltel, is currently the incumbent provider of mobile telecommunications services in Palestine with 2.1 million subscribers as at 30 June 2010 and, as the incumbent operator may seek to protect its dominant market position by trying to undercut Wataniya Mobile s tariff offering. Robust competition with existing and future providers may lead to price competition and declining ARPU s which will materially impact the Company s profitability. The MTIT announced in its Telecom Policy Statement that it intends to introduce a third mobile operator in The successful implementation of this proposal will depend on the availability of the necessary frequency. In addition to Jawwal, Wataniya Mobile competes with unlicensed Israeli operators who offer their SIM cards and scratch cards via dealers in the Palestinian market. Israeli providers are unable to openly advertise their products in the Palestinian market, are restricted to offering prepaid services and are not able to offer customer services to subscribers in Palestine. 33

35 RISKS RELATING TO THE MOBILE TELECOMMUNICATIONS INDUSTRY The Company s Business may exhibit unsustainable churn rates that weaken its position compared to its competitors. Prepaid customers currently represent approximately 90% of the Company s subscribers. Prepaid subscribers who are retail customers do not sign long-term service contracts, which make the Company s customer base susceptible to switching to other mobile service providers. Termination of usage of the Company s services by subscribers is referred to as churning. Although this risk is inherent in any mobile telecommunications market and applies equally to any company operating in the industry, the Company s inability to retain existing prepaid customers and manage churn levels could have a material adverse effect on its Business and results of operations. A failure to meet the churn rate targets envisaged by the Company s Business Plan or a failure to manage churn rates that compare favourably with those of its competitors could have a material adverse effect on the Company s Business, financial condition, prospects and results of operations. As a start-up operation, the Company needs significant financing to fund cash outflows in its early years of operations. The Company, similar to other mobile telecommunications operators in the early phase of operations, faces funding challenges as the cash flow generated from operations won t be sufficient to cover the funding required to expand the network, meet the license future payments, and to develop new services and products in the early years of operations. In addition, the Company shall require additional funds over the next several years, a significant proportion of which will be spent on developing mobile network infrastructure and supporting operational activities, including the payment of the remaining instalments under the Licence. All of these expected outflows of cash in the first years of operation may have a material adverse effect on the Company s Business, financial condition, prospects and results of operations, but are inherent and unavoidable in the early phase of any mobile telecommunications business. As at 30 September 2010, the Company had secured approximately US$304 million of available and undrawn funds through entering into credit facilities with local and international banks as well as through shareholder loans and share subscription monies from the Founders to meet these various funding needs (Q3 figures in this Prospectus are unaudited interim figures). For at least 12 months from the date of this Prospectus, the Company will not be generating substantial net cash inflows from its operating activities to fund the significant cash outflows which it is likely to face. While the Company expects that the funds under existing committed facilities should be sufficient to support the Company s investment programme over the 6 months following the date of this Prospectus, the Company does not currently have existing funding capacity through its existing bank facilities, the net proceeds of the Offer and projected cash flows, to fully fund its expected capital outflows over the first few years of operations. Accordingly, the Company will require further sources of funds, and if adequate financing on acceptable terms is not available, the Company s Business prospects may be adversely affected. The Company may not be able to retain key personnel upon whom it is reliant for the conduct of its daily business operations as well as strategic direction. The Company and its performance are largely dependent on the experience, technical know-how and commercial abilities of its personnel. The management team has significant experience and knowledge of the telecommunications industry. The success of the Company will depend, in part, on the continued service of its management team and key employees and its ability to attract, retain and motivate qualified personnel. Furthermore, competition for personnel with relevant expertise is intense in the market due to the scarcity of qualified individuals. In order to retain skilled and qualified individuals, the Company may need to offer higher compensation and other benefits. The Company is not insured against the detrimental effects to its Business resulting from the loss or dismissal of key personnel and it cannot assume that it will be able to attract and retain key personnel that will help it to achieve its business objectives. If the Company is not able to retain key personnel, or fails to attract new qualified personnel to support the growth of its Business, it could experience a material adverse effect on its Business, financial condition and results of operations. 34

36 Rapid technological changes. An inherent feature of the global telecommunications industry is rapid increases in the diversity and sophistication of the technologies and services that can be offered to customers. As a result, Wataniya Mobile will face competition from technologies that are currently being developed, or which may be developed at some time in the future, by existing competitors and new market entrants, if any. The development and introduction of new technologies involves time, cost and risks that cannot be reliably estimated in advance. In addition, the Company may also require further regulatory approvals to provide new services and upgraded technology in the future. RISKS RELATING TO CONDUCTING BUSINESS IN PALESTINE Political instability in Palestine. Palestine continues to experience political instability and security concerns. The continuation or re-emergence of such political instability in the future is likely to have a material adverse effect on economic or social conditions in Palestine. This could lead to outbreaks of civil unrest in the affected areas, which could have an adverse effect on the Company s financial condition and results of operations. Political instability, military unrest or other armed conflict could have a material adverse effect on the ownership, control and condition of the Company s assets in affected areas. In addition, substantially all of the Company s Business activities are concentrated in Palestine. As a result, the Company s operating revenues and results of operations and future growth depend, to a large extent, on the growth of the Palestinian economy. In the past, currency fluctuations, liquidity shortages, higher interest rates and other factors have materially and adversely affected the Palestinian economy. Due to the effect that larger economic conditions in the markets have on the Company s Business, further economic decline in Palestine could adversely affect the Company s results of operations and future growth. Palestine does not have its own currency and therefore does not have the ability to set monetary policy. Palestine does not have its own national currency and therefore the PNA does not have the ability to set monetary policy that will impact economic conditions in Palestine. The great majority of the Company s operations are denominated in Israeli Shekels, whereas its key equipment contracts are in US Dollars. The Company cannot assure that it will not be negatively impacted by its requirement to deal in Israeli Shekels and US Dollars and the inability of Palestinian policymakers to design monetary policies that will specifically respond to economic conditions in Palestine. Palestine s economy is dependent on inflows of international aid and financial assistance from donor governments and multilateral institutions. Palestine s economy is largely dependent on inflows of capital from foreign donor governments and multilateral institutions, such as the European Union and the United Nations. Although Palestine is projected to enjoy strong growth in the short term, declines in economic growth cannot be ruled out, particularly if capital inflows dry up for any reason. Any such decline in capital flows may directly impact the results of the Company s operations, leading to a diminished subscriber base or slower subscriber growth. Israel retains influence over the Palestinian telecommunications market. Palestine is still under the occupation of Israel and some industry sectors, are still under its control, including the telecommunications sector. Although Israel recognises that the PNA has the right to build and operate separate and independent communication systems and infrastructures including telecommunication networks, a television network and a radio network, the Oslo II Agreement provided Israel with certain administrative rights over the Palestinian telecommunications market. Such rights include the management and monitoring of the use of the radio frequency spectrum and the use of the geostationary satellite orbit. 35

37 In addition, Israel retains certain administrative rights related to the planning, formulation and implementation of telecommunications policies in Area C of the West Bank. In particular, Israel has required the rollout of telecommunications equipment in Area C of the West Bank to be subject to prior approvals from the Israeli Civil Administration. Such approvals are very difficult to secure and, even when granted, take a significant amount of time. This process undermines the ability of the Company to provide coverage over some of the roads in Area C and has forced the Company to sign national roaming agreements with Israeli operators in order to provide services in these areas. Unlicensed Israeli operators, who are able to provide services in some parts of the West Bank, do not face similar challenges in Area C. The management of these telecommunications matters is administered through the JTC, which consists of technical experts representing Israel and Palestine, and the JTC is charged with addressing any issue arising there from, including the growing future needs of Palestine. The JTC is charged with meeting on a regular basis to address all relevant problems, and as necessary in order to solve any urgent issues which may arise from time to time. Israeli cooperation with respect to the convening of JTC meetings and the fulfilment of Palestinian telecommunications requirements under its aegis is at all times subject to general political relations between the PNA and Israel. Constraints related to the importation of telecommunications equipment into Palestine. Due to the fact that Palestine does not control its own borders, with effective control being held by the Israeli authorities, Palestinian entities face obstacles in importing critical telecommunications equipment into the country. In addition, customs clearance for telecommunications equipment destined for the Palestinian territories takes more time than customs clearance for similar equipment destined for the Israeli market. The Company is required to obtain the approval of several different Israeli authorities in order to import telecommunications equipment into the West Bank and Gaza. Israel has in the past been reluctant to allow Palestinian telecommunications companies to import core network equipment into the region unless it is physically located inside Israel. Therefore, the Company s core equipment, as well as that of Jawwal, is located inside Israel. Non core equipment does not face similar restrictions and is permitted relatively easy entry into Palestine. Constraints related to the importation of telecommunications equipment into Palestine may potentially cause deterioration in the Company s network or services if it is unable to import critical equipment as necessary. This risk will be heightened subsequent to the Company s proposed launch of services in Gaza. The evolving Palestinian regulatory environment may impact the Company s ability to conduct its Business or impose significant additional costs on Wataniya Mobile. The Business of the Company is subject to regulation by the PNA, and particularly the MTIT. The regulatory framework within which the Company operates is continuing to evolve in the face of the liberalisation of the sector and the introduction of competition. This evolving framework may constrain the Company s ability to implement its business strategies and limit its flexibility to respond to changing market conditions and to meet its business objectives and plans, as currently envisaged. Since the establishment of the PNA, the telecommunications sector has been regulated by Telecommunication Law No. 3 of 1996, which endowed the MTIT with the power to regulate telecommunications networks and equipment licenses (as well as their renewal, amendment and annulment) and the authority to impose penalties against any breach of the law. In anticipation of the liberalisation of the telecommunications market, the PNA enacted the Law No. 15 of 2009 which created the PTRA to establish an independent regulatory authority which will assume the powers of the MTIT and will promote fair competition across the telecommunications sector. The President of the PNA has not yet issued the requisite presidential decree to appoint the Board of Directors of the PTRA. Until the issuance of this presidential decree, the MTIT will continue to be responsible for the regulation of the Palestinian telecommunications market. Wataniya Mobile s management expects the newly established PTRA to enact extensive bylaws necessary for the regulation of the market. As a result, the Palestinian telecommunications market will likely experience a major regulatory change that may affect the Company s operations and Business. 36

38 The Company s future growth will be dependent on the allocation of spectrum that is currently subject to Israeli control. The number of customers that can be accommodated on any mobile network is constrained by the amount of spectrum assigned to the operator and is also affected by customer usage patterns and the quality and design of network infrastructure. The size and capacity of the mobile network of a Palestinian telecommunications provider is limited by the amount of frequency which is ultimately assigned to the provider by the Israeli government. While Israel is party to certain international agreements that address the allocation of spectrum frequency to Palestine, and specifically to the MTIT, it is not certain that Israel will at all times honour these agreements or do so on schedule. At present, the Company has been assigned 4.8 MHz and has been promised that more frequency will be assigned to it in due course by the relevant Israeli and Palestinian authorities. If the promised spectrum is not allocated in the future, then this may impact the Company s ability to expand its Business beyond that enabled by current maximum capacity. Ultimately, any failure by the Company to retain, extend the tenure of, or acquire additional spectrum on a timely basis, and on commercially acceptable terms, could have a material adverse effect on the Company s Business, financial condition, results of operations and prospects. RISKS RELATING TO THE SHARES Absence of prior trading market and potential volatility of share price. Prior to the Offer, there has been no public market for the Shares. Furthermore, there can be no assurance that an active trading market for the Shares will develop or be sustained after the Offer. In any event, applicants may not be able to resell Shares that they acquire at or above the Offer Price, as the market price of the Shares after the Offer may be adversely affected by factors within and outside of the Company s control, including, but not limited to, variations in the Company s results of operations, market conditions, or changes in Government regulations. Market fluctuations, as well as economic conditions, may adversely affect the market price of the Shares. Also, any future sale or availability of the Shares in the public market can have a downward pressure on the Share price. The sale of a significant amount of Shares in the public market after the Offer, or the perception that such sales may occur, could materially and adversely affect the market price of the Shares. The Company may not be in a position to, or may simply choose not to, pay dividends to its Shareholders. The distribution of dividends will be dependent upon a number of factors, including, without limitation, the Company creating distributable reserves. There can be no assurance that any dividend will be paid, nor can there be an assurance as to the amount, if any, which will be paid in any given year. The ability to pay a dividend may also be subject to the terms and conditions of financing agreements entered into by the Company. Furthermore, the dividend policy of the Company may change from time to time. 37

