Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
BASE PROSPECTUS
EMIRATES TELECOMMUNICATIONS CORPORATION
(incorporated with limited liability in the United Arab Emirates)
U.S.$7,000,000,000
Global Medium Term Note Programme
Under this U.S.$7,000,000,000 Global Medium Term Note Programme (the Programme), Emirates Telecommunications
Corporation (Etisalat or the Issuer) may from time to time issue notes (the Notes) denominated in any currency agreed
between the Issuer and the relevant Dealer (as defined below).
Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes). The maximum aggregate
nominal amount of all Notes from time to time outstanding under the Programme will not exceed U.S.$7,000,000,000 (or its
equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as
described herein.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Overview of the Programme”
and any additional Dealer appointed under the Programme from time to time by the Issuer (each a Dealer and together the
Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Base Prospectus to the
relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all
Dealers agreeing to subscribe such Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks, see “Risk
Factors” beginning on page 14.
Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial
Services and Markets Act 2000 (the UK Listing Authority) for Notes issued under the Programme during the period of
12 months from the date of this Base Prospectus to be admitted to the official list of the UK Listing Authority (the Official
List) and to the London Stock Exchange plc (the London Stock Exchange) for such Notes to be admitted to trading on the
London Stock Exchange’s regulated market.
References in this Base Prospectus to Notes being listed (and all related references) shall mean that such Notes have been
admitted to trading on the London Stock Exchange’s regulated market and have been admitted to the Official List. The London
Stock Exchange’s regulated market is a regulated market for the purposes of Directive 2004/39/EC (the Markets in Financial
Instruments Directive).
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and
any other terms and conditions not contained herein which are applicable to each Tranche (as defined under “Terms and
Conditions of the Notes”) of Notes will be set out in a final terms document (the Final Terms), which, with respect to Notes
to be listed on the London Stock Exchange, will be delivered to the UK Listing Authority and the London Stock Exchange.
The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock
exchanges or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes
and/or Notes not admitted to trading on any market.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act) or
any U.S. State securities laws and the Notes may not be offered or sold in the United States or to, or for the account or the
benefit of, U.S. persons unless an exemption from the registration requirements of the Securities Act is available and the offer
or sale is made in accordance with all applicable securities laws of any state of the United States and any other jurisdiction.
The Notes are being offered and sold outside the United States to persons that are not U.S. persons in reliance on Regulation
S (Regulation S) under the Securities Act and within the United States only to persons who are reasonably believed to be
“qualified institutional buyers” (QIBs) in reliance on Rule 144A (Rule 144A) under the Securities Act. See “Form of the
Notes” for a description of the manner in which Notes will be issued. Registered Notes are subject to certain restrictions on
transfer, see “Subscription and Sale and Transfer and Selling Restrictions”.
Arrangers
Citi
The Royal Bank of Scotland
Dealers
Citi
The Royal Bank of Scotland
The date of this Base Prospectus is 12 November 2010.
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC
(the Prospectus Directive).
The Issuer accepts responsibility for the information contained in this Base Prospectus. To the best of the
knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information
contained in this Base Prospectus is in accordance with the facts and does not omit anything likely to affect
the import of such information.
Each Tranche of Notes will be issued on the terms set out herein under “Terms and Conditions of the Notes”
as amended and/or supplemented by the applicable Final Terms. This Base Prospectus must be read and
construed together with any amendments or supplements hereto and with any information incorporated by
reference herein and, in relation to any Tranche of Notes, the applicable Final Terms.
Subject as provided in the applicable Final Terms, the only persons authorised to use this Base Prospectus in
connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer
or the Managers (as defined in the applicable Final Terms), as the case may be.
Copies of Final Terms will be available from the registered office of the Issuer and the specified office set
out below of each of the Paying Agents (as defined below).
