Emirates Telecommunications Corporation

Transcription

1 Review report and condensed consolidated interim financial information for the period ended 31 March 2014

2 Review report and interim financial information for the period ended 31 March 2014 Contents Pages Management Report 1 Independent auditor's review report to the Board of Directors 2 Condensed consolidated interim statement of profit or loss 3 Condensed consolidated interim statement of comprehensive income 4 Condensed consolidated interim statement of financial position 5 Condensed consolidated interim statement of changes in equity 6 Condensed consolidated interim statement of cash flows 7 Notes to the condensed consolidated interim financial information 8-17

3 Management report on the condensed consolidated interim financial information for the period ended 31 March 2014 Financial Review 1. Revenue, profit and earnings per share The Group's financial performance in the three month period ended 31 March 2014 is summarised in the financial metrics below: i) Consolidated revenue amounted to 9,889.4 million, exhibiting an AED million (3.1%) increase over the corresponding period in the prior year. ii) Profit attributable to the equity holders of the Corporation amounted to AED 2,024.1 million, exhibiting an increase of AED million when compared to the corresponding period in the prior year. iii) Earnings per share increased by AED 0.03 when compared to the corresponding period in the prior year. 2. Corporate net assets As compared to 31 December 2013, the Group's net assets increased by AED million to AED 49,769 million as at 31 March Capital expenditure The Group incurred AED million on capital expenditure in the three month period ended 31 March 2014 (AED 1,060 million in the three month period ended 31 March 2013). 4. Dividends A final dividend for the year 2013 at the rate of AED 0.35 per share was approved for distribution to the shareholders registered in the Shareholders' Register at the close of business on Sunday, 06 April The dividend distribution commenced from Sunday, 13 April This brought the total dividend for the year 2013 to AED 0.70 per share. 5. International operations On 22 July 2013, the Group made a binding offer that valued Vivendi s 53% stake in Itisalat Al Maghrib ( Maroc Telecom ) share at MAD 92.6, amounting to a consideration of EURO 3.9 billion (equivalent to AED 19.3 billion) for Vivendi s 53% stake. The above consideration does not include the dividend received by Vivendi from Maroc Telecom in respect of the 2012 financial year, equivalent to MAD 7.40 per share, which will also be for the benefit of Etisalat. At closing, Etisalat will pay Vivendi the cash value of such 2012 dividend of Euro 0.3 billion (equivalent to AED 1.5 billion). On 4 November 2013, the Group signed a Share Purchase Agreement for the acquisition of Vivendi s 53% stake in Maroc Telecom. Closing of the transaction would be subject to a number of conditions which are expected to be fulfilled in These conditions include, among others, the execution of a shareholders agreement with the Kingdom of Morocco regarding Maroc Telecom and securing competition and regulatory approvals in the Kingdom of Morocco and certain other jurisdictions in Maroc Telecom s footprint. Etisalat is planning to finance the transaction through external borrowings and has already secured a commitment to provide the requisite funds from a syndicate of local and international banks. Etisalat s Extraordinary General Assembly Meeting that was held on 28 May 2013 approved the Board s recommendation to raise external funding in excess of the Corporation s capital, as per Etisalat s Articles of Association. 1

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5 Condensed consolidated interim statement of profit or loss for the period ended 31 March Notes AED 000 AED 000 Revenue 3 9,899,426 9,604,348 Operating expenses 4 (6,119,405) (5,763,346) Share of results of associates and joint ventures , ,163 Operating profit before federal royalty 4,155,225 3,983,165 Federal royalty 4 (1,900,632) (1,829,454) Operating profit 2,254,593 2,153,711 Finance income 3 151, ,026 Finance costs 3 (80,231) (115,567) Profit before tax 2,325,646 2,251,170 Taxation (173,128) (131,753) Profit for the period 2,152,518 2,119,417 Profit attributable to: The equity holders of the Corporation 2,024,140 1,824,633 Non-controlling interests 128, ,784 Earnings per share Three months ended 31 March 2,152,518 2,119,417 Basic and diluted 6 AED 0.26 AED 0.23 The accompanying notes on pages 8 to 17 form an integral part of the condensed consolidated interim financial information. 3