39 PART V OVERSEAS OFFERING RESTRICTIONS The PCMA bears no responsibility for any information contained in this Prospectus relating to foreign securities laws or regulations. Such responsibility shall rest with the Company. United Kingdom and the European Economic Area This Prospectus and the Offer are only addressed to and directed at persons in member states of the European Economic Area, or EEA, who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) ( Qualified Investors ). In addition, in the United Kingdom, this Prospectus is being distributed only to, and is directed only at, Qualified Investors (i) who have professional experience in matters relating to investments falling with Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (the Order ), (ii) who fall within Article 49(2)(a) to (d) of the Order or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This Prospectus must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the EEA other than the United Kingdom, by persons who are not Qualified Investors. The Shares are only available to, and any investment or investment activity to which this Prospectus relates is available only to (i) in the United Kingdom, relevant persons, and (ii) in any member state of the EEA other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons. This Prospectus has been prepared on the basis that the Offer of Shares will be made pursuant to an exemption under the Prospectus Directive (2003/71/EC), as implemented in member states of the EEA from the requirement to produce a Prospectus for Offer of Shares. Accordingly any person making or intending to make any offer within the EEA of Shares which are the subject of the Offer contemplated herein should only do so in circumstances in which no obligation arises for us to produce a Prospectus for such Offer. Jordan This Prospectus has not been filed with, reviewed or approved by the Jordanian Securities Commission (JSC) or any other relevant Jordanian regulatory authority. No Public offering of the Shares has been or will be made in Jordan and the Shares may only be offered, distributed or sold in Jordan to a limited number of investors in accordance with the Jordanian Securities Law (No. 76 of 2002) and the regulations issued pursuant thereto. Neither this document nor any other solicitation for investments in the Shares may be communicated or distributed in Jordan in any way that could constitute a public offering within the meaning of Article (2) of the Jordanian Securities Law. This document may not be copied, reproduced, distributed or passed on to others without the Company s prior written consent. This document is not a Prospectus within the meaning of Jordanian Securities law and the JSC Instructions for Issuance & Registration of Securities of The Shares will not be registered with the JSC or the Jordanian Depository Centre of Securities and will not be listed at the Amman Stock Exchange. United Arab Emirates (including the Dubai International Financial Centre) This Prospectus has not been, and is not intended to be, approved by the UAE Central Bank, the UAE Ministry of Economy, the Emirates Securities and Commodities Authority or any other authority in the United Arab Emirates (the UAE ), or by the Dubai Financial Services Authority (the DFSA ) or any other authority in the Dubai International Financial Centre (the DIFC ). It should not be assumed that any of the Company, the Sole Global Coordinator and Sole Bookrunner, the Regional Coordinator, the Receiving Banks or any placement agent has received any authorisation or licensing from the UAE Central Bank or any other authorities in the UAE or the DIFC to sell or market the Shares in the UAE or the DIFC, or is a licensed broker, dealer or investment adviser under the laws applicable in the UAE or the DIFC, or that it advises UAE or DIFC residents as to the appropriateness of investing in or purchasing or selling securities or other financial products. This Prospectus does not constitute a public offer of securities in the UAE under the UAE Commercial Companies Law (Federal Law No. 8 of 1984)(as amended) or otherwise. This Prospectus is being distributed to a limited number of selected institutional / Sophisticated Investors in the UAE: (a) upon their request and confirmation that they understand that the Shares have not been approved or licensed by or registered with the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the UAE; (b) on the condition that this Prospectus will not be provided to any person other than the 38

40 original recipient, is not for general circulation in the UAE and may not be reproduced or used for any other purpose; and (c) on the condition that no sale of securities or other investment products is intended to be consummated within the UAE. No agreement relating to the sale of the Shares is intended to be consummated in the UAE. DIFC Exempt Offer Statement: This Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the DFSA. It is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The Shares to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares offered should conduct their own due diligence on the Shares. If you do not understand the contents of this document you should consult an authorised financial adviser. This Prospectus is not to be relied upon by, or distributed to, any person who is a Retail Client for the purposes of rule of the Conduct of Business Module of the DFSA Rulebook. This Prospectus contains all other information required to make this DIFC Exempt Offer Statement. Kingdom of Saudi Arabia This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority of Saudi Arabia (the KSA CMA ). The KSA CMA does not make any representation as to the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this document you should consult an authorised financial adviser. Any investor in the Kingdom of Saudi Arabia (a Saudi Investor ) who acquires Shares pursuant to the Offer should note that the Offer is a limited offer pursuant to Article 11 of the Offers of Securities Regulations as issued by the Board of the KSA CMA pursuant to resolution number dated 20/08/1424H (corresponding to 04/10/2004G), as amended (the Offers of Securities Regulations ). Accordingly, the Shares may be offered to no more than 60 Saudi Investors, excluding Sophisticated Investors (as such term is defined in the Offers of Securities Regulations) and the minimum amount payable per Saudi Investor must be not less than SAR 1 million or an equivalent amount. The offer of Shares is therefore exempt from the public offer requirements of the Offers of Securities Regulations, but is subject to the following restrictions on secondary market activity pursuant to Article 17 of the Offers of Securities Regulations: (a) A Saudi Investor (the transferor ) who has acquired the Shares pursuant to the limited offer may not offer or sell the Shares to any person (referred to as a transferee ) unless the offer or sale is made through an authorised person and where: (i) the price to be paid by the transferee for such Shares equals or exceeds SAR 1 million; (ii) the securities are offered to a Sophisticated Investor; or (iii) the securities are being offered or sold in such other circumstances as the KSA CMA may prescribe for these purposes. (b) If the provisions of paragraph (a)(i) above cannot be fulfilled because the price of the Shares being offered or sold to the transferee has declined since the date of the original private placement, the transferor may offer or sell the Shares to the transferee if their purchase price during the period of the original private placement was equal to or exceeded SAR 1 million. (c) If the provisions of paragraph (b) above cannot be fulfilled, the transferor may offer or sell Shares if he sells his entire holding of Shares to one transferee. (d) The provisions of paragraphs (a), (b) and (c) above shall apply to all subsequent transferees of the Shares. United States Nothing in this Prospectus constitutes an offer to sell or solicitation of an offer to buy the Shares in the United States or in any jurisdiction where it is unlawful to do so. Any Share to be issued has not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act ), 39

41 or with any securities regulatory authority of any state of the United States or other jurisdiction. The Shares may not be offered, sold, pledged or otherwise transferred directly or indirectly within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act ( Regulation S ) except to a person who is not a US Person (as defined in Regulation S under the Securities Act) in an offshore transaction pursuant to rule 903 or rule 904 of Regulation S in accordance with any applicable securities laws of any state of the United States. Qatar This Prospectus has not been filed with, reviewed or approved by the Qatar Financial Markets Authority or any other relevant Qatari regulatory authority. No general offering of the Shares has been or will be made in Qatar and the Shares may only be offered, distributed or sold in Qatar to a limited number of investors in accordance with Qatari law. Kuwait The Shares have not been licensed for offering in Kuwait by the Ministry of Commerce and Industry or the Central Bank of Kuwait or any other relevant Kuwaiti government agency. The offering of the Shares in Kuwait on the basis of a private placement or public offering is, therefore, restricted in accordance with Decree Law No. 31 of 1990, as amended, and Ministerial Order No. 113 of 1992, as amended. No private or public offering of the Shares is being made in Kuwait, and no agreement relating to the sale of the Shares will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market the Shares in Kuwait. Switzerland The Shares may not and will not be publicly offered, distributed or re-distributed in or from Switzerland and neither this document nor any other solicitation for investments in the Shares may be communicated or distributed in Switzerland in any way that could constitute a public offering within the meaning of Articles 1156 or 652a of the Swiss Code of Obligations. The Shares are not a collective investment within the meaning of the Federal Collective Investment Schemes Act of 23 June 2006 (Bundesgesetz über die kollektiven Kapitalanlagen, KAG). This document may not be copied, reproduced, distributed or passed on to others without the Company s prior written consent. This document is not a Prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations or a listing Prospectus according to article 27 of the Listing Rules of the Swiss Exchange and may not comply with the information standards required thereunder. We will not apply for a listing of the Shares on any Swiss stock exchange or other Swiss regulated market and this document may not comply with the information required under the relevant listing rules. The Shares offered hereby have not been and will not be registered with the Swiss Federal Financial Market Supervisory Authority (FINMA) and have not been and will not be authorised under the Federal Collective Investment Schemes Act of 23 June 2006 (Bundesgesetz über die kollektiven Kapitalanlagen, KAG). The investor protection afforded by the Federal Collective Investment Schemes Act (Bundesgesetz über die kollektiven Kapitalanlagen, KAG) does not extend to acquirers of the Shares. 40

42 Founders and Directors of the Board Founders Names PART VI ADDITIONAL INFORMATION Nationality Number of Shares* Percentage of share capital Wataniya International FZ LLC... UAE 125,001, % Palestine Investment Fund Public Shareholding Company... Palestine 94,298, % Grand Park Hotel Public Shareholding Company**... Palestine 1 nominal Sama Real Estate Private Shareholding Company**... Palestine 1 nominal Palestine Commercial Service Private Shareholding Company**... Palestine 1 nominal Al Rehyan Real Estate Investment Private Shareholding Company**... Palestine 1 nominal Ammar Real Estate Group Private Shareholding Company**... Palestine 1 nominal TOTAL ,300,000 85% * This table shows shareholdings immediately after the Offer. ** Subsidiary of PIF. The Founders have undertaken all of the necessary procedures for conversion of the Company to a public shareholding company and for this purpose they have appointed a Founders Committee to represent them in carrying out the necessary tasks for incorporation and formation. Founders Committee Members NAME Dr Mohammad Mustafa Dr Nasser Marafih Sheikh Mohammed Bin Suhaim Al Thani Richard Seney TITLE Chairman Vice Chairman Member Member Members of the Board of Directors NAME Dr Mohammad Mustafa Dr Nasser Marafih Sheikh Mohammed Bin Suhaim Al Thani Richard Seney TITLE Chairman Vice Chairman Member Member Capitalisation Before the Offer and the conversion of the Company into a public shareholding company, the Company will have US$219.3 million (US$219,300,000) in paid up share capital. The expected capitalisation of the Company following the Offer, assuming all the Shares offered for subscription are applied for, is set out in the table below. The capitalisation comprises the contribution in cash of the Founders and the contribution in cash of new Shareholders subscribing under the Offer. 41

43 Share ownership structure of Wataniya Mobile after the Offer (assuming the Offer is fully subscribed) Name of Shareholder Percentage Holding No. of Shares Value of Shares (USD) New Shareholders... 15% 38,700,000 US$38,700,000 Wataniya International FZ LLC* % 125,001,000 US$125,001,000 Palestine Investment Fund Public Shareholding Company* % 94,298,995 US$94,298,995 Grand Park Hotel Public Shareholding Company*+... nominal 1 US$1.00 Sama Real Estate Private Shareholding Company*+... nominal 1 US$1.00 Palestine Commercial Service Private Shareholding Company*+... nominal 1 US$1.00 Al Rehyan Real Estate Investment Private Shareholding Company*+... nominal 1 US$1.00 Ammar Real Estate Group Private Shareholding Company*+... nominal 1 US$1.00 Authorised and Paid up Share Capital (after the Offer) % 258,000,000 US$258,000,000 * Founders + Subsidiary of PIF The Company s Objects The Company s objects set out in its Memorandum of Incorporation are as follows: 1) Fixed and wireless telecommunications Services of fixed and wireless telephones Services of telex and telegram Services of voice and image transfer through satellite Services of radio and television broadcast Service of telephone network maintenance Other fixed and wireless telecommunications services 2) Building installation Installation of fixed and wireless telecommunications Installation of telephone networks and connections Maintenance and repair of fixed and wireless telecommunications stations and networks 3) To provide the services of telecommunications (GSM) including the third generation services 4) To provide the services between Palestine and worldwide 5) To work in the field of providing the wireless telecommunications, GSM and cellular services, distribution, sale, purchase, import and export and work as general importers and exporters to the account of the company or others and whether directly and directly to the benefit of the company and to provide commercial services for traders in Palestine and abroad. To carry out the above-mentioned objects, the Company is authorised to perform the activities detailed in its Memorandum of Incorporation and Articles of Association. The Company, in order to achieve its main objects listed above, shall carry out the following activities inside Palestine: 1. Acquire, participate in or own stocks, Shares, or other interests in companies or trading enterprises operating in any field related to the Company s activity or to the expansion of such activity, or carrying out activities similar to those carried out by the Company or which may assist or conduce to the realization of the Company s objects, and to finance such companies and trading enterprises; 2. Enter into agreements with banks, financial institutions or credit agencies concerning the financing of the Company s activities, including without limitation the issuance of guarantees and granting securities on the Company s assets, including its Shares and properties, or the Shares, stocks or assets of companies affiliated thereto; enter into agreements in favour of any third party, including without limitation the issuance of guarantees or granting indemnity guarantees, 42

44 or to stand as surety for any third party s liabilities, without or without consideration, mortgage and create guarantees on all or part of the Company or Company s assets, or on the Shares, stocks, or assets of companies affiliated thereto in order to guarantee their liabilities or the liabilities of any third party in any other manner; 3. Enter into any contracts or agreements required for the execution of the Company s projects, including the conclusion of construction, operation, management, maintenance, transport, purchase, sale and distribution contracts, or agreements related to the management of companies operating in the field of construction, development, operation or maintenance of any facilities or projects of the Company, or in the field of any ancillary services related to the Company s work or activities, or agreements related to the construction, development, operation and maintenance of the facilities owned to the Company; 4. Participate with others in the incorporation of companies, partnerships or other entities in order to acquire, develop, own, operate or manage the Company s activities or projects; 5. Carry out any work or activity, and undertake any act or thing of any nature which the Board may deem feasible to achieve or which may be related or ancillary to the Company s activities, or which may directly or indirectly enhance the value of all or any of the Company s projects, properties or assets, increase in any manner its profitability, or consolidate the Company s interests or the interests of the Shareholders therein. The Company is authorised to carry out its objects through the Board and to exercise its above described powers and authorities in Palestine and in any other location around the world. The Company may as well expand, amend or change such objects or powers in any manner whatsoever from time to time, as long as such procedures rely on a decision duly issued and adopted by the Shareholders according to the provisions of the laws and regulations organising the activities of the Company. Corporate Governance Wataniya Mobile is committed to high standards of corporate governance and shall comply with the standards set forth in the Companies Rules for Corporate Governance in Palestine adopted by the National Committee for Corporate Governance in November Therefore in order to apply the abovementioned rules, Wataniya Mobile shall form the following committees namely: The Audit Committee The Company s Board of Directors will establish an audit committee in order to enhance the transparent company s accounts and to inform the Shareholders and other people with interests of the risks the Company is facing. The Compensation Committee The Company s Board of Directors will form from among its members a compensation committee, one of the members is one of the independent members in the Board and the remaining members from those not committed for any work in the Company. The main responsibility of the committee is to assist the Board in adopting the policies for the compensations of the members of the Board and predominant employees. Decisions of the committee must be approved by the General Assembly of the Company and its Chairman must attend the assembly to reply to any queries by the Shareholders in this regard. The establishment of this committee is already in progress. Corporate Governance Committee The Board will establish a committee for corporate governance consisting of the Chairman and two other members who are not employed by the Company in any other role to supervise the application of the corporate governance rules. The committee is advised to draft a directory for the corporate governance rules in the company provided the Board approves such directory. Wataniya Mobile is also required to comply with certain enumerated corporate governance policies proposed by its shareholder Qtel, which has in place a detailed manual on corporate governance matters which it applies to all subsidiaries and portfolio companies in which Qtel invests (the Qtel Corporate Governance Manual ). The Qtel Corporate Governance Manual aims to foster effective management, reliable internal controls, ethical behavior on the part of all Qtel personnel, transparency, and disclosure and protection of shareholder rights. The Qtel Corporate Governance Manual contains policies with respect to matters such as strategic and business development, human resources, procurement and finance, 43

