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Annual Report 2012
Global Connection
Independent Auditor
Ernst & Young
Depository Bank
Bank of New York Mellon
Ticker Symbol
Egyptian Stock Exchange: GTHE.CA
London Stock Exchange: GLTD LI
Requests for Corporate Information
Global Telecom Holding S.A.E.
2005A, Nile City Towers- South Tower
Corniche El Nile- Ramlet Beaulac, 11221, Cairo, Egypt
Investor Relations
Mamdouh Abdel Wahab
Head of Investor Relations
IR@gtelecom.com
+20 (2) 2461 5050/51
Contents
ORASCOM TELECOM
renamed to GLOBAL TELECOM
The Company is pleased to announce that it has
changed its name to “Global Telecom Holding S.A.E.”.
This gives effect to the decision of the shareholders at
the Extraordinary General Assembly meeting held on
November 12, 2012.
This name change has been effective since August
2013. Financial statements for the company for the year
2012 are published under the name Orascom Telecom.
2
Financial Highlights and KPIs
6
Message from the Chairman and the CEO
8
2012 Main Events
10
Business Review
26
Corporate Governance
28
Investor Information
32
Corporate Social Responsibility
34
Financial Review
102
Glossary of Terms
Financial highlights
7
Strong performance
across the board
Countries &
Brands
“2012 proved to be an exceptional year for Global Telecom,
in which we witnessed profitable organic growth in most of
our operations.”
Jo Lunder,
Chairman
Group Key Indicators
SUBSCRIBERS
2011
2012
84m
REVENUE
2011
2012
3,627m
EBITDA
2011
2012
2011
Revenue
3,627
3,636
EBITDA
1,755
1,647
EBITDA margin (%)
48.4%
45.3%
Net income
(205)
661
Earnings per share
(0.04)
0.13
387
816
2,732
3,022
in US$ millions
2012
1,755m
CAPEX
Net Debt 1
1. Net Debt is calculated as the sum of short term and long term debt, less cash and cash equivalents.
2
Financial Highlights
Annual Report 2012
at a glance
Diverse
markets
7
14,000
84m
451m
Global Telecom serves a
population of 451 million with an
average penetration of 56%
Countries & Brands
Employees worldwide
Subscribers
population Coverage
Canada
Algeria
Central
African
Republic
Population
Population
Population
Population
Population
Population
Population
Mobile penetration
Mobile penetration
Mobile penetration
Mobile penetration
Mobile penetration
Mobile penetration
Mobile penetration
Subscribers
Subscribers
Subscribers
Subscribers
Subscribers
Subscribers
Subscribers
Market Position
Market Position
Market Position
Market Position
Market Position
Market Position
34 million
72%
0.6 million
37 million
87%
16.7 million
1
4
At a glance
5 million
20%
0.4 million
1
Zimbabwe
Burundi
Pakistan
Bangladesh
13 million
69%
2.6 million
2
10 million
22%
1.4 million
1
190 million
64%
36.1 million
1
161 million
60%
25.9 million
2
Annual Report 2012
Message from
the Chairman
and CEO
“Organic EBITDA grew an
impressive 7%, surpassing
revenue growth, which was
flat year-over-year.”
“2012 proved to be an exceptional
year for Global Telecom in which we
witnessed profitable organic growth in
most of our operations, with resilient
market leadership in Algeria in spite
of the ongoing restrictions, successful
cost saving initiatives in Pakistan
and healthy subscribers’ growth
momentum in Bangladesh despite the
regulatory changes.
During my first year as Chairman,
we focused our efforts on increasing
cash flows by driving profitable
growth, operational excellence and
capital efficiency across the board.
We have also increased our subscriber
base and our penetration in key
markets, while focusing on operational
efficiency.
Moving forward, GTH is well
positioned to take advantage of data
growth opportunities in our operating
markets as the Company is ready
to pursue 3G opportunities, while
continuing to capture market positions.”
Another exceptional
year for Global Telecom
6
Message from the Chairman and CEO
Jo Lunder
Chairman
Global Telecom Holding
“It was another exciting year for GTH with our
operations achieving profitable growth for 2012.
Organic EBITDA grew an impressive 7%, surpassing
revenue growth, which was flat year-over-year.
This organic EBITDA growth was driven by our broad
operational excellence and cost savings initiatives,
leading to profitable growth. In Algeria, Djezzy
maintained its leadership position in the market,
despite the continuous challenges faced by our Algerian
subsidiary due to actions from a number of government
authorities. Revenues increased 6%, mainly driven
by growth in the subscriber base. EBITDA increased
at a similar rate driven by top-line growth. Djezzy also
celebrated its 10th anniversary in 2012.
In Pakistan, the subscriber base grew 6%, despite
the recently imposed regulatory restrictions on
retail channel sales and on the back of good churn
management. Revenues increased 8% for the year,
driven by the increase in subscribers and the focus
on voice, data and VAS offerings. However this strong
growth was negatively impacted during the fourth
quarter by the government enforced shutdown of
all cellular networks in major cities due to security
reasons. EBITDA increased 14%, reflecting the impact
of our profitable growth strategy and operational
efficiency initiatives coupled with revenue growth.
We also signed an agreement with leading vendors
for modernizing the nationwide mobile network with
the latest state of the art technology to ensure the
highest level of efficiency and to be 3G-ready once the
licenses are launched.
In Bangladesh, the subscriber base increased 9%,
while revenues grew 20% in 2012. Growth was driven
by a higher level of VAS and data adoption, as well as
targeted start-up and reactivation promotions, offset
somewhat by the negative impact of the regulator
directives of disconnecting high value suspected
VoIP customers on top line. EBITDA increased by
26% for the year, primarily as a result of savings on
commercial OPEX (lower SIM tax subsidy).
Telecel Globe subscribers increased 42% primarily driven
by a surge in the subscriber base in Zimbabwe as a
result of increased penetration into rural areas, as well
as improved sales and distribution channel performance.
In Canada, our subscriber base increased 47% to
approximately 590,000 in 2012, with the WIND
brand becoming one of the fastest growing mobile
operators in the Canadian market, well positioned
to become Canada’s fourth national operator. WIND
Mobile continued its “Value Plus” strategy execution,
adding primarily postpaid subscribers, while carefully
managing prepaid economics for both voice and mobile
broadband customers.”
Ahmed Abou Doma
CEO
Global Telecom Holding
Annual Report 2012
2012 Main Events
January
April
November
Appointment of GTH’s new
Chairman, Mr. Jo Lunder
GTH submission of a formal
Notice of Arbitration against
Algeria
GTH shareholders’ approval of
Company name change, service
agreement with VimpelCom Ltd. and
restructuring of WIND Mobile Canada
GTH’s Board of Directors elected
Mr. Jo Lunder to the position of
Chairman, replacing Mr. Khaled
Bichara. Mr. Lunder will focus
his efforts on the execution of
the operational strategy, which
will deliver profitable growth
through operational excellence
and the efficient use of capital. Mr.
Lunder has served as the CEO of
VimpelCom Ltd. since July 2011.
Conclusion of OTMT’s demerger
2012
Main Events
Trading resumed on GTH’s shares
and GDRs post conclusion of the
demerger of Orascom Telecom
Media and Technology Holding
S.A.E. (“OTMT”) from GTH after
the Egyptian Financial Supervisory
Authority (“EFSA”) granted its
approval to conclude the demerger,
as part of the merger agreement
between VimpelCom Ltd. and WIND
Telecom SPA.
March
OTA appeal to the judgment
by the Algerian Court of first
instance
Orascom Telecom Algeria “OTA”
appealed to the Algerian Court of
first instance’s judgment against
GTH’s subsidiary in Algeria “OTA”
and a member of OTA’s team in
connection with the so-called “Bank
of Algeria” case.
The judgment consists of fines of
DZD 99 billion (approximately USD
1.3 billion), including a criminal
sentence against a member of
OTA’s senior executive team. The
judgment relates to a previously
disclosed claim brought in 2010 by
the Algerian authorities alleging
breaches of foreign exchange
regulations. The lodging of the
appeal provisionally suspended the
judgment.
GTH submitted a formal Notice of
Arbitration against the People’s
Democratic Republic of Algeria in
respect of the unlawful actions
taken since 2008 by the Algerian
government against OTA. In the
Notice of Arbitration, GTH asserted
that since 2008 its rights under the
Agreement on the Promotion and
Reciprocal Protection of Investments
between Egypt and Algeria have
been violated by actions taken by
the Algerian government against
OTA, including the court judgment
against OTA and its senior executive
team, as well as the fines of USD 1.3
billion.
May
Confirmation of the Algerian
Court of Appeal on the judgment
by the Algerian Court of first
instance
The Algerian Court of Appeal
confirmed the judgment handed
down by the Algerian Court against
OTA. The criminal custodial sentence
ordered against a member of the
senior executive team is suspended;
however, OTA was ordered to pay
the whole amount of the fines. The
lodging of the appeal provisionally
suspended the judgment.
October
Strategic review and valuation
assessment of Sub-Saharan
operations
GTH performed a strategic review
and valuation assessment of its
operations in Burundi, Zimbabwe
and Central African Republic to
identify, examine and consider a
range of strategic alternatives,
including but not limited to a sale.
In an EGM and OGM, the Company’s
shareholders approved changing the
Company’s name from “Orascom
Telecom Holding S.A.E.” to “Global
Telecom Holding S.A.E.” However,
to date, the company is still awaiting
the approvals of the Egyptian
authorities to proceed with the
name change and related actions
including new ticker symbols on the
Egyptian Stock Exchange and the
London Stock Exchange. In addition,
shareholders approved a mutual
service agreement between the
Company and VimpelCom Ltd., with
the purpose of creating synergies and
operational efficiencies among the
Group entities and managing costs.
Furthermore, shareholders approved
the restructuring plans for the
Company’s investments in Globalive
Investment Holding Corp. (“GIHC”),
the parent company of WIND Canada
and Globalive Canada, which included
the restructuring of GTH’s shareholder
loans to the GIHC group and the
cancellation of accrued interest.
Global Telecom signs an agreement
with Huawei and Alcatel-Lucent for
modernizing the nationwide mobile
network of Mobilink, its Pakistani
subsidiary
The Company signed a five-year
agreement with Huawei and AlcatelLucent to provide the design, purchase,
deployment, and maintenance of nextgeneration mobile network equipment
and supporting services from two of
the world’s leading global providers.
With this investment, Mobilink expects
not only to further enhance the data
and voice services it provides to its
customers throughout Pakistan, but
also to pave the way for introducing 3G
services as soon as licenses are issued
in Pakistan.
Appointment of banglalink’s new CEO
Ziad Shatara was appointed to the
position of Chief Executive Officer
(“CEO”) of banglalink, reporting to GTH
Group CEO, Ahmed Abou Doma.
8
2012 Main Events
Annual Report 2012
Business review
Algeria
The Year in Review
Our Brand
Company Strategy
Orascom Telecom Algeria S.p.A.’s (“OTA” or “the Company”) main focus during 2012 was on
maintaining the Company’s value through key strategic pillars, despite the extremely challenging
operating conditions imposed by government authorities. OTA has focused on value segmentation,
distribution control, operational excellence, new revenue streams, and asset monetization, control of
regulatory risks, retaining key staff members and introducing new talent development programs.
OTA commenced its operations
under the brand “Djezzy” and
introduced a second prepaid brand
“Allo” in August 2004. Despite
having launched its GSM operation
approximately three years after the
launch by the incumbent, Algerian
Mobile Network (“AMN” conducting
business under the brand name
“Mobilis”), OTA was able to rapidly
grow into Algeria’s leading and
preferred telecommunications
operator.
Population
37 million
OTA operates a GSM network in
Algeria and provides a range of
prepaid and postpaid products
encompassing voice, data and
multimedia, using the corporate
brand “Orascom Telecom Algeria”
and the dual commercial brands,
“Djezzy” and “Allo”. OTA was
awarded the second GSM license
in Algeria in 2001 and launched its
operations in February 2002.
Mobile
penetration
87%
In 2012, OTA celebrated its tenth
anniversary through extensive
radio, press, outdoor and TV
campaigns. Djezzy also received
a prodigy award for the best
audiovisual content in Algeria in the
year 2012.
Market Position
1
Subscribers
16.7 million
Operational Data
Financial Data
FY 2011
Revenues (USD th.)
Revenues (DZD bln.)
EBITDA (USD th.)
1,859,804
FY 2012
1,841,486
Change
(1.0%)
Subscribers 1
4Q11
4Q12
16,172,625
16,711,502
3.3%
55.5%
54.0%
(2.7%)
9.3
9.2
(0.9%)
135.6
143.3
5.7%
1,050,663
1,093,396
4.1%
ARPU (USD) 1&3
698
733
5.1%
284
270
(4.8%)
6.5%
7.9%
22.6%
76.6
85.2
8.6%
EBITDA Margin
56.5%
59.4%
2.9%
MOU 1&3
Capex (USD th.)
40,010
54,763
36.9%
Churn 1&3
1. As announced on July 1 2013, during an internal investigation with regards to Djezzy’s active subscribers, management found a technical bug that overstated
Djezzy’s subscriber base by 1.4 million customers. The subscribers’ base comparative figures were adjusted accordingly. This event does not impact historical
reported revenues or EBITDA, but positively affect MOU and ARPU.
2. Market share is calculated according to our data warehouse.
3. Figures for three month period.
10
Business review - Algeria
Change
Market Share 1&2
ARPU (DZD) 1&3
EBITDA (DZD bln.)
Market share
During 2012, OTA maintained its
market leadership position despite
the ongoing challenges due to
unfair actions from a number
of government authorities. In
particular, the bank of Algeria
issued an unfounded decision
during 2Q10, instructing banks not
to process any overseas foreign
currency transfers for OTA, which
has impacted OTA’s network and
reputation. Despite this, OTA was
able to maintain a 54% market
share, controlling the largest
distribution network with 19,000
Points Of Sale, offering SIM cards
across all 48 provinces. OTA
ended the year with 16.7 million
subscribers.
37m
Population
Regulatory environment
OTA continues to face stringent
conditions imposed by the Algerian
telecommunication regulator (ARPT)
regarding promotions and products.
The government has announced the
launch of a 3G tender process, in
which OTA intends to bid. During
4Q12, OTA obtained the regulator´s
approval to introduce a new SIM
price, which will allow it to be more
competitive.
Leveraging Revenue
Streams
Voice
OTA launched promotions during
the year with a strategic focus on
subscriber acquisitions, without
creating peaks on the normal
network utilization and with efforts
focused on both postpaid and
prepaid. On the postpaid side,
promotions focused on Djezzy
card acquisitions by offering a
50% discount on the SIM price.
In prepaid, OTA launched a 15
day promotion offering a 50%
recharge bonus. Moving forward,
OTA’s subscriber growth is
expected to witness slowdowns,
and the strategic focus may be
shifted towards maintaining or
even improving ARPU, which
historically continued to decline
under intensifying price competition
between the three major operators.
Value Added Services
OTA continued to distinguish itself
in the marketplace by launching
new products and improving the
performance of current top value
added service. OTA distinguished
itself in the marketplace through
the launch of “Scoop Foot”,
information services regarding
the three Algerian soccer clubs
currently sponsored by OTA (MCA,
USMA and ESS). In addition, several
handset and tablet related outdoor
campaigns were launched during
the year, the last one being around
the Samsung Galaxy Tab.
Opportunities for the Future
OTA will focus its efforts on
maintaining Djezzy’s market
position and taking advantage
of the tremendous data growth
potential in Algeria, provided the
governmental restrictions are lifted.
Additionally, OTA will continue to
adopt a balanced value pricing
strategy in order to achieve stable
ARPU levels despite high market
growth. With regards to customer
service, OTA plans to enhance
loyalty, while improving quality
and control over the distribution
channel. OTA intends to modernize
the network once the ban on foreign
currency transfer is lifted.
Annual Report 2012
Business review
Pakistan
Leveraging Revenue
Streams
Voice
The Voice segment, which is the
major source of revenue for all the
operators, remained an area of
intense competition. With multiple
products and promotions, Mobilink
not only improved customers’
perception, but also maintained
its competitive portfolio. In 2012,
Mobilink strengthened its portfolio
of voice offers to increase customer
engagement and acquisitions by
launching multiple nationwide and
location based offers.
Company Strategy
Pakistan Mobile Company Limited (PMCL) operates under the brand “Mobilink” and has established
itself as a market leader amongst Pakistan’s GSM network operators, providing prepaid and postpaid
voice and data services to individuals and corporate clients across the country. Mobilink is focused on
retaining and strengthening its market share to achieve revenue growth, whilst continuing to reduce
operational costs.
36.1m
SUBSCRIBERS
Mobile
penetration
64%
Population
190 million
Market Position
1
Revenues (PKR bln.)
EBITDA (USD th.)
EBITDA (PKR bln.)
EBITDA Margin
Capex (USD th.)
Our Brand
Subscribers
36.1 million
Financial Data
Revenues (USD th.)
Operational Data
FY 2011
FY 2012
Change
1,133,704
1,132,917
(0.1%)
Subscribers 1
4Q11
4Q12
Change
34,213,552
36,141,241
5.6%
97.9
105.8
8.1%
Market Share 1
30.7%
29.6%
(0.8%)
402,406
489,300
21.6%
ARPU (USD) 2
2.7
2.5
(7.4%)
34.7
45%
11.0%
ARPU (PKR) 2
235
243
3.4%
35.5%
43.2%
7.7%
MOU 2
209
215
2.9%
261,259
175,604
32.8%
7.2%
5.2%
(2%)
Churn 2
1. Market share, as announced by the Regulator in Pakistan is based on information disclosed by the Other operators which use different subscriber recognition policies.
Market share as at December 2012, as disclosed by PTA.
2. Figures for three month period.
12
Business review - Pakistan
The Year in Review
PMCL was founded in 1990 and
began operations in August, 1994.
Since that time, the Company’s
flagship brand, Mobilink, has
established itself as a market leader
amongst Pakistan’s GSM network
operators, providing prepaid and
postpaid voice and data services
to individuals and corporate clients
across Pakistan. Mobilink’s brand
portfolio includes Jazz and Jazba
for prepaid customers and Indigo
for postpaid customers, whereas
broadband services are marketed
under the brand name of Infinity.
Jazz has established itself as a mass
market brand, offering multiple
packages, specially tailored to meet
the demands of a diverse customer
base. In 2012, Mobilink continued
to appeal to the Pakistani youth,
upgrading Jazba from a package
on Mobilink Jazz to its own brand.
Jazba is endorsed by Atif Aslam,
Pakistan’s biggest pop star. Based
on this demographics’ need for
mobile Internet, Jazba promises to
be ‘the best connection for the data
generation’.
Market share
During 2012, the cellular industry
remained very competitive in
Pakistan, with all operators
introducing aggressive customer
engagement campaigns with heavy
advertising support. Mobilink
maintained its focus on voice, data,
VAS, and customer acquisition
offers along with brand building
activities. By the end of 2012,
Mobilink served over 36 million
customers, retaining its market
leadership in a five-player market
with a 29.6% share.
Regulatory environment
The Pakistan Telecommunication
Authority (PTA) serves as the
licensing and regulatory authority
in Pakistan. During the first part
of the year, major regulatory
developments took place, including
the limitation on the number of SIM
cards to only five against each CNIC
(national identity card), alongside
the implementation of a new regime
for registering and activating new
SIM cards.
During the latter part of the year,
the Pakistani telecom market faced
strict regulatory guidelines on
issues pertaining to the security
situation of the country. Upon
government request for security
reasons, all cellular networks in
major cities were shut down a
few times during the Eid holiday
in October, Ashura and Other
occasions in November and
December, resulting in revenue
loss for all cellular operators.
Furthermore, new regulatory
guidelines were issued on retail
channel sales.
A ‘Bonus on Usage’ promotion was
launched offering bonus minutes
and SMS on a daily basis after
surpassing the daily threshold.
Subscriber acquisition and
reactivation promotions, offering
hybrid products as incentive,
continued during the quarter to
grow the subscriber base.
Value Added Services
Mobilink has continued to exhibit
significant growth in the VAS
segment, introducing several new
features and services during 2012.
New offerings include Sports Portal,
Youth Portal, Job Alerts Ring Back
Tone Copy Feature, Mobitunes, and
Song Dedications, along with Other
services. Entertainment services,
such as Mobitunes Star, continued
to gain popularity among the
youth segment and showed high
engagement.
Opportunities for the Future
PMCL’s goal going forward is to
increase voice revenues through
leveraging the large subscriber
base in Pakistan. Additionally,
given the low internet penetration
level, particularly though 3G, there
is significant potential to increase
PMCL’s mobile data presence. In
order to meet these goals and get
the most out of the Company’s
resources PMCL will work to
modernize its network and increase
infrastructure sharing.
Annual Report 2012
Business review
The Year in Review
Bangladesh
Our Brand
Company Strategy
Banglalink Digital Communications Limited is a GSM telecommunications operator in Bangladesh
providing a wide range of voice and data services. banglalink’s marketing strategy focuses on
targeting different consumer segments with specially designed products and services that are tailored
to the needs of those segments. banglalink aggressively enhanced its network since inception and has
consistently increased its infrastructure to build an efficient and dependable network.
Population
Mobile
penetration
161 million
60%
Market Position
2
Revenues (USD th.)
Revenues (BDT bln.)
EBITDA (USD th.)
EBITDA (BDT bln.)
EBITDA Margin
Capex (USD th.)
25.9 million
Operational Data
FY 2011
FY 2012
Change
511,291
554,301
8.4%
37.9
45.4
19.8%
Market Share 1
169,630
192,120
13.3%
ARPU (USD) 2
12.6
15.7
24.6%
33.2%
34.7%
1.5%
408,746
119,161
(70.8%)
4Q11
4Q12
Change
23,753,552
25,882,698
9.0%
27.9%
26.8%
(1.1%)
1.8
1.7
(5.6%)
ARPU (BDT) 2
140
138
(1.5%)
MOU 2
207
191
(7.9%)
5.4%
7.4%
2%
Subscribers 1
Churn 2
1. Market share, as announced by the Regulator in Bangladesh is based on information disclosed by the Other operators which use different
subscriber recognition policies. 2. Figures for three month period.
14
Business review - Bangladesh
Market share
Subscribers
Financial Data
Banglalink provides its services
under two brand names: “banglalink
Digital Communications Limited”
and “icon”. banglalink’s prepaid
brand, “banglalink desh”, is
considered the best prepaid
package in the country with
innovative tariff and value for
money features “banglalink
business”, “banglalink SME” and
“banglalink PCO” cater to the needs
of the business segment, including
the thriving SME sector where
banglalink has been the pioneer
in the country. The premium
brand ‘icon’ has already created
awareness and acceptability within
its target market.
In Bangladesh, banglalink is one
of the fastest growing operators
with a strong focus on increasing
value. bangalink’s brand places
second in a six-player market with
an innovative brand positioning
among the youth segment.
banglalink continues to tap into the
mobile data opportunity, providing
mobile financial services and
Other value added services that
continually offer new applications
to customers. As of December
2012, banglalink served more than
25.8 million subscribers and had
a 26.8% market share of total
mobile subscribers in Bangladesh.
Growth over the past year has been
fuelled by innovative products and
services, improvement of network
quality, dedicated customer care,
an extensive distribution network
across the country and strong
brand loyalty.
Regulatory environment
Towards the end of 2012,
the regulator enforced the
implementation of a 10 second
pulse for all packages, including
Interactive Voice Response (IVR)
services from September 2012
and a post-activation sales process
from October 2012 stopping sales
of pre-activated SIMs. The post
sales activation process has slowed
industry sales, resulting in a drop
in the total subscribers of the
market relative to earlier in the
year. Moreover, the regulator has
instructed all MNOs to disconnect all
bilateral connectivity and exchange
traffic through ICXs, which has led
to increased interconnection costs.
The government of Bangladesh is in
the process of developing guidelines
and awarding licenses for 3G.
Leveraging Revenue
Streams
Voice
banglalink continued to launch
attractive services and offers
to the market, including loyalty
programs, bonuses on usage, and
a reactivation promotion offering
bonus on recharge and appealing
tariffs. Under the flagship brand
“banglalink desh”, prepaid products
have been introduced with new
features, while maintaining a value
retention strategy. Features include
a flat tariff, one second pulse and
long call benefit and FnF uses to
address different usage needs of
its 24.5 million prepaid consumers.
The new offers were introduced
for the prepaid segment, allowing
more usage during the day, which
helped increase revenues without
increasing pick traffic.
The postpaid segment continued
to bring in new subscribers
aggressively in 2012. “banglalink
inspire”, the product aimed
at professionals, had a new
segment added in 2012 – Finance
Professionals. A unique smartphone
campaign was launched for
banglalink inspire and banglalink
business, which allowed both new
and existing customers to easily
pay for exclusive handset bundles
through monthly installments.