Certain information under the headings “Overview of the UAE”, “Book-Entry Clearance Systems”, “Risk
Factors”, “Management’s Description and Analysis of Financial Condition and Results of Operations of the
Group” and “Description of the Group” has been extracted from information provided by the International
Monetary Fund and the Central Bank of the UAE (in the case of “Overview of the UAE”), the clearing
systems referred to therein (in the case of “Book-Entry Clearance Systems”) and from various national
telecommunications regulators (in the case of “Risk Factors”, “Management’s Description and Analysis of
Financial Condition and Results of Operations of the Group” and “Description of the Group”). The Issuer
confirms that such information has been accurately reproduced and that, so far as it is aware and is able to
ascertain from information published by the sources referred to, no facts have been omitted which would
render the reproduced information inaccurate or misleading.
Neither the Dealers nor Citicorp Trustee Company Limited (the Trustee) have independently verified the
information contained herein. Accordingly, no representation, warranty or undertaking, express or implied,
is made and no responsibility or liability is accepted by the Dealers or the Trustee as to the accuracy or
completeness of the information contained in this Base Prospectus or any other information provided by the
Issuer in connection with the Programme. No Dealer or the Trustee accepts any liability in relation to the
information contained in this Base Prospectus or any other information provided by the Issuer in connection
with the Programme.
No person is or has been authorised by the Issuer, any of the Dealers or the Trustee to give any information
or to make any representation not contained in or not consistent with this Base Prospectus or any other
information supplied in connection with the Programme or the Notes and, if given or made, such information
or representation must not be relied upon as having been authorised by the Issuer, any of the Dealers or the
Trustee.
Neither this Base Prospectus nor any other information supplied in connection with the Programme or any
Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a
recommendation by the Issuer, any of the Dealers or the Trustee that any recipient of this Base Prospectus
or any other information supplied in connection with the Programme or any Notes should purchase any
Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of
the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Group
(as defined below). Neither this Base Prospectus nor any other information supplied in connection with the
Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer, any of
the Dealers or the Trustee to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any Notes shall in any
circumstances imply that the information contained herein concerning the Issuer or the Group (as defined
below) is correct at any time subsequent to the date hereof or that any other information supplied in
2
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
connection with the Programme is correct as of any time subsequent to the date indicated in the document
containing the same. The Dealers and the Trustee expressly do not undertake to review the financial
condition or affairs of the Issuer or the Group (as defined below) during the life of the Programme or to
advise any investor in the Notes of any information coming to their attention.
This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in
any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction.
The distribution of this Base Prospectus and the offer or sale of Notes may be restricted by law in certain
jurisdictions. The Issuer, the Dealers and the Trustee do not represent that this Base Prospectus may be
lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable
registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder,
or assume any responsibility for facilitating any such distribution or offering. In particular no action has been
taken by the Issuer, any of the Dealers or the Trustee which is intended to permit a public offering of any
Notes or distribution of this Base Prospectus in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus nor any
advertisement or other offering material may be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with any applicable laws and regulations. Persons into whose
possession this Base Prospectus or any Notes may come must inform themselves about, and observe, any
such restrictions on the distribution of this Base Prospectus and the offering and sale of Notes. In particular,
there are restrictions on the distribution of this Base Prospectus and the offer or sale of Notes in the United
States, the European Economic Area (including the United Kingdom), Japan, the United Arab Emirates
(excluding the Dubai International Financial Centre), the Dubai International Financial Centre, the Kingdom
of Saudi Arabia, the Kingdom of Bahrain, the State of Qatar, Hong Kong and Singapore. See “Subscription
and Sale and Transfer and Selling Restrictions”.
This Base Prospectus has been prepared on the basis that any offer of Notes in any Member State of the
European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member
State) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that
Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly, any
person making or intending to make an offer in that Relevant Member State of Notes which are the subject
of an offering contemplated in this Base Prospectus as completed by final terms in relation to the offer of
those Notes may only do so in circumstances in which no obligation arises for the Issuer or any Dealer to
publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant
to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer nor any
Dealer has authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an
obligation arises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.
In making an investment decision, investors must rely on their own independent examination of the Issuer,
the Group (as defined below) and the terms of the Notes being offered, including the merits and risks
involved. The Notes have not been approved or disapproved by the United States Securities and Exchange
Commission or any other securities commission or other regulatory authority in the United States, nor have
the foregoing authorities approved this Base Prospectus or confirmed the accuracy or determined the
adequacy of the information contained in this Base Prospectus. Any representation to the contrary is
unlawful.