45 amongst other issues. Wataniya Mobile will be required to appoint a corporate governance officer who will be responsible for supervising the Company s corporate governance initiatives and for ensuring that appropriate policies are in place which ensure that Wataniya Mobile complies with the Qtel Corporate Governance Manual. In addition, pursuant to the Qtel Corporate Governance Manual, all board committees that are formed by Wataniya Mobile must have charters that describe clearly the role and responsibility of such a committee as well as its members. Furthermore, the Qtel Corporate Governance Manual requires Wataniya Mobile to have in place a comprehensive authority manual which sets forth clear delegations of powers to board members, key executives and employees. Material Contracts Other than the contracts described below or otherwise in this Prospectus, the Company is not, nor has it been party to, nor does it have, any material contracts or licences. The Licence Wataniya Mobile s Licence authorises the Company to build and operate 2G and 3G networks in the West Bank and Gaza. The Licence has a fifteen year term and is renewable for a further term of five years. The effective date of the Licence is 10 September 2009 and its term begins from that date. Moreover, according to the Licence, the MTIT is not permitted to renew or otherwise offer any mobile telecommunications services licences on terms (including conditions and renewal fees) which are more favourable than those that the MTIT has granted to Wataniya Mobile. According to the Licence, Wataniya Mobile is required to comply with specified quality of service obligations, including but not limited to dropped calls, billing correctness, and network quality. These service levels are to be maintained twenty-four hours a day, seven days a week. The Licence is also tied to certain service coverage targets which require Wataniya Mobile to achieve coverage of over 100% of the cities and 97% of the population of the West Bank and Gaza at the end of three years. Wataniya Mobile is required to achieve service coverage of: (i) 75% of the country s population on the date that falls twelve months after the launch of Wataniya Mobile s services, (ii) 95% percent service coverage by the date that falls twenty-four months after the launch of Wataniya Mobile s services, and (iii) 97% service coverage by the date that falls thirty-six months after the launch of Wataniya Mobile s services. The Licence also specifies the cities that Wataniya Mobile must target to achieve 100% service coverage by the date that falls thirty-six months after the launch of Wataniya Mobile s services. The Licence also specifies areas which are within a certain kilometre radius of main roads that must be covered by Wataniya Mobile s service. If the Company is unable to achieve these coverage service targets, the MTIT has the right as per the Licence to either fine the Company up to a maximum of 10,000 Jordanian Dinars or, if the performance failures are judged to be a material breach by the MTIT, may result in the revocation or suspension of the Licence altogether. However the MTIT accepts that a failure by Wataniya Mobile to meet an individual coverage obligation target by less than one thousand inhabitants or ten kilometres of a major road shall not constitute a failure to meet the coverage obligation for the purpose of the Licence. Wataniya Mobile was awarded the mobile telephony licence on the basis of a total compensation of JD 251,000,000 (two hundred and fifty one million Jordanian Dinars), which amounts to approximately US$354,000,000 (three hundred and fifty four million US Dollars), to be paid in three instalments. The first payment was paid on 6 August Assuming, in each case that, the MTIT has fulfilled its obligations related to the assignment of each of the relevant frequencies (2G and 3G) and the Company is able to provide services in both the West Bank and Gaza, a second payment of US$80,000,000 must be paid to the MTIT once Wataniya Mobile has reached 700,000 subscribers, and a third and final payment of US$134,000,000 must be made to the MTIT once Wataniya Mobile has reached 1,000,000 subscribers. 44

46 Wataniya Mobile s Licence Terms Licensee Term Effective Date Scope Frequency Purpose Licence Area Exclusivity Services Coverage Targets Licence Fee Wataniya Mobile 15 years from Effective Date, renewable for 5 years The date upon which sufficient frequencies have been assigned to the Licencee being 10 September G services, 3G services and international gateway 4.8MHz assigned. Wataniya Mobile has the right to install, operate and maintain (at its own costs and expense) the facilities and equipment directly involved in the public provision and exploitation of mobile services The Palestinian territories, being both the West Bank and Gaza No additional 2G and 3G licences to be granted for a period of 4 years from the Licence Date GSM and 3G services, including voice, data, fax, SMS and other value added services; directory information; public call centres; access to national emergency services free of charge 100% of the cities and 97% of the population in West Bank and Gaza at the end of 3 years JD 251,000,000 (two hundred and fifty one million Jordanian Dinars), which amounts to approximately US$354,000,000 (three hundred and fifty four million US Dollars), paid in instatements, following achieving of certain milestones Licence Fee Obligations The Licence includes two types of obligations on Wataniya Mobile, which relate to built-out milestones, and certain fee payments. In terms of the fees, there are two components as shown in the below table. These sums are over and above the US$354,000,000 (three hundred and fifty four million US Dollars) payable for the Licence itself. Licence Fee Obligations Annual Royalty Frequency Fee Licence Fee 7% of gross revenues paid annually. Applicable revenues include operating revenue generated by the Company from the provision of the licensed services, net of tax, and calculated after the deduction of the balance amounts due to other interconnected and/or roaming operators in respect of Interconnection and/or roaming traffic between the Company and such operators. Following a 5 year exemption, to be based upon the total spectrum An undetermined additional Licence fee will commence 5 years from the Effective Date, following a public consultation Shareholders Agreement Wataniya International FZ LLC ( Wataniya International ), a special purpose vehicle ultimately owned and controlled by Qtel which directly owns 57% of the Shares of the Company, entered into a shareholders agreement on 11 December 2006 with PIF, which owns 43% of the shareholding of the Company, for the purposes of establishing the terms of their cooperation with respect to the mutual operation and control of the Company, as well as their respective obligations to financially support the Company s Business and operations (the Shareholders Agreement ). The Shareholders Agreement will remain in effect after the public listing of the Shares of the Company. The Company s Board of directors is responsible for the overall management and supervision of the Company and pursuant to the Shareholders Agreement, the Company will have a Board of directors consisting of seven members subsequent to the IPO. Of these seven members, Wataniya International shall 45

47 be entitled to nominate four Board members, while PIF shall have the right to nominate the other three members. In addition, Wataniya International shall have: (i) the right to appoint the Chairman of the Board whom should be Palestinian, and (ii) the right to nominate the Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer and the Board Secretary of the Company, subject to the consent of PIF. Other Company management can be appointed by the majority of the Board. Pursuant to the Shareholders Agreement, decisions of the Board are to be made by a simple majority vote. It should be noted that the parties to the Shareholders Agreement are PIF and Wataniya International. Reference to the Shareholders in the context of the Shareholders Agreement is therefore a reference to PIF and Wataniya International. With respect to funding, the Shareholders Agreement contains provisions which require the Shareholders to financially support the Business and operations of the Company as requested by the Board, whether by way of a subscription for further Shares, the granting of shareholder loans, or the provision of Shareholder guarantees. A failure to fund by either of the shareholders in response to a properly submitted request of the Board of directors opens up the possibility that such shareholder s equity stake will be diluted due to provisions in the Shareholders Agreement which provide the non-recalcitrant Shareholder the opportunity to fund the shortfall caused by the refusing Shareholders failure. The Shareholders Agreement also provides that the Company may obtain third party debt, such as bank finance, of up to the greater of US$540,000,000 and the amount that shall equal 150% of the aggregate nominal value of the authorised share capital of the Company that are outstanding at any point in time. At the commencement of each financial year, the Shareholders Agreement requires the Chief Financial Officer to prepare and the Chief Executive Officer to deliver to the Board a proposed budget and cash flow forecast for the coming year. The Board is required to review and approve the submitted budget as well as a Business Plan for the ensuing financial year and the Company s affairs are to be run in accordance with the approved Business Plan and budget unless any amendments thereto are approved by the majority of the Board (including at least one representative of each shareholder). Finally, with respect to the technical management of the Company, the Shareholders Agreement requires the entering into of the Technical Services and Management Agreement with Wataniya International. Technical Services and Management Agreement The Company entered into the Technical Services and Management Agreement (the Management Agreement ) with Wataniya International on 11 December 2007 as part of the Shareholder Agreement. The primary purpose of the Management Agreement is to provide the Company with adequate support to operate the Company and run the business of a mobile network operator with the high degree of sophistication and know-how that can be expected of experienced personnel and operators and to meet the Company s technical, operational, safety, commercial and regulatory requirements and to enable it to implement the Company s Business Plan from the initiation of its commercial operation. In exchange for the provision of the technical and management services, and subject to the achievement of certain performance targets, the Company is to pay a management fee to Wataniya International. The management fee payable to Wataniya International is equal to between 1% and 3% of the Company s net services revenues, subject to an overall ceiling equal to 15% of the Company s net profits for a particular financial year. Pursuant to the Management Agreement, the Company appointed Wataniya International on an exclusive basis as the provider of Corporate Services, Network Services and Retail Services for a term of ten years or until the expiry of the Company s Licence, unless earlier terminated in accordance with the Management Agreement s terms. Corporate Services include, amongst other services, assisting and advising the Board and management of the Company with respect to marketing and strategy including tariff plans, equipment supply, pricing, branding and customer care plans; review of annual budgets and other financial information; provision of management processes and systems; recruitment of staff with mobile telecommunications experience; provision of financial, accounting and treasury support to the operations of the Company; and the provision of legal support in relation to the Business of the Company. Network Services include, amongst other services, assisting and advising the Board and management of the Company in relation to optimisation of operational procedures to increase subscriber capacity; 46

48 analysis, development and preparation of equipment supply requests and operational plans; establishment of technical and operating standards and policies; establishment, management and administration of third party contractors; maintenance of the network coverage, maps and reliability; network planning and engineering services and maintenance of an effective and accurate model; design of the technical specifications for network enhancement, expansion and modifications; monitoring the operational performance of the network and implementation and maintenance of the network maintenance management system. Retail Services include, amongst other services, assisting and advising the Board and management of the Company with respect to the development and deployment of the Company s brand strategy, marketing and market research; development of new retail product offerings and managing the retail implementation of new product offerings; sales strategies and sales price structures; branded and co-branded products and the Company s distribution channels, and establishment and management of a billing system that enables the offering of hybrid products (both pre and postpaid). The Management Agreement provides that Wataniya International will also be required to advise the Company, if so requested, on how to achieve compliance with technical standards for the establishment and operation of the network; responding to the MTIT s queries in relation to the standards noted in the Licence in less than ten days or any such period as specified by the MTIT; and how to achieve certain other specified technical and service performance targets either mandated by the MTIT or established by the Company. Ericsson Network Contract On 26 August 2008, the Company entered into a US$62,500,000 (sixty-two million five-hundred thousand US Dollar) turnkey contract with Ericsson AB ( Ericsson ) and Ericsson Radio Systems Aktiebolaget, Ramallah ( Ericsson Palestine ) for the manufacture, supply, installation, commissioning, operation and maintenance of a mobile telecommunications network and certain associated systems and services (the Ericsson Network Contract ). The Ericsson Network Contract addressed both the construction and implementation of the mobile telecommunications network as well as certain on-going maintenance and operational services that ensure that the network, now constructed and delivered, remains in good working order, including the training of the Company s personnel to perform essential maintenance tasks. The Ericsson Network Contract has a twenty-four month warranty period commencing from the date upon which the system is accepted by the Company (or the date upon which 90% of the sites in a phase are in commercial service), during which time Ericsson will be obliged to repair any defects in the system free of cost. In addition, the Ericsson Network Contract required the company to enter into the Managed Services Agreement to more specifically document on-going services to be provided by Ericsson. Managed Services Agreement Concurrently with the Ericsson Network Contract, the Company entered into the managed services agreement with Ericsson Palestine which addresses operation, maintenance and support services that are necessary to maintain the mobile network system s integrity, performance and reliability (the Managed Services Agreement ). Specifically, the Managed Service Agreement includes, amongst other services, the following within the scope of work: Establishment of operations this includes managing and leading activities related to the establishment of the network and service operation and maintenance and network planning, design and performance optimisation. It also includes drafting specifications of the requirements with respect to the suitability of various premises for hosting network sites. Finally, this includes implementing processes, operational procedures, management systems and training operation staff to ensure efficient functioning of the network from launch onwards. Operation of the network this includes providing service cover for the network, systems, application and management system and operations infrastructure that are provided pursuant to the Ericsson Network Contract. Transfer of operations, responsibility and know-how this includes the provision of services and training with respect to service quality management, maintenance and repair work. 47