Value Added Services
banglalink subscribers enjoy a wide
range of innovative and superior
services, including caller ring-back
tone, music station, voice portal,
voice chat, news alerts, and other
services. In recent years, banglalink
has been leading the industry
in offering new and enhanced
services for business customers,
namely premium field force locator,
corporate SMS broadcast, and mobile
advertising to name a few examples.
In 2012, banglalink witnessed
phenomenal growth in its nonvoice revenues especially in the
messaging (A2P) and Data (GPRS/
EDGE) business. The introduction
of the MT charging model allowed
subscribers to enjoy alert and
notification services. GPRS/EDGE
revenues more than doubled in
2012 driven by successful marketing
campaigns and without having
any major network enhancement
or investments during the year.
banglalink created a unique
positioning called “internet for
everyone” to build on its core
messaging of “making a difference
in people’s lives”. Additionally
in 2012, banglalink successfully
acquired key business accounts and
maintained a high retention level
through its B2B VAS products, given
that attractive tariffs were no longer
a differentiator.
During the year, banglalink also
introduced Inbound Roaming
Management System which helped
to reduce signaling costs and serve
guest roamers better. The solution
is helping to serve more guest
roamers and their retention.
Opportunities for the Future
Looking ahead, we will work to
unlock mass-market value potential
by leveraging Bangladesh’s large
population base. We will do this by
appealing to potential customers
through improvements in high-end,
enterprise, and SME segments, as
well as by aggressive acquisition
drive in mass market. In data,
we will tap into mobile data
opportunities, given particularly low
penetration rates in Bangladesh,
and we will focus on improving
quality by modernizing our network
and increasing infrastructure
sharing. Furthermore, we will
expand on our innovation in mobile
integrated content in the fields of
education, agriculture, healthcare
and financial markets.
Annual Report 2012
Business review
Telecel Globe
The Year in Review
Our Brand
Company Strategy
Telecel Globe’s overall strategy is to offer smart choices based on consumer insights and life situations
to create the best value for subscribers through an innovative product offering, all while maintaining
simplicity in communications and customer engagement. Telecel Globe is committed to providing its
customers with high-tech mobile phone products and services at an affordable cost.
The Company currently serves a growing customer base and constantly demonstrates its core values
of simplicity, value for money. During 2012, Telecel Global focused its efforts on deriving profitability
by reaching critical mass in the underlying markets with very low penetration rates, as well as
maintaining value-driven pricing and capturing the data opportunity in the market.
Telecel Globe operates in SubSaharan Africa through two brands:
Telecel in the Central African
Republic, Telecel CAR (TCAR)
and Zimbabwe (TZIM), and leo in
Burundi (leo Burundi).
The red and white logo of Telecel is
very simple, with a plain red circle
and a small “t” inside and is very
appealing to both cultures (Central
African Republic and Zimbabwe).
Both brands stand for fun, youth
and friendliness, and both score
the highest in their markets in
terms of visibility and likability.
The Telecel brand identity is known
for trust, bonding, innovation and
accessibility. The leo brand on
the other hand is a celebration of
the present moment. Today leo
is an active and dynamic brand,
a brand that pushes industry
standards with innovative and
efficient technology and product
offerings. leo is also a community,
and firmly believes that the future
belongs to the community as a
whole. leo is now firmly entrenched
in Burundi as the most preferred
telecommunications brand.. The
brand exemplifies social mobility,
success, and empowerment to
a variety of segments including
corporate, SME, mass market and
the various sub segments such as
the younger generation and their
telecommunication preferences,
including social networking, games,
and promotions.
Market Position
Subscribers
4.5 million
1
28m
Population
Mobile
penetration
Market share
Population
37%
28 million
Financial Data
Revenues (USD th.)
EBITDA (USD th.)
EBITDA Margin
Capex (th.)
1. As per IFRS, revenues for FY2011 have not been restated to reflect the disposal of Powercom LTd. Namibia
16
Business review - Telecel Globe
4Q11
4Q12
Change
93,683 1
90,732
(3.2%)
7,776 1
33,311
n.m.
8.3%
36.7%
342.3%
25,000
18,489
(26.5%)
The mobile industry in Zimbabwe
has grown rapidly over the past
couple of years. Subscriber
numbers have increased from fewer
than 2 million at the end of 2008
to approximately 8.7 million at the
end of 2012. Unfulfilled demand,
initially for voice and increasingly
for data services, is one of the
main drivers of growth for mobile
communications in Zimbabwe. At
end of 2012, TZIM held the second
position in the market with 29.8%
of market share, serving 2.6 million
customers.
Market
Penetration
22%
20%
69%
Subscribers
in millions
1.4
0.4
2.6
Burundi
Central African
Republic
Zimbabwe
Burundi
Central African
Republic
Zimbabwe
Annual Report 2012
Business review
100/182 (1997). The Ministry of
Transport, Postal Services and
Telecommunications (“MoPT”)
has authority over the sector and
carries out its directives through the
Agence de Régulation et de Contrôle
des Télécom (“ARCT”), which is
directly attached to the President’s
office. The ARCT is currently
performing a review of the sector
and a new telecommunication law
is being drafted. The law must be
approved by the council of ministers
and the parliament, and expected to
be implemented during 2013.
Leveraging Revenue
Streams
Voice
1
Market Position
The Central African Republic mobile
telecommunications industry has
rapidly grown over the past three to
four years as a result of increased
coverage and a drop in the price of
handsets. While Telecel Globe sees
healthy demand in urban centers,
increased growth in the usage of
telecommunication services in rural
areas has been largely hampered
by the limited purchasing power
of the population at large and the
poor logistical infrastructure in the
country. At end of 2012, TCAR
continued to lead the market with a
market share of 43.7%.
At the end of 2012, leo Burundi was
the market leader with 61% market
share in a highly competitive, fiveplayer market, capturing most of
the high-value subscribers and
corporate segment with a network
covering over 60% of the Burundi
population. Leo is known for its
18
Business review - Telecel Globe
undisputed market dominance,
driving mobile penetration in rural
areas and maintaining strong
leadership in the capital.
Regulatory environment
Zimbabwe’s fixed line market
and licensing regime was
liberalised under the Postal
and Telecommunications Act
(“PATA”). Since 2009, the Ministry
of Information Communication
Technology (“MICT”) has been
given the responsibility of
overseeing the policy relating to
the development of the ICT sector.
Pursuant to the PATA, the Postal
and Telecommunications Regulatory
Authority (“POTRAZ”) operates
as an independent regulator and
licensing body on behalf of the
MICT. POTRAZ focuses on:
•Technical evaluation of all
telecommunications license
applications;
•Managing the National Numbering
Plan for all telecommunication
services;
•Monitoring and enforcing
performance and delivery of
good quality service by licensed
operators; and
•Establishing technical standards
and specifications for all
telecommunications equipment in
Zimbabwe.
In CAR, the telecommunications
sector which is governed by the
Telecommunications Law n07020
and n07021 passed on 28 December
2007, has been regulated by the
Agence Chargée de la Régulation
des Télécommunications (“ART”)
since April 2004.
Burundi’s telecoms market is
governed by the Ordonnance
Ministérielle No. 199 (1999)
and the Décret Présidentiel No.
During 2012, Telecel Globe
continued to focus on acquisition
through lowering entry barriers,
such as SIM price, and introducing
lower denomination recharges
through further pushing E-top
up services. The Company also
continued to accelerate profitable
growth of the voice market without
diluting average revenue per user
(ARPU) of our existing base. In
Zimbabwe, Telecel Globe launched
a bonus on recharge promotion
on higher denomination recharge
cards as well as conducted a
couple of micro-segmented BTL
promotions to stimulate the usage
during off-peak hours. In Burundi,
Telecel Globe conducted an ATL
usage stimulation promotion where
customers were awarded a bonus of
double their weekday usage during
the weekend. In CAR, Telecel Globe
revamped the pricing of its daily
on-net bundle as well as introduced
a new on-net daily at a higher price
point offering more benefits.
WIMAX. Telecel Zimbabwe was the
first to offer 3G services, followed
by Leo Burundi. Telecel Central
Africa currently provides mobile
Internet using GPRS / EDGE but
will soon be joining its African sister
companies offering 3G.
to further stimulate the SMS usage
and revenues. Likewise, in Burundi,
Telecel was the first to launch RBT
and advanced credit services in
the market. During 2012, Telecel
witnessed the launch of our Mobile
Financial Service in Burundi.
3G has proven to be extremely
popular. Telecel Zimbabwe and Leo
Burundi are seeing strong demand
for their 3G offerings. During
2012, GTH continued to focus on
capturing the data opportunity in
its markets. In Zimbabwe, GTH
revamped the pricing of our data
bundles, as well as launching select
price discount promotions to further
increase the uptake of our data
bundles and dongles.
Opportunities for
the Future
On the VAS front, the activity
continued to distinguish itself as
well by launching new innovative
products. In Zimbabwe, Telecel was
the first in the market to launch
RBT (Ring Back Tone) and advanced
credit services. Additionally, Telecel
launched an SMS Trivia Mega Promo
The opportunities for the Telecel
brand are tremendous. Telecel
will focus its efforts on taking
advantage of very low penetration
levels in rural markets, while
capitalizing on its market leadership
in both voice and data. Telecel
will achieve this by increasing the
impact and differentiation of brand
communications and advertising,
deploying low capital-intensive sites
suitable for rural environments,
and offering relevant products and
services. In the near-term, Telecel
will maintain value-driven pricing
to accelerate the profitable growth
of the voice market without diluting
ARPU of existing base.
Value Added Services
Global Telecom’s three African
operators are key players in
the efforts to make mobile data
services available to the masses in
the countries where GTH operates.
In the Central African Republic and
Burundi, OTC was the first operator
to offer high speed Internet using
Mobile
penetration
37%
Annual Report 2012
Business review
Canada
0.6m
Company Strategy
Subscribers
WIND Mobile continued to deliver on its “Value Plus” strategy during the year under review, adding
primarily postpaid subscribers, while carefully managing prepaid economics for both phone and mobile
broadband customers. WIND Mobile offers a variety of plans for phone, smartphone and mobile broadband
users with both postpaid and prepaid options (including pay-as-you-go service for purely prepaid customers).
Monthly recurring plans target smartphone customers who are looking for value-rich, all inclusive plans,
non-restricted usage and no fixed-term contracts, offering unlimited voice, text and data services.
WIND also addresses the prepaid pay-as-you-go market with “Pay Your Way” prepaid service, as well
as the multicultural new Canadian segment by offering attractive international long distance pricing. A
number of add-ons are available for subscription including voicemail, premium data, US long distance,
reduced international calling rates & texting (World Saver), and preferred roaming rates. The continuing
success of the “Better Together Savings Program” led to a growing number of multiline activations and an
increased number of referrals. Simplicity and transparency are the cornerstones of WIND Mobile’s value
proposition, which has proven to be successful and a long standing differentiator in the Canadian market.
The Year in Review
Our Brand
Mobile
penetration
WIND Mobile has distinguished
itself from struggling new entrants
in Canada and is now considered
one of the fastest growing mobile
operators in the Canadian market.
WIND Mobile continued to
strengthen brand awareness,
consideration and brand equity
in Canada throughout 2012, as it
outgrew Other new entrants that
continued to stall at far lower levels.
72%
Market share
Subscribers
Population
0.6 million
34 million
Operational Data
2011
2012
Change
402,662
590.438
46.6%
ARPU (USD) 1
26.0
28.4
9%
ARPU (CAD) 1
26.4
28.1
6.4%
Subscribers
WIND Mobile continued to grow
increasing the subscriber base by 47%
to 590,438 active customers by the
end of 2012. WIND Mobile embarked
on a tactical current network
densification and expansion program,
which grew the coverage footprint to
14 million Canadians and addressed
customer highlighted problematic
areas. WIND Mobile completed an
additional 231 sites across the country
and launched service in regions,
including Windsor, Kingston, Barrie,
Woodstock, and Peterborough. WIND’s
network improvement program was
also focused on upgrading sites to
support HSPA+.
Regulatory environment
Several governmental decisions
occurred, including the decision
to lift restrictions (under certain
conditions) on non-Canadian
ownership and control of
telecommunications companies
operating in Canada. Furthermore,
the government issued policy
regarding the upcoming auction
of 700MHz spectrum, which was
updated during 2013 and the
decision on spectrum transfer rules
was announced.
Additionally, the Wireless Code of
Conduct was established in the first
half of the year, implying new rules
for contract terms, subsidies, and
wireless services, which is expected
to be in effect during taking effect
in 4Q13.
Leveraging Revenue
Streams
Data
WIND Mobile continued to provide
a variety of data services catering
to significant smartphone demand
and niche mobile broadband
services. During 2012, a premium
data concept was introduced
as an upgrade to our unlimited
smartphone data offering and
was met with enthusiasm by our
customer base.
Value Added Services
WIND Mobile increased its focus
on international long distance
calling and international roaming
addressing the important
multicultural segments in our
markets.
Opportunities for the Future
The new CRTC mandated ‘Wireless
Code of Conduct’ is expected to
have great impact on the Canadian
competitive landscape. This could
potentially decrease subsidy levels
by incumbent players that have
traditionally relied on the threeyear fixed term contracts with high
subsidies, while simultaneously
influencing the high-end
smartphone market. In the long
term, a more competitive landscape
is expected to emerge in Canada
with two-year contracts, contractfree offerings and more outright
handset purchases leading to more
customers available for acquisition.
“1. Figures for three month period
20
Business review - Canada
Annual Report 2012
Corporate Governance
Corporate
Governance
The Company is committed to achieving and maintaining the highest
standards of corporate governance. The Company considers effective
corporate governance essential to enhancing shareholder value and
protecting stakeholder interests.
Accordingly, the Board attributes a high priority to identifying and implementing appropriate corporate
governance practices to ensure transparency, accountability and effective internal controls. The Board
continued to further its commitment to corporate governance through reviewing existing processes
and, where appropriate, developing new ones. The Company complies with the practices enunciated
in the Egypt Code of Corporate Governance and will strive to comply with these and Other appropriate
standers and governance guidelines. The Company’s key corporate governance principles and practices
are as follows: Board of Directors
The Board has the responsibility of working to enhance the value of the Company in the
interest of the Company and its shareholders. In summary, the Board
• Is engaged in active and continuous strategic
planning and approves corporate strategies, including
the approval of transactions relating to acquisitions
and divestments, and capital expenditure above
delegated authority limits;
• Reviews and approves the corporate plan for the
forthcoming year and following two years, including
the capital expenditure and operating budget, and
reviews performance against strategic objectives;
• Assesses business opportunities and risks on an
• Monitors and approves the Company’s financial
reporting and dividend policies;
• Appoints and has the authority to remove the Chief
Executive Officer and approves the recommendations
of Human Resources;
• Ratifies the appointment and has the authority to
remove the Chief Financial Officer and Group General
Counsel and appoints the Company Corporate
Secretary; and oversees succession planning for the
Chief Executive Officer and senior management.
ongoing basis and oversees the Company’s control
and accountability systems;
The Chairman and the Chief Executive Officer establish meeting agendas to ensure adequate coverage of key
issues during the year. In addition workshops and strategy meetings take place. Executives and Other senior
people regularly attend Board meetings and are also available to be contacted by Directors between meetings.
3,627m
REVENUE
The General Assembly
The General Assembly (“GA”) of the Company is the ultimate governing body of the Company. In
summary, the (“GA”):
• Includes all the shareholders of the Company;
• Takes its decision by voting among shares
represented in the meeting. The voting rule is:
1 share = 1 vote for all shares indifferently;
• Holds at least one ordinary meeting per year
and may have an extra-ordinary meeting as
needed;
22
Corporate Governance
• The responsibilities of the GA are based on the
laws and Company statues;
• It appoints the Board, approves the financial
results, appoints the external auditors, and
approves dividends distribution.
Annual Report 2012
Corporate Governance
Composition of the
Board of Directors
Chairman
The Board Member classifications are based on the Egyptian Corporate Governance code. The latter did not specify
the criteria for independent directors that would allow the Company to benchmark against, yet in our opinion
and based on internationally recognized best practices, a number of our directors would qualify as independent
directors bringing to the company the highest possible standing from both a personal and professional standpoint.
Committees
The Committee System of the Company is one of the most important tools for the management and the operational
integration of the Company. It has recently been revised to:
•
Monitor the implementation of strategies and the
development of plans and results.
• Ensure the overall coordination of business actions
and the management of the relative cross-over
business issues.
• Build up the necessary operating synergies between
Jo Lunder
Board
Members
the various functions involved in the technological,
business and support processes.
• Support the integrated development of the innovation
processes of the Company.
• In particular, the new Committee System of the
Company includes:
Board Committees
Ahmed
Abuo Doma
Khalid
Elliacy
Henk
Van Dalen
(Group CEO)
(ExecutiveBoard Member)
(Non-Executive Board Member)
Executive Committee
Audit Committee
Remuneration Committee
The objective of the Executive
Committee is to review and, where
appropriate, authorize corporate
action with respect to most matters
concerning the Company’s interests,
strategy and management of its
business and subsidiaries during
intervals between meetings of the
Board of Directors, and generally
perform such duties as may be
directed by the Board of Directors
from time to time.
The objective of the Audit
Committee is to assist the Board in
fulfilling its oversight responsibilities
by reviewing (i) proposed financial
plans; (ii) the financial information
provided to shareholders and
Others; (iii) systems of internal
controls which management and the
Board of Directors have established;
and (iv) the audit process, including
both internal and external audits.
The objective of the Remuneration
Committee is to ensure that the
Company has a formal process
of considering management and
directors remuneration that is,
executive directors should play
no part in decisions on their own
remuneration, there should be an
alignment of the remuneration
schemes and the performance
objectives of the Company,
and the remuneration schemes
should attract and retain talented
individuals.
Investment Committee
Jeffrey
Mc Ghie
Alex
Shalaby
Dr. Mohamed
Shaker
Elena
Shmatova
(Non-ExecutiveBoard Member)
(Non-ExecutiveBoard Member)
(Non-ExecutiveBoard Member)
(Non-ExecutiveBoard Member)
Secretary to
the Board
The objective of the Investment
Committee is to assist the Board
in reviewing the Company’s
investment policies, strategies,
transactions and performance,
and in overseeing the Company’s
capital and financial resources.
The Committee has resources and
authority appropriate to discharge
its responsibilities, including the
authority to retain experts or
consultants.
The Audit Committee interacts
directly with the independent
auditor to ensure the independent
auditor is ultimate accountability to
the Board and the Committee, as
representatives of the shareholders,
and is directly responsible for
the appointment, compensation
and oversight of the independent
auditor.
The Company and its subsidiaries
have taken a number of steps
in recent years and months to
employ transparent, quality
driven Corporate Governance.
The Company understands that
these structures and an attention
to values are the cornerstone of
a successful, strategic application
of international standards. This
trend will persist as the Company
continues to set the bar high in all
areas of compliance.
David Dobbie
24
Corporate Governance
Annual Report 2012
investor Information
Investor
Information
Global Telecom’s Executive Management and Investor Relations
department maintain an open dialogue with all capital market
participants utilizing various communication tools.
As at December 31st 2012, the company’s issued capital amounted to EGP 3,043 million divided into
5,245,690,620 shares each having a par value of EGP 0.58, and an authorized capital of EGP 14,000
million. No dividends were distributed during 2012. The company’s free float stood at 48.08%, while
the balance is held by its majority shareholder, VimpelCom Ltd., indirectly through Weather Capital
S.P.1 and Weather Capital S.A.R.L., collectively owning 51.92%.
The company retains a high level of disclosure for all stakeholders through interim, quarterly and
annual reports, an up to date corporate website, and electronic news releases to ensure that all
stakeholders are always up to date with the latest development and changes. The company’s
consolidated financial statements are prepared and issued in accordance with International Financial
Reporting Standards (IFRS) and the Egyptian Accounting Standards (EAS).
Trading Information
The company is dually listed with its primary listing on the mainboard of the Egyptian Stock Exchange
(The EGX), and a secondary listing in the form of Global Depositary Receipts’ (GDRs) traded on the
London Stock Exchange (The LSE).
Share Information
Cairo, Egypt
Listing
5,245,690,620
Number of Shares Listed
Currency
Egyptian Pound
ISIN Code
EGS74081C018
Ticker Code (Bloomberg) 2
GTHE:EY
Ticker Code (Reuters) 2
GTHA:CA
GDRs price performance in comparison to FTSE 1001
120%
GDRs Information 1
London, United Kingdom
60%
US Dollar
40%
Conversion Ratio
ISIN Code
5 Shares = 1 GDR
US68554W2052
Ticker Code (Bloomberg) 2
OTLD:LI
Ticker Code (Reuters) 2
ORTEq.L
1 as at December 31st 2012
2 effective September 23,2013 the EGX and the LSE updated the company’s ticker symbols on the trading screens
Investor Information
+74% GLTD
LI
80%
806,936,757 (Regulation S), 144,677 (144-A)
Currency
26
GLTD LI: USD 3.138
FTSE100: 5897.81
01/01/2012 - 31/12/2012
100%
Listing
Number of GDRs Listed
GLTD LI: USD 1.800
FTSE100: 5572.28
+6% FTSE
100
20%
0%
-20%
1/1/12
29/2/12
30/4/12
30/6/12
30/8/12
20/10/12
31/12/12
1 January 1st – December 31st 2012
Annual Report 2012
Analysts Coverage
Bank of America Merrill Lynch
Citi
Exane BNP PARIBAS
Stephen Pettyfer:
stephen.pettyfer@baml.com
Dalibor Vavruska:
dalibor.vavruska@citi.com
Barclays Capital
San Dhillon:
san.dhillon@barclayscapital.com
Beltone Financials
Maria Samir:
msamir@beltonefinancial.com
CI Capital
Karim Khadr:
karim.khadr@cicapital.com.eg
Sarah Shabayek:
sarah.shabayek@cicapital.com.eg
28
Information on Shares
Justine Dimovic:
justine.dimovic@
exanebnpparibas.com
Christian Kern:
christian.a.kern@jpmorgan.com
Alexandra Serova:
AServoa@rencap.com
Morgan Stanley
Dilya Ibragimova:
dilya.ibragimova@citi.com
Goldman Sachs
Cesar Tiron:
Cesar.Tiron@morganstanley.com
Johan Snyman:
JSnyman@rencap.com
Deutsche Bank
Alexander Balakhnin:
Alexander.Balakhnin@gs.com
Naeem Holding
Carola Bardelli:
carola.bardelli@db.com
EFG-Hermes
Marise Ananian:
mananian@EFG-HERMES.com
Daria Fomina:
Daria.Fomina@gs.com
JP Morgan
Herve Drouet:
Herve.drouet@hsbcib.com
Nadine Ghobrial:
nghobrial@EFG-HERMES.com
HSBC
Omar Maher:
omaher@EFG-HERMES.com
Jean- Charles Lemardeley:
jean-charles.lemardeley@
jpmorgan.com
Ahmed Adel:
ahmed.adel@naeemholding.com
UBS
Alexander Wright:
alexander.wright@ubs.com
New Street Research
Ujwal Kumar:
Ujwal.Kumar@ubs.com
Chris Hoare:
hris@newstreetresearch.com
VTB Capital
Renaissance Capital
Ivan Kim:
Ivan.Kim@vtbcapital.com
Investor Relations
Contacts
Mamdouh Abdel Wahab
Head of Investor Relations
Email: IR@gtelecom.com
Website: www.gtelecom.com
Tel: +202 2461 5120/21
Fax: +202 2461 5055/54
Alexander Kazbegi:
Akazbegi@rencap.com
Annual Report 2012
Corporate Social responsibility
Global
Telecom Holding
Corporate Responsibility management at Global Telecom Holding is
designed to follow a stakeholder sensitive system that covers various
aspects of our commitment to shareholders and investors, business
partners, communities, employees, and other stakeholders, in a rights
based approach.
Corporate Responsibility issues can vary significantly across countries as diverse as Algeria,
Zimbabwe, Canada and Bangladesh, and therefore we empower our respective management teams
to design and deliver localized programmes. Our approach to Corporate Responsibility is based on
decentralization, which has been a key element of our corporate culture and is also the basis for our
success in implementing group recommended social, governance and environmental initiatives that are
tailored to meet local market needs.