None of the Dealers, the Issuer or the Trustee makes any representation to any investor in the Notes regarding
the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the
economic risk of an investment in the Notes for an indefinite period of time.
U.S. INFORMATION
This Base Prospectus is being submitted on a confidential basis in the United States to a limited number of
persons reasonably believed to be QIBs for informational use solely in connection with the consideration of
the purchase of certain Notes issued under the Programme. Its use for any other purpose in the United States
3
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
is not authorised. It may not be copied or reproduced in whole or in part nor may it be distributed or any of
its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.
The Bearer Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within
the United States or its possessions or to United States persons, except in certain transactions permitted by
U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal
Revenue Code of 1986 and the regulations promulgated thereunder.
Registered Notes may be offered or sold in the United States only to persons reasonably believed to be QIBs
in transactions exempt from registration under the Securities Act in reliance on Rule 144A or pursuant to any
other applicable exemption. Prospective purchasers are hereby notified that sellers of the Notes may be
relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.
Each purchaser or holder of Notes represented by a Rule 144A Global Note (as defined under “Form of the
Notes”) or any Notes issued in registered form in exchange or substitution therefor (together Legended
Notes) will be deemed, by its acceptance or purchase of any such Legended Notes, to have made certain
representations and agreements intended to restrict the resale or other transfer of such Notes as set out in
“Subscription and Sale and Transfer and Selling Restrictions”. Unless otherwise stated, terms used in this
paragraph have the meanings given to them in “Form of the Notes”.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW
HAMPSHIRE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE
AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION
OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE
SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO
ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with any resales or other transfers of Notes that are
“restricted securities” within the meaning of the Securities Act, the Issuer has undertaken in a trust deed
dated 12 November 2010 (the Trust Deed) to furnish, upon the request of a holder of such Notes or any
beneficial interest therein, to such holder or to a prospective purchaser designated by him, the information
required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, any of
the Notes remain outstanding as “restricted securities” within the meaning of Rule 144(a)(3) of the Securities
Act and the Issuer is neither a reporting company under Section 13 or 15(d) of the U.S. Securities Exchange
Act of 1934, as amended, (the Exchange Act) nor exempt from reporting pursuant to Rule 12g3-2(b)
thereunder.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is a corporation organised under the laws of the United Arab Emirates (the UAE). All of the
officers and directors named herein reside outside the United States and all or a substantial portion of the
assets of the Issuer and of its officers and directors are located outside the United States. As a result, it may
4
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
not be possible for investors to effect service of process outside the UAE upon the Issuer or its officers or
directors, or to enforce judgments against them predicated upon United States federal securities laws.
The Notes are governed by English law and disputes in respect of them may be settled by arbitration under
the LCIA Arbitration Rules in London, England. In addition, actions in respect of the Notes may be brought
in the English courts.
In the absence of any bilateral treaty for the reciprocal enforcement of foreign judgments, the UAE courts
are unlikely to enforce an English judgment without re-examining the merits of the claim and may not
observe the choice by the parties of English law as the governing law of the Notes. Investors may have
difficulties in enforcing any English judgments or arbitration awards against the Issuer in the courts of the
UAE. See “Risk Factors — Risks Related To Enforcement — Investors may experience difficulty in enforcing
arbitration awards and foreign judgments in the UAE”.
NOTICE TO BAHRAIN RESIDENTS
The Central Bank of Bahrain and the Bahrain Stock Exchange assume no responsibility for the accuracy and
completeness of the statements and information contained in this Base Prospectus and expressly disclaim any
liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents
of this Base Prospectus. Each potential investor resident in Bahrain intending to subscribe Notes (each, a
potential investor) may be required to provide satisfactory evidence of identity and, if so required, the
source of funds to purchase Notes within a reasonable time period determined by the Issuer and the Dealers.