6 Condensed consolidated interim statement of comprehensive income for the period ended 31 March 2014 Three months ended 31 March Notes AED 000 AED 000 Profit for the period 2,152,518 2,119,417 Other comprehensive income / (loss) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations 934,899 (673,810) Loss on revaluation of available-for-sale financial assets (108,266) (44,393) Reclassification adjustment relating to available-for-sale financial asset on disposal 15 (36,874) - Total other comprehensive income/ (loss) 789,759 (718,203) Total comprehensive income for the period 2,942,277 1,401,214 Attributable to: The equity holders of the Corporation 2,289,367 1,332,802 Non-controlling interests 652,910 68,412 2,942,277 1,401,214 The accompanying notes on pages 8 to 17 form an integral part of the condensed consolidated interim financial information. 4

7 Condensed consolidated interim statement of financial position as at 31 March 2014 As at 31 March December 2013 Notes AED 000 AED 000 Non-current assets Goodwill 9 5,846,061 5,552,266 Other intangible assets 9 9,367,162 9,447,281 Property, plant and equipment 10 31,957,883 31,319,161 Investment property 11 40,782 41,211 Investments in associates and joint ventures 9,14 7,178,424 7,062,009 Other investments , ,984 Trade and other receivables , ,981 Loans to related party 16 2,390,194 2,390,194 Deferred tax assets 8 251, ,042 58,545,983 57,518,129 Current assets Inventories , ,232 Trade and other receivables 7 11,469,760 10,613,248 Current income tax assets 8 435, ,396 Due from associates and joint ventures , ,833 Other investments held for sale 15,29 373, ,448 Cash and cash equivalents 8 18,823,473 15,450,248 32,268,257 28,197,405 Total assets 3 90,814,240 85,715,534 Non-current liabilities Trade and other payables , ,565 Borrowings 21 3,945,690 4,467,122 Payables related to investments and licenses 22 54,710 68,751 Deferred tax liabilities 8 1,802,786 1,749,839 Finance lease obligations 23 2,393 2,460 Provisions , ,089 Provision for end of service benefits 26 2,033,955 1,911,773 9,019,103 9,229,599 Current liabilities Trade and other payables 9 26,154,243 21,164,411 Borrowings 21 1,558,850 1,404,543 Payables related to investments and licenses 22 2,947,675 2,963,623 Current income tax liabilities 8 181, ,812 Finance lease obligations 23 2,273 2,564 Provisions 24 1,181,528 1,172,286 32,026,116 26,893,239 Total liabilities 41,045,219 36,122,838 Net assets 49,769,021 49,592,696 Equity Share capital 27 7,906,140 7,906,140 Reserves 28 28,532,207 28,266,980 Retained earnings 3,617,212 4,359,024 Equity attributable to the equity holders of the Corporation 40,055,559 40,532,144 Non-controlling interests 12 9,713,462 9,060,552 Total equity 49,769,021 49,592,696 The accompanying notes on pages 8 to 17 form an integral part of the condensed consolidated interim financial information. 5

8 Condensed consolidated interim statement of changes in equity for the period ended 31 March 2014 Share capital Reserves Retained earnings Owners' equity Noncontrolling interests Total equity Notes AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 Balance at 1 January ,906,140 29,115,839 3,492,333 40,514,312 9,398,260 49,912,572 Total comprehensive income for the period Transaction with owners: Attributable to equity holders of the Corporation - (491,831) 1,824,633 1,332,802 68,412 1,401,214 Dividends (3,556,224) (3,556,224) - (3,556,224) Balance at 31 March ,906,140 28,624,008 1,760,742 38,290,890 9,466,672 47,757,562 Balance at 1 January ,906,140 28,266,980 4,359,024 40,532,144 9,060,552 49,592,696 Total comprehensive income for the period - 265,227 2,024,140 2,289, ,910 2,942,277 Transaction with owners: Dividends (2,765,952) (2,765,952) - (2,765,952) Balance at 31 March ,906,140 28,532,207 3,617,212 40,055,559 9,713,462 49,769,021 The accompanying notes on pages 8 to 17 form an integral part of the condensed consolidated interim financial information. 6