Pakistan
28,000
Flood victims in
flood hit
regions
Bangladesh
5000
Orphans
Egypt
Social Investment
Global Telecom provides support to programmes and projects that contribute to the social development and
improves the standard of living of several communities through direct financial donations, in kind, as well as
employee donations and volunteering. Across our operating companies and through our products and social
investment program, we contribute to the achievement of the United Nations Millennium Development (MDG)
Goals. Below are some examples:
MDG Goal
Country
Example of our contribution
Achieve universal
primary education
Pakistan,
Zimbabwe,
Burundi and
Central African
Republic
In Pakistan, Zimbabwe, Burundi and Central African Republic we
support primary school education by providing bursary schemes and
financial support to families who can’t afford to send their children to
school or students from under privileged communities. Special emphasis
has also been put on supporting the education of orphans and Other
vulnerable children with disabilities (hearing impaired, blind and visually
impaired, physically challenged, and children affected by the war).
Combat HIV/
AIDS, malaria and
Other diseases
Burundi
leo Burundi continues providing direct financial donations to schools and
orphanages. The target beneficiaries are children whose parents are
HIV positive.
Ensure
Environmental
sustainability
Across the
Group
Across our operations, we reduce carbon emissions and energy
consumptions by using alternative energy, such as solar power and
wind energy. In addition, as a Company we take part in environmental
cleanup initiatives like “International Coastal Cleanup” day in Bangladesh
and in Pakistan we recycle advertising material into school bags to be
used by unprivileged students in various schools around Pakistan.
Eradicate
extreme poverty
Bangladesh,
Pakistan &
Zimbabwe
The launch of mobile-banking services in these countries help to easily
access banking services anytime and anywhere, which in turn expands
the rural economy and national output by increasing commerce in
villages in Bangladesh, Pakistan and Zimbabwe.
Improve
maternal health
Pakistan
Mobilink increased the scale of its partnership with Pink Ribbon in 2012
to mark October as ‘Pinktober - Breast Cancer Awareness Month’.
Mobilink and Pink Ribbon initiated a nationwide awareness drive with
the support of Higher Education Commission, aiming to reach out to
100,000 young girls. Mobilink Foundation supported the cause through
enabling SMS Donations from customers and sending informational
material to customers through bill inserts, awareness literature at
Customer Care Centers and Public Service Messages (OOH).
In commemoration of ‘Pinktober’, a national monument in Islamabad
was turned Pink with on-ground activation, the first of its kind.
Promoting gender
equality and
empower women
Pakistan
In partnership with UNESCO, Mobilink in Pakistan has been empowering
women and young ladies through the provision of literacy to adolescent
girls using mobile phones.
Reduce child mortality
Pakistan
Mobilink in Pakistan partnered with the Prime Minister Secretariat’s
Polio Control Cell for the National Polio Eradication Campaign in 2012.
To back up the advocacy and sensitization drive, Mobilink supported
the awareness campaign through broadcasting informational messages
via SMS to customers across Pakistan. These messages highlighted the
dangers of polio, dates of the polio campaign, and support to parents to
get children vaccinated
450
global business leaders
Given the fact that all direct operations in various areas around the world are handled by our
subsidiaries, our CSR division at GTH has developed a commitment to mobilize, motivate and support
GTH’s subsidiaries to further enhance their commitment to compliance based processes and impactful
social investment. To this end, the CSR division conducts trainings and networking sessions covering
topics of interest, including best practices of CSR.
There is a strong history of effective management of CSR across many of our markets and a number
of our businesses have world-class programmes. In 2012, our local operating companies received a
number of awards.
• Mobilink Foundation became the first and
only telecom industry corporate responsibility
function to be awarded certification by the
Pakistan Center for Philanthropy (PCP) in
recognition of the Foundation’s excellence
for large scale humanitarian and social
development initiatives across the country.
Further details on the PCP and the certification
process can be seen at www.pcp.org.pk.
• Mobilink foundation, through the third phase of
the ‘Mobile Based Literacy’ program, has been
30
CSR
awarded the best Global Mobile Award 2013
in the category of ‘Best Mobile Education or
Learning Product or Service’ at the GSMA Mobile
World Congress in Barcelona.
• WIND Mobile won the Bronze 2012 Canadian
Marketing Association Award for Community
Engagement in recognition of the Company’s
continuous efforts in fundraising events for local
charities. WIND Mobile employees are actively
involved in these events and regularly volunteer
their time and expertise.
Annual Report 2012
Corporate Social responsibility
Global
Telecom Holding
Egypt- Global Telecom Holding
Pakistan – Mobilink
Global Telecom sponsors French University to compete in Enactus World Cup 2012
Mobile Based Literacy
Global Telecom Holding, for the third consecutive year, proudly sponsored the Enactus Egypt team
from the French University to compete in Enactus 2012 World Cup. The competition took place in
Washington D.C., USA in October of 2012 where 38 national championship university teams presented
their countries’ civic engagement projects. The Egyptian team won second place in the World Cup.
Once a year, the National Champion Enactus teams from around the world meet at the World Cup
where they present the results of their community outreach projects to a prestigious group of
international business leaders. Through a written annual report and live audio visual presentation,
teams are evaluated based on how successful they use business concepts to improve the quality of life
and standard of living for people in need in their respective countries. More than 450 global business
leaders assembled at the event to evaluate the outreach projects of 38 national championship teams.
“We are entrepreneurial in spirit and well-resourced with
excellent technical and operational capability. The future
for Global Telecom is very bright.”
Pakistan – Mobilink: Mr. Rashid Khan, CEO, Mobilink with the Global Mobile
Award in Barcelona February 2013, along with Mr John Hoffman, CEO, GSMA
(far left)
Zimbabwe – Telecel Zimbabwe: Jairos Jiri Children’s
Centre in Waterfalls, Harare
In addition to the competition, events such as the culture fair provide an exhibit of the rich diversity of
cultures represented within Enactus. Multiple receptions, along with special activities such as the “Top
to Top and Top” to “Future-Top” forums, as well as panel discussions, speakers and sessions provide
engagement and collaboration opportunities for participants. To watch Egypt team’s presentation
please visit: http://enactus.org/world-cup-archive/2012/results/
Enactus is an international non-profit organization that brings together the leaders of today and
tomorrow to create a better, more sustainable world through the positive power of business. Founded
in 1975, Enactus has active programs on more than 1,500 college and university campuses in over 40
countries. Through Enactus, students around the world are discovering that “doing well” and “doing
good” can be accomplished simultaneously throughout college and during their career.
32
CSR
Mobilink has partnered with UNESCO to launch the
third phase of the ‘Mobile Based Literacy’ program a broad based initiative that was launched in 2009.
The program is a unique initiative that utilizes mobile
technology to improve literacy for female students,
aged 15 to 25 years, in rural and deprived areas.
The third phase of ‘SMS Based Literacy’ program in
collaboration with UNESCO was commissioned in Q2
2012. SMS Based Literacy is the first and the only
service in Pakistan that utilizes Short Messaging
Service (text messages) to impart education. To
date it has reached out to 4,000 female learners and
100 teachers living in rural areas of KPK and Punjab.
Mobilink contributed GPRS-enabled connections to all
learners with free SMS services. Mobilink Foundation
also funded the development of web-based software
for transmitting and evaluating info and Q/A messages.
This unique mobile based post literacy program has
Bangladesh - banglalink: Cox’s Bazar Sea
Beach Cleaning Project
enabled new literates to receive lessons on their
mobile phones and has fostered the ability to read
and respond to these lessons. The program has been
awarded the Global Mobile Awards 2013 in the category
of ‘Best Mobile Education or Learning Product or
Service’.
Flood Relief Efforts for 2012
Mobilink reached out to over 28,000 flood victims as
part of its flood relief initiatives during the months
of October and November 2012 by assisting those
affected in areas of Southern Punjab and Balochistan
with ready to eat meals, potable water and Other basic
necessities. As in previous years, the flood relief activity
was coordinated with the Pakistani naval forces and
the National Disaster Management Authority (NDMA).
Mobilink Foundation Torchbearers were also involved in
the distribution of flood relief items in some areas.
Mobilink Foundation organizes a clean-up drive
on Pakistan Day
Bangladesh - banglalink
Algeria – Djezzy
Cox’s Bazar Sea Beach Cleaning Project
FIKRA
Since 2005, banglalink has been cleaning the longest
sea beach of the world- Cox’s Bazar. Under this project,
26 female workers clean the beach 363 days a year in
alternating shifts. In order to support these efforts,
banglalink has placed bins throughout the beach with
signage requesting people to discard waste in designated
bins. Additionally, representatives communicate similar
messages through microphones. It is assumed that they
collect approximately 300kg debris per day.
Djezzy organized a networking day “FIKRA” (Idea)
where ten start-ups were selected through various
auditions in front of a panel, to receive one million
Dinars (around 10,000 USD) and a special oneon-one mentoring session by one of the Directors
at Djezzy. These efforts help inspire the recent
graduates by gaining experience in the information and
communication technology field.
Annual Report 2012
Financial review
- Consolidated balance sheet
- Consolidated income statement
- Consolidated statement of comprehensive income
Financial Review
The following financial review for the company
for the year 2012 is published under the name
“Orascom Telecom Holding S.A.E.”
- Consolidated statement of changes in equity
- Consolidated statement of cash flows
- Notes to the consolidated financial statements
- Appendix A - Liabilities to banks
- Appendix B – Bonds
- Appendix C - Scope of consolidation
34
Financial review
Annual Report 2012
Financial review
Consolidated
balance sheet
As of December 31, (in million of US$)
Consolidated
income statement
For the year ended December 31,
(in million of US$)
Note
2012
2011
20
2,494
2,902
Revenues
Intangible assets
21
1,449
1,558
Other income
Other non-current financial assets
22
781
1,024
Purchases and services
Deferred tax assets
23
76
65
4,800
5,549
29
33
Assets
Note
2012
2011
8
3,627
3,636
40
30
9
(1,536)
(1,600)
10
(137)
(175)
Continuing operations
Property and equipment
Total non-current assets
Inventories
Other expenses
Personnel costs
11
(239)
(244)
Depreciation and amortization
12
(705)
(773)
Trade receivables
24
233
205
Impairment charges
13
(12)
(10)
Other current financial assets
22
145
230
Disposal of non current assets
14
(15)
58
1,023
922
Current income tax receivables
19
64
99
Other current assets
25
827
825
Cash and cash equivalents
26
Operating income
2,026
1,014
Financial income
15
77
80
Total current assets
3,324
2,406
Financial expense
15
(454)
(536)
Total assets
8,124
7,955
Foreign exchange loss
15
(74)
(150)
(451)
(606)
Net financing costs
Equity and liabilities
Share capital
27
598
598
Share of loss of associates
16
(103)
(135)
(241)
(192)
Impairment of financial assets
17
(344)
(22)
Retained earnings
1,198
1,450
Other non-operating costs
18
(77)
-
Equity attributable to owners of the Company
1,555
1,856
Profit before income tax
48
159
(253)
(243)
(205)
(84)
Reserves
Non-controlling interest
Total equity
75
57
1,630
1,913
Income tax expense
19
Loss from continuing operations
Liabilities
Non-current borrowings
28
4,075
3,492
Other non-current liabilities
29
110
167
Provisions
31
71
8
Non-current income tax liabilities
19
2
9
Deferred tax liabilities
23
50
71
Total non-current liabilities
Profit from discontinued operation (net of income tax)
7
Profit/(loss) for the year
-
745
(205)
661
(224)
628
19
33
Attributable to:
4,308
3,747
Current borrowings
28
683
544
Trade payables
30
710
738
Other current liabilities
29
574
592
Earnings/ (loss) per share - (in US$)
Current income tax liabilities
19
103
328
Basic and diluted earnings / (loss) per share:
(0.04)
0.13
Provisions
31
116
93
From continuing operations:
(0.04)
(0.01)
-
0.14
Total current liabilities
2,186
2,295
Total liabilities
6,494
6,042
Total equity and liabilities
8,124
7,955
Group CFO
36
Discontinued operations
Financial Review
Khalid Ellaicy
Group CEO
Ahmed Abou Doma
Owners of the Company
Non-controlling interest
32
From discontinued operations:
(Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)
Annual Report 2012
Financial review
Consolidated statement
of comprehensive income
For the year ended December 31,
(in million of US$)
Profit/(loss) for the year
2012
Consolidated statement
of changes in equity
2011
Attributable to
owners
of the Company
(in million of US$)
(205)
661
Changes in fair value of available-for-sale financial assets
2
6
Cash flow hedges reserve
-
57
Comprehensive income
Currency translation differences
(80)
24
Other comprehensive income for the year, net of tax
(78)
87
(283)
748
Share
Note capital
Treasury
Other
shares reserves
Retained
earnings
Total
Noncontrolling
Interest
Total
equity
Other comprehensive income:
Total comprehensive income for the year
Attributable to:
Owners of the Company
Non-controlling interest
(301)
703
18
45
As of January 1, 2012
598
(1)
(191)
1,450
1,856
57
1,913
Loss for the year
-
-
-
(224)
(224)
19
(205)
Other comprehensive
income
-
-
(77)
-
(77)
(1)
(78)
Total comprehensive
income
-
-
(77)
(224)
(301)
18
(283)
Increase in legal reserve
-
-
28
(28)
-
-
-
Total transaction with
Owners
-
-
28
(28)
-
-
-
598
(1)
(240)
1,198
1,555
75
1,630
Transactions with owners
As of December 31, 2012
Attributable to
owners
of the Company
(in million of US$)
Share
Note capital
As of January 1, 2011
Treasury
Other
shares reserves
Retained
earnings
Total
Noncontrolling
Interest
Total
equity
1,031
(44)
(235)
1,975
2,727
74
2,801
Profit for the year
-
-
-
628
628
33
661
Other comprehensive
income
-
-
117
(42)
75
12
87
Total comprehensive
income
-
-
117
586
703
45
748
(433)
-
(55)
(1,106)
(1,594)
(57)
(1,651)
-
-
-
-
-
(5)
(5)
Comprehensive income
Transactions with owners
Demerger effect
2
Dividends paid
Increase in legal reserve
Share based compensation
Total transactions with owners
As of December 31, 2011
34
-
-
5
(5)
-
-
-
-
43
(23)
-
20
-
20
(433)
43
(73)
(1,111)
(1,574)
(62)
(1,636)
598
(1)
(191)
1,450
1,856
57
1,913
(Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)
38
Financial Review
Annual Report 2012
Financial review
Consolidated statement
of cash flows
For the year ended December 31, (in million of US$)
2012
2012
For the year ended December 31, (in million of US$)
2012
2012
Cash flows from investing activities
Continuing operations
Cash outflow for investments in:
Cash flows from operating activities
- Property and equipment
(312)
(452)
- Intangible assets
(100)
(139)
-
(57)
(37)
-
20
12
-
14
(161)
(203)
10
15
(580)
(810)
Proceeds from loans, banks' facilities and bonds
1,301
877
Payments for loans, banks' facilities and bonds
(961)
(1,619)
Net change in cash collateral
121
(129)
Net cash generated by / (used in) financing activities
461
(871)
1,071
(641)
Loss for the year
(205)
(84)
- Consolidated subsidiaries
Adjustments for:
- Financial assets
Depreciation, amortization and impairment charges
717
783
Proceeds from disposals of:
Income tax expense
253
243
- Property and equipment
4
3
377
456
Advances and loans made to associate and Other parties
Currency translation differences
74
150
Dividends and interest received
(Gain)/loss on disposal of non-current assets
15
(58)
Share of loss of associates
103
135
Impairment of financial assets
344
22
Other non-operating costs
77
-
Change in assets carried as working capital
24
(189)
Change in provisions and allowances
33
48
(10)
(53)
Income tax paid
(501)
(199)
Interest expense paid
(115)
(217)
Net cash generated by / (used in) continuing operations
Net cash generated by operating activities
1,190
1,040
Net cash generated by operating activities
-
90
Net cash generated by investing activities
-
1,044
Net cash (used in)/ generated by financing activities
-
(9)
Net cash generated by discontinued operations
-
1,125
1,071
484
-
(263)
(59)
(31)
Cash and cash equivalents at the beginning of the year
1,014
824
Cash and cash equivalents at the end of the year
2,026
1,014
Share-based compensation
Net financial charges
Change in Other liabilities carried as working capital
- Financial assets
Net cash used in investing activities
Cash flows from financing activities
Net increase in cash and cash equivalents
Cash included in assets held for sale and Spin-off Assets
Effect of exchange rate changes on cash and cash equivalents
(Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)
40
Financial Review
Annual Report 2012
Financial review
Notes to the consolidated
financial statements
1.
General information
Orsacom Telecom Holding S.A.E. (“OTH” or the “Company”) is a joint stock company with its head office
in Cairo, Egypt. The Company, through its subsidiaries (together the “Group”) is a leading provider of
mobile telecommunications in Africa, Asia and North America. The Company is listed on the Egyptian Stock
Exchange and has Global Depository Receipts (“GDR”) listed on the London Stock Exchange. The Company
is a subsidiary of VimpelCom Ltd. (“VimpelCom”).
These consolidated financial statements as of and for the year ended December 31, 2012 (the
“Consolidated Financial Statements”) was approved for issue by the Board of Directors on March 5th 2013.
2.
VimpelCom
Transaction and
the Demerger
VimpelCom Ltd. (“VimpelCom”) and Weather
Investments II Sarl (“Weather II”) announced in
October 2010 that they had signed an agreement
to combine VimpelCom and Wind Telecom SpA (the
“VimpelCom Transaction”). The VimpelCom Transaction
closed in April 2011 and as a result VimpelCom owns,
through Wind Telecom SpA (“Wind Telecom”), 51.7%
of the Company and 100% of Wind Telecomunicazioni
S.p.A. (“Wind Italy”).
2.1
Demerger and Spin-Off Assets
Under the terms of the VimpelCom Transaction,
VimpelCom, Weather II and OTH agreed a demerger
plan (the “Demerger”) pursuant to which the
Company’s investments in certain telecom, media and
technology assets (the “Spin-Off Assets”) which were
not intended to form part of the VimpelCom business
going forward would be transferred to a new company,
Orascom Telecom Media and Technology Holding S.A.E.
(“OTMT”).
The Demerger was performed in accordance with
the guidelines of the Egyptian Financial Supervisory
42
Financial Review
Authority and in particular decree no. 124 of 2010 and
was completed in December 2011. The split of the OTH
shares by the way of the Demerger resulted in OTH
shareholders holding the same percentage interest in
OTMT as they held in the Company. The demerger plan
was approved in shareholders meetings dated April
14, 2011 and October 23, 2011. Approval from the
Egyptian Financial Supervisory Authority was received
in December 2011.
As a result of the Demerger, during November and
December 2011, ownership of the following Spin-Off
Assets were transferred from the Company to OTMT:
• 28.755% ownership stake in Mobinil for
Telecommunications S.A.E.
• 20.00% ownership stake in the Egyptian Company
for Mobile Services
• 75% ownership stake in CHEO Technology Joint
Venture Company, together with all Other assets and
businesses located in North Korea
• 95% ownership in Orabank NK
• 100% direct and indirectly held ownership stake in
Middle East and North Africa for Sea Cables
• 51% ownership stake in Trans World Associate
(Private) Limited (Pakistan)
• 100% ownership of Med Cable Limited (UK)
• 99.99% ownership stake in Intouch Communications
Services S.A.E. (a/k/a OT Ventures Internet
portals and Other ventures in Egypt including Link
Development, ARPU+ and LINKonLine) and
• 1% ownership stake in ARPU for
Telecommunications Services S.A.E.
The Demerger was performed based on the book
value of the Spin-Off Assets, taking into consideration
the terms and conditions of a separation agreement
entered into between the relevant parties, which
requires among Others, OTH to reimburse OTMT
for certain revenue items pertaining to the Spin-Off
Assets. The effect of the Demerger was a reduction of
total equity of US$ 1,651 million, including a reduction
of US$ 433 million in share capital.
The Demerger was effected through a reduction in
the issued capital of the Company. In particular, the
nominal value of the Company’s shares was reduced
from L.E. 1 to L.E. 0.58. As the Demerger took place
before the balance sheet date, the Demerger, including
the transfer of the Spin-Off Assets has already been
reflected in the consolidated balance sheet as of
December 31, 2011, whilst, for income statement
purposes, the results of operations relating to the
Spin-Off Assets have been classified as “discontinued
operations” in 2011.
2.2
Refinancing Plan
Certain of the Company’s financial liabilities included
mandatory repayment clauses in the event of a change
in control. In particular, the Company’s senior secured
credit facility and equity linked notes became repayable
as a result of the VimpelCom Transaction.
wAt an extraordinary general assembly meeting of
the Company held on April 14, 2011 (the “April 14
EGM”), the shareholders approved a refinancing
plan to refinance/repay the Company’s outstanding
secured debt and unsecured high yield notes, together
with certain derivative transactions for an amount of
approximately US$ 2.7 billion (the “Refinancing Plan”).
Therefore, in May 2011 VimpelCom provided two
shareholder loans to the Group to refinance such
financial liabilities. These shareholder loans are
repayable in May 2014 and bear a fixed interest rate of
9.5% which is payable in kind at maturity.
3.
Significant
accounting policies
3.1
Basis of presentation
The Consolidated Financial Statements of the Group,
as of and for the year ended December 31, 2012,
have been prepared in accordance with International
Financial Reporting Standards (IFRS) promulgated by
the International Accounting Standards Board (IASB)
and all interpretations of the International Financial
Reporting Interpretations Committee (IFRIC) and the
Standing Interpretations Committee (SIC).
The consolidated financial statements have been
prepared under the historical cost basis except for the
following:
• derivative financial instruments are measured at fair
value;
• financial instruments at fair value through profit or
loss are measured at fair value; and
• available-for-sale financial assets are measured at
fair value
• Assets and liabilities held for sale (or disposal group)
are measured at the lower of their carrying amount
and fair value less cost to sell.
For presentational purposes, the current/non-current
distinction has been used for the balance sheet, while
expenses are analyzed in the income statement using
a classification based on their nature. The indirect
method has been selected to present the cash flow
statement.
The information in this document has been presented
in millions of United States Dollar (“US$”), except
earnings per share and unless Otherwise stated.
3.2
Change in Accounting Polices
The Group has adopted the following new and amended
IFRSs and IFRIC Interpretations, as of January 1, 2012,
with no material impact on these financial statements:
Annual Report 2012
Financial review
• IFRS 7 (amendment), “Financial instruments:
Disclosures”. This amendment promotes
transparency in the reporting of transfer transactions
and improves users’ understanding of the risk
exposures relating to transfers of financial assets
and the effect of those risks on an entity’s financial
position, particularly those involving securitization of
financial assets.
• IAS 12 (amendment), “Income taxes”. This
amendment introduces an exception to the existing
principle for the measurement of deferred tax
assets or liabilities arising on investment property
measured at fair value.
3.3
Summary of main accounting
principles and policies
The main accounting principles and policies adopted in
preparing these Consolidated Financial Statements are
set out below. These policies have been consistently
applied to all periods in those consolidated financial
statements, and have been applied consistently by the
group entities.
3.3.1
Basis of consolidation
The Consolidated Financial Statements include the
financial statements of the Company and those entities
over which the Company exercises control, both
directly or indirectly, from the date of acquisition to the
date when such control ceases.
Control may be exercised through direct or indirect
ownership of shares with majority voting rights, or by
exercising a dominant influence expressed as the direct
or indirect power, based on contractual agreements
or statutory provisions, to determine the financial and
operational policies of the entity and obtain the related
benefits, regardless of any equity relationships. The
existence of potential voting rights that are exercisable
or convertible at the balance sheet date is also
considered when determining whether there is control
or not.
The financial statements used in the consolidation
process are those prepared by the individual Group
entities as of and for the year ended December 31,
2012 (the reporting date for these Consolidated
44
Financial Review
Financial Statements) in accordance with IFRS and
approved by the respective Boards of Directors.
The consolidation procedures used are as follows:
• The assets and liabilities and income and expenses
of consolidated subsidiaries are included on a lineby-line basis, allocating to non-controlling interests,
where applicable, the share of equity and profit
or loss for the year that is attributable to them.
The resulting balances are presented separately in
consolidated equity and the consolidated income
statement;
• The purchase method of accounting is used to
account for business combinations in which the
control of an entity is acquired. The cost of an
acquisition is measured as the fair value of the
assets acquired, liabilities incurred or assumed and
equity instruments issued at the acquisition date,
plus all Other costs directly attributable to the
acquisition.