Pending the provision of such evidence, an application to subscribe for Notes will be postponed. If a
potential investor fails to provide satisfactory evidence within the time specified, or if a potential investor
provides evidence but none of the Issuer or the Dealers are satisfied therewith, its application to subscribe
for Notes may be rejected, in which event any money received by way of application will be returned to the
potential investor (without any additional amount added thereto and at the risk and expense of such potential
investor). In respect of any potential investors, the Issuer will comply with Bahrain’s Legislative Decree
No. (4) of 2001 with respect to Prohibition and Combating of Money Laundering and various Ministerial
Orders issued thereunder including, but not limited to, Ministerial Order No. (7) of 2001 with respect to
Institutions’ Obligations Concerning the Prohibition and Combating of Money Laundering.
KINGDOM OF SAUDI ARABIA NOTICE
This Base Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are
permitted under the Offers of Securities Regulations issued by the Capital Market Authority of the Kingdom
of Saudi Arabia (the Capital Market Authority).
The Capital Market Authority does not make any representations as to the accuracy or completeness of this
Base Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in
reliance upon, any part of this Base Prospectus. Prospective purchasers of Notes issued under the Programme
should conduct their own due diligence on the accuracy of the information relating to the Notes. If a
prospective purchaser does not understand the contents of this Base Prospectus he or she should consult an
authorised financial adviser.
5
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
PRESENTATION OF FINANCIAL INFORMATION
References in this Base Prospectus to the “Group” are, (i) unless otherwise specified or the context otherwise
requires, to the Issuer, its consolidated subsidiaries and its associated companies and joint ventures or (ii)
with respect to the Conditions (as defined in the section “Terms and Conditions”), to the Issuer and its
subsidiaries, and such references do not refer to an independent legal entity.
The financial statements and information presented for the Group in this Base Prospectus are, unless
otherwise specified or the context otherwise requires, for the Issuer, its consolidated subsidiaries and its share
of associated companies.
The unaudited condensed consolidated financial statements as of 30 September 2010 and for the nine months
ended 30 September 2010 and 2009 (the Interim Financial Statements) were prepared in accordance with
IAS 34 “Interim Financial Reporting”. The audited consolidated financial statements of the Group as of and
for the financial year ended 31 December 2009 (and the unaudited consolidated comparatives as of and for
the financial year ended 31 December 2008) (the IFRS Financial Statements) were prepared in accordance
with the International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The audited consolidated financial statements of the Group as of and for the financial years ended
31 December 2007 and 31 December 2008 were prepared in accordance with the Issuer’s internal accounting
policies (Etisalat GAAP) described therein (together, the Etisalat GAAP Financial Statements and,
together with the IFRS Financial Statements, the Annual Financial Statements).
Etisalat GAAP is not an internationally recognised body of accounting principles and, accordingly, should
not be considered as such. As a result, the audit opinions issued by the auditors of the Issuer and appearing
elsewhere in this Base Prospectus state that the Etisalat GAAP Financial Statements prepared by the Issuer
have been prepared in all material respects in accordance with the accounting policies set out in note 2 to the
Etisalat GAAP Financial Statements to which the opinions pertain. The audit opinions issued by the auditors
of the Issuer in relation to the Etisalat GAAP Financial Statements did not include the words “true and fair”
or “presents fairly” in the auditor opinion paragraph. This is because the Etisalat GAAP Financial Statements
prepared by the Issuer are not considered to be financial statements prepared for purposes of providing a “fair
presentation” of the results of operations of the Issuer within the context of the meaning provided in
International Standards on Auditing, which in turn reflects the fact that the Issuer’s Etisalat GAAP Financial
Statements are not prepared in accordance with a recognised accounting framework. Accordingly, it is not
appropriate to state that the Etisalat GAAP Financial Statements present either a true and fair view or present
fairly the results of operations of the Issuer. Instead the auditors have reported that the financial statements
have been prepared in all material respects in accordance with Etisalat GAAP.
The Group has adopted Standards and Interpretations issued by the International Accounting Standards
Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB as
of 31 December 2009 with a transition date of 1 January 2008.