9 Condensed consolidated interim statement of cash flows for the period ended 31 March Notes AED 000 AED 000 Operating profit 2,254,593 2,153,711 Adjustments for: Depreciation 10, , ,475 Amortisation 9 193, ,465 Share of results of associates and joint ventures 13 (375,204) (142,163) Provisions and allowances 104,268 (272,328) Operating profit before changes in working capital 3,084,588 2,840,160 Changes in working capital: Three months ended 31 March Inventories (30,933) (265,625) Due from associates and joint ventures 46,773 70,047 Trade and other receivables (973,680) 184,212 Trade and other payables 2,334,199 1,505,514 Cash generated from operations 4,460,947 4,334,308 Income taxes paid (64,811) (77,169) Payment of end of service benefits 26 (41,787) (293,675) Net cash generated from operating activities 4,354,349 3,963,464 Cash flows from investing activities Net proceeds from disposal / (acquisition) of other investments 33,144 (96,949) Proceeds from capital reduction of a joint venture 14-40,000 Loans to associates - (89,306) Purchase of property, plant and equipment (825,148) (919,922) Proceeds from disposal of property, plant and equipment 8,499 8,751 Purchase of other intangible assets (84,968) (139,732) Proceeds from disposal of intangible assets Dividend income received from associates and other investments 270, ,120 Finance income received 96, ,062 Net cash used in investing activities (501,023) (769,976) Cash flows from financing activities Proceeds from borrowings and finance lease obligations 312, ,884 Repayments of borrowings and finance lease obligations (710,644) (245,333) Finance costs paid (80,231) (117,761) Net cash used in financing activities (478,665) (159,210) Net increase in cash and cash equivalents 3,374,661 3,034,278 Cash and cash equivalents at the beginning of the year 15,450,248 13,934,076 Effect of foreign exchange rate changes (1,436) (25,660) Cash and cash equivalents at the end of the year 8 18,823,473 16,942,694 The accompanying notes on pages 8 to 17 form an integral part of the condensed consolidated interim financial information. 7

10 Notes to condensed consolidated interim financial information for the period ended 31 March General information The Emirates Telecommunications Corporation Group ( the Group ) comprises the holding company Emirates Telecommunications Corporation ( the Corporation ) and its subsidiaries. The Corporation was incorporated in the United Arab Emirates ( UAE ), with limited liability, in 1976 by UAE Federal Government decree No. 78, which was revised by the UAE Federal Act No. (1) of 1991 and further amended by Decretal Federal Code No. 3 of 2003 concerning the regulation of the telecommunications sector in the UAE. In accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The address of the registered office is P.O. Box 3838, Abu Dhabi, United Arab Emirates. The Corporation s shares are listed on the Abu Dhabi Securities Exchange. The principal activities of the Group are to provide telecommunications services, media and related equipment including the provision of related contracting and consultancy services to international telecommunications companies and consortia. These activities are carried out through the Corporation (which holds a full service license from the UAE Telecommunications Regulatory Authority valid until 2025), its subsidiaries, associates and joint ventures. This condensed consolidated interim financial information was approved by the Board of Directors and authorised for issue on 27 April Significant accounting policies The significant accounting policies adopted in the preparation of this consolidated interim financial information are set out below. Basis of preparation The interim consolidated condensed interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated interim financial information does not include all the information and disclosures required in the annual audited consolidated financial statements, and should be read in conjunction with the Group s latest annual audited consolidated financial statements. The condensed consolidated interim financial information is presented in UAE Dirhams (AED) which is the Corporation's functional and presentational currency, rounded to the nearest thousand except where otherwise indicated. The condensed consolidated interim financial information has been prepared under the historical cost convention, except for the revaluation of certain financial instruments that have been recorded at fair value. New and amended standards adopted by the Group The accounting policies adopted in the preparation of the condensed consolidated interim financial information are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations effective as of 1 January The following revised IFRSs have been adopted in this consolidated condensed interim financial information. The application of these revised IFRSs has not had any material impact on the amounts reported for the current and prior periods but may affect the accounting for future transactions or arrangements. Amendments to IAS 32 Financial Instruments: Presentation relating to offsetting financial assets and liabilities Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements relating to investment entities and exemption of consolidation of particular subsidiaries Amendments to IAS 36 Impairment of Assets relating to recoverable amount disclosures for non-financial assets Amendments to IAS 39 Financial instruments Recognition and Measurement amendments for novations of derivatives and continuation of hedge accounting IFRIC 21 Levies Guidance on when to recognize a levy imposed by a government 8