The excess of the cost of acquisition over the
fair value of the assets, liabilities and contingent
liabilities acquired is recorded as goodwill. If the cost
of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is
recognized immediately in the income statement;
• Business combinations in which all of the combining
entities or businesses are ultimately controlled by
the same party or parties both before and after
the business combination are considered business
combinations involving entities under common
control. In the absence of an accounting standard
guiding the accounting treatment of these operations
and in accordance with IAS 8, the Group consolidate
the book values of the entity transferred and report
any gains arising from the transfer in goodwill;
• The purchase of equity holdings from non-controlling
holders in entities where control is already exercised
is considered a purchase. Therefore the difference
between the cost incurred for the acquisition and the
respective share of the accounting equity acquired is
recognized in goodwill;
• any options to purchase non-controlling interests
outstanding at the end of the year are treated as
exercised and are reported as a financial liability or
in equity depending on whether the transaction is to
be settled in cash or through the exchange of equity
instruments;
•
unrealized gains and losses on transactions carried
out between companies consolidated on a lineby-line basis and the respective tax effects are
eliminated if material, as are corresponding balances
for receivables and payables, income and expense,
and finance income and expense;
• Gains and losses arising from the sale of holdings in
consolidated entities are recognized in the income
statement as the difference between the selling price
and the corresponding portion of consolidated equity sold.
3.3.2
Associates
Investments in companies where the Group exercises
a significant influence (hereafter “associates”), which is
presumed to exist when the Group holds between 20%
and 50%, are accounted for using the equity method.
The equity method is as follows:
• The Group’s share of the profit or loss of an investee
is recognized in the income statement from the date
when significant influence begins up to the date
when that significant influence ceases. Investments
in associates with negative shareholders’ equity are
impaired and a provision for its losses is accrued
only if the Group has a legal or constructive
obligation to cover such losses.
Equity changes in investees accounted for using
the equity method that do not result from profit or
loss are recognized directly in consolidated equity
reserves;
• Unrealized gains and losses generated from
transactions between the Company or its subsidiaries
and its investees accounted for using the equity
method are eliminated on consolidation for the
portion pertaining to the Group; unrealized losses
are eliminated unless they represent impairment.
• The license of the Group’s associated undertaking
in Canada, Globalive Wireless Management Corp, is
indefinite life assets. Although the spectrum licenses
have an initial term of 10 years, based on available
information, the management believes that they are
subject to perfunctory renewal and that renewal
cost will not be significant. Accordingly, they are
not subject to amortization but are tested annually
for impairment, or when indicators exist that the
carrying value is not recoverable.
3.3.3
Joint ventures
Joint ventures are those entities over whose activities
the Group has joint control, established by contractual
agreement and requiring unanimous consent for
strategic financial and operating decisions.
Interests in joint ventures are consolidated using the
proportionate method under which the assets and
liabilities and income and expenses of the joint venture
are consolidated on a line-by-line basis in proportion
to the share held by the Group in the venture. The
carrying amount of the consolidated investment is
then eliminated against the respective portion of
equity. Transactions, balances and any unrealized
gains and losses on intercompany transactions are
proportionately eliminated.
Unrealized gains arising from transactions with
associates (and jointly controlled entities) are
eliminated to the extent of the Group’s interest in the
enterprise. Unrealized gains resulting from transactions
with associates and joint ventures are eliminated
against the investment in the associates or joint
venture.
Appendix C includes a list of the entities included in the
scope of consolidation.
3.3.4
Foreign currency translation
Functional and presentation currency
The functional currency of each subsidiary is the local
currency where that entity operates. The functional
currency of OTH is the Egyptian Pound. In order to
present financial information to international investors
the Group’s presentation currency is US$.
Transactions and balances
Transactions in foreign currencies are translated into
the functional currency of the relevant entity at the
exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated, at the balance sheet date,
into the prevailing exchange rates at that date.
Foreign currency exchange differences arising on the
settlement of transactions and the translation of the
balance sheet are recognized in the income statement.
Group companies
The financial statements of the Group entities are
Annual Report 2012
Financial review
translated into the presentation currency as follows:
• assets and liabilities are translated at the closing
exchange rate;
• income and expenses are translated at the average
exchange rate for the year;
• all resulting exchange differences are recognized as
a separate component of equity in the “translation
reserve”;
The exchange rates applied
in relation to the US$ are as
follows:
2012
2011
Closing rate as of December 31,
2012
2011
Egyptian Pound (LE)
0.1647
0.1682
0.1571
0.1658
Algerian Dinar (DZD)
0.0128
0.0137
0.0127
0.0133
Tunisian (TND)
0.6402
0.7114
0.6440
0.6685
Pakistan Rupee (PKR)
0.0107
0.0116
0.0103
0.0111
Bangladeshi Taka (BDT)
0.0122
0.0135
0.0125
0.0122
Canadian Dollar (CAD)
1.0004
1.0115
1.0080
0.9791
Euro (EUR)
1.2852
1.3920
1.3193
1.2939
Property and equipment
Property and equipment are stated at purchase cost
or production cost, net of accumulated depreciation
and any impairment losses. Cost includes expenditure
directly attributable to bringing the asset to the
location and condition necessary for use and any
dismantling and removal costs which may be incurred
as a result of contractual obligations which require the
asset to be returned to its original state and condition.
Borrowing costs directly associated with the purchase
or construction of property and equipment are
capitalized as incurred together with the asset to which
they relate.
Costs incurred for ordinary and cyclical repairs and
maintenance are charged directly to the income
statement in the year in which they are incurred.
Costs incurred for the expansion, modernization or
improvement of the structural elements of owned or
leased assets are capitalized to the extent that they
have the requisites to be separately identified as
Financial Review
The useful lives estimated by the Group for the various categories of property and equipment are as follows.
Number of years
Buildings
50
Cell Sites
8-15
Tools
5-10
Computer equipment
3-5
Furniture and Fixtures
Average for year ended
December 31,
3.3.5
46
• goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and are translated
at the closing exchange rate; and
• in the preparation of the consolidated cash flow
statement, the cash flows of foreign subsidiaries are
translated at the average exchange rate for the year.
an asset or part of an asset, in accordance with the
“component approach”. Under this approach each
asset is treated separately if it has an autonomously
determinable useful life and value. Depreciation is
charged at rates calculated to write off the costs over
their estimated useful lives on a straight-line basis from
the date the asset is available and ready for use.
The useful lives of property and equipment and their
residual values are reviewed and updated, where
necessary, at least at each year end. Land is not
depreciated. When a depreciable asset is composed of
identifiable separate components whose useful lives
vary significantly from those of Other components
of the asset, depreciation is calculated for each
component separately, applying the “component
approach”. Gains or losses arising from the sale or
retirement of assets are determined as the difference
between the net disposal proceeds and the net carrying
amount of the asset sold or retired and are recognized
in the income statement in the period incurred under
“Disposal of non-current assets”.
5-10
Vehicles
3-6
Leasehold improvements and renovations
3-8
Finance leases are leases that substantially transfer
all the risks and rewards incidental to the ownership
of assets to the Group. Property and equipment
acquired under finance lease are recognized as assets
at their fair value or, if lower, at the present value of
the minimum lease payments, including any amounts
to be paid for exercising a purchase option. The
corresponding liability due to the lessor is recognized
as part of financial liabilities. An asset acquired under
a finance lease is depreciated over the shorter of the
lease term and its useful life.Lease arrangements in
which the lessor substantially retains the risks and
rewards incidental to ownership of the assets are
classified as operating leases. Lease payments under
operating leases are recognized as an expense in the
income statement on a straight-line basis over the
lease term.
3.3.6
Intangible assets
Intangible assets are identifiable non-monetary assets
without physical substance which can be controlled
and which are capable of generating future economic
benefits. Intangible assets are stated at purchase
and/or production cost including any expenses that
are directly attributable to preparing the asset for
its intended use, net of accumulated amortization
and impairment losses, if applicable. Borrowing costs
accruing during and for the development of the asset
are capitalized as incurred. Amortization begins when
an asset becomes available for use and is charged
systematically on the basis of the residual possibility
of utilization of the asset, meaning on the basis of its
estimated useful life.
Licenses
Costs for the purchase of telecommunication licenses
are capitalized. Amortization is charged on a straightline basis such as to write off the cost incurred for the
acquisition of a right over the shorter of the period
of its expected use and the term of the underlying
agreement, starting from the date on which the
acquired license may be exercised.
Goodwill
Goodwill represents the excess of the cost of an
acquisition over the interest acquired in the net
fair value at the acquisition date of the assets and
liabilities of the entity or business acquired. Goodwill
relating to investments accounted for using the equity
method is included in the carrying amount of the
investment. Goodwill is not systematically amortized
but is rather subject to periodic tests to ensure that
the carrying amount in the balance sheet is adequate
(“impairment testing”). Impairment testing is carried
out annually or more frequently when events or
changes in circumstances occur that could lead to an
impairment of the cash generating units (“CGUs”) to
which the goodwill has been allocated. An impairment
loss is recognized whenever the recoverable amount
of goodwill is lower than its carrying amount. The
recoverable amount is the higher of the fair value of
the CGU less costs to sell and its value in use, which
is represented by the present value of the cash flows
expected to be derived from the CGU during operations
and from its retirement at the end of its useful life.
The method for calculating value in use is described
in the paragraph below “Impairment of assets”. Once
an impairment loss has been recognized for goodwill it
cannot be reversed.
Whenever an impairment loss resulting from the above
testing exceeds the carrying amount of the goodwill
allocated to a specific CGU, the residual loss is allocated
to the assets of that particular CGU in proportion to
their carrying amounts. The carrying amount of an
asset under this allocation is not reduced below the
higher of its fair value less costs to sell and its value in
use as described above.
Annual Report 2012
Financial review
Software
Acquired software licenses are capitalized on the
basis of the costs incurred to acquire and bring to
use the specific software. Software licenses are
amortized on a straight-line basis over their useful life
(between 3 to 8 years), while software maintenance
costs are expensed in the income statement in the
period in which they are incurred. Costs incurred on
development of software products are recognized as
intangible assets when the Group has intentions to
complete and use or sell the assets arising from the
project, considering the existence of a market for the
asset, its commercial and technological feasibility, its
costs can be measured reliably and there are adequate
financial resources to complete the development of the
asset. Other development expenditures are recognized
in the income statement in the period in which they are
incurred.
Directly attributable costs that are capitalized as part
of a software product include software development
employee costs and an appropriate portion of relevant
overheads. Other development expenditures that do
not meet these criteria are recognized as an expense
as incurred. Development costs previously recognized
as an expense are not recognized as an asset in a
subsequent period.
Customer List
The customer list as an intangible asset consists of
the list of customers identified when allocating the
purchase price in acquisitions carried out by the Group.
Amortization is charged on the basis of the respective
estimated useful lives which range from 5 to 10 years.
3.3.7
Impairment of non-financial assets
At each balance sheet date, property and equipment
and intangible assets with finite lives are assessed
to determine whether there is any indication that an
asset may be impaired. If any such indication exists,
the recoverable amount of the asset concerned is
estimated and any impairment loss is recognized in the
income statement. Intangible assets with an indefinite
useful life are tested for impairment annually or more
frequently when events or changes in circumstances
occur that could lead to an impairment loss.
The recoverable amount of an asset is the higher of its
fair value less costs to sell and its value in use, which
is represented by the present value of its estimated
future cash flows. In determining an asset’s value in
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Financial Review
use the estimated future cash flows are discounted
using a pre-tax rate that reflects the market’s current
assessment of the cost of money for the investment
period and the specific risk profile of the asset. If an
asset does not generate independent cash flows its
recoverable amount is determined in relation to the
cash-generating unit (CGU) to which it belongs. An
impairment loss is recognized in the income statement
when the carrying amount of an asset or the CGU to
which it is allocated exceeds its recoverable amount.
If the reasons for previously recognizing an impairment
loss cease to exist, the carrying amount of an asset
Other than goodwill are increased to the net carrying
amount of the asset that would have been determined
(net of amortization or depreciation) had no impairment
loss been recognized for the asset, with the reversal
being recognized in the income statement.
3.3.8
Investments
Investments in companies Other than those classified
as available for sale are measured at fair value with any
changes in fair value being recognized in the income
statement. (The accounting treatment of financial
assets available for sale is discussed in “Financial
assets available for sale”). If fair value cannot be
reliably determined, an investment is measured at cost.
Cost is adjusted for impairment losses if necessary, as
described in the paragraph “Impairment of financial
assets”. If the reasons for an impairment loss no
longer exist, the carrying amount of the investment is
increased up to the extent of the loss with the related
effect recognized in the income statement.
Any risk arising from losses exceeding the carrying
amount of the investment is accrued in a specific
provision to the extent of the Group’s legal or
constructive obligations on behalf of the associate.
Investments held for sale or to be wound up in the
short term are classified as current assets and stated
at the lower of their carrying amount and fair value less
costs to sell.
3.3.9
Financial instruments
Financial instruments consist of financial assets and
liabilities whose classification is determined on their
initial recognition and on the basis of the purpose for
which they were purchased. Purchases and sales of
financial instruments are recognized at their settlement
date. Financial assets are derecognized when the right
to receive cash flows from them ceases and the Group
has effectively transferred all risks and rewards related
to the instrument and its control.
The fair values of quoted investments are based on
current bid prices. If the market for a financial asset
is not active (and for unlisted securities), the Group
establishes fair value by reference to prices supplied
by third-party operators and by using valuation models
based primarily on objective financial variables and,
where possible, prices in recent transactions and
market prices for similar financial instruments.
Financial Assets
Financial assets are initially recognized at fair value and
classified in one of the following four categories and
subsequently measured as described:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
includes financial assets purchased primarily for sale
in the short term, (held for trading) and derivative
financial instruments, except for the effective portion
of those designated as cash flow hedges. These
assets are measured at fair value; any change in the
year is recognized in the income statement. Financial
instruments included in this category are classified as
current assets if they are held for trading or expected
to be disposed of within twelve months from the
balance sheet date.
Derivatives are treated as assets or liabilities
depending on whether their fair value is positive or
negative; positive and negative fair values arising from
transactions with the same counterparty are offset if
this is contractually provided for. Fair value gains and
losses from foreign currency swaps are recognized
in foreign currency gains and losses in the income
statement.
Financial receivables
Financial receivables are non-derivative financial
instruments which are not traded on an active
market and which are expected to generate fixed or
determinable repayments. They are included as current
assets unless they are contractually due more than
twelve months after the balance sheet date in which
case they are classified as non-current assets. These
assets are measured at amortized cost using the
effective interest method. If there is objective evidence
of factors which indicate impairment, the asset is
reduced to the present value of future cash flows.
The impairment loss is recognized in the income
statement. If in future years the factors which caused
the impairment cease to exist, the carrying amount
of the asset is reinstated up to the amount that would
have been obtained had amortized cost been applied.
Financial assets available-for-sale
Financial assets available for sale are non-derivative
financial instruments which are either designated
in this category or not classified in any of the Other
categories. Available for sale financial assets are
measured at fair value. Changes in the fair value of
monetary securities denominated in a foreign currency
and classified as available for sale are analyzed
between translation differences resulting from changes
in amortized cost of the security and Other changes in
the carrying amount of the security. The translation
differences on monetary securities are recognized in
profit or loss; translation differences on non-monetary
securities are recognized in equity. Changes in the
fair value of monetary and non-monetary securities
classified as available for sale are recognized in equity.
When securities classified as available for sale are sold
or impaired, the accumulated fair value adjustments
recognized in equity are included in the income
statement.
The classification of an asset as current or non-current
is the consequence of strategic decisions regarding
the estimated period of ownership of the asset and its
effective marketability, with those which are expected
to be realized within twelve months from the balance
sheet date being classified as current assets.
Financial assets held to maturity
These are non-derivative assets with fixed maturities
that the Group has the intention and ability to hold to
maturity. Those maturing within 12 months are carried
as current assets. These financial assets are measured
at amortized cost using the effective interest method.
3.3.10
Impairment of financial assets
Individually significant financial assets are tested for
impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that
share similar credit risk characteristics. In the case
of equity securities classified as available for sale, 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.
Annual Report 2012
Financial review
If any such evidence exists for available for sale
financial assets, the cumulative loss – measured
as the difference between the acquisition cost and
the current fair value, less any impairment loss on
that financial asset previously recognized in profit or
loss – is removed from equity and recognized in the
income statement. Impairment losses recognized in
the income statement on equity instruments are not
reversed through the income statement.
3.3.11
Financial liabilities
Financial liabilities consisting of borrowings, trade
payables and Other obligations are measured at
amortized cost using the effective interest method.
When there is a change in cash flows which can be
reliably estimated, the value of the financial liability
is recalculated to reflect such change based on the
present value of expected cash flows and the originally
determined internal rate of return. Financial liabilities
are classified as current liabilities except where the
Group has an unconditional right to defer payment until
at least twelve months after the balance sheet date.
Financial liabilities are derecognized when settled and
the Group has transferred all the related costs and
risks relating to an instrument.
3.3.12
Derivative financial instruments
Derivatives are initially recognized at fair value on
the date a derivative contract is entered into and
subsequently remeasured at fair value. The method
of recognizing the resulting gain or loss depends on
whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being
hedged.
The Group documents at the inception of the
transaction the relationship between hedging
instruments and hedged items, as well as its risk
management objectives and strategy for undertaking
various hedging transactions. The Group also
documents its assessment, both at hedge inception and
on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows of
hedged items. The full fair value of a hedging derivative
is classified as a current asset or liability when the
remaining maturity of the hedged item is less than 12
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Financial Review
months. Derivatives which do not qualify for hedge
accounting are classified as a financial asset at fair
value through profit or loss.
Fair value hedge
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in the income statement, together with any
changes in the fair value of the hedged asset or liability
that are attributable to the hedged risk. If the hedge
is not fully effective, meaning that these changes are
different, the non-effective portion is treated as part
of the net financing cost for the year in the income
statement.
Cash flow hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges is recognized in equity in a specific reserve (the
“cash flow hedge reserve”) .
The gain or loss relating to the ineffective portion is
recognized immediately in the income statement.
A hedge is normally considered highly effective if from
the beginning and throughout its life the changes
in the expected cash flows for the hedged item are
substantially offset by the changes in the fair value of
the hedging instrument. When the economic effects
deriving from the hedged item are realized, the related
gains or losses in the reserve are reclassified to the
income statement together with the economic effects
of the hedged item. Whenever the hedge is not highly
effective, the non-effective portion of the change in
fair value of the hedging instrument is immediately
recognized as part of the net financing cost for the year
in the income statement.
on the weighted average method. Net realizable value
is the estimated selling price in the ordinary course
of business, less the estimated costs of completion
and selling expenses. When necessary, obsolescence
allowances are made for slow-moving and obsolete
inventories. Inventories mainly comprise handsets
and SIM cards.
3.3.14
Cash and cash equivalents
Cash and cash equivalents include cash in hand,
deposits held at call with banks and Other short-term
highly liquid investments with original maturities of
three months or less.
3.3.15
Non-current assets and
liabilitiesheld for sale
Non-current assets (or disposal groups comprising
assets and liabilities) that is expected to be recovered
primarily through sale rather than through continuing
use is classified as held for sale. Immediately
before classification as held for sale, the assets (or
components of a disposal group) are remeasured in
accordance with the Group’s accounting policies.
Thereafter the assets and liabilities held for sale (or
disposal group) are measured at the lower of their
carrying amount and fair value less cost to sell. Any
impairment loss on a disposal group first is allocated
to goodwill, and then to remaining assets and liabilities
on pro rata basis, except that no loss is allocated to
inventories, financial assets, and deferred tax assets,
which continue to be measured in accordance with the
Group’s accounting policies.
When a hedging instrument expires or is sold, or
when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in
equity at that time remains in equity and is recognized
when the forecast transaction is ultimately recognized
in the income statement. When a forecast transaction
is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately
transferred to the income statement.
Impairment losses on initial classification as held for
sale and subsequent losses on remeasurement are
recognized in the income statement. Subsequent
increase in fair value less costs to sell may be
recognized in the income statement only to the extent
of the cumulative impairment loss that has been
recognized previously.
3.3.13
Current and deferred income tax
Inventories
Inventories are stated at the lower of purchase cost or
production cost and net realizable value. Cost is based
3.3.16
The tax expense for the period comprises current
and deferred tax. Tax is recognized in the income
statement, except to the extent that it relates to
items recognized directly in equity. In this case, the
tax is also recognized in equity. The current income
tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet
date in the countries where the Group’s subsidiaries,
associates and joint venture operate and generate
taxable income. Management periodically evaluates
positions taken in tax returns with respect to
situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is recognized, using the balance
sheet liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial
statements. However, deferred income tax is not
accounted for if it arises from initial recognition of
goodwill or the initial recognition of an asset or liability
in a transaction Other than a business combination
that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income
tax is determined using tax rates (and laws) that have
been enacted or substantially enacted at the balance
sheet date and are expected to apply when the related
deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognized only to the
extent that it is probable that future taxable profit will
be available against which the temporary differences
can be utilized. Deferred income tax is provided on
temporary differences arising on investments in
subsidiaries, associates and joint ventures, except
where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the
foreseeable future. Additional income taxes that arise
from the distribution of dividends are recognized at the
same time that the liability to pay the related dividend
is recognized.Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the
same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities will be
realized simultaneously.
3.3.17
Provisions
Provisions are only recognized when the Group has a
present legal or constructive obligation arising from
past events that will result in a future outflow of
Annual Report 2012
Financial review
resources, and when it is probable that this outflow
of resources will be required to settle the obligation.
The amount provided represents the best estimate of
the present value of the outlay required to meet the
obligation. The interest rate used in determining the
present value of the liability reflects current market
rates and takes into account the specific risk of each
liability. Provisions are not recognized for future
operating losses.
3.3.18
Employee benefits
Short-term benefits
Short-term benefits are recognized in the income
statement in the year when an employee renders
service.
Share-based employee benefits
The Group recognizes additional benefits to certain
managers and Other members of personnel through
share based payment plans. IFRS 2 – “Share-based
Payment” considers these plans to represent a
component of employee remuneration. The fair
value of the employee services received at the grant
date in exchange for the grant of options or shares
is recognized as an expense with a correspondent
increase in equity. The total amount to be expensed is
determined by reference to the fair value of the options
granted, excluding the impact of any non-market
service and performance vesting conditions. The total
amount expensed is recognized over the vesting period,
which is the period over which all of the specified
vesting conditions are to be satisfied.
3.3.19
Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares
are shown in equity as a deduction, net of tax, from
proceeds.
3.3.20
Treasury shares
Where any Group company purchases the Company’s
equity share capital (treasury shares), the
consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted
from equity attributable to equity holders of the
Company until the shares are cancelled or re-issued.
Where such shares are subsequently re-issued, any
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Financial Review
consideration received, net of any directly attributable
incremental transaction costs and the related income
tax effects, is included in equity attributable to equity
holders of the Company.
3.3.21
Legal reserve
As per the Company’s statutes, 5% of net profit for
the year is set aside to form a legal reserve, the
transfer to such reserve ceases once it reaches 50%
of the Company’s paid in share capital. The reserve
can be utilized for covering losses or for increasing the
Company’s share capital. If the reserve falls below the
said 50%, the Company should resume setting aside
5% of its annual net profit until the reserve reaches
50% of the Company’s paid in share capital.
3.3.22
Dividend distribution
Dividend distribution to the Company’s shareholders is
recognized as a liability in the Consolidated Financial
Statements in the period in which the dividends are
approved by the Company’s shareholders.
3.3.23
Revenue recognition
Revenue comprises the fair value of the consideration
received or receivable for the sale of goods and
services in the ordinary course of the Group’s activities.
Revenue is shown net of value added tax, rebates and
discounts and after eliminating sales within the Group.
Revenue from the sale of goods is recognized when the
Group transfers the risks and rewards of ownership
of the goods. Revenue from services is recognized
in the income statement by reference to the stage of
completion and only when the outcome can be reliably
estimated.
More specifically, the criteria followed by the Group in
recognizing ordinary revenue are as follows:
• Revenue arising from post-paid traffic,
interconnection and roaming is recognized on the
basis of the actual usage made by each subscriber
and telephone operator. Such revenue includes
amounts paid for access to and usage of the Group
network by customers and Other domestic and
international telephone operators;
• Revenue from the sale of prepaid cards and
recharging is recognized on the basis of the prepaid
traffic actually used by subscribers during the
year. The unused portion of traffic at period end is
recognized as deferred income in “Other liabilities”;
• revenue from the sale of mobile phones and fixedline phones and related accessories is recognized at
the time of sale;
• Connection fee recognized on a straight-line basis
over the expected term of the relevant customer
relationship (either the contract period or estimated
customer life). In the case of promotions with a
cumulative plan still open at the end of the year, the
activation fee is recognized on an accruals basis so
as to match the revenue with the year in which the
service may be used.
Dividend income from investments recorded at fair
value through profit and loss or as available for sale
is recognized when the right to receive payment is
established.