Note 37 to the IFRS Financial Statements contains a reconciliation of profit for the year and shareholders’
equity as of and for the year ended 31 December 2008 under Etisalat GAAP to IFRS and describes the
principal differences between Etisalat GAAP and IFRS. As a result of the transition to IFRS the presentation
of the Group’s results of operations and financial condition and the line items reported in the IFRS Financial
Statements differ in certain respects from those presented in the Etisalat GAAP Financial Statements. Also
as a result, financial data, including revenue, expenditures, assets and liabilities presented in accordance with
IFRS in respect of the years ended 31 December 2009 and 2008 in this Base Prospectus are not directly
comparable with such data presented in accordance with Etisalat GAAP in respect of the years ended 31
December 2008 and 2007.
The auditors’ report included elsewhere in this Base Prospectus in respect of the IFRS Financial Statements
has been issued only in respect of the Group’s consolidated financial statements prepared in accordance with
6
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
IFRS as of and for the year ended 31 December 2009. The Group has prepared consolidated financial
statements under IFRS as of and for the year ended 31 December 2008 and has included such financial
information, for comparative purposes only, in its consolidated financial statements prepared in accordance
with IFRS as of and for the year ended 31 December 2009. However, the Group’s auditors have not issued
an auditors’ report in respect of its consolidated financial statements under IFRS as of and for the year ended
31 December 2008.
The Financial Statements are prepared in United Arab Emirates dirham, which has been pegged to the U.S.
dollar since 22 November 1980. The mid-point between the official buying and selling rates for the dirham
is at a fixed rate of AED 3.6725 = U.S.$1.00.
The Group’s financial year ends on 31 December, and references in this Base Prospectus to any specific year
are to the 12-month period ended on 31 December of such year.
Presentation of Sub-Segments
For the purpose of monitoring performance and allocating resources, the Group’s segments are the UAE
segment and the international segment. The Group further monitors operating performance by each operating
business and with respect to revenue from the following sub-segments (which are principally relevant in the
UAE, Sudan and Pakistan as the Group generally provides only mobile services in its other markets of
operation):
•
Mobile: Mobile includes revenue from SIM rental, handset rental and voice services (including local,
national and international direct dial (IDD) calling, as well as revenue attributable to roaming).
•
Fixed-line: Fixed-line includes revenue from fixed-line rental (including the line rental revenue
associated with fixed-lines used for voice and/or internet services), connection fees and fixed-line
voice services.
•
Internet: Internet includes revenue from fixed-line internet services, including dial-up and broadband
services.
•
Data Services: Data services includes all revenue from data communications services, including SMS,
MMS, GPRS, 3G data and other value-added services (from both mobile and fixed-lines), as well as
revenue from both small and medium-sized businesses (SMB) and enterprise services.
•
Interconnect: Interconnect includes revenue from the connection between the Group’s network and
other third-party operators, and includes revenue generated from termination of third-party operator
calls on the Group’s network.
In certain cases, there may be differences between the Group’s accounting of sub-segment revenue and its
operating businesses’ accounting of sub-segment revenue required for internal reporting or regulatory
obligations.
Non-GAAP Financial Measures
In this Base Prospectus, certain financial measures are presented that are not recognised by IFRS. These
include EBITDA and Adjusted EBITDA.
The Group defines EBITDA as net income before interest, taxes, depreciation and amortisation. The Group
calculates Adjusted EBITDA as EBITDA excluding the effects of royalties and the share of results of joint
ventures and associates. For a reconciliation of EBITDA and Adjusted EBITDA to profit for the period, see
“Selected Financial Information for the Group”.