11 Notes to condensed consolidated interim financial information for the period ended 31 March Significant accounting policies (continued) New and amended standards in issue but not yet effective At the date of the interim condensed consolidated interim financial information, the following Standards, Amendments and Interpretations have not been effective but have not been early adopted: Effective date IFRS 9 Financial Instruments (as amended in 2010) Not earlier than 1 January 2018 Amendment to IFRS 7 Financial Instruments: Disclosures relating to transition to IFRS 9 (or When IFRS 9 is otherwise when IFRS 9 is first applied) first applied IFRS 14 Regulatory deferral accounts 1 January 2016 Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1 July 2014 Amendments to IAS 39 Financial instruments Continuation of hedge accounting When IFRS 9 is first applied Annual Improvements Cycle, IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16 and 38 and IAS 1 July Annual Improvements Cycle, IFRS 1, IFRS 3, IFRS 13 and IAS 40 1 July 2014 Management anticipates that the application of the above Standards and Interpretations in future periods will have no material impact on the consolidated financial statements of the Group in the period of initial application. As required by the Securities and Commodities Authority ( SCA ) notification dated 12 October 2008, accounting policies related to investment in associates and joint ventures, investment property and financial assets have been disclosed in the notes below. Associates and joint ventures A joint venture is a joint arrangement whereby the Group has joint control of the arrangement and has corresponding rights to the net assets of the arrangement. Associates are those companies over which Group exercises significant influence but it does not control those companies. Investments in associates and joint ventures are accounted for using the equity method of accounting. Investments in associates and joint ventures are carried in the consolidated statement of financial position at cost as adjusted by post-acquisition changes in the Group s share of the net assets of the associates and joint ventures less any impairment in the value of individual investments. Losses of the associates and joint ventures in excess of the Group s interest are not recognised unless the Group has incurred legal or constructive obligations. The carrying values of investments in associates and joint ventures are reviewed on a regular basis and if an impairment in the value has occurred, it is written off in the period in which those circumstances are identified. Any excess of the cost of acquisition over the Group s share of the fair values of the identifiable net assets of the associates at the date of acquisition is recognised as goodwill and included as part of the cost of investment. Any deficiency of the cost of acquisition below the Group s share of the fair values of the identifiable net assets of the associates at the date of acquisition is credited to the consolidated statement of profit or loss in the year of acquisition. The Group s share of associates and joint ventures results is based on the most recent financial statements or interim financial statements drawn up to the Group s reporting date. Accounting policies of associates and joint ventures have been adjusted, where necessary, to ensure consistency with the policies adopted by the Group. Profits and losses resulting from upstream and downstream transactions between the Group (including its consolidated subsidiaries) and its associate or joint ventures are recognised in the Group s financial statements only to the extent of unrelated group s interests in the associates or joint ventures. Losses may provide evidence of an impairment of the asset transferred, in which case appropriate provision is made for impairment. Dilution gains and losses arising on deemed disposal of investments in associates and joint ventures are recognised in the consolidated statement of profit or loss. 9

12 Notes to condensed consolidated interim financial information for the period ended 31 March Significant accounting policies (continued) Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is carried at cost less accumulated depreciation and impairment loss. Investment properties are depreciated on a straight-line basis over the lesser of 20 years and the period of the lease. Financial assets i) Held-to-maturity investments Bonds and Sukuk bonds with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. The Group considers the credit risk of counterparties in its assessment of whether such financial instruments are impaired. ii) Available-for-sale financial assets ( AFS ) Listed securities held by the Group that are quoted in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investment revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in the consolidated statement of profit or loss. Dividends on AFS equity instruments are recognised in the consolidated statement of profit or loss when the Group s right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate prevailing at the reporting date. The foreign exchange gains/losses that are recognised in the consolidated statement of profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains/losses are recognised in the consolidated statement of changes in equity. The Group assesses at each reporting date whether there is objective evidence that AFS assets are impaired. In the case of equity securities, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. Impairment losses recognised in the consolidated statemet of profit or loss on equity instruments are not reversed through the consolidated statement of profit or loss. 10