3.3.26
Discontinued operations
A discontinued operation is a component of the
Group’s business that represents a separate major
line of business or geographical area of operations
that has been disposed of or is held for sale, or is a
subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon
disposal or when the operation meets the criteria
to be classified as held for sale, if earlier. When an
operation is classified as a discontinued operation, the
comparative income statement is re-presented as if the
operation had been discontinued from the start of the
comparative period.
3.3.27
Segment reporting
Interest income is recognized on a time-proportion
basis using the effective interest rate method.
Operating segments are reported in a manner which
is consistent with the internal reporting information
provided to the chief operating decision-maker. The
chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the
operating segments, has been identified as the board
of directors.
3.3.25
3.3.28
Basic
The following new standards, amendments to standards
and interpretations have been issued but are not
effective for the financial year 2012 and have not been
early adopted:
• IAS 1 (amendment), “Financial statement
presentation” (effective for annual periods beginning
on or after July 1, 2012). The main change
resulting from these amendments is a requirement
for entities to group items presented in ‘Other
comprehensive income’ (OCI) on the basis of
whether they are potentially reclassifiable to profit
or loss subsequently (reclassification adjustments).
The amendments do not address which items are
presented in OCI.
3.3.24
Interest income
Earnings per share
Basic earnings per share are calculated by dividing
the profit for the year attributable to equity holders of
the Company, both from continuing and discontinued
operations, by the weighted average number of
ordinary shares in issue during the year excluding
ordinary shares purchased by the Company and held as
treasury shares.
Diluted
Diluted earnings per share are calculated by dividing
the profit for the year attributable to equity holders of
the Company by the weighted average of the number
of ordinary shares of the Company outstanding
during the year where, compared to basic earnings
per share, the weighted average number of shares
outstanding is modified to include the conversion of all
dilutive potential shares, while the profit for the year
is modified to include the effects of such conversion
net of taxation. Diluted earnings per share are not
calculated when there are losses as any dilutive effect
would improve earnings per share.
Recent accounting pronouncements
• IAS 19 (amendment), “Employee benefits” (effective
date January 1, 2013). These amendments eliminate
the corridor approach and calculate finance costs on
a net funding basis.
• IFRS 9, “Financial instruments” (effective date
January 1, 2015). IFRS 9 is the first standard issued
Annual Report 2012
Financial review
as part of a wider project to replace IAS 39. IFRS
9 retains but simplifies the mixed measurement
model and establishes two primary measurement
categories for financial assets: amortized cost and
fair value. The basis of classification depends on the
entity’s business model and the contractual cash flow
characteristics of the financial asset. The guidance in
IAS 39 on impairment of financial assets and hedge
accounting continues to apply.
• IFRS 10, “Consolidated financial statements”
(effective date January 1, 2013). The objective of
IFRS 10 is to establish principles for the presentation
and preparation of consolidated financial statements
when an entity controls one or more Other entity (an
entity that controls one or more Other entities) to
present consolidated financial statements. Defines
the principle of control, and establishes controls as
the basis for consolidation. Set out how to apply the
principle of control to identify whether an investor
controls an investee and therefore must consolidate
the investee. Sets out the accounting requirements
for the preparation of consolidated financial
statements.
• IFRS 11, “Joint arrangements” (effective date
January 1, 2013). IFRS 11 is a more realistic
reflection of joint arrangements by focusing on the
rights and obligations of the arrangement rather
than its legal form. Proportional consolidation of joint
ventures is no longer allowed.
• IFRS 12, “Disclosures of interests in Other entities”
(effective date January 1, 2013). IFRS 12 includes
the disclosure requirements for all forms of interests
in Other entities, including joint arrangements,
associates, special purpose vehicles and Other off
balance sheet vehicles.
• Amendments to IFRS 10, “Consolidated financial
statements”, IFRS 11, “Joint arrangements” and
IFRS 12, “Disclosures of interests in Other entities”
(effective date January 1, 2013). These amendments
provide additional transition relief in IFRSs 10,11
and 12, limiting the requirement to provide adjusted
comparative information to only the preceding
comparative period.
• IFRS 13, “Fair value measurement” (effective
date January 1, 2013). IFRS 13 aims to improve
consistency and reduce complexity by providing a
precise definition of fair value and a single source of
fair value measurement and disclosure requirements
for use across IFRSs. The requirements, which are
largely aligned between IFRSs and US GAAP, do not
54
Financial Review
extend the use of fair value accounting but provide
guidance on how it should be applied where its use
is already required or permitted by Other standards
within IFRSs or US GAAP.
• IAS 28, “Associates and joint ventures” (revised).
This revised standard includes the requirements for
joint ventures, as well as associates, to be equity
accounted following the issue of IFRS 11.
• IFRS 7, “Financial instruments: Disclosures”
(amended) (effective date January 1, 2013). This
amendment includes new disclosures intended to
facilitate comparison between those entities that
prepare IFRS financial statements and those that
prepare US GAAP financial statements.
• IAS 32, “Financial instruments: Presentation”
(amended) (effective date January 1, 2014).Updates
the application guidance contained within IAS 32
to clarify some of the requirements for offsetting
financial assets and liabilities on the balance sheet.
• IAS 16, “Property, plant and equipment” (amended)
(effective date January 1, 2013).The amendment
clarifies that spare parts and servicing equipment
are classified as property, plant and equipment
rather than inventory when they meet the definition
of property, plant and equipment
• IAS 32, “Financial instruments: Presentation”
(amended) (effective date January 1, 2013). The
amendment clarifies the disclosure requirements
for segment assets and liabilities in interim financial
statements.
The Group is currently assessing the impact of these
new standards and amendments.
4.
Use of Estimates
The preparation of these Consolidated Financial
Statements required management to apply accounting
policies and methodologies that are based on complex,
subjective judgments, estimates based on past
experience and assumptions determined from time
to time to be reasonable and realistic based on the
related circumstances. The use of these estimates
and assumptions affects the amounts reported in the
balance sheet, the income statement and the cash flow
statement as well as the notes.
The final amounts for items for which estimates and
assumptions were made in the Consolidated Financial
Statements may differ from those reported in these
statements due to the uncertainties that characterize
the assumptions and conditions on which the estimates
are based.
The accounting principles requiring a higher degree of
subjective judgment in making estimates and for which
changes in the underlying conditions could significantly
affect the Consolidated Financial Statements are briefly
described below.
4.1
Goodwill
Goodwill is tested for impairment on an annual basis to
determine whether any impairment losses have arisen
that should be recognized in the income statement.
More specifically, the test is performed by allocating
the goodwill to a cash generating unit and subsequently
estimating the unit’s fair value. Should the fair value
of the net capital employed be lower than the carrying
amount of the CGU an impairment loss is recognized
for the allocated goodwill.
The allocation of goodwill to cash generating units and
the determination of the fair value of a CGU requires
estimates to be made that are based on factors that
may vary over time and that could as a result have an
impact on the measurements made by management
which might be significant.
4.2
Impairment of non-current assets
Non-current assets are reviewed to determine whether
there are any indications that the net carrying amount
of these assets may not be recoverable and that they
have suffered an impairment loss that needs to be
recognized. In order to determine whether any such
elements exist it is necessary to make subjective
measurements, based on information obtained
within the Group and in the market and also on past
experience.
When a potential impairment loss emerges it is
estimated by the Group using appropriate valuation
techniques. The identification of the elements that
may determine a potential impairment loss and the
estimates used to measure such loss depend on factors
which may vary over time, thereby affecting the
estimates and measurements.
4.3
Depreciation of non-current assets
The cost of property and equipment is depreciated on
a straight-line basis over the useful lives of the assets.
The useful life of property and equipment is determined
when the assets are purchased and is based on the
past experience of similar assets, market conditions
and forecasts concerning future events which may
affect them, amongst which are changes in technology.
The actual useful lives may therefore differ from the
estimates of these lives. The Group regularly reviews
technological and business sector changes, dismantling
costs and recoverable amounts in order to update
residual useful lives. Such regular updating may entail
a change of the depreciation period and consequently a
change in the depreciation charged in future years.
4.4
Deferred tax assets
The recognition of deferred tax assets is based on
forecasts of future taxable profit. The measurement of
future taxable profit for the purposes of determining
whether or not to recognize deferred tax assets
depends on factors which may vary over time
and which may lead to significant effects on the
measurement of this item.
Annual Report 2012
Financial review
4.5
Income tax
The companies of the Group are subject to different
tax legislation. A significant amount of estimates are
necessary in order to account for the total tax effects
on the financial statements. The Group has a number
of operations for which the relevant taxes are difficult
to estimate and thus has to accrue some tax liabilities
based on estimates. Whenever the actual tax expense
is different from the estimated, the difference is
recorded in the income statement.
4.6
Fair value of derivatives and Other
financial instruments
The fair value of financial instruments is determined
based on quoted market prices, where available, or
on estimates using present values or Other valuation
techniques. Those techniques are significantly affected
by the assumptions used, including discount rates
and estimates of future cash flows. Where market
prices are not readily available, fair value is based on
either estimates obtained from independent experts or
quoted market prices of comparable instruments.
4.7
Provisions and contingencies
In recognizing provisions the Group analyses the extent
to which it is probable that a liability will arise from
disputes with employees, suppliers and third parties
and in general the losses it will be required to incur
as a result of past obligations. The definition of such
provisions entails making estimates based on currently
known factors which may vary over time and which
could actually turn out to be significantly different from
those referred to in preparing the financial statements.
5.
inancial Risk
Management
5.1
Financial Risk Factors
The Group’s activities expose it to a variety of financial
risks: market risk (including currency risk, fair value
interest risk and cash flow interest risk), credit risk and
liquidity risk. In particular the Group is exposed to risks
from movements in exchange rates, interest rates and
market prices. The Group’s overall risk management
program focuses on the unpredictability of financial
markets and seeks to minimize potential adverse
effects on the Group’s performance through ongoing
operational and finance activities. Depending on the
risk assessment, the Group uses selected derivative
hedging instruments. The management has overall
responsibility for the establishment and oversight of the
group’s risk management framework.
5.2
Market Risk
5.2.1
Foreign exchange risk
The Group operates internationally and is exposed
to foreign exchange risk arising when its business
transactions are in currencies Other than its functional
currency. The main currencies to which the Group is
exposed are the US Dollar, the Canadian Dollar and the
Euro.
In general the Group’s subsidiaries are encouraged to
obtain financing in their functional currency in order
to have a natural hedge of the exchange rate of such
financing. As some transactions are executed in
foreign currencies, and in particular in US$, CAD and
Euro, the Group may be subject to the risk of exchange
rate fluctuations.
As of December 31, 2012 the Group’s borrowings
included US$ borrowings amounting to US$ 4,075
million, PKR borrowings amounting to PKR 35,922
million (equivalent to US$ 370 million), BDT borrowings
amounting to BDT 18,797 million (equivalent to US$
56
Financial Review
236 million) and Euro borrowings amounting to Euro 18
million (equivalent to US$ 24 million).
In certain instances the Group has entered into
economic hedging agreements to manage the risk of
fluctuations relating to these financing operations.
In particular, Pakistan Mobile Communication
Limited (“PMCL”) had borrowings hedged by hedging
agreement for US$ 129 million and Euro 18 million
(equivalent to US$ 24 million) as of December 31,
2012. Such borrowings were fully hedged by PMCL
using cross currency swaps pursuant to which interest
payments and principal payments are paid in Pakistani
Rupee. The Group subsidiaries generally execute
their operating activities in their respective functional
currencies. Some Group subsidiaries are, however,
exposed to foreign currency risks in connection with
scheduled payments in currencies that are not their
functional currencies. In general this relates to
foreign currency denominated supplier payables and
receivables. The Group monitors the exposure to
foreign currency risk arising from operating activities
and, where relevant, enters into hedging transactions
in order to manage the exposure.
As described further in “Credit Risk”, the Group
has provided loan facilities to Globalive Wireless
Management Corp which are denominated in CAD.
As of December 31, 2012, if the functional currencies
had weakened / strengthened by 10% against the
US$, the Euro and CAD, with all Other variables
held constant, the translation of foreign currency
receivables and payables would have resulted in a
decrease/ increase in profit for the year (after tax) of
US$ 156 million, mainly relating to US$ denominated
borrowings. Additionally, the Group has investments
in foreign operations, whose net assets are exposed to
foreign currency translation risk. Currency exposure to
such risk is not hedged.
5.2.2
Cash flow and fair value
interest rate risk
The Group is exposed to market risks as a result of
changes in interest rates particularly in relation to
borrowings. Borrowings issued at floating rates expose
the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value
interest rate risk. The basic strategy of interest rate
risk management is to balance the debt structure
with an appropriate mix of fixed and floating interest
rate borrowings based on the Group’s perception of
future interest rate movements. In particular, the
risk monitored relates to the impact of movements in
floating rate indices on the Group’s finance costs.
As of December 31, 2012, 20.5% of the Group’s
financial liabilities were floating rate liabilities,
mainly relating to borrowings of PMCL. Prior to the
Refinancing Plan the Group used certain interest rate
derivatives to hedge movements in interest rates.
Subsequent to the Refinancing Plan, the majority of the
Group’s long term borrowings are fixed rate. Therefore
the Group does not use interest rate derivatives. The
Group considers the sensitivity of its finance costs to
movements in interest rates. In particular an increase /
decrease of 1.0% in interest rates as of December 31,
2012, would have resulted in an increase / decrease in
finance costs of US$ 11 million.
5.2.3
Price risk
The Group has limited exposure to equity securities
price risk on investments held by the Group.
5.2.4
Credit Risk
The Group considers that it is not exposed to major
concentrations of credit risk in relation to trade
receivables. However, credit risk can arise in the
event of non-performance of counterparty, particularly
in relation to credit exposures for trade and Other
receivables, financial instruments and cash and
cash equivalents. The Group considers that the
concentration of credit risk with respect to trade
receivables is limited given that the Group’s customer
base is largely pre-paid subscribers. Post paid
subscribers generally represent a small portion of the
subscriber base and therefore the credit exposure is
limited. In addition, the Group tries to mitigate credit
risk by adopting specific control procedures, including
assessing the credit worthiness of the counterparty and
limiting the exposure to any one counterparty.
Credit risk relating to cash and cash equivalents,
derivative financial instruments and financial deposits
arises from the risk that the counterparty becomes
insolvent and accordingly is unable to return the
deposited funds or execute the obligations under the
derivative transactions as a result of the insolvency.
To mitigate this risk, wherever possible the Group
conducts transactions and deposits funds with financial
institutions with a minimum of investment grade rating.
Annual Report 2012
Financial review
After considering such losses and the previously
explained impairment, an amount of US$ 756 million
is recorded in financial receivables. (see Note 22
“Other financial assets” for further details).
The Group is exposed to credit risk relating to financial
receivables as follows:
• During 2008 the Company entered into two loan
agreements to provide a total amount of CAD 508
million to Globalive Wireless Management Corp
(“GWMC”), a subsidiary of the associate Globalive
Investment Holdings Corp (“Globalive”). During
2009, 2010, 2011 and 2012 further loans were
provided and as of December 31, 2012 the amount
outstanding under such loan agreements, including
accrued interest, was CAD 1,790 million (equivalent
to US$ 1,804 million).
The loans were primarily provided to GWMC to fund
the acquisition of spectrum licenses in Canada. The
licenses were awarded to GWMC during March 2009
by Industry Canada and GWMC launched operations
in December 2009. During the start-up phase of
operations Globalive has incurred losses and as
a result the Group’s share of losses exceeds the
carrying value of the investment.
The Group’s share of the excess losses of Globalive
compared to the carrying value of the investment
have been disclosed together with the long term
receivable. During the year, the Group performed
a reorganization of the GWMC holding. As part of
the reorganization, an independent appraisal was
performed, as a result of which the receivable was
impaired by USD$ 344 million, accordingly the
amount of the accumulated loss and impairment
recorded as of December 31, 2012 was CAD 1,040
million (equivalent to US $ 1,048 million).
December 31, 2011
Liabilities
carrying
amount
ExpecteD
cash flows
(*)
less than 1
year
between 1
and 5 years
More than 5
years
Liabilities due to banks
828
906
529
376
1
Bonds
In general the remaining Other receivables and
financial receivables included in financial assets relate
to a variety of smaller amounts due from a wide range
of counterparties, therefore, the Group does not
consider that it has a significant concentration of credit
risk except for the ones mentioned above.
5.3
238
294
55
239
-
2,912
3,618
-
3,618
-
58
59
24
32
3
Telecommunication license
payable
190
242
97
101
44
Trade payables
738
738
738
-
-
4,964
5,857
1,443
4.366
48
Shareholders loans
Other borrowings
* Expected cash flows are the gross contractual undiscounted cash flows including interest, charges and Other fees.
Liquidity Risk
The Group monitors and mitigates liquidity risk arising
from the uncertainty of cash inflows and outflows by
maintaining sufficient liquidity of cash balances as well
as undrawn credit lines and by diversifying its sources
of finance. In general, liquidity risk is monitored at
entity level whereby each subsidiary is responsible for
managing and monitoring its cash flows and rolling
liquidity reserve forecast in order to ensure that it
has sufficient committed facilities to meet its liquidity
needs.
The table below analyses the group’s financial
liabilities into relevant maturity groupings based on
the remaining period at the balance sheet to the
contractual maturity date. The amounts disclosed in
the table are the contractual undiscounted cash flows.
The table below analyses the group’s derivative financial instruments into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows.
December 31, 2012
CARRYING
AMOUNT
EXPECTED CASH
FLOWS (*)
LESS THAN 1
YEAR
BETWEEN 1 AND
5 YEARS
Cash outflow / (cash inflow)
Foreign exchange derivatives
(58)
(59)
(56)
(3)
Total
(58)
(59)
(56)
(3)
CARRYING
AMOUNT
EXPECTED CASH
FLOWS (*)
LESS THAN 1
YEAR
BETWEEN 1 AND
5 YEARS
Foreign exchange derivatives
(61)
(78)
(5)
(73)
Total
(61)
(78)
(5)
(73)
As of December 31,
2011
Cash outflow / (cash inflow)
* Derivative cash flows for interest rate derivatives and foreign exchange derivatives represent the net cash flow from the relevant swap transaction as such derivatives are net settled. Cash inflow and cash outflow for Other derivative instruments are shown separately as such derivatives are gross settled.
December 31, 2012
Liabilities
ExpecteD
cash flows
(*)
less than 1
year
between 1
and 5 years
More than 5
years
Liabilities due to banks
672
738
470
268
-
Bonds
256
289
188
101
-
3,765
4,496
-
4,496
-
65
90
24
66
-
Telecommunication license
payable
145
174
85
60
29
Trade payables
710
710
710
-
-
5,613
6,497
1,477
4,991
29
Shareholders loans
Other borrowings
58
carrying
amount
Financial Review
Annual Report 2012
Financial review
5.4
Capital risk management
The Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going
concern in order to provide returns to shareholders
and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the
capital structure, the Group may, among Other things,
adjust the amount of dividends paid to shareholders,
return capital to shareholders through share buyback
transactions, issue new shares or sell assets to
reduce debt.
5.5
Other risks
5.5.1
Political and economic risk
in emerging countries
A significant amount of the Group’s operations are
conducted in Algeria and Pakistan. The operations
of the Group depend on the market economies of
the countries in which the subsidiaries operate. In
particular, these markets are characterized by
economies that are in various stages of development or
are undergoing restructuring. Therefore the operating
results of the Group are affected by the current and
future economic and political developments in these
countries.
In particular, the results of operations could be
unfavorably affected by changes in the political or
governmental structures or weaknesses in the local
economies in the countries where it operates. These
changes could also have an unfavorable impact
on financial condition, performance and business
prospects.
5.5.2
Regulatory risk in emerging countries
Due to the nature of the legal and tax jurisdictions in
the emerging countries where the Group operates, it is
possible that laws and regulations could be amended.
This could include factors such as the current tendency
to withhold tax on the dividends of these subsidiaries,
receiving excessive tax assessments, granting of
relief to certain operations and practices relating to
foreign currency exchange. These factors could have
60
Financial Review
an unfavorable effect on the financial activities of the
Group and on the ability to receive funds from the
subsidiaries.
Revenue generated by the majority of the Group
subsidiaries is expressed in local currency. The Group
expects to receive most of this revenue from its
subsidiaries and therefore it relies on their ability to be
able to transfer funds.
The regulations in the various countries where the
subsidiaries operate could reduce the ability to pay
interest and dividends and to repay loans, credit
instruments and securities expressed in foreign
currency through the transfer of currency. In addition,
in some countries it could be difficult to convert large
amounts of foreign currency due to central bank
regulations. The central banks may amend regulations
in the future and therefore the ability of the Company
to receive funds from its subsidiaries may be restricted.
6.
Segment reporting
The chief operating decision-maker has been identified
as the board of directors of the Group. The board
of directors reviews the Group’s internal reporting
in order to assess its performance and allocate
resources, mainly from a geographical perspective, of
the mobile telecommunication business. Management
has determined the reportable operating segments
according to the information analyzed periodically by
the board of directors as follows:
• Segment capital expenditure is the total cost
incurred during the period to acquire property, plant
and equipment, and intangible assets Other than
goodwill.
• The Mobile Telecommunication business in Egypt
and Tunisia, relate to the operations of ECMS and
Orascom Telecom Tunisia S.A. respectively, which
were both disposed of in 2011, Accordingly these
have no income statement or asset disclosures for
the year ended December 31, 2012.
• Mobile telecommunication business in Algeria;
• Mobile telecommunication business in Pakistan;
• Mobile telecommunication business in Bangladesh;
• Other GSM which comprises the mobile
telecommunication businesses in Central and South
Africa; and
• Other Telecom service (Non GSM Service) which
includes Other territories in which the Group
operates as a mobile telecommunication operator
and Other services.
For the years ended December 31, 2011, management
also considered the Mobile telecommunication
businesses in Egypt and Tunisia as separate reportable
operating segments. As these businesses were
disposed of in 2011, they are no longer included within
the disclosures. The Group reports on operating
segments which are independently managed. The
board of directors assesses the performance of such
operating segments based on:
• Total revenues
• EBITDA, defined as profit for the period before
income tax expense (or if applicable profit from
continuing operations for the period before
income tax expense), gains (losses) on disposal
of associates, share of profit (loss) of associates,
foreign exchange gains (losses), financial expense,
financial income, disposal of non-current assets,
impairment charges, depreciation and amortization
and net unusual capital loss.
Annual Report 2012
Financial review
Consolidated
Discontinuing
Operation
Holdings & Others
Other Telecom
services (Non GSM)
Other GSM
Bangladesh
Tunisia
Egypt
Algeria
As of December 31, 2012
Pakistan
The information provided to the board of directors is measured
consistently with that of the financial statements.
Financial expense - previous
period
(2)
(95)
-
-
(51)
(8)
(2)
(381)
3
(536)
Net Foreign exchange gain / (loss)
- current period
(1)
(22)
-
-
7
(3)
2
(57)
-
(74)
Net Foreign exchange gain / (loss)
- previous period
(7)
(28)
-
-
(55)
(7)
2
(55)
-
(150)
Share of profit (losses) of Associates - current period
-
-
-
-
-
-
-
(103)
-
(103)
Total segment
revenue - current period
1,841
1,133
-
-
554
91
8
-
-
3,627
Share of profit (losses) of Associates - previous period
-
-
-
-
-
-
-
(135)
-
(135)
Total segment revenue - previous
period
1,860
1,134
-
-
511
233
189
-
(291)
3,636
Impairment of financial assets current period
-
-
-
-
-
-
-
(344)
-
(344)
EBITDA - current period
1,094
489
-
-
192
33
(6)
(47)
-
1,755
Impairment of financial assets prior period
-
-
-
-
-
-
-
(22)
-
(22)
EBITDA - previous period
1,051
402
-
-
170
109
21
17
(123)
1,647
Other non-operating costs - current
period
-
-
-
-
-
(3)
-
(74)
-
(77)
Depreciation and amortization current period
(243)
(265)
-
-
(174)
(16)
(1)
(6)
-
(705)
Other non-operating costs - prior
period
-
-
-
-
-
-
-
-
-
-
Depreciation and amortization previous period
(314)
(284)
-
-
(151)
(31)
(9)
(7)
23
(773)
Profit (Loss) Before Income Tax current period
852
128
-
-
(39)
5
(8)
(890)
-
48
Impairment charges - current
period
-
-
-
-
(12)
-
-
-
-
(12)
Profit (Loss) Before Income Tax previous period
728
7
(42)
935
(95)
123
-
(511)
(986)
159
Impairment charges - prior period
-
-
-
-
(10)
-
-
-
-
(10)
Total assets - current period
3,736
1,602
-
-
1,181
213
42
1,350
-
8,124
Gains (losses) on disposal of noncurrent assets - current period
-
(6)
-
-
(6)
-
(3)
-
-
(15)
Total assets - previous period
2,378
1,341
-
-
490
174
46
3,526
-
7,955
Gains (losses) on disposal of noncurrent assets - previous period
(3)
2
(42)
935
-
57
2
-
(893)
58
Capital expenditure - current
period
55
176
-
-
119
18
-
19
-
387
Financial income - current period
3
5
-
-
2
(1)
-
68
-
77
Capital expenditure - previous
period
40
261
-
-
409
26
78
2
-
816
Financial income - previous period
2
10
-
-
2
3
5
62
(4)
80
Financial expense - current period
(1)
(73)
-
-
(48)
(5)
-
(327)
-
(454)
• Holding and Other mainly represent income and expense relating to activities provided from the holding and
Other companies. These represent mainly management fees and revenue as a result of supporting activities provided by Orascom Telecom Holding.