49 International Roaming Agreements The Company has entered into several roaming agreements with foreign operators that have the effect of bolstering the Company s roaming coverage footprint in both Palestine and overseas (the Direct Roaming Agreements ). The Direct Roaming Agreements follow a common format, but exhibit some deviations from contract to contract based upon the specific negotiations that the Company has conducted with particular counterparties. In addition to the Direct Roaming Agreements, the Company has entered into a roaming agreement with many roaming broker/hubs such as Belgacom Mobile SA, as a broker, and Link2One, as roaming hub, which further supplements the Company s roaming coverage footprint (the Indirect Roaming Agreements ). Under the terms of the Direct Roaming Agreements, the Company and its counterparties agree to establish direct international roaming services between their public mobile networks in accordance with certain relevant technical specifications, which means that all financials shall be settled directly between the two operators. While receiving roaming service, customers may experience conditions of service that differ from the conditions of service that they are accustomed to receiving in their home mobile network. However, their service quality shall not differ substantially from the service quality experienced by customers of the mobile network operator upon whose system the customer is roaming. In general, a Company customer availing roaming services will be treated akin to the customers of the mobile network operator upon whose system the Company customer is roaming. For instance, pursuant to the Direct Roaming Agreements, services to roaming customers will only be suspended or terminated in the same circumstances in which those services would be suspended or terminated with respect to its own customers. The Direct Roaming Agreements do not have a specified duration but, barring certain limited and defined termination triggers, are to continue in force unless terminated by one of the Parties by providing written notice six months in advance of the date of termination. In the Indirect Roaming Agreements, the Company and the broker/hub agree to establish international roaming services in which the Company will have access to all the broker/hubs members. This should mean that all financials between the Company and the broker/hubs members are settled through the broker or the hub. With regard to the technical specifications, customers of both sides will be subject to the same operational conditions as contained in the Direct Roaming Agreements explained above. Interconnection Agreements The Company has entered into Interconnection agreements with local, regional and international mobile operators, either directly or through well-established regional and international carriers (the Interconnection Agreements ). The Interconnection Agreements follow a standard form and vary only slightly from one another. The Interconnection Agreements require each party to arrange for the termination or transit of telephony traffic (including SMS and MMS) sent from the other party s network. The Parties to the Interconnection Agreements have agreed to interconnect their respective networks through a minimum of two (2) Interconnection links (POIs) and have agreed that the cost of establishing the Interconnection links shall be shared bilaterally by the parties on a basis. The Interconnection Agreements are effective as of the date they are entered into and are typically valid for a period of one (1) or two (2) years, though they are automatically renewed for additional periods of one (1) year unless either party informs the other Party of their intention to not renew the agreement by providing sixty (60) days notice to this effect. CBOSS Contract In January of 2009, the Company entered into a contract with CBOSS Oy for the procurement, delivery, configuration, and installation of a mobile network billing system as well as the provision of associated hardware, software and certain support services relating to such a system (the CBOSS Contract ). The CBOSS Contract, which relates to both prepaid and postpaid subscriber accounts, provides the billing platform which forms the backbone of the Company s billing and revenue collection system. The billing system provided pursuant to the CBOSS Contract is designed to be integrated with the network constructed by Ericsson under the terms of the Ericsson Network Contract. The CBOSS contract includes the delivery and installation of certain software that is used by the Company to maintain its billing systems. The Company also benefits from provisions of the agreement which provide that its employees will be adequately trained by CBOSS with respect to matters relating to the billing system and associated hardware and software. 48

50 Share Description and Rights Description of Share Capital The authorised share capital of the Company is US$258 million (US$258,000,000) divided into 258 million (258,000,000) Shares of a nominal value of US$1.00 each. The Founders of the Company have subscribed to 85% of the authorised share capital of the Company, equivalent to million (219,300,000) Shares. The remaining 38.7 million (38,700,000) Shares are offered for public subscription in accordance with this Prospectus. Share Ownership All the Shares of the Company are ordinary Shares. Shareholder Rights The Companies Law and the Articles of Association of the Company provide the holders of Shares with certain rights, including, but not limited to: To cash dividends declared at the General Assembly; To subscribe for new Shares in the Company in priority to non-shareholders; To participate in any distribution of assets of the Company upon liquidation; To review the audited balance sheets and profit and loss statements published by the Company; To receive notices of the General Assembly of the Company; To participate and vote at such general assemblies either in person or by proxy; To legally object to any resolution passed by the General Assembly or Board of Directors if it is inconsistent with the Companies Law or Articles of Association & Memorandum of Incorporation of the Company; To require the Directors and the auditors of the Company to act in accordance with the provisions of the Companies Law; and Nomination to Board of Directors. The Company will have an independent legal personality and the liability of a Shareholder with respect to the Company will be limited to the full nominal value of his/its total Shares. Accordingly, no recourse by third parties to any other assets of the Shareholder shall be allowed. It should be noted that the above is not intended to be an exhaustive statement of all the rights enjoyed by a shareholder under the Companies Law. Transfer of Shares With the exception of Founders Shares, Shares may only be traded or transferred following the announcement of the Company s incorporation in the first General Assembly and the listing of Shares on the PEX. Once the Company s Shares are listed on the PEX, transfer of Shares will be made according to the rules and regulations that govern this market. Full details of the procedures relating to the transfer of Shares are provided in the Articles of Association of the Company contained in the Supplement to this Prospectus. The Company will not offer guidance on the market value of the Shares. Founders Shares The Founders agree not to transfer their Shares, except to other Founders or Directors, prior to the publication of the balance sheet and profit and loss accounts for at least one financial year after the incorporation of the Company. Separately, each of the Shareholders of Wataniya Mobile are subject to share lockup periods pursuant to the Licence that prevent them from disposing of their Shares for a period of three years in the case of PIF, and five years in the case of Qtel. It should be noted that these lockup arrangements do not apply to the sale of Shares pursuant to the Additional Offering described on page 32 of this Prospectus. 49

51 Changes in Share Capital The share capital may only be increased, following the recommendation of the Board of Directors of the Company, upon approval by the Shareholders of a resolution at an extraordinary General Assembly, through the issue of new Shares, the integration of reserves into capital or the conversion of debentures into Shares. Shareholders will have pro rata pre-emptive rights to subscribe to new issues of Shares in proportion to their Shareholding in accordance with the provisions of the Companies Law, the Securities Law and the Securities Issuance Instructions. New Shares may not be issued with a value less than their nominal value. If issued with a value more than the nominal value, the difference shall be added to the legal reserve. New Shares shall be allocated to Shareholders applying for such subscription in proportion to the Shares they own, provided that this does not exceed an amount equal to the amount each of them applied for. The Shareholders may, by resolution of an extraordinary General Assembly, for the reasons and in the manner laid down in the Companies Law, authorise a reduction in the share capital. Liquidation Rights On liquidation of the Company the net remaining assets, after settlement of all liabilities and reimbursement of the nominal amount paid-up on the Shares, shall be divided among the Shareholders in proportion to their share of the capital. Share Certificates The Company will not issue any share certificates after the full incorporation of the Company. Upon listing the Shares on the PEX, the procedures and regulations of the PEX shall apply then. Share Listing Upon sending out the allotment notices to investors, the Company will provide the PEX, within 30 days from holding the founding General Assembly of the Company, with all legal documents and proofs of ownership of Shares to complete the electronic registration with the Clearing and Depositary Centre within the PEX before the start of trading of Company s Shares. Shareholders Meetings All Shareholders shall be invited to attend all general assemblies including the first General Assembly of the Company. Shareholders may attend in person or by proxy. A Shareholder may authorise another shareholder to attend the General Assembly on his behalf. Such authorisation shall be considered valid if a special written proxy, who if the proxy is not a Shareholder, must be authenticated or countersigned, confirms it. The proxy holder may not in such capacity hold more than 5% of the Shares in the Company. Notices inviting shareholders to attend the first founding General Assembly will be despatched within 2 months of the Closing Date, and the first founding General Assembly will be held 21 days following the date of such notice. In the event that a quorum is not present at the first founding General Assembly, the General Assembly will be adjourned to the same day in the following week. Founders will issue notification of the first General Assembly and send a copy of the agenda by registered mail to each Shareholder. Notification of general assemblies will also be published in two local newspapers prior to the date of the General Assembly. The quorum for the first General Assembly shall be achieved in accordance with Companies Law. Resolutions of the first General Assembly shall be adopted by majority of the Shares represented at the assembly. The Founders shall present to the first General Assembly of the Company a report on all actions taken by them, the incorporation formalities of the Company and the expenses incurred in this respect and the commitments entered into in the name of the Company together with the relevant supporting documents. Convening of the Ordinary General Assembly The Board of Directors shall call for the convening of the ordinary General Assembly at least once each year and within four months following the end of the financial year. The ordinary General Assembly shall be quorate if attended by Shareholders representing at least 50% of the share capital of the Company. If a quorum is not achieved at the first meeting, the General Assembly 50

52 shall be called to a second meeting to be held at the same time and date of the following week. In all cases, the second meeting shall be considered duly convened. Resolutions of the ordinary General Assembly shall be adopted by the absolute majority of the votes represented at the meeting. Convening of the Extraordinary General Assembly In accordance with the provisions of the Companies Law, the Board of Directors shall be entitled to call for the convening of the extraordinary General Assembly. Furthermore, Shareholders holding at least 15% of the share capital of the Company, shall be entitled to call for the convening of the extraordinary General Assembly whenever necessary if such request was accepted by the Controller of Companies. In addition, the Company s auditors and the Controller of Companies in the Ministry of National Economy in the PNA, may call for the convening of the extraordinary General Assembly in certain circumstances as defined in Article (83) of the Articles of Association. The extraordinary General Assembly shall be quorate if attended by Shareholders representing at least 50% of the share capital of the Company. If a quorum is not achieved at the first meeting, the extraordinary General Assembly shall be called to a second meeting to be held at the same time and date of the following week. The second meeting shall require a quorum of 40% of the share capital. If a quorum is not achieved at the second meeting, the extraordinary General Assembly shall be cancelled whatever the reasons to call for such meeting. Resolutions of the extraordinary General Assembly shall be adopted by at least two third of the votes represented at the meeting unless such resolutions concern the increase or reduction in the share capital, the change of the headquarters of the Company, the dissolution of the Company, amendment of the Articles of Association and Memorandum of Incorporation, to dismiss the Chairman or any member of the Board or the amalgamation of the Company with another company, in which case the resolution of the extraordinary General Assembly shall be adopted by not less than 75% of the Shares represented in the assembly. Voting Rights Holders of Shares are entitled to one vote per Share on all matters submitted to a vote of the Shareholders. Every shareholder present or by proxy or through his/its authorised representative shall have one vote for each Share held by him/it. Directors Remuneration Decision regarding the remuneration of the Board of Directors will be taken in accordance with Article (135) of the Companies Law and Article (67) of the Articles of Association of the Company. Such decision will be in accordance with the Companies Law and the Articles of Association of the Company. Amendment of the Articles of Association and/or Memorandum of Incorporation The Shareholders at an extraordinary General Assembly of the Company may alter the provisions of the Articles of Association and/or Memorandum of Incorporation subject to the mandatory requirements of the Companies Law. Financial Statements and Other Communications with Shareholders The Company shall provide every Shareholder with a copy of the Company s annual report and a summary of its financial results audited by the Company s auditors. Dividend Distribution Net profits shall be the income of the Company after deduction of all expenses including depreciation, interest and general provisions made for potential losses, corporate taxes, commitments or contingent liabilities. In accordance with the Companies Law, ten percent (10%) of the net profits of the Company must be deducted to create a statutory reserve, until such statutory reserve reaches one quarter of the paid up capital of the Company. 51

53 The net profit of each financial year shall be available for distribution to the Shareholders as dividends subject to any restrictions and limitations that may be applicable to such dividends pursuant to debt facilities that Wataniya Mobile has availed from lenders. Subject to these limitations, the General Assembly, on the recommendation of the Board of Directors, may resolve to allocate the whole or part of the distributable profits to reserves, to profits to be carried forward to the following year or to Shareholders in the form of dividends. The Company shall establish a general reserve account in accordance with the Articles of Association, to transfer of 10% of the net profits to such general reserve. If a dividend is declared at an ordinary General Assembly, each Shareholder is entitled to receive, in respect of each Share held, the dividend so declared. The method of payment of dividends shall be fixed by the General Assembly upon the recommendations of the Board of Directors. Insurance The following is a summary of the insurance coverage currently undertaken by the Company: Property All Risk: Insurance that protects the physical property and equipment of a business against loss from theft, fire or other perils; all-risk coverage covers against all risks; named-peril coverage covers only against specific perils named in the policy. Electronic Equipment: Covers any unforeseen and sudden physical loss or damage to Electronic Equipment s from any cause, other than those excluded. Business Interruption Insurance: Protects the Company against losses resulting from a temporary shutdown because of fire or other insured peril. Generally, business interruption insurance provides reimbursement for lost net profits and necessary continuing expenses. Machinery Break down Insurance: Covers sudden and unforeseen accidental damage to machinery. The machinery can be at work or at rest. Machinery being dismantled for cleaning / overhauling and in course of these operations being shifted within specified premises or being re-erected subsequently also covered. Crime Insurance: Fidelity/Crime Insurance protects the Company from loss of money, securities, or inventory resulting from crime. Common Fidelity/Crime insurance claims allege employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting, and other criminal acts. Medical Insurance: All employees of the Company are covered by Medical Insurance. Property and Equipment In addition to the Licence, as at 30 September 2010 (unaudited interim figures) Wataniya Mobile had telecommunications fixed assets of approximately US$72.3 million. Wataniya Mobile s management has acquired a number of leased properties as sites for the operation of its network. Environmental and Health Issues The Company acknowledges that there are public health concerns about mobile phone technology, in particular exposure to the energy carried by radio frequency signals (often referred to as electromagnetic energy, or EME ). The World Health Organisation, health authorities and governments around the world closely monitor the safety of radio technology and have co-operated to develop International Commission on Non-Ionising Radiation Protection ( ICNIRP ) guidelines to ensure the use of mobile phone technology does not carry any health risks for adults or children. The Company has processes in place to ensure that all of its base stations and mobile phone terminals allowed on its network comply with international safety guidelines and standards. Legal and Regulatory Proceedings Other than as disclosed in this Prospectus, the Company is not, and has not been, subject to or involved in any material litigation or formal arbitration proceedings. So far as the Company is aware, no such proceedings are pending or threatened. 52