13 Notes to condensed consolidated interim financial information for the period ended 31 March Segmental information Information regarding the Group s operating segments is set out below in accordance with IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Group s chief operating decision maker and used to allocate resources to the segments and to assess their performance. a) Products and services from which reportable segments derive their revenues The Group is engaged in a single line of business, being the supply of telecommunications services and related products. The majority of the Group s revenues, profits and assets relate to its operations in the UAE. Outside of the UAE, the Group operates through its subsidiaries and associates in sixteen countries which are divided in to the following operating segments: Pakistan Egypt International - others Revenue is attributed to an operating segment based on the location of the Group company reporting the revenue. Intersegment sales are charged at arms length prices. b) Segment revenues and results Segment results represent operating profit earned by each segment without allocation of finance income, finance costs and federal royalty. This is the measure reported to the Group s Board of Directors ( Board of Directors ) for the purposes of resource allocation and assessment of segment performance. The Group s share of results from associates and joint ventures has been allocated to the segments based on the geographical location of the operations of the associate and joint venture investments. The allocation is in line with how results from investments in associates and joint ventures are reported to the Board of Directors. c) Segment assets For the purposes of monitoring segment performance and allocating resources between segments, the Board of Directors monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments. The segment information has been provided in the following page. 11

14 Notes to the condensed consolidated interim financial information for the period ended 31 March Segmental information International UAE Egypt Pakistan Others Eliminations Consolidated AED 000 AED 000 AED 000 AED 000 AED 000 AED 000 Three months ended 31 March 2014 Revenue External sales 6,658,270 1,139,117 1,076,922 1,025,117-9,899,426 Inter-segment sales 105,265 6, ,383 13,120 (228,699) - Total revenue 6,763,535 1,146,048 1,180,305 1,038,237 (228,699) 9,899,426 Segment result 3,408, , , ,479 4,155,225 Federal royalty (1,900,632) Finance income 151,284 Finance costs (80,231) Profit before tax 2,325,646 Taxation (173,128) Profit for the period 2,152,518 Total assets at 31 March ,713,325 13,734,856 19,579,122 15,619,007 (19,832,070) 90,814,240 Three months ended 31 March 2013 Revenue External sales 6,175,435 1,127,003 1,217,009 1,084,901-9,604,348 Inter-segment sales 148,817 8,721 15,371 24,178 (197,087) - Total revenue 6,324,252 1,135,724 1,232,380 1,109,079 (197,087) 9,604,348 Segment result 3,499,579 95, , ,949-3,983,165 Federal royalty (1,829,454) Finance income 213,026 Finance costs (115,567) Profit before tax 2,251,170 Taxation (131,753) Profit for the period 2,119,417 Total assets at 31 December ,557,080 13,766,144 18,117,964 15,352,603 (20,078,257) 85,715,534 12