There were no intersegment revenues recorded in 2012 or 2011. The following table provides a breakdown of
revenue and Other income by product and service:
Product and services
2012
2011
Mobile
3,619
3,599
8
37
Fixed - line and Internet
Other income
Total revenue and Other income
62
Financial Review
40
30
3,667
3,666
Annual Report 2012
Financial review
9.
7.
Purchases and services
Assets and liabilities
classified as held for
sale and discontinued
operations
IN MILLION OF US$
2012
2011
Interconnection traffic
318
336
Telephony cost
301
269
In 2012 there are no assets and liabilities classified as
held for sale or discontinued operations.
result of the Demerger. The results of operations
relating to the Spin-Off Assets have been classified as
discontinued operations in 2011.
Customer acquisition costs
202
203
Maintenance costs
154
161
2011 Discontinued Operations
Orascom Telecom Tunisia S.A.
Utilities
2012
Discontinued operations in 2011 relate to the Spin-Off
Assets and Orascom Telecom Tunisia S.A. (“OTT”).
Spin Off Assets
As described in Note 2, during November and
December 2011 the Company transferred its
shareholdings in the Spin-Off Assets to OTMT as a
In November 2010, the Company announced that it had
entered into a share purchase agreement with Qatar
Telecom Q.S.C., pursuant to which the Company sold
its entire 50% shareholding of OTT for a total cash
consideration of US$ 1.2 billion. The transaction was
completed on January 2, 2011.
The following provides a breakdown of discontinued operations for the years indicated:
For the year ended December 31,
(In millions of US$)
Expected cash
flows (*)
Less than 1
year
Revenues
291
-
291
Expenses
(193)
-
(193)
(42)
-
(42)
Profit before tax from discontinued operations
Income tax
Profit after tax from discontinued operations
56
-
56
(4)
-
(4)
52
-
52
Gain from disposal of OTT
-
930
930
Income tax on gains
-
(237)
(237)
52
693
745
Profit from discontinued operations
8.
101
Advertising and promotional services
94
93
Rental of civil and technical sites
76
74
Other leases and rentals
31
37
Rental of local network
32
36
Consulting and professional services
26
31
Raw, ancillary and consumable materials and goods
11
12
9
9
Other service expenses
83
101
1,536
1,600
2012
2011
Promotion and gifts
62
81
Annual contributions for licenses
31
31
Provisions for risks and charges
6
17
21
17
Total
10.
Other expenses
(In millions of US$)
Write down of current receivables and liquid assets
Other operating expenses
Revenues
(In millions of US$)
137
62
National and international roaming
Carrying
amount
Share of profit/(loss) from associates
137
Mobile Finish Good Purchases
Total
2012
2011
3,179
3,158
390
387
17
18
17
29
137
175
Revenues from services
Telephony services
Interconnection traffic
International and national roaming
Other services
Total revenues from services
Total revenues from sale of goods
Total
64
Financial Review
25
29
3,611
3,592
16
44
3,627
3,636
Annual Report 2012
Financial review
11.
12.
Personnel costs
(In millions of US$)
Depreciation and amortization
2012
2011
146
160
Social security
12
8
Pension costs
31
18
Commercial and Other tangible assets
Other personnel costs
50
58
Buildings
239
244
Wages and salaries
Total
(In millions of US$)
2012
2011
Depreciation of property and equipment:
Plant and machinery
562
616
34
33
9
13
100
107
-
4
705
773
Amortization of intangible assets
Licenses
Personnel costs include Board of Directors remuneration of US$ 2 million in 2012 and US $ 3 in 2011.
Other intangible assets
Total
Personnel cost includes share based compensation costs of US$ 4 million in 2012 and US$ 3 million in 2011.
Other personnel costs include US$ 15 million in termination benefits as a result of corporate re-structuring at
OTH.
The table below provides a breakdown of the number of employees as of December 31:
(in number of employees)
2012
2011
Senior management
175
156
Middle management
897
1,012
Staff
10,747
10,781
Total
11,819
11,949
13.
Impairment charges
Impairment charges amounting to US$ 12 million
in 2012, (2011 US$ 10 million) mainly relate to the
impairment of property and equipment (plant and
machinery) in Bangladesh.
The table below provides a breakdown of the average number of employees for the years ended
December 31, 2012 and 2011:
(in number of employees)
66
2012
2011
Senior management
166
189
Middle management
955
957
Staff
10,764
11,268
Total
11,885
12,414
Financial Review
Annual Report 2012
Financial review
14.
15.3
Interest income decreased in 2012 compared to 2011 a
result of a decrease in interest income on deposits, due
to the decrease in the deposits balance during the year
(See Note 22).
In 2011, VimpelCom provided two shareholders loans
to the Group to refinance certain financial liabilities.
These shareholders loans are repayable in 2014 and
bear fixed rates of interest of 9.50% which is payable
in kind prior to maturity. During the year ended
December 31, 2012, a further facility of US$ 2,500
million was provided by VimpelCom which bears
interest at 12.50%. For the year ended December 31,
2012, interest accrued on such loans amounted to US$
322 million.
Financial income
Disposal of non current assets
During the year ended 2012, OTH disposed of noncurrent assets generating losses of US$ 15 million,
mainly relating to disposals of property and equipment
in Pakistan and Bangladesh amounted to US$ 13 million
and losses from disposals of Ring Tunisia companies
amounted to US $ 2 million.
15.1
The Company has disposed during the second quarter
of 2011 Powercom against the debt related to it,
generating a net gain amounting to US$ 58 million.
These losses were not classified as losses from
discontinued operation as they are not representing a
separate major line of business or geographic area of
operation.
15.2
Financial expense
Interest on shareholders loan
Refinancing Plan
15.
Net financing costs
(in million of US$)
Interest income – deposits
Other interest income
2011
9
15
68
65
Financial income
77
80
Interest on bonds
(29)
(76)
Interest on bank borrowings
(81)
(79)
(323)
(146)
Refinancing Plan
-
(150)
Fair value losses on derivatives
-
(65)
Interest on shareholders loans
Other financial expenses
Financial expense
Foreign exchange losses, net
Fair value gains/(losses) on foreign exchange derivatives
Net foreign exchange losses
Net financing costs
68
2012
Financial Review
(21)
(20)
(454)
(536)
(79)
(142)
5
(8)
(74)
(150)
(451)
(606)
As a result of the Refinancing Plan in 2011, (see also
Note 2 for further details):
• the unamortized portion of the arrangement fees
(US$ 74 million) relating to the Senior Facility, the
Equity Linked Notes and the OTH High Yield Notes
has been recognized in the income statement
upon the extinguishment of the relevant financial
instruments;
• the Group incurred early repayments fees for US$ 30
million in relation to the equity linked notes due 2013
issued by Orascom Telecom Oscar S.A.;
• interest rate derivatives were entirely extinguished
and the cumulative gains and losses which had been
recognized in cash flow hedge reserves, amounting
to US$ 46 million, were reclassified from equity to
the income statement.
Annual Report 2012
Financial review
18.
16.
Other non-operating
costs
Share of profit and loss
of associates
Share of loss of associates in 2012 and 2011 includes
the investment in Globalive Canada Investment
Holdings Corp. and Globalive Canada Holdings Corp.
(collectively “Globalive”). The Group holds a 65.4%
investment in Globalive which comprises a combination
of voting and non-voting rights. Considering direct
and indirect interests, the Group holds 65.4% of the
outstanding shares and holds 33.2% of the voting
rights. The Group has significant influence over this
investment but does not have control over the financial
and operating policies of Globalive. Therefore the
investment is equity accounted.
2012
2011
Current asset
110
91
Non-current assets
964
883
Current liabilities
119
209
1,624
1,467
Non-current liabilities
Revenue
305
206
Net loss
(354)
(372)
% shareholding
65.4%
65.4%
(231)
(243)
Proportional share of net loss
Income tax expense
(IN MILLIONS OF US$)
2012
Current income tax expense
285
369
Deferred taxes
(32)
(126)
253
243
Income tax expense
Elimination of intercompany transactions
132
112
Equity accounting and Other adjustments
(4)
(4)
(103)
(135)
2011
Current income tax receivables and liabilities in the consolidated balance sheet are as follows:
(IN MILLIONS OF US$)
Share of loss in associate
license fees to foreign governments on which a 32%
Egyptian withholding tax was due. The total estimated
liability, including penalties is US$ 77 million, of which
US$ 31 has already been paid.
19.
The following table provides selected financial information of the Group’s associates as of December 31, 2012
and 2011 and for each of the years then ended.
(In millions of US$)
Other non-operating costs mainly relate to a dispute
between OTH and the Egyptian tax authorities involving
liabilities for withholding taxes on certain investments
made by OTH during the tax years of 2000 to 2004.
The tax authority alleges that certain investments
made by OTH in its subsidiaries were payments of
Current income tax receivable
Current and non current income tax liabilities
2012
2011
64
99
(105)
(337)
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profits of the consolidated entities as follows:
17.
(IN MILLIONS OF US$)
Impairment of financial
assets
Impairment of financial assets in 2012 amounting to
US$ 344 million relates to impairment of the financial
receivable from GWMC, following an independent
appraisal of the value of such asset, see Note 22.
Impairment of financial assets in 2011 relates to a
settlement loss on the receivable from OTMT. In
70
Financial Review
Profit/(loss) before income tax
Tax calculated at Company's income tax rate
Different income tax rates in subsidiaries
particular, pursuant to the separation agreement,
an amount of US$ 72 million was recognized as the
receivable due from OTMT. The receivable balance was
adjusted pursuant to a memorandum of understanding
among the various parties and as a result a settlement
loss of US$ 22 million was recorded.
Theoretical income tax for the year
Permanent differences
2012
48
2011
159
12
40
(2)
(120)
10
(80)
168
200
Unrecognized deferred tax for tax losses
59
81
Reversal of unused deferred tax assets
10
23
Minimum tax expense
6
14
Adjustments in respect of prior years
-
4
Other differences
-
1
Annual Report 2012
Financial review
20.
Property and equipment
(In millions of US$)
Land and
Buildings
Plant and
machinery
Commercial and
Other tangible
assets
Assets Under
Construction
Total
Cost
As of January 1, 2012
123
5,389
240
451
6,203
Additions
9
23
46
292
370
Disposals
(5)
(76)
(5)
(1)
(87)
Exchange differences
(8)
(231)
(12)
(40)
(291)
-
347
1
(365)
(17)
119
5,452
270
337
6,178
70
3,030
178
23
3,301
9
562
34
-
605
(3)
(47)
(5)
-
(55)
-
10
-
2
12
(5)
(144)
(11)
(19)
(179)
As of Dec. 31, 2012
71
3,411
196
6
3,684
Net book value as of Dec. 31, 2011
53
2,359
62
428
2,902
Net book value as of Dec. 31, 2012
48
2,041
74
331
2,494
Land and
Buildings
Plant and
machinery
Commercial and
Other tangible
assets
Assets Under
Construction
Total
135
5,507
242
807
6,691
6
73
27
488
594
Reclassifications
As of December 31, 2012
Depreciation and impairment losses
As of January 1, 2012
Depreciation for the year
Disposals
Impairment losses
Exchange differences
(In millions of US$)
Cost
As of January 1, 2011
Additions
Change in the scope of consolidation
(8)
(221)
(17)
(388)
(634)
Disposals
(6)
(17)
(7)
(35)
(65)
Exchange differences
(5)
(326)
(12)
(40)
(383)
1
373
7
(381)
-
123
5,389
240
451
6,203
69
2,663
168
28
2,928
Reclassifications
As of Dec. 31, 2011
Depreciation and impairment losses
As of January 1, 2011
Depreciation for the year
13
631
35
-
679
Change in the scope of consolidation
(3)
(111)
(12)
(4)
(130)
Disposals
(5)
(5)
(4)
-
(14)
Impairment losses
-
9
-
1
10
(4)
(157)
(9)
(2)
(172)
As of December 31, 2011
70
3,030
178
23
3,301
Net book value as of Dec. 31, 2010
66
2,844
74
779
3,763
Net book value as of Dec. 31, 2011
53
2,359
62
428
2,902
Exchange differences
72
Financial Review
Additions to property and equipment in 2012 mainly
relate to assets under construction and commercial
and Other tangible asset investments relating to
new base stations in Pakistan (Pakistan Mobile
Telecommunications Limited), Bangladesh (Orascom
Telecom Bangladesh Limited), Algeria (Orascom
Telecom Algeria) and Burundi (U-Com Burundi S.A.).
These investments are mainly driven by the expansion
of the business, increased capacity and the change in
GSM technology.
Disposals of property and equipment in 2012 includes
the sale of the entire 26th floor – located at 2005A
– Nile City Towers - Corniche El Nil, Ramlet Beaulac
- 11221 Cairo to OTMT, pursuant to the settlement
agreement.
Change in scope of consolidation in 2011 relates to
the property and equipment of the Spin-Off Assets and
Powercom. See Note 7 for further details.
Impairment losses in 2012 of US$ 12 million and 2011
of US$ 10 million relate the impairment of plant and
equipment in Bangladesh. Property and equipment
pledged as security for bank borrowings amount to US$
1.0 billion as of December 31, 2012 (US$ 1.1 billion as
of December 31, 2011) and primarily relate to securities
for borrowings of PMCL.
In the year ended December 31, 2012 the Group did
not capitalize any borrowing costs (in 2011 the Group
capitalized borrowing costs of US$ 200 thousand,
relating to the acquisition of property and equipment).
The Group leases various assets under non-cancelable
finance lease agreements. As of December 31, 2012
the Group had assets under finance lease with net book
value of US$ 26 million (US$ 24 million as of December
31, 2011) mainly relating to a sale and lease back of
the premises at Nile City Towers (headquarter offices in
Cairo), as well as minor finance leases for vehicles and
equipment.
Annual Report 2012
Financial review
21.
Additions to intangible assets in 2012 mainly relate
to the acquisition of software licenses in Algeria and
Pakistan. Additions to Others relates to intangible
assets in progress in Bangladesh.
Intangible assets
(In millions of US$)
Licenses
Goodwill
Others
Total
1,517
945
35
2,497
13
-
4
17
-
17
-
17
(1)
-
-
(1)
Cost
As of January 1, 2012
Additions
Change in scope of consolidation
Disposals
Reclassifications
Currency translation differences
As of December 31, 2012
4
-
(5)
(1)
(51)
(31)
-
(82)
1,482
931
34
2,447
Amortization and impairment losses
As of January 1, 2012
817
105
17
939
Amortization for the year
100
-
-
100
Disposals
(1)
-
-
(1)
Currency translation differences
(34)
(5)
(1)
(40)
As of December 31, 2012
882
100
16
998
Net book value as of December 31, 2011
700
840
18
1,558
Net book value as of December 31, 2012
600
831
18
1,449
The Goodwill generated by the change in the scope of
consolidation relates to the acquisition of MedCable in
2012.
Intangible assets pledged as security for bank
borrowings amount to US$ 1.0 billion as of December
31, 2012 (US$ 1.1 billion as of December 31, 2011) and
primarily relate to securities for borrowings of PMCL.
21.1
Impairment tests for goodwill
Goodwill is allocated to the individual CGU which
reflects the minimum level at which the units are
monitored for management control purposes.
The carrying amount as of December 31, 2012 and
2011 was subject to an impairment test to compare the
carrying amount with value in use and the recoverable
amount. During 2012 and 2011 no impairments were
identified. Value in use is determined by discounting
the expected cash flows, resulting from business plans
approved by the respective Board of Directors, using
the post-tax weighted average cost of capital (WACC)
as the discount rate. More specifically, the value in
use was calculated on the basis of the discounted cash
flows resulting from the five year business plan, using
a growth rate of 1% and a discount rate equal to the
weighted average cost of capital, calculated using the
capital asset pricing model.
Fair value less costs to sell (“FVLCTS”) was calculated
to assess the recoverability of the Algeria business,
since, as more fully discussed in Note 27, the
Company is engaged in without prejudice settlement
discussions with the Algerian Government, including
the exploration of a possible sale of an interest in
OTA to an Algerian state entity. Costs to sell are
immaterial in the context of this valuation. Although
the settlement discussions are ongoing and the
terms of any settlement are uncertain, the Company
determined that the valuation placed on the business
by the Company and the Algerian government,
pursuant to the settlement discussions, was the best
available evidence of FVLCS. This valuation exceeded
the Algeria segments book value.
The following table provides an analysis of goodwill by segment:
(In millions of US$)
Licenses
Goodwill
Others
Total
Cost
As of January 1, 2011
Additions
1,358
1,014
51
2,423
287
-
5
292
(101)
(50)
(9)
(160)
7
-
(7)
-
(34)
(19)
(5)
(58)
1,517
945
35
2,497
As of January 1, 2011
760
151
25
936
Amortization for the year
111
-
4
115
(28)
(44)
(9)
(81)
Change in the scope of consolidation
Reclassifications
Currency translation differences
As of December 31, 2011
Amortization and impairment losses
Change in the scope of consolidation
Currency translation differences
As of December 31, 2011
74
(26)
(2)
(3)
(31)
817
105
17
939
Net book value as of December 31, 2010
598
863
26
1,487
Net book value as of December 31, 2011
700
840
18
1,558
Financial Review
AS OF DECEMBER 31, 2012
(IN MILLIONS OF US$)
GSM
Telecom Services
AS OF DECEMBER 31, 2011
(IN MILLIONS OF US$)
GSM
Telecom Services
ALGERIA
PAKISTAN
BANGLADESH
CENTRAL AND SOUTH
AFRICA AND Other
TOTAL
477
275
16
62
830
-
-
-
1
1
477
275
16
63
831
ALGERIA
PAKISTAN
BANGLADESH
CENTRAL AND SOUTH
AFRICA AND Other
TOTAL
485
273
17
64
839
-
-
-
1
1
485
273
17
65
840
The movement in goodwill in 2012 includes US$ 26 million from foreign
currency translation movements.
Annual Report 2012
Financial review
Derivative financial instrument
22.
2012
Other financial assets
(IN MILLIONS OF US$)
2012
Noncurrent
Current
777
Derivative financial instruments
Deposits
Financial assets held for trading
-
-
Financial assets held to maturity
-
4
Financial assets available for sale
1
51
781
145
(In millions of US$)
Financial receivables
Total
Noncurrent
Current
Total
2
779
964
52
1,016
2
56
58
57
4
61
1
32
33
1
160
161
-
-
4
4
4
-
-
-
52
2
10
12
926
1,024
230
1,254
22.1
Financial Receivables
As of December 31, 2012 and 2011 financial
receivables mainly relate to loans provided to Globalive
Management Corp (“GWMC”), a subsidiary of Globalive
(see Note 16 “Share of loss of associates”).
During 2008 the Company entered into two loan
agreements with Globalive Management Corp
(“GWMC”, a subsidiary of Globalive) to borrow an
amount of up to CAD 508 million. Both loans are
non-revolving term loans bearing interest of Libor plus
18%. In 2009 the loan agreements were amended
to increase the facility to CAD 608 million and were
further amended during 2010 to increase the facility
to CAD 970 million. As of January 1, 2011 the interest
rate was reduced to Libor plus 10.8%, and the total
principal amount (not including accrued interest)
outstanding under this facility amounted to US$ 1,037
million (CAD 1,059 million).
During 2012, a further US$ 161 million (equivalent
to CAD 161 million) was advanced to GWMC, after
considering foreign exchange differences of US$ 20
million, (negative CAD 12 million) the total principal
amount outstanding at December 31, 2012 amounted
to US$ 1,218 million (CAD 1,208 million).
As of December 31, 2012 the amount outstanding
under such loan agreements, including accrued
interest, amounted to US$ 1,804 million (CAD 1,790
million). Given that the Group’s share of losses is in
excess of the carrying value of the investment, given
that the net book value of the investment has been
written down, the group continue recording the losses
76
2011
Financial Review
as there is a constructive obligation on the group to
cover the associates’ obligation. These losses were
deducted from the long term receivable.
During the year ended December 31, 2012 the
accumulated losses of associates deducted from long
term receivables amounted to US$ 720 million (CAD
715 million).
Pursuant to its annual business plan cycle, in the
fourth quarter, management reassessed the long term
business plan of GWMC. Subsequently, an impairment
test was deemed necessary, given the change in
GWMCs business plan resulting from the reassessment.
The recoverable amount for GWMC was determined
based on a value in use calculation using cash flow
projections covering 10 years. A 10 year period was
deemed appropriate since the business will be in a
start-up phase for several years, while it purchases
and implements the additional spectrum necessary to
accommodate current and future handset technologies.
Based on the impairment test, the recoverable amount
was lower than the book value of the investment in
GWMC .The resulting impairment charge amounted
to US$ 344 million (CAD 344 million). In determining
the recoverable amount for the investment in GWMC,
a discount rate of 11.4% was used, which was
determined using the methodology described under “
Use of Estimates”.
After considering the share of the accumulated losses
and the previously explained impairment, the amount
recorded in financial receivables resulting from the
facility is US$ 756 million, (CAD 750 million).
2011
ASSETS
LIABILITIES
ASSETS
LIABILITIES
Foreign exchange derivatives
58
-
61
-
Total
58
-
61
-
2
-
57
-
56
-
4
-
Less non-current portion
Foreign exchange derivatives
Current portion
22.2
Foreign exchange derivatives
Foreign exchange derivatives primarily relate to the economic hedge of PMCL. The cross currency swap relates to certain
borrowings of PMCL, which are swapped from US$ to PKR and from Euro to PKR, whilst the associated interest is swapped from
LIBOR to KIBOR and from Euribor to KIBOR. The changes in the fair value of the derivative are recognized in foreign exchange
loss / gain in the income statement. As of December 31, 2012 the fair value of this derivative asset was US$ 58 million (US$ 61
million as of December 31, 2011).
22.3
Deposits
Deposits primarily relate to letters of guarantee and Other restricted cash held as security for the performance of
Group obligations.
Deposits with amounts of US$ 33 million as of December 31, 2012 (US$ 161 million December 31, 2011) are
pledged or blocked as security against related bank borrowings or Others commitments.
The following table shows the ageing analysis of financial receivables and deposits as of December
31, 2012 and 2011:
2012
(IN MILLIONS OF US$)
Not past due
2011
DEPOSITS
FINANCIAL
RECEIVABLES
DEPOSITS
FINANCIAL
RECEIVABLES
33
779
161
1,016
Past due 0-30 days
-
-
-
-
Past due 31-120 days
-
-
-
-
Past due more than 150 days
COMPANY NAME
Lingo Media Corporation
Other investments
-
-
-
-
33
779
161
1.016
% OWNERSHIP
DECEMBER 31,
2012
DECEMBER 31,
2011
23%
1
1
-
51
11
52
12
Annual Report 2012
Financial review
22.5
Deferred tax liabilities
(In millions of US$)
Depreciation and
amortization
Unremitted
earnings
As of December 31, 2011
204
-
18
4
226
Charged / (credited) to the income statement
(8)
-
(18)
1
(25)
Currency translation differences
(6)
-
-
-
(6)
As of December 31, 2012
190
-
-
5
195
Deferred taxes
due to the same tax authority. The following table
provides a reconciliation of deferred tax assets and
liabilities of the Group to the amounts included in the
face of the balance sheet.
(In millions of US$)
Deferred tax liabilities, gross
Deferred tax assets offset
Deferred tax liabilities
Deferred tax assets, gross
Deferred tax liabilities offset
Deferred tax assets
2012
2011
195
226
(145)
(155)
50
71
221
220
(145)
(155)
76
65
2011
6
170
(32)
(126)
Charged directly to equity
-
16
Change in the scope of consolidation
-
(50)
Assets held for sale
-
-
Currency translation differences
-
(4)
(26)
6
As of December 31,
78
Financial Review
Total
5
5
10
-
Total
Fair
value
OTHER
51
220
Charged / (credited) to the income statement
(7)
13
(3)
(1)
3
2
7
Exchange differences
(3)
(3)
-
-
-
-
(6)
As of December 31, 2012
139
61
2
4
13
2
221
the tax treatment of such expenses, as they might be
challenged by local tax authorities.