54 Dividend Policy Wataniya Mobile has not to date paid any dividends to its Shareholders. Unless and until income and distributable reserves are generated, Wataniya Mobile will not be in a position to pay any dividends. The Directors will consider Wataniya Mobile s dividend policy further once the Company is in a position to pay dividends. The amount of annual dividends and the decision whether to pay dividends in any year may be affected by a number of other factors including the Company s Business prospects, financial performance, cash availability, loan covenants, and the overall outlook of the telecommunications sector. In any event, the decision of whether or not to pay dividends will remain within the absolute discretion of the Board at all times. Taxation A vital component of the Palestine reconstruction and development program has been the restructuring of all Government laws and regulations related to economic activities. To encourage a wide scope of investments throughout the West Bank and Gaza, an all-inclusive restructuring of the tax system is currently taking place. To date, the PNA has succeeded in implementing part of the reform agenda especially in strengthening efficiency, as it adopted the Income Tax Law No. (17) of 2004 as amended on 1 January 2008 (hereinafter referred to as the Income Tax Law ), and further reduced the Value Added Tax ( VAT ). This law as amended establishes rules relating to individuals as well as corporate tax issues, as explained below. Individuals and Corporations The tax is levied on the taxable income of corporations and residents following the consideration of applicable deductions and exemptions prescribed under the law. The tax is imposed on a universal basis, which includes income from work, business or profession as accruing as salaries or wages, profits, dividends, rent and interest. The tax law is based in accordance with the following rates: Yearly Taxable Income US$ Individuals ,000 10,001-20,000 Above 20,000 Corporations... Domestic Foreign Rate 5% 10% 15% 15% 15% Palestine Tax Scheme The income Tax Law has devoted several clauses that set out the deductions and exemptions that taxpayers may benefit from in the process of calculating the taxable income. As to exemptions, Article (6) of the income tax law, for instance, has been amended to exempt taxes on dividends distributed by registered and resident Palestinian companies to their Shareholders. Furthermore, Article (7) of the income tax law has also been amended to exempt profits made out of selling Palestinian securities of investment portfolios to Banks and financial institutions, US$7,200 for the resident taxpayer; in addition to the actual amount paid to employees as fixed transportation expenses or 10% of the total salaries, whichever is less, a onetime only deduction of US$5,000 for the purchase or construction of a house, employee s contribution in pension funds, medical insurance and social security, as such funds are approved by the Minister. The current VAT rate in the West Bank and Gaza is 14.5%. It is the PNA s policy to maintain a low VAT and to set regular incentives on the Income Tax such as Tax Deductions and exemptions in its efforts to encourage investments in Palestine. This can be seen in the amendments of 1 January 2008 on the Income Tax Law whereby tax deductions and exemptions have been increased. The rate for all domestically produced goods and services is 14.5% except for zero rates on exported goods, tourist services and fruits and vegetables. The purchase tax on all the wholesale prices of consumer goods, and several raw materials and processed goods and the corresponding rate for cigarettes, cars alcohol, electrical equipment and other raw materials are also categorised and provided accordingly within the Income Tax Law. 53

55 Investment Incentives The PNA has created a framework of economic legislation to encourage and to support foreign and local investment in the West Bank and Gaza. The legal framework for investment in Palestine is based on the Law on Encouragement of Investment in Palestine No. (1) of 1998, as amended in 2004 (hereinafter referred to as the Encouragement of Investment Law ). It provides incentives for capital investment in numerous sectors of the Palestinian economy by both local and foreign corporations registered to carry out business in Palestine. The PNA foresees that increasing capital investment growth will generate jobs and develop an export-oriented manufacturing base. The Encouragement of Investment Law aims to achieve the development objectives and increase investment in Palestine by providing guarantees for investors, granting incentives in the way of tax and customs exemptions, ensuring non-discriminatory treatment, protection against expropriation, dispute resolution mechanisms and repatriation guarantees. The Encouragement of Investment Law provides guarantees for the repatriation of the entire amount of capital invested and profits made after payment of applicable taxes and transference of interest to subsequent purchasers with all invested exemptions. The Encouragement of Investment Law prohibits expropriation and nationalisation of approved foreign investments. In addition, provisions for the suspension or cancellation of licences under certain circumstances, including conduct amounting to bribery, supplying false information or forged documents during the application process, are also included. In addition, the Encouragement of Investment Law provides for the establishment of the Palestinian Investment Promotion Agency (hereinafter referred to as PIPA ) to set up new businesses, review and approve all project and programme applications which contribute to providing the appropriate investment climate pursuant to this Law. The PIPA is managed by a 13 member board of directors, comprised of representatives from various ministries of the PNA and the private sector. Its principal function is to advise the PNA on the performance and recommended development of investment legislation in order to enhance and further strengthen the Encouragement of Investment Law. Through the Encouragement of Investment Law, the PNA guarantees to all investors the unrestricted transfer of all financial resources outside Palestine including the capital, profits, dividends and capital profits, wages and salaries, interest, debt payments, management fees, technical assistance, fees and compensation money for expropriation, cancellation of licences, courts of law decisions, arbitration awards and any other form of payments or financial resources. Article (22) of the Encouragement of Investment Law states that fixed assets are given the following exemptions: The project s fixed assets shall be exempted from customs duties and taxes provided that they are brought in within a period specified by the PNA s decision approving the lists of fixed assets of the project, and The spare parts which are imported for the project shall be exempted from customs duties and taxes, provided the value of such spare parts does not exceed 15% of the value of the fixed assets and that they are brought in or used in the project with a period specified by the PNA from the date of commencement of the production or work and by a decision of the PNA approving the lists and quantities of spare parts. Other exemptions apply to fixed assets, which are necessary for developing or expanding an already existing company and price increases due to higher costs because of price increases in the exporting country or increases in shipping costs. Article (23) of the Encouragement of Investment Law provides that the projects approved by the PNA and which have obtained the licences required under the law shall be granted the incentives stated in the law: Any investment with a value ranging from US$100,000 to US$1 million shall be granted an income tax exemption for 5 years from commencement of production or carrying on the activity and shall be exempted at a nominal rate of 50% of the tax due for an additional period of 8 years; Any investment with a value ranging from US$1 million to US$5 million shall be granted a 5-year income tax exemption and shall be exempted at a nominal rate of 50% of the tax due for the next 12 years; 54

56 Any investment with a value ranging from US$5 million and above shall be granted a five-year income tax exemption and shall be exempted at a nominal rate of 50% of the tax due for the next 16 years; Projects recommended by PIPA and approved by the Council of Ministers in the PNA are exempt from tax for five years and exempted at a nominal rate of 50% of the tax due for the following 20 years. This special exemption may be granted depending on the nature and priorities of the Palestinian development programme. Palestine Exchange The Palestine Exchange is a public shareholding company that was established in 1996 as the Palestine Securities Exchange (PSE) after the PNA approved and entrusted the PSE to establish a fully electronic exchange and depository. By August 1996, the Exchange was fully operational, and on 7 November 1996, the PSE signed an operating agreement with the PNA, allowing for the licensing and qualification of brokerage firms to take place. On 18 February 1997, the PSE conducted its first trading session. In 2006, the Average Daily Trading Volume ( ADTV ) dropped 37.9% to 0.94 million Shares, compared to 1.50 million Shares in 2005, and the Average Daily Trading Value ( ADTVa ) dropped 49.1% to US$4.48 million, compared to US$8.52 million for the same period. Over the year, the PSE lost 38.8% of its market capitalisation to close at US$2.73 billion. The Al-Quds Index lost 46.39% to close at 605 points. In September 2010, the PSE was rebranded as the Palestine Exchange (the PEX ). As at the date of this Prospectus, there are 39 companies listed on the PEX across five main economic sectors: banking, insurance, investments, industry and services, with additional companies expected to be listed in the future. Shares of listed companies are mostly traded in Jordanian Dinars, while some are traded in US Dollars. The PEX operates under the supervision of the PCMA and in accordance with the Securities Law and its by-laws, in addition to modern regulations, which form a strong basis that ensure a fair trading environment. There are no restrictions on foreign investments at the PEX or on Foreign Exchange by the Palestinian Monetary Authority. HSBC provides global custody services to interested foreign clients. The PEX common values are good governance, transparency, efficiency, fairness & equal opportunity. For more information about the PEX, please visit: 55

57 PART VII FINANCIAL INFORMATION Independent auditors report to the shareholders of Wataniya Palestine Mobile Telecommunication Company Ltd. We have audited the accompanying financial statements of Wataniya Palestine Mobile Telecommunication Company Ltd. (the Company), which comprise the statement of financial position as of December 31, 2009 and the income statement, statement of comprehensive income, statement of changes in equity, and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Wataniya Palestine Mobile Telecommunication Company Ltd. as of December 31, 2009 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Ernst & Young February 5,

58 STATEMENT OF FINANCIAL POSITION As of December 31, 2009 Notes Assets Non-current assets Property and equipment, net ,022, ,984 Projects in progress ,945,219 21,309,071 Advances to contractors ,175 7,520,781 Intangible assets ,793, ,871, ,523, ,072,173 Current assets Prepayments and other current assets ,661,148 4,106,890 Inventory ,022 Accounts receivable ,405 Cash and cash equivalents ,149,025 7,162,793 25,969,600 11,269,683 Total Assets ,493, ,341,856 Equity and liabilities Equity Paid-in share capital ,000, ,000,000 Accumulated losses... (46,605,002) (17,274,837) Net equity ,394, ,725,163 Non-current liabilities Provision for employees indemnity , ,131 Interest-bearing loans and borrowings ,017,342 10,631,579 Other non-current liability ,181,616 46,371, ,855,167 57,310,979 Current liabilities Accounts payable... 23,329,916 5,860,094 Due to related parties ,612,986 1,306,704 Deferred revenues ,064 Accrued expenses ,997,962 1,166,720 Other current liabilities , ,346 Accrued project cost... 8,849,237 6,674,850 40,243,205 15,305,714 Total liabilities ,098,372 72,616,693 Total Equity and Liabilities ,493, ,341,856 57

59 INCOME STATEMENT For the year ended December 31, 2009 Notes Revenues ,074,951 Finance revenues ,324 83,627 Currency exchange gain/(loss) ,860 (74,841) 2,496,135 8,786 General and administrative expenses (8,847,772) (3,061,012) Personnel costs (8,555,367) (5,269,452) Finance costs (5,221,062) (1,737,086) Depreciation and amortization... 3,4 (4,150,214) (162,458) Marketing and sales expenses (2,984,414) (480,859) Operation and maintenance... (1,689,597) (20,283) Interconnection costs and roaming fees (250,137) License fees (127,737) 31,826,300 10,731,150 Loss for the year... (29,330,165) (10,722,364) 58

60 STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, Loss for the year... (29,330,165) (10,722,364) Other comprehensive income for the year... Total loss and comprehensive income for the year... (29,330,165) (10,722,364) 59

61 CASH FLOW STATEMENT For the year ended December 31, Operating activities Loss for the year... (29,330,165) (10,722,364) Adjustments for: Depreciation... 2,072, ,458 Provision for employees indemnity , ,865 Loss from disposal of property and equipment... 19,091 Finance revenue... (113,324) (83,627) Finance costs... 5,221,062 1,737,086 License Amortization... 2,077,972 Working capital changes: Prepayments and other current assets... (5,554,258) (2,129,122) Inventory... (886,022) Accounts Receivable... (273,405) Accounts payable... 17,469,822 5,549,495 Deferred revenue ,064 Accrued expenses... 5,621, ,134 Other current liabilities , ,348 Indemnity paid... (53,408) (11,158) Net cash flows used in operating activities... (2,171,815) (4,868,885) Investing activities Purchase of property and equipment... (1,090,008) (34,531) Purchase of intangible assets... (140,000,000) Projects in progress... (54,114,113) (13,870,358) Advances to contractors... 6,757,606 (7,373,021) Interest received ,324 83,627 Net cash flows used in investing activities... (48,333,191) (161,194,283) Financing activities Paid-in share capital ,000,000 Shareholders loans... 20,019,196 8,000,000 Syndicated loan... 44,485,625 Syndicated loan transaction costs... (5,329,045) (1,579,448) Interest Paid... (990,820) Due to related parties , ,563 Net cash flows from financing activities... 58,491, ,003,115 Increase in cash and cash equivalents... 7,986,232 5,939,947 Cash and cash equivalents, Beginning of year... 7,162,793 1,222,846 Cash and cash equivalents, End of year... 15,149,025 7,162,793 60

62 STATEMENT OF CHANGES IN EQUITY For the year ended December 31, 2009 Paid-in share capital Accumulated losses Net Equity Balance at January 1, ,000,000 (17,274,837) 152,725,163 Total loss and comprehensive income for the year... (29,330,165) (29,330,165) Balance at December 31, ,000,000 (46,605,002) 123,394,998 Balance at January 1, ,000,000 (6,552,473) (1,552,473) Paid-in share capital ,000, ,000,000 Total loss and comprehensive income for the year... (10,722,364) (10,722,364) Balance at December 31, ,000,000 (17,274,837) 152,725,163 61

63 NOTES TO THE FINANCIAL STATEMENTS December 31, Activities Wataniya Palestine Mobile Telecommunications Company (the Company), located in Ramallah, is a private limited shareholding company registered and incorporated in Palestine on January 27, 2007 under registration No The Company was formed with an authorized share capital of 5,000,000 shares with one par value each. The Company s General Assembly in its extraordinary meeting held on July 29, 2008 agreed to increase the Company s authorized share capital to 170,000,000 shares with one par value each. During July and November 2008, the Company s paid-in share capital was increased to 170,000,000 shares with one par value each. On March 14, 2007, the Company entered into a license agreement (the License) with the Ministry of Telecommunications and Information Technology (the MTIT) to provide 2G and 3G mobile services in the West Bank and Gaza. The term of the License shall be fifteen years from the effective date being the date on which the MTIT makes the frequencies available to the Company. The effective date was originally set on August 6, On December 16, 2009, the MTIT approved the Company s request to determine September 10, 2009 as the effective date, instead of August 6, 2008, since it represents the date on which the frequencies were actually allocated. The company started its operations on November 1, The Company s main activities are offering, managing, and selling wireless telecommunication services, as well as constructing and operating wireless telecommunication stations and telephone networks. The financial statements of the Company as of December 31, 2009 were authorized for issuance in accordance with a resolution of the Board of Directors on February 5, Summary of significant accounting policies Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards. The financial statements are presented in United States Dollar, which is the functional currency of the Company. The financial statements have been prepared under the historical cost convention. Changes in accounting policy and disclosures The accounting policies adopted are consistent with those of the previous financial year except that the Company has adopted the following new and amended IFRS and IFRIC Interpretations during the year. Adoption of these standards and interpretations did not have any effect on the results of activities or financial position of the Company. They did however in some cases, give rise to additional disclosures: IFRS 2 Share-based Payment (Revised) IAS 1 Presentation of Financial Statements IAS 32 Financial Instruments (Revised) IFRIC 13 Customer Loyalty Programmes IFRIC 16 Hedges of a Net Investment in a Foreign Operation 62