15 Notes to the condensed consolidated interim financial information for the period ended 31 March Operating expenses and federal royalty Three months ended 31 March a) Operating expenses (before federal royalty) AED 000 AED 000 Direct cost of sales 2,175,600 2,081,295 Staff costs 1,285,448 1,287,466 Depreciation 907, ,475 Network and other related costs 552, ,204 Amortisation 193, ,465 Regulatory expenses 176, ,564 Marketing expenses 162, ,636 Foreign exchange losses 57,665 92,738 Operating lease rentals 33,973 27,604 Other operating expenses 574, ,899 Operating expenses (before federal royalty) 6,119,405 5,763,346 b) Federal Royalty In accordance with the Cabinet decision No. 558/1 for the year 1991, the Corporation was required to pay a federal royalty, equivalent to 40% of its annual net profit before such federal royalty, to the UAE Government for use of federal facilities. With effect from 1 June 1998, Cabinet decision No. 325/28M for 1998 increased the federal royalty payable to 50%. On 9 December 2012 the Cabinet of Ministers of UAE issued decision no. 320/15/23 of 2012 in respect of a new royalty mechanism applicable to Etisalat. Under the new mechanism a distinction is made between revenue earned from services regulated by Telecommunications Regulatory Authority ( TRA ) and non-regulated services as well as between foreign and local profits. Etisalat is required to pay 15 % royalty fee on the UAE regulated revenues and 35 % of net profit after deduction of the 15 % royalty fee on the UAE regulated revenues. In respect of foreign profit, the 35 % royalty is reduced by the amount that the foreign profit has already been subject to foreign taxes. Ministry of Finance have confirmed via their letter dated 29 January 2014 that the mechanism of calculating the royalty fee for the year ended 31 December 2013 will follow the same principles that were applicable for the calculation of royalty fees for the year ended 31 December The mechanism for computation of Federal royalty for the period ended 31 March 2014 is consistent with the mechanism followed for the computation of the Federal royalty for the year ended 31 December The federal royalty has been treated as an operating expense in the consolidated condensed interim statement of profit or loss on the basis that the expenses the Corporation would otherwise have had to incur for the use of the federal facilities would have been classified as operating expenses. 5. Dividends Amounts recognised as distribution to equity holders: AED 000 Three months ended 31 March 2013 Final dividend for the year ended 31 December 2012 of AED 0.45 per share 3,556,224 Three months ended 31 March 2014 Final dividend for the year ended 31 December 2013 of AED 0.35 per share 2,765,952 13

16 Notes to the condensed consolidated interim financial information for the period ended 31 March Earnings per share Earnings (AED'000) Earnings for the purposes of basic earnings per share being the profit attributable to the equity holders of the Corporation Three months ended 31 March ,024,140 1,824,633 Number of shares ('000) Weighted average number of ordinary shares for the purposes of basic earnings per share 7,906,140 7,906,140 Earnings per share AED 0.26 AED 0.23 The Group does not have potentially dilutive shares and accordingly, diluted earnings per share equals to basic earnings per share. 7. Trade and other receivables As at 31 March 2014, trade and other receivables include a net amount of AED 5,813 million (2013: AED 5,073 million) receivable for services rendered and an amount of AED 3,229 million (2013: 2,985 million) due from other telecommunication operators/carriers. 8. Cash and cash equivalents As at 31 March December 2013 AED 000 AED 000 Cash and cash equivalents 18,823,473 15,450,248 of which maintained locally 16,864,681 13,834,412 of which maintained overseas, unrestricted in use 1,707,710 1,448,825 of which maintained overseas, restricted in use 251, ,011 Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. These are denominated primarily in UAE Dirham, with financial institutions and banks. Interest is earned on these deposits at prevailing market rates. The carrying amount of these assets approximates to their fair value. 9. Trade and other payables As at 31 March 2014, trade and other payables include an amount of AED 8,030 million (2013: AED 6,129 million) payable towards Federal royalty and an amount of AED 2,766 million (2013: 272 million) towards dividend payable. 10. Share of results of associates and joint ventures During the period ended 31 March 2013, the Group has reassessed its accounting treatment for share of results of one of its associates. Consequently, the Group has discontinued the recognition of the share of the results of that associate with effect from 01 January