No liability has been recognized in respect of
unremitted earnings associated with investments in
subsidiaries, branches and associates and interests
in joint ventures, where the Group is in a position to
control the timing of the reversal of the temporary
differences and it is probable that such differences will
not reverse in the foreseeable future.
No deferred tax assets were recognized on income
tax loss carry forwards for some foreign subsidiaries,
mainly Orascom Telecom Bangladesh Limited
(“Banglalink”) and CAT, as it is currently not probable
that taxable profit will be available in the near future
against which such tax loss carry forwards might be
utilized.
The following table provides a breakdown by estimated
recoverability of recognized deferred tax assets and
liabilities:
Generally the Group does not recognize deferred tax
assets for temporary differences related to accruals
for provisions, due to uncertainties in connection with
2012
Charged / (credited) to the income statement
149
Deferred tax assets on tax losses carry forwards
mainly refer to income tax loss carry forwards of the
Group’s subsidiaries in Pakistan with no expiry date.
The movement in the deferred income tax account is as follows:
As of January 1,
As of December 31, 2011
Impairment
of assets
Other investments mainly relate to government
treasury bills and investment bonds purchased by
PMCL in Pakistan.
23.
(In millions of US$)
Other
Other investments
Deferred tax assets
(In millions of US$)
Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred
income tax assets and liabilities relate to income taxes
Fair
value
Depreciation
and
amortization
In August 2008, the Company entered into a
subscription agreement to acquire 2,857,143 common
shares of Lingo Media Corporation, a media entity
focusing on online advertising. The investment
represents approximately 23% of the total share
capital and existing voting rights. The Company also
purchased share warrants to acquire up to 2,142,857
shares of this entity. The warrants can be exercised
from the date of the agreement for a period of two
years, at an increasing price from US$4 up to US$8;
the warrants were expired without exercise. The total
purchase price of the shares and warrants was US$
The movement of deferred tax assets and liabilities during the year, without taking into consideration any offsetting is provided
in the tables below:
Accrued
expense
Lingo Media Corporation
5 million. Based on an assessment of the contractual
rights, management does not consider that it has
significant influence over the company. Therefore,
the investment has been recorded as a financial asset
available for sale and measured at fair value. As
of December 31, 2012, 2011, the fair value of the
investment was US$ 1 million.
Tax losses
22.4
Deferred tax liabilities
(In millions of US$)
within 1 year
within 1 - 5 years
after 5 years
2012
Deferred tax assets
2011
2012
2011
-
1
8
8
156
180
186
181
39
45
27
31
195
226
221
220
Annual Report 2012
Financial review
24.
25.
Trade receivables
(In millions of US$)
Receivables due from customers
Receivables due from telephone operators
Receivables due from authorized dealers
Other trade receivables
Allowance for doubtful receivables
Total
Other current assets
2012
2011
147
217
107
87
7
5
102
11
(130)
(115)
233
205
(In millions of US$)
Receivables due from tax authority
Prepaid expenses
Advances to suppliers
Other receivables
Allowance for doubtful current assets
Total
2012
2011
725
719
70
67
7
7
63
66
(38)
(34)
827
825
The following table shows the movement in the allowance for Other current assets:
The following table shows the movement in the allowance for doubtful receivables:
(In millions of US$)
2012
(In millions of US$)
2011
At January 1
115
108
Currency translation differences
(5)
(4)
Additions (allowances recognized as an expense)
-
14
Change in the scope of consolidation
6
(1)
(3)
(3)
Use
Reversal
-
-
Reclassifications
3
1
130
115
At December 31,
The following table shows the ageing analysis of trade receivables as of December 31, 2012 and 2011, net of the
relevant provision for doubtful receivables:
(In millions of US$)
2012
2011
Not past due
92
43
Past due 0-30 days
53
88
Past due 31-120 days
34
14
4
30
Past due 121 - 150 days
Past due more than 150 days
Trade receivables
50
30
233
205
At January 1
2012
2011
34
33
Currency translation differences
-
-
Additions (allowances recognized as an expense)
-
4
Reclassifications
4
(3)
At December 31,
38
34
(In millions of US$)
2012
2011
Bank accounts and deposits
2,025
1,013
26.
Cash and cash equivalents
Cash on hand
Total
1
1
2,026
1,014
Cash and cash equivalents at December 31, 2012 includes US$ 1,844 million (US$ 896 million as of
December 31, 2011) held in subsidiaries which have regulatory restrictions, contractual restrictions or
operate in countries where exchange controls and Other legal restrictions apply and are therefore not
available for general use by the Company.
The maximum exposure to credit risk at the reporting date is the carrying value of the receivable. The Group
does not hold any collateral as security.
80
Financial Review
Annual Report 2012
Financial review
27.
3,043 million (L.E. 3,043 million as of December 31,
2011) divided into 5,245,690,620 shares each having a
par value of L.E. 0.58.
Share Capital
Authorized and issued share capital and
legal reserves
As disclosed in note 2, the Demerger was implemented
by effectively partitioning the Company into two
separate companies, OTH and OTMT, in accordance
with the demerger guidelines of the Egyptian Financial
Supervisory Authority as per decree no. 124 of the
year 2010 and the related tax laws. The Demerger
resulted in the reduction of the issued capital of the
Company via a decrease in the nominal value per
share. As a result, the aggregate nominal value of
shares issued by OTH as of December 31, 2012 is L.E.
The shareholders voted an increase in OTH’s authorized
share capital from L.E. 7.5 billion to L.E. 14.0 billion
during the April 14, 2011 general meeting, with the
issued and paid-in capital remaining unchanged.
Any future issuances relating to the portion of the
Company’s authorized share capital being increased
pursuant to this resolution will only be undertaken in
order to repay debt, will offer customary preemptive
rights to all shareholders, and will be issued at fair
market value rather than par value.
28.3
Shareholder loan
As described in Note 2, certain of the Company’s
financial liabilities included mandatory repayment
clauses in the event of a change of control, which was
triggered as part of the VimpelCom Transaction. In
May 2011, VimpelCom provided two shareholder loans
to the Group to refinance such financial liabilities. The
shareholder loans are repayable in May 2014 and bear
a fixed interest rate of 9.5% which is payable in kind
on maturity. As of December 31, 2012 the amount
outstanding under such loans was US$ 3,153 million
(US$ 2,912 million as of December 31, 2011).
During 2012 the Company entered into a new five year
credit facility with VimpelCom for an amount of US$
Dividends
Other Borrowings
Other borrowings mainly relates to finance leases and
loans from suppliers.
28.5
Liabilities to banks
Total
TOTAL
Others
AFTER
5 YEARS
Algerian
Dinar
4-5
YEARS
Bangladeshi Taka
3-4
YEARS
Pakistan
Rupee
2-3
YEARS
Euro
1-2
YEARS
US$
WITHIN
ONE
YEAR
Egyptian
Pound
Currency Information of Borrowings
Borrowings
Total borrowings by currency of issue
4,075
24
41
370
236
2
10
4,758
(129)
(24)
-
153
-
-
-
-
3,946
-
41
523
236
2
10
4,758
310
-
-
523
236
2
10
1,081
3,636
-
41
-
-
-
-
3,677
470
94
47
46
10
5
672
Notional amount of currency derivatives
496
198
78
30
26
-
828
Borrowings after derivative effect
188
45
13
10
-
256
of which (after derivative effect):
30
173
35
-
-
-
238
floating rate borrowings
-
3,153
-
-
612
-
3,765
fixed rate borrowings
-
-
2,912
-
-
-
2,912
As of December 31, 2011
25
24
8
3
2
3
65
Total borrowings by currency of issue
3,293
65
44
399
222
2
11
4,036
18
24
6
2
3
5
58
Notional amount of currency derivatives
(144)
(65)
-
209
-
-
-
-
Total as of December 31, 2012
683
3,316
68
59
624
8
4,758
Borrowings after derivative effect
3,149
-
44
608
222
2
11
4,036
Total as of December 31, 2011
544
395
3,031
32
29
5
4,036
of which (after derivative effect):
237
-
-
608
222
2
-
1,069
2,912
-
44
-
-
-
11
2,967
Bonds
Shareholder loan
Other borrowings
floating rate borrowings
28.1
28.2
The decrease in Liabilities to Banks relates to the
normal scheduled repayments of borrowing facilities in
accordance with the relevant agreements. Appendix A
includes a detailed analysis of liabilities due to banks as
of December 31, 2012.
The increase in bonds relates to notes issued by PMCL
in Pakistan.Appendix B includes a detailed analysis of
Bonds as of December 31, 2012.
Liabilities due to Banks
82
28.4
No dividends were distributed during 2011 or 2012.
28.
(IN MILLIONS OF US$)
DECEMBER 31, 2012
2.5 billion. The credit facility is primarily to finance
working capital and investment requirements and each
drawdown must be approved by the lender. The loan,
which is repayable in a single payment on maturity
in May 2017, bears fixed rate interest of 12.50% per
annum, payable in kind prior to maturity by automatic
addition to the principal balance. As of December 31,
2012, the amount outstanding under such facility was
US$ 612 million.
Financial Review
Bonds
fixed rate borrowings
Financial liabilities include secured liabilities of US$ 530 million as of December 31, 2012 and US$ 740 million as
of December 31, 2011. In general, the financial liabilities are secured on property and equipment of the relevant
subsidiary, pledged shares and receivables.
Annual Report 2012
Financial review
29.
32.
Other liabilities
Earnings per share
2012
(In millions of US$)
Telecommunication license payable
Basic and diluted
2011
Current
Noncurrent
Total
Current
Noncurrent
Total
85
60
145
82
108
190
Prepaid traffic and deferred income
135
-
135
139
-
139
Due to local authorities
150
-
150
174
-
174
58
27
85
67
19
86
Other
146
23
169
130
40
Total
574
110
684
592
167
Personnel payables
Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the Company
by the weighted average number of ordinary shares
outstanding during the year, excluding ordinary
shares purchased by the Company and held as
treasury shares or for the purposes of the share based
compensation. Diluted earnings per share is calculated
by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive
potential ordinary shares. During the period covered
by the report, the Company did not have any dilutive
potential ordinary shares and as such diluted and
basic earnings per share are equal.
Profit /(loss) attributable to equity
holders of the Company (in million of US$):
2012
2011
170
- from continuing operations
(205)
(84)
759
- from discontinued operations
Weighted average number of shares (in millions of shares)
Telecommunication license payable is mainly related to the Orascom Telecom Bangladesh license, which was
renewed in September 2011 for a further 15 years. In accordance with the agreement the fee of BDT 19.8 billion is
payable over three years.
Trade payables
(In millions of US$)
2012
2011
Capital expenditure payables
389
396
Trade payables due to suppliers
104
141
82
75
Other trade payables
135
126
Total
710
738
Trade payables to telephone operators
Trade payables are all due within one year.
31.
Provisions
Bangladesh to face value added expected tax claim
and US$ 6 million in Ring Group to face expected
claims and termination benefits for some employees.
Current provisions as of 31 December 2012 include
provisions recognized by OTH for expected tax claims
amounting to US$ 63million, US$ 47 million in
Long term provisions relate primarily to provisions
for asset retirement obligations in Bangladesh and
Pakistan.
84
Financial Review
33.
Commitments
30.
(In millions of US$)
Earnings per share – basic and diluted (in US$)
-
745
5,246
5,231
(0.04)
0.13
The commitments as of December 31, 2012 and 2011
are provided in the table below:
As of December 31, 2012
As of December 31, 2011
Property and equipment
52
90
Total
52
90
Commitments for purchase of property and equipment mainly relate to the
purchase of tools related to PMCL and Bangladesh.
The following table provides the future aggregate minimum lease payments under
non-cancellable operating leases:
(In millions of US$)
2012
2011
Within one year
7
6
Between 1-5 years
2
-
9
6
34.
Share based
compensation
In September 2011, the remuneration Committee
granted an incentive to eligible employees payable in
cash based on the average GDR price during the last
30 days of the calendar year. The incentive payable to
eligible employees is based on their specific category.
The average GDR price in the last 30 days of 2012
was US$ 3.04 (US$ 2.75 in 2011). The total expense
recognized in the income statement, within personnel
costs was US$ 4 million in 2012 (US$ 3 million in
2011). The 2012 incentive was paid in January 2013
whilst the 2011 incentive was paid in January 2012.
Annual Report 2012
Financial review
35.
Transactions with subsidiaries, associates, with the Parent Company and its subsidiaries and Other related parties
are not considered atypical or unusual, as they fall within the Group’s normal course of business and are conducted
under market conditions that would be performed by independent third parties.
The main related party transactions are summarized as follows:
(In millions of US$)
2012
2011
Purchase of
services and goods
2012
2011
Interest income/
(expenses)
2012
-
-
VimpelCom Garmeenphone
10
-
VimpelCom Telenor
46
-
10
10
Wind Telecomunicazioni SpA
-
WIS sarl
OTSE
(323)
(146)
28
-
-
-
40
-
-
-
-
-
-
-
3
-
-
-
-
-
12
-
11
-
-
-
-
3
-
-
GWMC
4
2
-
-
67
57
ECMS
-
8
-
-
-
-
Summit technology
-
-
-
6
-
-
70
35
68
20
(256)
(89)
Wind Telecom Group
Receivables
(In millions of US$)
2012
Borrowings
2011
2012
2012
2011
VimpelCom Group
VimpelCom Amsterdam Finance B.V.
-
-
(3,765)
(2,912)
-
-
VimpelCom Garmeenphone
3
-
-
-
9
-
VimpelCom Telenor
2
-
-
-
-
-
26
16
-
-
-
-
Wind Telecom Group
Wind Telecom SpA
Associates
86
GWMC
16
7
756
953
-
-
Total
47
23
(3,009)
(1,959)
9
-
Financial Review
Key management includes executive and non executive directors of the Board of Directors of the
Company, the Company’s chief financial officer, Other managing directors considered key personnel
and the chief executive officers of significant subsidiaries.
The compensation paid or payable to key management for employee services is shown below:
As of December
31, 2012
Salaries and Other short-term employee benefits
Share based payments
36.
Business combinations
Payables
2011
Transactions with Wind Telecom and its subsidiaries
mainly relate to management fees charged by the
Company and interconnection traffic between the
Group and the subsidiaries of Wind Telecom, and
particularly Wind Telecomunicazioni SpA.
(In millions of US$)
Associates
Total
The Group has provided financing to GWMC, an
associate of the Group, in connection with the funding
of the acquisition of the spectrum licenses. For further
details see Note 22 “Other financial assets”.
Key management compensation
-
Wind Telecom SpA
Transactions with the VimpelCom Group relate to
the shareholder loans provided by VimpelCom, as
described in note 28 above.
Transactions with Associates
of the Group
35.3
2011
VimpelCom Group
VimpelCom Amsterdam Finance B.V.
35.2
Transactions with VimpelCom and
Wind Telecom Group
Related party transactions
Sale of services
and goods
35.1
On November 15, 2012 OTH entered into a sale and
purchase agreement with OTMT relating to
(i) OTH’s purchase from OTMT of 555,000 shares in
Medcable Ltd (“MedCable”) for a total price of Euro
100, (ii) the purchase of amounts owed by MedCable
to OTMT equal to Euro 12,293,710 (the “MedCable
Loans”), and, (iii) the transfer of the promissory
notes issued by PMCL to OTV for a total amount of
Euro 7,706,190 (the “PMCL Promissory Notes”). The
consideration relating to the MedCable
Loans and the PMCL Promissory Notes was offset
As of December
31, 2011
11
4
3
against the financial receivable with OTMT.
As a result of the acquisition, the group expects to
reduce costs through synergies between MedCable
and the Group’s operations in Algeria. The provisional
goodwill arising from the acquisition amounts to US$ 17
million.
The fair values of the assets acquired, liabilities
assumed and goodwill recognized on the acquisition are
provisional given that the purchase price allocation as
part of the application of the acquisition method had
not yet been completed as of the date of these financial
statements. Management expects to have the purchase
price allocation completed within 12 months from the
acquisition date.
Annual Report 2012
Financial review
37.
Contingent assets and
liabilities
The Group is subject to various legal proceedings and
claims which arise in the ordinary course of business
due to the nature of the operations of the Group and
the nature of the markets where the Group operates.
The Group recognizes a provision for losses and
liabilities when the existence is certain or probable.
As of December 31, 2012 the Company is a party in a
number of legal disputes which resulted from carrying
out its activities. Based on the legal advice obtained,
the Company’s management considers based on
the information available to them at the date hereof
that the outcome of these disputes, individually or
in aggregate, should not be material to the Group’s
results (except as Otherwise disclosed).
37.1
PMCL tax claims
Up to Tax year 2011, the ACIR has levied tax amounting
Rs. 32,568 million (equivalent to US$ 336 million for
alleged short payment of tax under section 162/205
of the Ordinance. The commissioner Inland Revenue
(Appeals [CIR (A)] has decided the matter against the
parent Company. The parent Company has filed an
appeal with appellant tribunal Inland Revenue (ATIR)
DCIR has ordered PMCL to pay Federal Excise Duty
(FED) on technical services fees accrued in respect of
Tax Year 2010 in an amount of approximately Rs. 574
million (equivalent to US$ 6 million).
For the tax year 2009, tax authorities have curtailed
expenditure claimed by the Company, and raised a
demand amounting to Rs. 3,631 million (equivalent
to US$ 37 million). The Company has filed the appeal
before CIR (A) against the order. Further, stay order
has been obtained from High Court till the decision of
CIR (A).
Appeals filed by the Company, for Tax Years 2006
and 2007 have been decided in favor of the Company
by Commissioner Inland Revenue [CIR (A)]. The tax
authorities had contested the decision of CIR (A)
before Appellate Tribunal Inland Revenue (ATIR). In
this respect an appeal effect order has been issued,
88
Financial Review
whereby certain expenses have been disallowed. The
Company has filed appeal before CIR (A) against the
order. Appeals up to and including Tax Year 2005 have
been decided up to the level of the ATIR, whereby, the
assessments were set aside for fresh consideration. Reassessment orders for up to Tax Year 2005 have also
been issued. Against appeals filed by the Company on
re-assessment orders:
• For assessment year 1995-1996 to 1999-2000,
substantial relief has been allowed by the ATIR.
However, appeal effect orders are awaited from tax
authorities.
• For assessment year 2000-2001 to 2002-2003, the
Company and Department have filed the appeal
before ATIR against the decision of CIR (A).
• For tax year 2003, department appeal is pending
before ATIR on the issue of taxation of income from
sale of imported equipment and accessories. Further,
PMCL appeal is pending before CIR (A) on the issue of
brought forward losses.
• For tax year 2004, department appeal is pending
before ATIR on the issue of Salary Commission.
Further, PMCL appeal is pending before CIR (A) on
the issue of brought forward losses.
For assessment year 1997-1998 and 1998-1999,
tax authorities levied taxes by alleging that the
company had not made tax deductions required while
making certain payments. Against appeal filed by tax
authorities the issue has been decided against the
company by the High Court. Company is contesting the
issue in the Supreme Court.
37.2
Sales tax contingency
Sales Tax Authorities of Azad Jammu & Kashmir
Territory (AJK) have levied Federal Excise Duty (FED)
and penalties in an amount of approximately Rs.
86.5 million ( equivalent to US$ 892 K ) based on an
allegation that PMCL has sold connections in AJK that
are liable to FED.
The appeal is pending before Appellate Tribunal
(Custom, Excise and Sales Tax) for AJK. A writ petition
has been filed with the High Court and a stay against
the recovery of this amount has been granted by the
High Court.
The tax authorities levied Sales tax/FED under various
heads aggregating Rs. 3,254 million (equivalent to US$
33 M) for the year 2008. The Company has filed the
appeal against the order before CIR (A). The Company
has also filed Writ petition before High Court and stay
against the recovery proceedings has been obtained till
the filing of appeal before ATIR. Sales tax authorities
issued show cause amounting to Rs 389 Million
(equivalent to US$ 4M) in respect of apportionment of
Input tax. The tax authorities issued order by alleging
non-payment of FED amounting to Rs 266 million
(equivalent to US$ 3 M) on Connection Charges &
Equipment Revenue for the years 2002 and 2003. The
Company has filed the appeal against the order before
CIR (A). A writ petition has also been filed before the
High Court and stay against recovery of tax demand
has been granted in this respect.
The tax authorities issued orders for the years
2007 to 2009 creating aggregate demand of Rs 838
million (equivalent to US$ 8.6M on account of FED by
contending that the company was franchisee of IWCPL.
The Company is in process of filing appeal with (ATIR)
against CIR (A) order. The Company has also filed
Writ petition before High Court and stay against the
recovery proceedings has been obtained till the filing
of appeal before ATIR.Management of the Company
believes that all the above cases will be decided in
the Company’s favor in the appellate forums as the
demands raised against the Company are illegal and
without lawful authority.
37.3
Income tax contingency of LDI
The Company is contesting income tax deducted
on payments made to foreign inter-connect
telecommunication service Operators, with the income
tax authorities. The Company believes that the matter
will be decided in its favor. However, in the interest of
prudence, it has made a provision of Rs. 2,029 million
(equivalent to US$ 21 million), which is included under
accrued liabilities.
For tax year 2008 and 2009 tax authorities have
framed assessment by curtailing expenditure claimed
by the company, thereby creating a disputed amount
of Rs. 177M (equivalent to US$ 1.8M) and Rs. 217M
(equivalent to US$ 2.2M) respectively. The Company
has filed the appeal with Appellate Tribunal Inland
Revenue (ATIR) against the decision of Commissioner
Inland Revenue [CIR (A)]. Management of the company
believes that the case will be decided in the company’s
favor in the appellate forums.
37.4
Egyptian tax dispute in relation to
license payments during the period
2000-2004
The Egyptian tax authorities have conducted a
review and assessed taxes of approximately L.E. 2.4
Billion(equivalent to US$ 375 million). relating to alleged
liabilities for withholding taxes on certain investments
made by OTH during the tax years of 2000 to 2004.
The tax authority alleges that certain investments
made by OTH in its subsidiaries were payments of
license fees to foreign governments on which a 32%
Egyptian withholding tax was due.
OTH challenged these assessments at the internal
tax committee which rejected OTH’s challenge. OTH
appealed the case to the high appeal committee of the
tax authority.
The high appeal committee of the tax authority
rendered its ruling dated May 15, 2012 and the decision
was notified to OTH on May 23, 2012.
The high appeal committee of the tax authority reduced
the tax assessment from approximately 2.4 Billion to
an amount of approximately L.E. 397 M (equivalent to
US$ 62 million)..
The high appeal committee rejected the argument of
the tax authority that investments in existing mobile
operators could be treated as license fee payments
but upheld the assessment of the tax authority where
it related to OTH first “greenfield” operations in which
a new license was granted by a foreign government
(in particular, in relation to OTH’s investment in its
subsidiary in Algeria and its former subsidiary in Syria).
OTH has appealed the decision of the high appeal
committee of the tax authority to the court of first
instance.
The Company has made an advance payment to the
tax authority of L.E. 199 million (equivalent to US$ 31
million), and a full provision has been made for the
remaining amount.
Annual Report 2012
Financial review
37.5
OTA tax claims
OTA is subject to tax claims by the Algerian tax
authority with respect to payment of taxes during its
taxation period between 2002 and 2009.
Claims for July 2004 to
August 2007 Period
In 2001, when OTA signed its investment agreement
with the Algerian Investment Promotion Organization
in connection with its GSM license, OTA was granted
favorable tax treatment for a period of five years
starting in July 2002 and ending in August 2007.
OTA has been charged by the Algerian Directions
des Grandes Entreprises (DGE) with a final tax
reassessment for 2004 and has been ordered to pay
approximately DZD 4.532 billion, including penalties,
(equal to approximately US$ 57 at the exchange rate as
of 31 December 2012).
In November 2009, OTA received a further final tax
reassessment for the years 2005 through 2007 from
the DGE ordering it to pay approximately DZD 43.9
billion, including penalties (equal to approximately US$
637 at the exchange rate as of 31 December 2012).
The DGE has alleged that (i) OTA did not keep proper
manual accounts during these years notwithstanding
that OTA’s accounts were fully audited and approved by
both OTA’s international auditors and its local statutory
auditors, and (ii) OTA deducted certain expenses such
as management and bad debt expenses and therefore
understated the taxable income. In Algeria the tax
authorities are able to raise additional tax assessments
for four years after the end of the relevant tax period.