64 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 The following IFRS and IFRIC interpretations have been issued but are not yet effective, and have not been adopted by the Company: IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions (Amendments) IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) IAS 39 Financial Instruments: Recognition and Measurement Eligible Hedged Items (Amendment) IFRIC 17 Distribution of Non-cash Assets to Owners. IFRS 9 Financial Instruments: Classification and Measurement Significant accounting judgments, estimates and assumptions The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions. It also requires management to exercise its judgment in the process of applying the Company s accounting policies. The Company s management continually evaluates its estimates, assumptions and judgments based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The areas involving a higher degree of judgment or complexity are described below: Interconnection revenues and costs The Company s management uses certain estimates to determine the amount of interconnection revenues, costs, receivable, and payable. Useful lives of tangible and intangible assets The Company s management reassesses the useful lives of tangible and intangible assets, and adjusts if applicable, at each financial year end. Revenue recognition Revenues are recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenues are measured at the fair value of the consideration received, excluding discounts and sales commissions. The following specific recognition criteria must also be met before revenue is recognized: Rendering of services Revenues from airtime are recognized when the service is rendered. Sales of prepaid cellular phone cards are recorded as deferred revenues until recognized as revenues. Equipment sales Revenues from sale of cellular phone sets are recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be reliably measured. Interest income Interest income is recognized as interest accrues using the effective interest rate. Expenses recognition Expenses are recognized when incurred based on the accrual basis of accounting. 63

65 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 Income tax According to the Palestinian Investment Promotion Agency certificate issued on October 27, 2009, the Company was granted the right to benefit from the Palestinian Law for Encouragement of Investment. Accordingly, the Company is granted full exemption from income tax for a period of five years starting after the year in which the company commenced its operations. Property and equipment Property and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows: Useful Lives (years) Network Equipment... 8 Network Infrastructure... 8 Leasehold Improvements... 5 Furniture and Fixtures... 4 Computers and Systems Office equipment and Others The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use. Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalized, and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalized only when it increases future economic benefits of the related item of property and equipment. All other expenditure is recognized in the income statement as the expense is incurred. Projects in progress Projects in progress comprise costs of direct labor, direct materials, equipment, and contractors costs. After completion, projects in progress are transferred to property and equipment. The carrying values of projects in progress are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the projects are written down to their recoverable amount. Inventories Inventories are stated at the lower of cost or net realizable value; cost is determined using the weighted average method. Costs are those amounts incurred in bringing each product to its present location and condition. Accounts receivable Accounts receivable are stated at original invoice amount less a provision for any uncollectable amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery. Cash and cash equivalents For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less. 64

66 Provision for employees indemnity NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 Provision for employees indemnity (end of service benefit) is calculated in accordance with the Labor Law prevailing in Palestine and the Company s human resource policies. The entitlement is based upon the employees last salary and length of service. The expected costs of these benefits are accrued over the period of employment. Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term. Provisions Provisions are recognized when the Company has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured. Loans and borrowings Loans and borrowings are initially recognized at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through the amortization process. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period to get ready for its intended use or sale are capitalized 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. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. If payment for an intangible asset is deferred beyond normal credit terms, its cost is the cash price equivalent. The difference between this amount and the total payments is recognized as interest expense over the period of credit. The Company s intangible asset is the license agreement with the Ministry of Telecommunications and Information Technology. The term of the license is fifteen years from the effective date of September 10, 2009, being the date on which the frequencies to launch operations in the West Bank were made available to the Company. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the 65

67 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the expense category consistent with the function of the intangible asset. Foreign currencies Transactions denominated in currencies other than, occurring during the period, are translated to using the exchange rate at the date of the transaction. Monetary assets and liabilities, which are denominated in foreign currencies are translated into using the rate of exchange at the balance sheet date. Gains or losses arising from exchange differences are reflected in the income statement. 3. Property and equipment Network Equipment Network Infrastructure Computers and Systems Office Equipment Furniture and Fixtures Leasehold Improvements Others Total 2009 Cost At January 1, ,123 86, , , ,346 Additions ,870,094 14,159,408 13,157, , ,856 3,613,932 39,061 70,742,360 Disposals (540) (2,738) (2,133) (15,702) (21,113) At December 31, ,870,094 14,159,408 13,458, , ,368 3,722,054 23,359 71,333,593 Accumulated depreciation At January 1, ,170 25,843 38,658 25, ,362 Depreciation charge for the year , , ,872 58,277 98, ,755 4,807 2,072,242 Disposals (53) (159) (213) (1,597) (2,022) At December 31, , , ,989 83, , ,446 3,210 2,311,582 Net carrying amount At December 31, ,245,776 14,007,056 12,467, , ,062 3,402,608 20,149 69,022,011 Computers and Systems Office Equipment Furniture and Fixtures Leasehold Improvements Total 2008 Cost At January 1, ,558 82, , , ,815 Additions ,565 3,990 4,831 2,145 34,531 At December 31, ,123 86, , , ,346 Accumulated depreciation At January 1, ,502 6,569 15,131 2,702 78,904 Depreciation charge for the period ,668 19,274 23,527 22, ,458 At December 31, ,170 25,843 38,658 25, ,362 Net carrying amount At December 31, ,953 60,613 76,987 82, , Intangible assets On March 14, 2007, the Company entered into a license agreement (the License) with the Ministry of Telecommunications and Information Technology (the MTIT) to provide 2G and 3G mobile services in the West Bank and Gaza for the total price of 354,000,000. The term of the License is fifteen years from the effective date, being the date on which the frequencies to enable launch of operations in the West Bank were allocated to the Company. The effective date was originally set on August 6, On December 16, 2009, the MTIT approved the Company s request to determine September 10, 2009 as the effective date, instead of August 6, 2008, since it represents the date on which the frequencies were actually allocated. 66

68 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 An amount of 140,000,000 of the total license price was paid by the Company on August 6, The remaining price of the license of 214,000,000 is to be paid in two instalments of 80,000,000 and 134,000,000 upon reaching certain subscribers milestones and provided that the MTIT fulfills its obligations to enable the Company to provide 2G and 3G services in the West Bank and Gaza as stated in the license agreement. The Company s license includes the West Bank and Gaza. The MTIT notified the Company that it can start operations in the West Bank; however, the Company s right to use the frequencies in Gaza was delayed until further notice. Therefore, the license price of 354,000,000 was allocated between the West Bank and Gaza based upon the split of addressable markets in both territories and assumed subscribers and revenues for each territory. The portion of the license price relating to the West Bank was estimated at 212,400,000, of which 140,000,000 was paid on August 6, The Company estimates that the remaining amount of 72,400,000 will be paid in 2014, being the date on which the Company expects to reach the subscribers milestone. The portion of the license price of 141,600,000 relating to Gaza was not recognized in the financial statements as the Company was not granted access to launch services in Gaza. The deferred portion was initially recorded as other non current liability at its fair value of 44,871,337 calculated by discounting the 72,400,000 to its present value using an interest rate of 8%, which approximated the Company s borrowing interest rate. The deferred portion of the price was subsequently measured at amortized cost using the effective interest method. Interest expense recorded for the year ended December 31, 2009 and the year ended December 31, 2008 amounted to 3,810,347 and 1,499,932, respectively. The intangible asset was recorded at 184,871,337 being the total of the payment made on the effective date of 140,000,000 and the present value of the deferred portion of 44,871,337. The outstanding license liability of 50,181,616 as of December 31, 2009 represents the deferred portion of 44,871,337 and interest expense recorded since the effective date of 5,310,279. The company started amortising the License on November 1, 2009 being the date on which it commenced its operations. The movement on intangible assets is as follows: License ,871, ,871,337 Amortization... (2,077,972) 182,793,365 84,871,337 67

69 5. Projects in progress NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, Network... 3,701,284 10,951,781 Network Infrastructure... 3,179,738 Billing system ,559 5,064,428 Leasehold improvements... 2,922,668 Call Center ,372 Corporate Systems ,000 LANWAN ,195 Capitalized interest cost , ,604 ERP System ,679 Sites Electricity ,380 80,133 ERP Software Oracle... 74,681 Service Centers... 21,416 Roaming Platform System ,000 Knowledge Base Manager System... 49,725 Sites Civil Work... 1,114 Others ,277 7,945,219 21,309,071 The movement on projects in progress is as follows: Beginning balance... 21,309, ,408 Additions... 56,288,500 20,592,663 Transferred to property and equipment... (69,652,352) 7,945,219 21,309, Prepayments and other current assets VAT receivables... 7,504,817 2,177,434 Deferred transaction costs... 1,579,448 Prepaid site rent , ,203 Prepaid rent expense... 50,796 35,333 Prepaid car lease expense... 34,388 Due from related parties... 89,082 Prepaid warranty ,355 Prepaid software license ,418 Due from employees... 15, Other ,872 57,733 9,661,148 4,106, Inventory Sim cards ,802 Scratch cards... 55,974 Accessories , ,022 68

70 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, Accounts receivable Subscribers receivable ,676 Interconnect partners ,213 Roaming partners... 7, , Cash and cash equivalents Cash on hand... 7, Cash at banks and short term deposits... 15,141,733 7,162,073 15,149,025 7,162,793 As of December 31, 2009, the Company has five short term deposits amounting to 14,622,332 (2008: 6,938,644) at local banks with an average interest rate of 1% (2008: 1.2%). 10. Paid-in share capital Wataniya International FZ LLC (WIL)... 96,900,000 96,900,000 Palestinian Investment Fund, PLC (PIF)... 73,100,000 73,100, ,000, ,000, Provision for employees indemnity Balance, beginning of year , ,424 Additions , ,865 Payments during the year... (53,408) (11,158) Balance, end of year , , Interest-bearing loans and borrowings Shareholders loans Wataniya International FZ LLC (WIL)*... 17,701,529 6,060,000 Palestine Investment Fund, PLC (PIF)*... 13,353,785 4,571,579 Accrued interest (WIL)... 1,029,105 Accrued interest (PIF) ,343 32,860,762 10,631,579 Third parties loans... Local banks loans**... 17,270,890 IFC loan**... 15,700,809 Ericsson loan**... 10,990,566 ECA loan** ,360 44,485,625 Less: transaction costs directly attributable to third parties loans***... (5,329,045) 72,017,342 10,631,579 69

71 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 * On January 14, 2009, the Company entered into a new loan agreement with its shareholders for a total amount of 31,055,314. The loan bears annual interest rate of LIBOR plus 5.85%. The loan and the interest are repayable in full on December 31, The Company has utilised an amount of 11,036,118 during the year to repay the outstanding shareholders loans of 10,631,579 and the related interest of 404,539 as of December 31, ** On January 19, 2009, the Company signed syndicated loan agreements with various lenders for a total amount of 85,000,000. The loans bear annual interest rate ranging from Libor plus 5.31% to 6.34% and are repayable in semi annual installments commencing January 15, 2011 and ending January 15, All the Company s assets are mortgaged as collaterals for these loans. The Company received the first drawdown on May 14, 2009; which amounted to 44,485,625. Accrued interest as of December 31, 2009 amounted to 1,149,125. Following is the loan principal maturities: Matures during ,262, ,262, ,001, ,001,132 Matures during 2015 and thereafter... 11,957,737 44,485,625 *** This item represents legal and other fees directly attributable to loans and borrowings that were incurred to finalize the loan agreements with the respective financial institutions. 13. Due to related parties Wataniya International FZ LLC (WIL) , ,353 Palestine Investment Fund, PLC (PIF) ,296 Qatar Telecommunications (QTEL)*... 1,323, ,055 1,612,986 1,306,704 * Qatar Telecommunications Company (QTEL) is the Parent Company of Wataniya International FZ LLC. 14. Accrued expenses Bonus , ,580 Payroll tax , ,002 Marketing costs ,272 79,354 Employees vacations ,242 70,010 Accrued lease line expense ,380 Accrued interest and commitment fees... 1,449,116 Accrued license fees ,737 Other... 1,420, ,774 4,997,962 1,166,720 70

72 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, Revenues Activation revenue ,937 Voice revenue ,907 Other ,107 2,074, General and administrative expenses Professional and consulting fees , ,739 Accommodation, travel and transportation , ,451 Rent... 2,102, ,401 Project launch costs... 1,290, ,406 Telephone, fax and mail , ,123 Water, electricity and fuel ,568 90,309 Stationery and supplies... 31,711 19,745 Maintenance... 48,950 24,828 Bank charges... 96,034 13,560 Warehousing and logistics ,759 Security services ,556 Other , ,450 8,847,772 3,061, Personnel costs Salaries and related expenses... 8,153,881 5,076,587 End of service expense , ,865 8,555,367 5,269, Finance costs Interest on loans and borrowings... 1,206, ,154 Interest on other non-current liability... 3,810,347 1,499,932 Amortization of transaction costs ,583 5,221,062 1,737, Marketing and sales expenses Cost of SIM cards and other direct selling costs ,573 Designs and exhibitions , ,020 Media advertisements ,141 19,101 Sponsorships , ,877 Research... 94,609 13,925 Other marketing expenses ,275 19,936 2,984, ,859 71

73 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, Interconnection costs, and roaming fees Telecommunication services costs comprise mainly of interconnection costs and roaming fees due to other telecommunication companies. 21. License fees This item represents the license fee payable to Palestine National Authority at 7% of the Company s annual gross service revenues. 22. Commitments and contingencies As of the financial statements date, the Company has outstanding contractual commitments resulting from purchases, services and construction contracts, as well as its license. Following is a summary of the outstanding commitments: Contracts and purchase orders... 9,994,070 49,063,895 License* ,600, ,600,000 * As disclosed in Note 4 to the financial statements, the Company entered into a license agreement with MTIT for a total price of 354,000,000. The portion of the license price of 141,600,000 relating to Gaza was not recognized in the financial statements as the Company was not granted access to launch services in Gaza. The Company entered into an agreement to lease the office building on 27 January The lease has a life of five years with an option to renew included in the contract. Future minimum rentals payable under non-cancellable operating lease as at December 31 are as follows: Within one year , ,792 After one year but not more than five years , , ,100 1,088, Related party transactions Related parties represent associated companies, shareholders, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company s management. Balances and transactions with related parties included in the financial statements are as follows: Interest-bearing loans and borrowings (note 12)... 31,055,314 10,631,579 Due to related parties (note 13)... 1,612,986 1,306,704 Finance cost on shareholders loans (Including capitalized interest)... 1,815, ,755 Key management personnel compensation , , Fair value of financial instruments Financial instruments comprise of financial assets and financial liabilities. 72