17 Notes to the condensed consolidated interim financial information for the period ended 31 March Contingent liabilities a) Derivative financial instruments Derivative financial instruments representing the fair value of a written put option over the equity of a former subsidiary amounting to AED 355 million are treated as contingent liability. b) Foreign exchange regulations On 23 July 2011, Etisalat DB Telecom Pvt Limited ("the Company") received a show cause notice from the Directorate of Enforcement (ED) of India alleging certain breaches of the Foreign Exchange Management Act, 1999 (FEMA), by the Company and its Directors. The Company and its Directors have filed their response(s) to the notice and the cases of each of the notices have been part heard by the ED. The proceedings of the case are ongoing at the statement of financial position date. c) Other contingent liabilities The Group is disputing certain charges from the regulatory and other Government agencies in the UAE and certain other jurisdictions but it does not expect any material adverse effect on the Group's financial position and results from resolution of these. 12. Capital Commitments The Group has approved capital projects and investments commitments to the extent of AED 5,067 million (2013: AED 5,448 million). 13. Related party transactions Transactions between the Corporation and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transaction between Group and its associates are disclosed below: a) Federal Government and state controlled entities As stated in Note 1, in accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The Group provides telecommunication services to the Federal Government (including ministries and local bodies). These transactions are at normal commercial terms. The credit period allowed to the Government customers ranges from 90 to 120 days. At 31 March 2014, trade receivables include an amount of AED 1,059 million (2013: AED 1,123 million), receivable from Federal Ministries and local bodies. See note 4 and 9 for disclosure of the royalty payable to the Federal Government of the UAE. In accordance with IAS 24 (revised 2009) Related Party Disclosures the Group has elected not to disclose transactions with the UAE Federal Government and other entities over which the Federal Government exerts control, joint control or significant influence. The nature of the transactions that the Group has with such related parties is the provision of telecommunication services. b) Joint ventures and associates Associates Joint Ventures AED millions AED millions AED millions AED millions Trading transactions for the three months ended 31 March Telecommunication services sales Telecommunication services purchases Management and other services Net amount due from related parties as at 31 March 2014 / 31 December Loans to related party Loans due from related party as at 31 March 2014 / 31 December , , Sales to related parties comprise management fees and the provision of telecommunication products and services (primarily voice traffic and leased circuits) by the Group. Purchases relate exclusively to the provision of telecommunication products and services by associates to the Group. The loans due from related party is subordinated to external borrowings. 15

18 Notes to the condensed consolidated interim financial information for the period ended 31 March Finance and other income The Group follows the criteria of IAS 39 to determine whether its financial assets are impaired and accordingly the Group has assessed that its loan and interest receivable due from one of its related parties may be impaired. The Group has accounted for an impairment of AED million (2013: Nil) in relation to the loan and interest receivable during the period. 15. Comparatives The comparative figures for 2013 have been reclassified to conform with the current year's presentation of operating expenses (before federal royalty), so that they appropriately reflect the nature of transactions. This reclassification does not have an impact on the profit or the statement of financial position in the current or prior year. 16. Reserves The movement in the Reserves is provided below: AED 000 AED 000 As at 1 January 28,266,980 29,115,838 Total comprehensive income for the year 265,227 (491,831) As at 31 March 28,532,207 28,624,007 The movement for each type of reserves is provided below: AED 000 AED 000 Translation reserve As at 1 January (2,209,882) (1,100,346) Total comprehensive income for the year 410,940 (448,367) As at 31 March (1,798,942) (1,548,713) Investment revaluation reserve As at 1 January 204,478 80,108 Loss on revaluation (108,839) (43,464) Reclassification adjustment relating to available-for-sale financial assets on disposal (36,874) - As at 31 March 58,765 36,644 Development reserve As at 31 March 7,850,000 7,850,000 Asset replacement reserve As at 31 March 8,166,000 8,108,000 Statutory reserve As at 31 March 165,077 97,561 General reserve As at 31 March 14,091,307 14,080,515 16

19 Notes to the condensed consolidated interim financial information for the period ended 31 March Significant Events Following the Supreme Court of India's cancellation of all of Etisalat DB Telecom Private Limited's ("the Company") licenses removing the Company's ability to operate its current mobile telecommunications business, on 22 February 2012 the Board of the Company unanimously decided to shut down its network and gave the appropriate notices to the indian authorities. Furthermore, the resignation of the directors of the Company appointed by the majority shareholders without replacement adversely affected the ability of the Company's Board of Directors to take decisions. Subsequent to this, Etisalat Mauritius Limited (owned by Etisalat Corporation) filed proceedings on 12 march 2012 for the just and equitable winding up of the Company, which are ongoing. On 3 July 2012, the Bombay High Court appointed indian law firm, as the Authorised Person to manage the Company pending the Bombay High Court's decision on the admission of the just and equitable winding up Petition submitted by Etisalat Mauritius Limited. In November 2013, the High Court in Bombay admitted the petition and confirmed the Authorised Person shall remain in place until further orders. This decision was appealed by one of the Company's shareholders. The appeal was dismissed by the Appeal Court on 08 April However on request of the opposing shareholder the Appeal Court has stayed its order to a limited extent relating to publication of the winding up notice and appointment of official liquidator until 15 July