OTA has received the final tax assessment for the
years 2004, 2005, 2006 and 2007. OTA filed a tax claim
objection (tax appeal) on the 2004, 2005, 2006 and
2007 final tax assessments.
On 7 March 2010 OTA received a rejection on
its submitted administrative appeal filed on 27
December 2009 against the notice of reassessment
dated 16 November 2009 received from the DGE in
respect of the tax years 2005, 2006 and 2007. OTA’s
administrative appeal in relation to the 2004 tax
reassessment has also been rejected. OTA appealed
these rejections before the Algiers Administrative
Tribunal. Its claims were rejected in April 2012.
OTA appealed the decision of the Administrative
Tribunal before the State Council in July 2012; these
proceedings remain pending.
90
Financial Review
Claims for 2008 and 2009 Tax Years
In September 2010 OTA received a preliminary tax
notification from the DGE in respect of the years 2008
and 2009, in which the DGE re-assessed taxes alleged
to be owed by OTA in the amount of approximately
DZD 17.1 billion (equal to approximately US$ 217 at the
exchange rate as of 31 December 2012), despite the
fact that OTA has already paid the taxes due for these
years.
The tax audit for these years was initiated in early 2010
following the tax filing for 2009.
This reassessment was based primarily on the
allegation that OTA did not keep proper accounts for
the years 2008 and 2009 notwithstanding that OTA’s
accounts were fully audited and approved by both OTA’s
international auditors, and its local statutory auditors.
OTA received a final tax notification from the DGE in
respect of the years 2008 and 2009 in December 2010.
OTA’s administrative appeal against this notification
was rejected in March 2012 (of which OTA was formally
notified in June 2012). OTA appealed this rejection
before the Algiers Administrative Tribunal in October
2012; these proceedings remain pending.
Furthermore in 2011 OTA received an additional tax
notification from the DGE in respect of the penalties
for claims for July 2002 to August 2007 period, in the
amount of approximately DZD 6.56 billion (equal to
approximately US$ 81 at the exchange rate as of 31
December 2012).
OTA continues to appeal all of the tax claims and
continues to believe that the assessments are
unjustfied. Without prejudice to its rights and the rights
of its shareholders under its investment agreement
with the Algerian Investment Promotion Organization,
applicable bilateral investment treaty and applicable
laws, OTA was required to prepay claimed amounts
and penalties totaling approximately DZD 71.9 billion
(equal to approximately US$ 955 using the average
annual exchange rates according to the years in
which amounts were prepaid). Management views the
amounts paid to the DGE as uncertain tax positions and
have accounted for them using a two step approach in
accordance with IAS 12. In so doing, the Company has
considered the technical merits of the assessments,
including input in the form of a technical report from
an independent external expert. There are significant
risks involved in this case and as a result, the prepaid
claimed amounts may not be fully recovered and for
this appropriate provision has been recorded.
37.6
Other Algerian claims
Bank of Algeria Claim
On 15 April 2010, an injunction by the Bank of Algeria
came into effect that restricts all Algerian banks from
engaging in foreign banking transactions on behalf
of OTA. OTA has challenged this injunction in the
Algerian courts but the case is still pending. As a result
of the injunction OTA is prevented from importing
equipment from foreign suppliers and is prevented
from transferring funds outside of Algeria. The Algerian
authorities alleged breaches of foreign exchange
regulations by OTA and a member of its senior
management, as described below.
On 28 March 2012, the Algerian Court of First Instance
handed down a judgment against OTA and a member of
OTA’s senior executive team. The judgment consists of
fines of DZD 99 billion (approximately US$ 1,300 at the
exchange rate as of 28 March 2012) including a criminal
sentence against a member of OTA’s senior executive
team.
On 5 April 2012, OTA and its senior executive appealed
the Criminal Court’s judgment and on 27 May 2012,
the Algerian Criminal Court of Appeal handed down
judgment on the day of the hearing, confirming
the judgment against OTA, suspending the criminal
custodial sentence previously ordered against OTA’s
senior executive and transferring the burden of
payment of the US$ 80.5 fine ordered against the
senior executive to OTA. On 31 May 2012, OTA lodged a
final appeal against the 27 May 2012 judgment before
the Algerian Supreme Court, which is still pending.
Should OTA lose its final appeal, it will be required to
pay the fine assessed by the Bank of Algeria.
OTA maintains that OTA and its senior executive have
acted in compliance with the law, and accordingly, no
provision has been made for the Bank of Algeria claims
in the financial statements.
Arbitration following Tax Reassessments and Bank
of Algeria litigation
On 12 April 2012, OTH submitted a formal Notice of
Arbitration against the Algeria government in respect
of actions taken by the Algerian government against
OTA. The claim in the Notice of Arbitration is being
made under the arbitration rules of the United Nations
Commission on International Trade Law. In its Notice
of Arbitration, OTH asserts that since 2008 its rights
under the Agreement on the Promotion and Reciprocal
Protection of Investments between Egypt and Algeria
have been violated by actions taken by the Algerian
government against OTA, including the Algerian Court
of First Instance’s 28 March 2012 judgment against
OTA and a member of its senior executive team and the
Tax Reassessments.
Sim-card Users
In 2010, the Algerian government issued a new finance
law, where in case of failure to identify the SIM card
user, a penalty amounting to DZD 100,000 (equivalent
to US$ 0.0013) for each unidentified SIM is paid for
the first year and increase to DZD 150,000 (equivalent
to US$ 0.0019) for the second year. Although the
exposure cannot currently be estimated, it is not
expected to have a material impact on the financial
statements.
Algerian business
The Algerian government has announced its intention
to unilaterally purchase OTA, alleging that it has the
right to do so under the pre-emption right contained
in the 2009 Finance Act and the 2010 Supplemental
Finance Act. Pursuant to this announcement, the value
of OTA was to be determined by a valuation advisor
retained by the Algerian Government. The unilateral
purchase of OTA by the Algerian Government could
have a materially adverse effect on the financial
position and results of operations of the Company.
OTA remains a strategically important asset for the
Company and, therefore, VimpelCom is interested in
exploring with the Algerian government, a resolution
which would allow the Company to retain an interest
in OTA. VimpelCom is engaged in without prejudice
settlement discussions with the government, including
the exploration of a possible sale to the Algerian
government by OTH of an interest in OTA, including,
subject to certain conditions, a majority stake in OTA.
Any transaction will be subject to corporate approvals
by OTH and VimpelCom. Such settlement discussion
may address the resolution of the tax and Other
Algerian claims described above, which may be part of
any settlement agreement. Depending on the terms
of any such settlement agreement, the accounting for
the tax and Other Algerian claims may be materially
different to that currently refflected in the financial
statements.
It is contemplated that, pursuant to any sale to
the Algerian government, that the governance and
Annual Report 2012
Financial review
management control of OTA would be such that
Vimpelcom would continue to consolidate OTA.
The Company continues to be open to finding an
amicable resolution with the Algerian government that
is mutually beneficial to both parties.
37.6
Pioneer Investment Ltd
The Jordanian Tax Authority has claimed JD 59.7
million (equivalent to US$ 84 million) income taxes
against Pioneer Investment Ltd in connection with
the sale of Fastlink (Jordan Mobile Telecommunication
Services) to MTC in 2002. The court issued a final
judgment against Pioneer Investment Ltd on May 19,
2011 confirming the assessment by the Jordanian Tax
Authority. No further appeals are available to Pioneer
Investment Ltd. Pioneer Investment Ltd has no
business operations or assets in Jordan and is a limited
liability company with shareholders liability limited to
the capital of the company.
37.7
Orascom Telecom Iraq Corp Limited
Upon the disposal of its investment in Iraqna for Mobile
Services, Orascom Telecom Iraq Corp Limited provided
a warranty to the purchaser. Liability under this
warranty in respect of tax covenant claims is limited to
US$ 60 million.
In December 2011 and March 2012, Iraqna received a
tax claims for an amount of approximately 219 billion
Iraqi Dinars that is allegedly imposed on OTH as a
guarantor and in May 2012, Iraqna received Another
tax claim for an amount of approximately 96 billion
Iraqi Dinars. OTH’s position in respect of those tax
claims is that OTH is not liable for any such amount.
37.8
Ring Algeria
During 2009 Ring Algeria received tax claims
amounting to US$ 46 million relating to the tax periods
92
Financial Review
from 2005 to 2008. No further appeals were made and
the amount became payable. No further payments
have been made and management has not made any
provision as the parent company of Ring Algeria, Ring
Distribution SAE (and ultimately the entire Ring group)
is under liquidation.
37.9
Telecel Globe Group Telecel CAR
In August 2009, Telecel CAR received from the Post and
Telecommunication Ministry a license revaluation document
requesting payment of an amount of 577 M XAF (equivalent
to US$ 1.2 million). Telecel did not pay this amount and no
provision has been booked.
U-Com
In January 2010, UCOM received a preliminary
assessment from the tax administration amounting to
US$ 11 million. U-Com disputed this assessment and
booked a total provision with an amount US$ 7 million
in this respect. On August 2010, a settlement was
signed between U-COM and the local tax authority, in
which U –Com agreed to pay US$ 3.1 million of which
US$ 1.9 million were paid on 30 September 2010 in
order to resolve all pending issues relating to the tax
due relating to financial years 2008 and 2009.
Group will own an indirect 99.3% interest in Globalive
Wireless Management Corp., and will therefore gain
control and fully consolidate the investment.
Under the terms of the signed agreement, upon
obtaining certain necessary regulatory approvals,
OTH will indirectly acquire all of AAL Corp.’s interest in
Globalive Wireless Management Corp., which operates
under the WIND Mobile brand in Canada. AAL Corp. is
a holding company that is majority-owned by Anthony
Lacavera. As part of the consideration to be paid to
AAL Corp. (which includes cash consideration and a
continuing economic participation in WIND Mobile for
AAL Corp.), the Globalive group’s fixed-line assets
(including the Globalive name and trademark) will be
transferred to AAL Corp.
Completion of the transactions is subject to satisfaction
of certain conditions, including Canadian regulatory
approval of the conversion of OTH’s non-voting shares
into voting shares, which would result in OTH holding
an indirect 65.1% voting and economic interest in
Globalive Wireless Management Corp. immediately
before completion of the transactions with AAL Corp.
OTH currently holds an indirect 32% voting interest and
65.1% economic interest in Wind Mobile Canada. AAL
Corp. currently holds an indirect 66.7% voting interest
and 34.3% economic interest.
38.
Subsequent events
38.1
WIND Mobile Canada
On January 18, 2013, OTH and WIND Mobile’s founder,
Chairman and Chief Executive Officer Anthony
Lacavera, jointly announced that they had entered
into an agreement to transfer Mr. Lacavera’s shares of
WIND Mobile Canada to the Group. Mr. Lacavera, will
remain WIND Mobile’s Chairman and CEO until closing,
and will continue in a non-operational capacity as WIND
Mobile Canada’s Honorary Chair. Upon closing, the
Annual Report 2012
Financial review
Liabilities to banks
Current
Non-current
Total
Currency
Nominal
Millions of US$
Line of credit
Maturity
Securities
Millions of contract currency
Orascom Telecom Holding S.A.E.
NSGB Car Loan
NSGB Car Loan Ext2
Credit Agricole
HSBC
1
-
1
1
L.E.
9
9
31/07/2015
Unsecured
13
-
13
US$ or Equivalent in L.E.
22
22
30/04/2013
Unsecured
US$ or Equivalent in L.E.
15
15
31/05/2012
Unsecured
11
-
11
1
26
15
15
Unsecured
-
25
L.E.
28/02/2013
1
Pakistan Mobile Communications Limited
Faysal Bank Limited
2
28
30
PKR
2,600
2,600
29/7/2016
Secured
Habib Bank Limited - Islamabad - Pakistan (2007)
10
-
10
PKR
1,000
3,000
18/12/2013
Secured
Royal Bank of Scotland, London; Citibank International
plc; Sumitomo Mitsui Banking Corporation Europe Limited
- ECGD - ECA Round II
11
5
16
US$
17
70
28/02/2014
Secured
Royal Bank of Scotland London; Citibank International plc;
Sumitomo Mitsui Banking Corporation Europe Limited Coface - ECA Round II
10
-
10
EUR
7
85
31/12/2013
Secured
DEG – Germany
7
-
7
EUR
5
20
15/08/2013
Secured
FMO – Netherlands
7
-
7
EUR
5
20
15/08/2013
Secured
MCB Bank Limited (PKR 22.060 Billion) - Islamabad Pakistan
83
38
121
PKR
11,030
22,060
01/04/2014
Secured
SCB Bank Limited STFA (PKR 5.1 Billion) - Islamabad
Pakistan
9
-
9
PKR
850
5,100
05/09/2013
Secured
Dubai Islamic Bank (Pakistan) Ltd Ijara Facility PKR 1
Billion
-
10
10
PKR
1,000
1,000
15/06/2019
Secured
Silkbank Limited PKR 400 Million
1
4
5
PKR
380
400
30/07/2015
Secured
12
33
45
PKR
4,377
4,651
13/10/2016
Secured
MCB PKR 900 Million
MCB Syndication PKR 7.08 Billion Facility
1
8
9
PKR
900
900
12/06/2016
Secured
Citibank N.A OPIC
2
19
21
PKR
2,000
3,251
15/06/2019
Secured
Burj Bank Ltd.-Ijarah Facility for PKR 1 Billion
-
10
10
PKR
1,000
1,000
31/12/2017
Secured
MCB Bank Ltd PKR 6.00 Billion-Syndication
-
5
5
PKR
500
6,000
29/11/2017
Secured
PKR
-
500
After 3 Months
Secured
Meezan Short Term
94
Financial Review
5
-
5
160
160
320
Annual Report 2012
Financial review
Liabilities to banks
Current
Non-current
Total
Currency
Nominal
Millions of US$
Line of credit
Maturity
Securities
Millions of contract currency
Orascom Telecom Bangladesh Limited
Hermes Facility
DFI Facility
USD Commercial Facility
Standard Chartered Bank, London
BDT B Facility
Brac Bank Limited
Commercial Bank of Ceylon
16
12
28
US$
29
120
01/07/2014
Secured
7
4
11
US$
11
30
15/06/2014
Secured
25
-
25
US$
24
130
08/01/2013
Secured
6
20
26
US$
29
50
30/09/2016
Secured
3
1
4
BDT
306
1,030
30/06/2014
Secured
11
-
11
BDT
840
863
29/10/2013
Unsecured
1
-
1
BDT
100
100
31/05/2013
Unsecured
The City Bank Limited
11
-
11
BDT
850
1,034
14/08/2013
Unsecured
Citibank NA
15
-
15
BDT
1,150
1,195
24/04/2013
Unsecured
9
-
9
BDT
700
1,000
31/10/2013
Unsecured
Dhaka Bank Limited
3
-
3
BDT
250
250
28/02/2013
Unsecured
Eastern Bank Limited
14
-
14
BDT
1,150
1,350
31/05/2013
Unsecured
Mutual Trust Bank Limited
10
-
10
BDT
796
850
30/11/2013
Unsecured
One Bank Limited
4
-
4
BDT
350
350
30/04/2013
Unsecured
Premier Bank Limited
6
-
6
BDT
500
500
30/10/2013
Unsecured
13
-
13
BDT
1,000
1,000
31/01/2013
Unsecured
5
-
5
BDT
400
400
31/05/2013
Unsecured
Dutch Bangla Bank Limited
Pubali Bank Limited
The Trust Bank Limited
Standard Chartered Bank
19
-
19
BDT
1,500
1,600
10/12/2013
Unsecured
WCS - 1st Trn
33
-
33
BDT
-
2,650
2-Nov-13
Unsecured
-
2,495
13/12/2013
Unsecured
WCS - 2nd Trn
22
-
22
BDT
233
37
270
PKR
46
-
46
US$
47
86
15/11/2012
Secured
46
-
46
Orascom Telecom Algeria S.P.A.
Hermes loan 2006 'Secured by pledge over OTA's business
undertaking; pledge over OTA' s bank account
Telecel Globe Limited
Banque de development des etats de l'afrique Central March
2007
1
1
2
XAF
1,398
2,464
30/06/2015
Secured
Ecobank CentrAfrique S.A
1
1
2
XAF
1,342
3,000
08/10/2014
Secured
Commercial Bank Centrafriqu
-
-
-
XAF
-
-
31/07/2012
Unsecured
Banque Sahélo Sahalienne pour le Commerce et
l'Investissement
1
2
3
XAF
1,255
1,500
31/01/2016
Secured
Ecobank CentrAfrique S.A
1
-
1
XAF
278
-
Secured
Banque Populaire Maroco Centrafricaine
1
-
1
XAF
394
-
Secured
Commercial Bank Centrafrique
1
-
1
XAF
460
-
Secured
6
4
10
470
202
672
Total - liabilities to banks
96
-
Financial Review
Annual Report 2012
Financial review
Bonds
Current
Non-current
Total
Currency
Millions of US$
Nominal
Maturity
Securities
Millions of contract currency
Pakistan Mobile Communications Limited
Royal Bank of Scotland and Deutsche Bank Securities Inc.
(Euro Bond)
113
-
113
US$
250
13/11/2013
Unsecured
6
-
6
PKR
3,262
31/05/2013
Secured
38
-
38
PKR
4,257
28/10/2013
Unsecured
MCB PPTFC Facility of PKR 2.4
7
18
25
PKR
2,430
13/10/2016
Unsecured
JS Bank - TFC (Listed)-Karachi-Pakistan
4
16
20
PKR
2,000
18/04/2016
Secured
20
34
54
BDT
7,070
30/06/2014
Secured
188
68
256
Pak Oman Investment Company Limited - Karachi Pakistan (Trustee - Public Listed TFC)
Allied Bank Limited - Karachi - Pakistan (2007)
Orascom Telecom Bangladesh Limited
Senior Secured Bonds Due 2014
Total - bonds
98
Financial Review
Annual Report 2012
Financial review
Subsidiaries, joint ventures and associates
Country of domiciliation
North Africa
Asia
Middle East
Shareholding (directly/indirectly) held by Orascom
Telecom Holding
Algeria
Orascom Telecom Algeria S.P.A.
Algeria
Data Base Management services Algeria
Algeria
Ring Algeria LLC
Algeria
Algeria
Bangladesh
Orascom Telecom Bangladesh Limited
96.81%
Country of domiciliation
Europe
France
Orascom Telecom Wireless Europe
100.00%
100.00%
Luxembourg
Orascom Luxembourg Sarl
100.00%
98.01%
Luxembourg
Orascom Luxembourg Finance SCA
100.00%
Consortium Algerian Telecommunication S.P.A.
50.00%
Luxembourg
Orascom Telecom Sarl
100.00%
Ring Algeria Services
97.02%
Luxembourg
Orascom Telecom Finance SCA
100.00%
Luxembourg
Orascom Telecom Acquisition
100.00%
100.00%
Luxembourg
Orascom Telecom One Sarl
100.00%
98.98%
Bangladesh
Ring Bangladesh
Luxembourg
Orascom Telecom Oscar
100.00%
Pakistan
Pakistan Mobile Communications Limited
100.00%
Malta
Sawyer Limited
100.00%
Pakistan
Business & Communications
100.00%
Malta
Orascom Telecom Eurasia Limited
100.00%
Pakistan
Link Direct International Limited
100.00%
Malta
Oratel International Inc plc
100.00%
Pakistan
Ring Pakistan
94.59%
Malta
Moga Holding Limited
100.00%
Pakistan
Ring Pakistan Service
94.59%
Malta
International Wireless Communications Pakistan Limited
100.00%
Pakistan
Link Pakistan Ltd.
99.99%
Malta
TMGL
100.00%
Pakistan
LinkdotNet Pakistan
100.00%
Malta
Telecel International Limited
100.00%
Pakistan
Waseela Bank
100.00%
Malta
Orascom Iraq Holding
100.00%
Malta
Orascom Telecom Iraq Corporation
100.00%
Dubai
Ring Dubai
96.53%
Malta
Orascom Telecom Ventures Limited
100.00%
Egypt
Cortex Egypt
94.00%
Malta
Telecel Globe Limited
100.00%
Egypt
Ring for Distributions
99.00%
Malta
Orascom Telecom Holding (Malta) Canada Limited
100.00%
Egypt
Advanced Electronic Industries
96.52%
Malta
Minimax Ventures
100.00%
Egypt
MMMS
98.80%
Malta
Financial Powers Plan Limited
100.00%
Egypt
OTH for mobile phone investments
100.00%
Malta
Orascom Telecom ESOP Limited
100.00%
Iraq
Ring Iraq
Malta
Orascom for International Investment Holding
100.00%
96.53%
Europe
Central Africa
North America
100
Financial Review
Shareholding (directly/indirectly) held by Orascom
Telecom Holding
Burundi
U-Com Burundi S.A.
100.00%
Malta
Data Base Management services Limited
100.00%
Central Africa
Telecel Centrafrique S.A.
100.00%
Malta
Orascom Telecom CS
100.00%
Malta
Orascom Telecom Finance
100.00%
Canada
Globalive Investment Holdings
47.60%
Netherland
Orascom Telecom Netherland
100.00%
Canada
Globalive Canada Holdings
65.40%
Netherland
Orascom telecom Holding Canada BV
100.00%
Canada
Globalive Wireless Management
65.40%
Switzerland
Telecel International S.A. Switzerland
100.00%
Canada
Gloablive Wireless LP (GELP)
65.40%
United Kingdom
International Telecommunication Consortium Limited
Canada
Globalive Telecom Holdings
65.40%
United Kingdom
Medcable
Canada
Orascom Telecom Holding (Canada) Limited
50.00%
100.00%
100.00%
Annual Report 2012
Glossary of terms
Glossary
of terms
Average Revenue per User (“ARPU”):
Friends and Family (“FnF”):
Average monthly recurrent revenue per
customer (excluding visitors roaming revenue
and connection fee). This includes airtime
revenue (national and international), as well as,
monthly subscription fee, SMS, GPRS and data
revenue. Quarterly ARPU is calculated as an
average of the last three months.
The friends and family feature allows users to
stay in touch with friends and family at lower
tariffs.
Bangladesh Telecommunication Regulatory
Commission (“BTRC”):
The regulatory authority for the telecom sector
in Bangladesh, overseeing licensing, policies, etc.
Capital Expenditure (“Capex”):
Tangible & Intangible fixed assets additions
during the reporting period, includes work in
progress, network, IT, and Other tangible and
intangible fixed assets additions, but excludes
license fees.
Churn:
Disconnection rate. This is calculated as the
number of disconnections during a month divided
by the average customer base for that month.
Churn Rule:
A subscriber is considered churned (removed
from the subscriber base) if he exceeds the 90
days from the end of the validity period without
recharging. It is worth noting that the validity
period is a function of the scratch denomination.
In cases where scratch cards have open validity,
the subscriber is considered churned in case he
has not made a single billable event in the last 90
days (i.e. outgoing or incoming call or SMS, WAP
session). Open cards validity is applied for OTA,
Mobilink and Banglalink so far.
Canadian Radio-television and
Telecommunications Commission (“CRTC”):
A public organisation in Canada with mandate
as a regulatory agency for broadcasting and
telecommunications. Its main responsibility is
regulating telecommunication carriers.
102
Glossary of Terms
Interconnection Exchange (“ICX”):
This is an Interconnection Exchange company in
Bangladesh. It receives all calls made from
mobile and fixed operators and passes local calls
to the destination network whereas international
calls will be passed to the IGW.
Minutes of Usage (“MOU”):
Average airtime minutes per customer per
month. This includes billable national and
international outgoing traffic originated by
subscribers (on-net, to land line and to Other
operators). Also, this includes incoming traffic to
subscribers from land line or Other operators.
GTH’s Market Share Calculation Method:
The market share is calculated through the data
warehouse of GTH’s subsidiaries. The number of
SIM cards of competitors that appeared in the
call detail record of each of GTH’s subsidiaries is
collected. This reflects the number of subscribers
of the competition. However, GTH deducts the
number of SIM cards that did not appear in the
call detail records for the last 90 days to account
for churn.
The same is applied to GTH subsidiaries. This
method is used to calculate the market shares
of Djezzy. In Pakistan and Bangladesh, market
share as announced by the regulators is based on
disclosed information by the Other operators which
may use different subscriber recognition policy.
Organic Growth for Revenue and EBITDA:
Non-IFRS financial measures that reflect changes
in Revenue and EBITDA excluding foreign
currency movements and Other factors, such as
business under liquidation, disposals, mergers
and acquisitions. We believe readers of this
earnings release should consider these measures
as it is more indicative of the Group’s on-going
performance. Management uses these measures to
evaluate the Group’s operational results and trends.