74 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 Financial assets consist of cash on hand and cash at banks, accounts receivable and some other current assets. Financial liabilities consist of accounts payable, interest-bearing loans, other non-current liability, due to related parties, and some other current liabilities. The fair values of financial instruments are not materially different from their carrying values. 25. Risk management Interest rate risk The Company is exposed to interest rate risk on its interest-bearing assets and liabilities (Interest bearing loan and borrowings and short term bank deposits). The following table demonstrates the sensitivity of the income statement to reasonably possible changes in interest rates, with all other variables held constant. The sensitivity of the income statement is the effect of the assumed changes in interest rates on the Company s profit for one year, based on the floating rate financial assets and financial liabilities held at December 31, There is no direct impact on the Company s equity. Increase/ decrease in basis points Effect on loss for the year , (555,896) , (3,693) Foreign currency risk The table below indicates the Company s foreign currency exposure, as a result of its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Israeli New Shekel (ILS), with all other variables held constant, on the income statement. Increase/ decrease in ILS rate to Effect on loss for the year % 48, % (48,629) % 80, % (80,831) Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Most of the Company s customers are prepaid card customers. The maximum exposure with respect to customers is the carrying amount as disclosed in note 8. With respect to credit risk arising from the other financial assets, including cash and cash equivalents, the company s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets. 73

75 NOTES TO THE FINANCIAL STATEMENTS (Continued) December 31, 2009 Liquidity risk The Company limits its liquidity risk by ensuring banks loans and funding from shareholders are available. The table below summarizes the maturities of the Company s undiscounted financial liabilities at December 31, 2009, based on contractual payment dates and current market interest rates. December 31, 2009 Less than 3 months 3to12 months 1-5 years Over 5 years Total Interest-bearing loans and borrowings... 2,903,470 79,571,883 12,345,012 94,820,365 Accounts payables... 11,190,760 12,139,156 23,329,916 Due to related parties... 1,612,986 1,612,986 Other non current liabilities... 72,400,000 72,400,000 Total liabilities... 11,190,760 16,655, ,971,883 12,345, ,163,267 December 31, 2008 Less than 3 months 3to12 months 1-5 years Over 5 years Total Interest-bearing loans and borrowings... 10,761,579 10,761,579 Accounts payables... 5,860,094 5,860,094 Due to related parties... 35, , ,326 1,306,704 Other non current liabilities... 72,400,000 72,400,000 Total liabilities... 5,895,933 11,166, ,326 72,400,000 90,328, Capital Management The primary objective of the Company s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the year ended 31 December 2009 and the year ended 31 December Capital comprises paid in capital, and accumulated losses, and is measured at 123,394,998 as at 31 December 2009 (2008: 152,725,163). 27. Concentration of risk in geographic area The Company will be carrying out the majority of its activities in Palestine. The political and economical situation in the area increases the risk of carrying out business and may adversely affect the performance. 28. Comparative Figures The corresponding figures for December 31, 2008 have been reclassified in order to conform to the presentation for the current period. Such reclassification had no effect on the previously reported losses or retained earnings. 74

76 Report on review of Interim Condensed Financial Statements to the Board of Directors of Wataniya Palestine Mobile Telecommunication Company Ltd. Introduction We have reviewed the accompanying interim condensed financial statements of Wataniya Palestine Mobile Telecommunication Company Ltd. (The Company) as of June 30, 2010, comprising of the interim statement of financial position as of June 30, 2010 and the related interim statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended and explanatory notes. The Board of Directors is responsible for the preparation and presentation of these interim condensed financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting ( IAS 34 ). Our responsibility is to express a conclusion on these interim condensed financial statements based on our review. Scope of Review 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. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial statements are not prepared, in all material respects, in accordance with IAS 34. July 21,

77 INTERIM STATEMENT OF FINANCIAL POSITION June 30, 2010 Notes June 30, 2010 Unaudited December 31, 2009 Audited Assets Non-current assets Property and equipment, net ,819,496 69,022,011 Projects in progress ,182,039 7,945,219 Advances to contractors , ,175 Intangible assets ,627, ,793, ,352, ,523,770 Current assets Prepayments and other current assets... 11,330,768 9,661,148 Inventory , ,022 Accounts receivable... 2,837, ,405 Cash and cash equivalents ,740,877 15,149,025 25,622,512 25,969,600 Total Assets ,974, ,493,370 Equity and liabilities Equity Paid-in share capital ,000, ,000,000 Accumulated losses... (76,945,257) (46,605,002) Net equity... 93,054, ,394,998 Non-current liabilities Provision for employees indemnity... 1,039, ,209 Interest-bearing loans and borrowings ,420,394 72,017,342 Other non-current liability... 52,205,572 50,181, ,665, ,855,167 Current liabilities Current portion of interest-bearing loans and borrowings ,131,406 Accounts payable... 27,430,889 23,329,916 Due to related parties... 2,240,386 1,612,986 Deferred revenues... 1,362, ,064 Accrued expenses... 9,274,618 4,997,962 Other current liabilities , ,040 Accrued project cost... 8,535,528 8,849,237 53,254,493 40,243,205 Total liabilities ,920, ,098,372 Total Equity and Liabilities ,974, ,493,370 76

78 INTERIM STATEMENT OF INCOME For the three-month and six-month periods ended June 30, 2010 Three Months Ended June 30 Six Months Ended June 30 Notes Unaudited Unaudited Revenue... 9,149,532 13,154,817 Cost of service... (9,752,004) (15,331,294) (602,472) (2,176,477) Finance revenue... 8,627 3,306 32,630 8,022 Currency exchange (loss) gain... (249,273) 391,814 (129,337) 120,356 General and administrative expenses... (4,680,137) (3,635,725) (9,157,472) (6,886,196) Marketing expenses... (1,205,767) (181,167) (2,214,908) (319,397) Depreciation and amortization... (6,284,637) (207,830) (12,177,711) (256,961) Finance costs... 8 (2,315,525) (1,113,198) (4,516,980) (2,050,973) Loss for the period... (15,329,184) (4,742,800) (30,340,255) (9,385,149) 77

79 INTERIM STATEMENT OF COMPREHENSIVE INCOME For the three-month and six-month periods ended June 30, 2010 Three Months Ended June 30 Six Months Ended June Unaudited Unaudited Loss for the period... (15,329,184) (4,742,800) (30,340,255) (9,385,149) Other comprehensive income for the period... Total loss and comprehensive income for the period... (15,329,184) (4,742,800) (30,340,255) (9,385,149) 78

80 INTERIM STATEMENT OF CHANGES IN EQUITY For the six-month period ended 30 June 2010 Paid-in share capital Accumulated losses Net equity Balance at January 1, ,000,000 (46,605,002) 123,394,998 Total loss and comprehensive income for the period... (30,340,255) (30,340,255) Balance at June 30, 2010 (Unaudited) ,000,000 (76,945,257) 93,054,743 Balance at January 1, ,000,000 (17,274,837) 152,725,163 Total loss and comprehensive income for the period... (9,385,149) (9,385,149) Balance at June 30, 2009 (Unaudited) ,000,000 (26,659,986) 143,340,014 79

81 INTERIM STATEMENT OF CASH FLOWS For the six-month period ended June 30, 2010 Six Months Ended June Unaudited Unaudited Operating activities Loss for the period... (30,340,255) (9,385,149) Adjustments for: Depreciation... 6,011, ,961 Provision for employees indemnity , ,002 Loss from disposal of property and equipment... 6,738 4,990 Finance revenue... (32,630) (8,022) Finance costs... 4,516,980 2,050,973 License amortization... 6,165,784 (13,267,893) (6,900,245) Working capital changes: Prepayments and other current assets... (1,669,620) (3,868,006) Inventory ,365 (43,392) Accounts receivable... (2,563,805) Accounts payable... 4,100,973 5,562,703 Deferred revenues ,224 Accrued expenses... 4,899,781 1,872,621 Other current liabilities... (290,662) 211,979 Employees indemnity paid... (19,983) (36,810) Net cash flows used in operating activities... (8,159,620) (3,201,150) Investing activities Purchase of property and equipment... (1,305,432) (264,661) Increase in projects in progress... (3,061,247) (33,551,838) Advances to contractors... 39,812 3,996,602 Interest received... 32,630 8,022 Net cash flows used in investing activities... (4,294,237) (29,811,875) Financing activities Shareholders loan... 10,000,000 20,000,000 Syndicated loan... 44,485,625 Syndicated loan transaction cost paid... (1,073,961) (4,745,200) Interest paid... (1,507,730) Due to related parties ,400 (276,779) Net cash flows from financing activities... 8,045,709 59,463,646 (Decrease) increase in cash and cash equivalents... (4,408,148) 26,450,621 Cash and cash equivalents, beginning of period... 15,149,025 7,162,793 Cash and cash equivalents, end of period... 10,740,877 33,613,414 80

82 NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS June 30, Activities Wataniya Palestine Mobile Telecommunication Company (the Company), located in Ramallah, is a private limited shareholding company registered and incorporated in Palestine on January 27, 2007 under registration No The Company was formed with an authorized share capital of 5,000,000 shares with one par value each. The Company s General Assembly in its extraordinary meeting held on 29 July 2008 agreed to increase the Company s authorized share capital to 170,000,000 shares with one par value each. During July and November 2008, the Company s paid-in share capital was increased to 170,000,000 shares with one par value each. On March 14, 2007, the Company entered into a license agreement (the License) with the Ministry of Telecommunications and Information Technology (the MTIT) to provide 2G and 3G mobile services in the West Bank and Gaza. The term of the License shall be fifteen years from the effective date being the date on which the MTIT makes the frequencies available to the Company. The effective date was originally set on August 6, On December 16, 2009, the MTIT approved the Company s request to determine September 10, 2009 as the effective date, instead of August 6, 2008, since it represents the date on which the frequencies were actually allocated. The company started its operations on November 1, The Company s main activities are offering, managing, and selling wireless telecommunication services, as well as constructing and operating wireless telecommunication stations and telephone networks. The interim condensed financial statements of the Company were authorised for issuance by the management on July 21, Summary of significant accounting policies Basis of preparation The interim condensed financial statements of the Company have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with Company s annual financial statements as of December 31, The results for the period ended June 30, 2010 are not necessarily indicative of the results that may be expected for the financial year ending December 31, The interim condensed financial statements have been presented in United States Dollar, which is the functional currency of the company. Changes in accounting policies The accounting policies used in the preparation of the interim condensed financial statements are consistent with those used in the preparation of the annual financial statements for the year ended December 31, The following IFRS and IFRIC interpretations have been issued but are not yet effective, and have not been adopted by the Company: IFRS 9 Financial Instruments IAS 24 Related Party Disclosures (Revised) IAS 32 Classification of Rights Issues (Amendment) 3. Property and equipment During the six months ended June 30, 2010, the Company acquired property and equipment with a cost of 1,305,432 (2009: 1,090,008). Additionally, an amount of 7,510,718 was transferred from projects in progress to property and equipment during the six months ended June 30, 2010 (2009: 69,652,352). 81

83 NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Continued) June 30, Projects in progress The movement on projects in progress is as follows: June 30, 2010 December 31, 2009 Beginning balance... 7,945,219 21,309,071 Additions... 2,747,538 56,288,500 Transferred to property and equipment... (7,510,718) (69,652,352) 3,182,039 7,945, Intangible assets The movement on intangible assets is as follows: December 31, June 30, Unaudited Audited License ,871, ,871,337 Amortization... (8,243,756) (2,077,972) 176,627, ,793,365 The movement on license amortization is as follows: December 31, June 30, Unaudited Audited Beginning balance... (2,077,972) Amortization for the period/year... (6,165,784) (2,077,972) (8,243,756) (2,077,972) The company started amortising the License on 1 November 2009 being the date on which it commenced its operations. 6. Cash and cash equivalents December 31, June 30, Unaudited Audited Cash on hand... 11,876 7,292 Cash at banks and short term deposits... 10,729,001 15,141,733 10,740,877 15,149,025 As of June 30, 2010, the Company has five short term deposits amounting to 9,799,978 (2009: 14,622,332) at local banks with an annual interest rate of 0.75% (2009: 1%). 82

84 NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Continued) June 30, Interest-bearing loans and borrowings June 30, 2010 Unaudited December 31, 2009 Audited Shareholders loans Wataniya International FZ LLC (WIL)*... 23,401,529 17,701,529 Palestine Investment Fund, PLC (PIF)*... 17,653,785 13,353,785 Accrued interest (WIL)... 1,554,293 1,029,105 Accrued interest (PIF)... 1,188, ,343 43,798,115 32,860,762 Third parties loans Local banks loans... 17,270,890 17,270,890 IFC loan... 15,700,809 15,700,809 Ericsson loan... 10,990,566 10,990,566 ECA loan , ,360 44,485,625 44,485,625 Less: transaction costs directly attributable to third parties loans... (5,731,940) (5,329,045) 82,551,800 72,017,342 Non-current portion... 78,420,394 72,017,342 Current portion... 4,131,406 82,551,800 72,017,342 * On June 22, 2010, the Company entered into a new loan agreement with its shareholders for a total amount of 30,000,000. The new loan includes an unsubordinated potion of U.S $5,000,000 and a subordinated portion of 25,000,000. The loan bears annual interest rate of LIBOR plus 5.85%. The loan and the interest of the subordinated portion are repayable in full on the later of December 31, 2014 or six months after the final maturity of all or any senior loans which the company has or will obtain, whereas the repayment of the loan and interest of the unsubordinated portion is to be made when the Company has the financial ability to make payment. The Company received the first drawdown on this loan amounting to 10,000,000 in June 2010, of which 5,000,000 relates to the subordinated portion and the remaining relates to the unsubordinated portion. 8. Finance cost June 30, 2010 Unaudited June 30, 2009 Unaudited Interest on other non-current liability... 2,023,956 1,833,354 Interest on loans and borrowings... 2,014, ,521 Amortization of transaction costs ,313 25,098 4,516,980 2,050, Commitments and contingencies As of the interim condensed financial statements date, the Company has outstanding contractual commitments resulting from purchases, services and construction contracts, as well as its license. 83

85 NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Continued) June 30, 2010 Following is a summary of the outstanding commitments: June 30, 2010 Unaudited December 31, 2009 Audited Contracts and purchase orders... 15,263,469 9,994,070 License* ,600, ,600,000 * The Company entered into a license agreement with MTIT for a total price of 354,000,000. The portion of the license price of 141,600,000 relating to Gaza was not recognized in the interim condensed financial statements as the Company was not granted access to launch services in Gaza. The Company entered into an agreement to lease the office building on 27 January The lease has a life of five years with an option to renew included in the contract. Future minimum rentals payable under operating lease are as follows: June 30, 2010 Unaudited December 31, 2009 Audited Within one year , ,426 After one year but not more than five years , , , , Related party transactions Related parties represent associated companies, shareholders, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company s management. Balances with related parties included in the interim condensed financial statements are as follows: Nature of Relationship June 30, 2010 Unaudited December 31, 2009 Audited Interest-bearing loans and borrowings... Shareholders 43,798,115 32,860,762 Due to related parties... Shareholders 2,240,386 1,612,986 Transactions with related parties included in the interim condensed income statement were as follows: June 30, 2010 Unaudited June 30, 2009 Unaudited Finance cost (Including capitalized interest) , ,008 Key management personnel compensation , ,089 84

86 PART VIII DEFINITIONS AND GLOSSARY The following definitions apply throughout this Prospectus unless the context requires otherwise: 2G... Second Generation mobile phone technology. 2.5G... Twoandahalf Generation mobile phone technology, including GPRS and EDGE. 3G... Third Generation mobile phone technology. ADTV... Average daily trading volume. ADTVa... Average daily trading value. ARPU... Average revenue per user. Articles of Association... TheArticles of Association of the Company. ATMs... Automated teller machines. Bahrain... TheKingdom of Bahrain. Board... TheBoard of Directors of the Company. Board Member, Member of the Board or Director... Amember of the Board. Business... Thebusiness of the Company. Business Plan... Theten year business plan of the Company, last amended on 18 July 2010, which the Board intends will be updated on an annual basis. CAGR... Compounded annual growth rate. CBOSS Contract... Hasthemeaning given to it in the Material Contracts section of this Prospectus. Chairman... Thechairman of the Board. Closing Date... 2December Companies Law... Companies Law No. (12) of 1964, as amended, and its implementing regulations. Company or Wataniya Mobile... Wataniya Palestine Mobile Telecommunications Public Shareholding Company (registered with the Controller of Companies in the Ministry Of National Economy under No ), which will use the commercial name Wataniya Palestine. Note that the Company was previously a private limited company under the name of Wataniya Palestine Mobile Telecommunication Company Ltd. The Company was re-registered as a public shareholding company on 25 October Competent Authorities... The Capital Market Authority in Palestine, Controller of Companies in the Ministry of National Economy and/or ministry and/or authority and/or governmental related entity. 85

87 Controlled Subsidiaries... Controller of Companies... Council of Ministries... DFSA... DIFC... Direct Roaming Agreement... Disposal... EBITDA... EDGE... EME... Entities for which Qtel: (i) owns or controls (directly or indirectly) more than fifty percent (50%) of the voting share capital; (ii) has the ability to direct the casting of more than fifty percent (50%) of the votes exercisable at general meetings of such entity; or (iii) has the right to appoint or remove directors holding a majority of the voting rights at meetings of the board of directors on all, or substantially, all matters. TheController of Companies in the Ministry of National Economy. TheCouncil of Ministries in the PNA. TheDubai Financial Services Authority. TheDubai International Financial Centre. Has the meaning given to it in the Material Contracts section of this Prospectus. Any assignment, transfer, creation of any charge or encumbrance over or disposal of any Shares in any way (and Dispose shall be construed accordingly). Earnings before interest, tax, depreciation and amortisation. Enhanced data rates for GSM evolution, a digital mobile phone technology that allows increased data transmission rates and improved data transmission reliability. Electromagnetic energy. Encouragement of Investment Law... Law on Encouragement of Investment in Palestine No. (1) of 1998 of Palestine, as amended in Ericsson... Ericsson Network Contract... Ericsson Palestine... Ericsson AB. The Ericsson Network Contract referred to in the Material Contracts section of this Prospectus. Ericsson Radio Systems Aktiebolaget, Ramallah. Founders... Thefounders of the Company, whose names are listed on page 41 of this Prospectus. Founders Committee... GDP... The persons as listed in the beginning of this Prospectus appointed to a committee formed by the Founders to act on their behalf and to represent them in carrying out the necessary tasks for the Offer of the Shares of the Company. Gross domestic product. General Assembly... General meeting of the Shareholders of the Company. Government... GPRS... GSM... TheGovernment in the Palestinian National Authority. General packet radio service, a packet-oriented mobile data service available for GSM, generally classified as 2.5G. Global system for mobile communications, a second-generation mobile phone technology in which signalling and speech channels are digital. 86

88 HSBC... ICNIRP... HSBC Bank Middle East Limited. International Commission on Non-Iodising Radiation Protection. IFRS... International Financial Reporting Standards issued by the International Accounting Standards Board. Income Tax Law... Indirect Roaming Agreement... Interconnection... Income Tax Law No. (17) of 2004 of Palestine, as amended on 1 January Has the meaning given to it in the Material Contracts section of this Prospectus. Means the physical and logical linking of telecommunications networks used by the same services provider or by a number of service providers in order to allow the customers of one service provider to communicate with the customers of the same or other service provider, or to enable them to access services provided by another service provider. Interconnection Agreement... The Interconnection agreements set out in the Material Contracts section of this Prospectus. Israel... IT... TheState of Israel. Information Technology relating to support or management of computer-based information systems. IVR... Interactive voice response. Jordan... JTC... KSA CMA... Kuwait... Licence... Managed Services Agreement... TheHashemite Kingdom of Jordan. A Joint Technical Committee, being a committee consisting of technical experts representing Israel and Palestine responsible for administering certain telecommunications matters. TheCapital Market Authority of Saudi Arabia. TheState of Kuwait. The second mobile telecommunications networks and services licence in Palestine granted to the Company on 14 May Has the meaning given to it in the Material Contracts section of this Prospectus. Management Agreement... The management agreement as described in the Material Contracts section of this Prospectus. MCTI... Memorandum of Incorporation.. MENA... MHz... Ministry... MCTInvestor, L.P. The Memorandum of Incorporation of the Company as adopted by the Founders. The countries and territories of the Arab Middle East and North Africa. Mega hertz. The Ministry of National Economy in the Palestinian National Authority. 87

89 Mobile Penetration Rate... The number of mobile SIM cards used by the total number of customers of all mobile operators in a country divided by the total population of that country. MSC... Mobile Switching Centre. MTIT... NIS, ILS or Israeli New Shekel... NMTC (Wataniya Telecom)... Offer... Offer Price... The Palestinian Ministry of Telecommunications and Information Technology. The lawful currency of Israel. Incorporated in 1997 and based in Kuwait City, Wataniya Telecom (National Mobile Telecommunications Company K.S.C. or NMTC ) operates as a subsidiary of Qatar Telecom Q.S.C. (Qtel) and is a leading mobile telecommunications operator with operations in Kuwait, Tunisia, Algeria, Palestine, the Maldives and Kingdom of Saudi Arabia. NMTC is publicly listed on the Kuwait Stock Exchange. The initial public offer of Shares representing 15% of the authorised share capital of the Company. US$1.30 per Share pursuant to the Offer. Offer for Subscription... The public offer for subscription of up to 38.7 million (38,700,000) Shares made pursuant to this Prospectus and managed by the Founders. Offer Period... Offers of Securities Regulations... Oman... The period from 7 November 2010 to 2 December 2010 during which the Offer will remain open. The Offers of Securities Regulations of Saudi Arabia, as issued by the Board of the KSA CMA pursuant to resolution number dated 20/08/1424H corresponding to 04/10/2004G. TheSultanate of Oman. Order... The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 of the United Kingdom, as amended. Oslo II Agreement... Palestine or the Palestinian Territories... Palestinian Nationality... Paltel... The agreement formally known as the Interim Agreement on the West Bank and the Gaza Strip signed in Taba, Egypt by representatives of Israel and the Palestine Liberation Organisation on 24 September The territories under the controller of the PNA, the West Bank and Gaza Strip. A person holding a Palestinian passport or Nationality Identity Card and business entities incorporated, established or registered in Palestine as Palestinian companies. Palestine Telecommunications Company. PCMA or the Capital Market Authority in Palestine... The Capital Market Authority in Palestine established in accordance with the Securities Law. PIF... ThePalestine Investment Fund. 88

90 PLO... PNA... ThePalestine Liberation Organisation. ThePalestinian National Authority. PTRA... The Palestinian Telecommunications Regulatory Authority organised under the 2009 Law regarding Telecommunications. Prospectus... This document. PEX... The Palestine Exchange, formerly known as the Palestine Securities Exchange (PSE). Q1, Q2, Q3 or Q4... Refers to the first, second, third or fourth quarter of the relevant financial year. Qatar... Qualified Investor... Quartet... Qtel... Qtel Corporate Governance Manual... Qtel International... RA&FM... Receiving Banks... Related Party Transaction... Relevant person... SAR... Saudi Arabia... Saudi Investor... Regulation S... Securities Act... TheState of Qatar. A Qualified Investor within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC). Refers to the foursome of nations and supranational entities involved in mediating the peace process regarding Palestine. These are the United States, the United Nations, Russia and the European Union. Qatar Telecom (Qtel) Q.S.C. and its Controlled Subsidiaries. The manual maintained by Qtel on corporate governance matters which Qtel applies to all subsidiaries and portfolio companies in which Qtel invests. Qtel International LLC. Revenue Assurance & Fraud Management. Means those banks named as the Receiving Banks, whose names appear on the front of this Prospectus, being those banks responsible for receiving the subscription funds and issuing refund checks in case of over-subscription. Any related party transaction, contract, arrangement or proposal to be entered into by the Company which under the Articles would require a Director to abstain from voting on a Board decision on whether the Company should enter into such transaction, contract, arrangement or proposal, because either the Director or the Shareholder appointing him has an interest in such transaction, contract, arrangement or proposal. Hasthemeaning given to it on page 38 of this Prospectus. Thelawful currency of Saudi Arabia. TheKingdom of Saudi Arabia. Hasthemeaning given to it on page 39 of this Prospectus. Regulation S under the Securities Act. USSecurities Act of 1933, as amended. 89

91 Securities Law... Shareholders... Shareholders Agreement... Shares... Securities Law No. (12) of 2004 of Palestine, as amended, and its implementing regulations. The holders of Shares; and Shareholding shall be construed accordingly. Hasthemeaning given to it on page 45 of this Prospectus. The ordinary shares of one (1) US Dollar each in the share capital of the Company. SIM card... Subscriber identity module card used in mobile telecommunications devices. SMS... Subscription Form... Supplement... UAE... Short message service, a communications protocol allowing the interchange of short text messaging services between mobile telephone devices. A subscription form, available only from the Receiving Banks and to be completed and submitted in relation to the Offer. The supplement attached to this Prospectus containing the Memorandum of Incorporation and the Articles of Association of the Company. TheUnited Arab Emirates. United Kingdom or UK... TheUnited Kingdom of Great Britain and Northern Ireland. US, USA, United States or United States of America... USD, US$ or US Dollar... VAT... Wataniya International... The United States of America, including its territories and possessions (including US Minor Outlying Islands), any state of the United States of America and the District of Columbia. Thelawful currency of the United States of America. Value Added Tax. Wataniya International FZ LLC. 90

92 Advisers Sole Global Coordinator and Sole Bookrunner... Regional Coordinator... International Legal Advisers as to the Transaction... Legal Advisers as to Palestinian Law... Auditors... HSBC Bank Middle East Limited Level 2, Building 5, Emaar Square, PO Box , Dubai, UAE Al-Arabi Investment Group Al-Tahta, P.O. Box 1476, Ramallah, Palestine Latham & Watkins LLP Precinct Building 1, Level 3, Dubai International Financial Centre, PO Box , Dubai, UAE Amro & Associates Law Office Al Sheikh Commercial Tower, Jerusalem Nablus Street, P.O. Box 1903, Ramallah, Palestine Ernst & Young 300 King Abdulla Street, P.O. Box 1140, Amman 11118, Jordan 91

93 Receiving Banks... HSBC Bank Middle East Limited Jaffa Street, P.O. Box 2067, Ramallah, Palestine Arab Bank plc Al-Tahta, P.O. Box 1476, Ramallah, Palestine Bank of Palestine Court Street, Ein Musbah, P.O. Box 471, Ramallah, Palestine Palestine Commercial Bank Nahda Street, Al-Masyoun, P.O. Box 1799, Ramallah, Palestine Palestine Islamic Bank Al-Quds Street, P.O. Box 2106, Ramallah, Palestine Qatar National Bank P.O. Box 1000 Doha Qatar Quds Bank Al-Quds Street, Al-Masyoun, P.O. Box 2471, Ramallah, Palestine 92

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95 WATANIYA PALESTINE MOBILE TELECOMMUNICATIONS PUBLIC SHAREHOLDING COMPANY Initial Public Offer of 38,700,000 shares representing 15% of the authorised share capital of Wataniya Palestine Mobile Telecommunications Public Shareholding Company at an Offer Price of US$1.30 per Share SUPPLEMENT S-1

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