EBITDA and Adjusted EBITDA are not defined by or presented in accordance with IFRS, are not a measure
of performance and should not be considered as alternatives to:
•
profit after tax from continuing operations (as determined in accordance with IFRS), or as a measure
of operating performance;
7
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
•
cash flows from operating, investing or financing activities (as determined in accordance with IFRS),
or as a measure of the Group’s ability to meet its cash needs; or
•
any other measures of performance under IFRS.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and an investor should not consider
these measures in isolation from, or as a substitute for, analysis of the Group’s results of operations. Some
limitations of these measures are that:
•
they do not reflect the Group’s cash expenditures or future requirements for capital expenditure or
contractual commitments;
•
•
they do not reflect changes in, or cash requirements for, the Group’s working capital needs;
•
although depreciation and amortisation are non-cash charges, the assets being depreciated and
amortised will often have to be replaced in the future, and these measures do not reflect any cash
requirements for such replacements; and
•
other companies in the Group’s industry may calculate these measures differently from how the Group
does, limiting their usefulness as a comparative measure.
they do not reflect the significant interest expense, or the cash requirements necessary to service
interest or principal payments in respect of any borrowings;
EBITDA and Adjusted EBITDA may not be indicative of the Group’s historical operating results, nor are
they meant to be a projection or forecast of future results.
The Group believes that EBITDA and Adjusted EBITDA provide useful information to investors because
these measures are used by management in analysing the Group’s core performance excluding the impact of
certain non-operating factors, as they remove the results of certain decisions that are outside the control of
operating management and can differ significantly from company to company depending on long term
strategic decisions regarding capital structure, the stage of growth development, capital expenditure
requirements and the jurisdictions in which certain of its companies operate and make capital investments.
In addition, the Issuer believes EBITDA and Adjusted EBITDA are measures commonly used by investors,
analysts and other interested parties in the Group’s industry. EBITDA and Adjusted EBITDA are not subject
to audit or review by any independent auditors.
PRESENTATION OF INDUSTRY, MARKET AND CUSTOMER DATA
The customer data included in this Base Prospectus, including penetration rates, average revenue per user
rates (ARPU), churn rates and market shares, are derived from management estimates of such customer data
for Etisalat and, where relevant, its operating subsidiaries. The Group’s use or computation of ARPU may
not be comparable with the use or computation of similarly titled measures reported by other companies in
the telecommunications industry, including its competitors. How the Group calculates its number of
customers, churn and ARPU in relation to its UAE telecommunications businesses is described in more detail
below. In certain cases, there may be differences between the Group’s methodology described below and that
of its operating businesses for their internal reporting or regulatory obligations. Where these differences
affect data disclosed in this Base Prospectus, they are also identified below.
The subscriber, market share, churn rates and ARPU data included in this Base Prospectus are not part of the
Group’s financial statements or financial accounting records and have not been audited or otherwise
reviewed by outside auditors, consultants or independent experts.
Customers
Mobile customers who pay in advance of services provided are counted as prepaid customers and mobile
customers who pay periodically following the provision of services are counted as postpaid customers. The
Group further delineates its customer base in the UAE by the annual revenue contribution per customer.
8
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
Customers contributing up to AED 25,000 per year are consumer customers; those contributing AED 25,000
to AED 250,000 per year are SMB customers, and those contributing more than AED 250,000 per year are
enterprise customers.
The Group calculates active mobile subscribers (customers) on a monthly basis in each of its operating
businesses by deducting the total number of subscribers that ceased their subscription for the relevant service
in the relevant month from the total number of new subscribers for that service in that month and adding or
subtracting the resulting figure, as applicable, from the total number of subscribers for the service as of the
previous month end. A mobile customer is counted from the date of the activation of such mobile customer’s
subscriber identity module card (SIM card). A mobile subscriber is considered to have ceased its
subscription if (1) the subscriber itself terminates the subscription, (2) in the case of postpaid subscriptions,
if the operator terminates the subscription for non-payment or (3) after expiry of any prepaid or postpaid
contract period, if the subscriber has not made any outgoing activity (voice, text or multimedia) or received
any incoming calls within a 90-day period.
Fixed-line and internet customers are calculated by the number of active lines at the end of the period. In
general, a customer is no longer counted as a fixed-line customer if (1) the customer has voluntarily
terminated the contract or (2) the customer has not made a payment on an outstanding balance within
approximately 60 days.
Customers who subscribe to Etisalat’s e-Life bundled services (including double- and triple-play packages)
are counted uniquely as e-Life customers.
Unless otherwise indicated, all subscriber figures presented in this Base Prospectus are calculated using the
methods described above. However, some of the Group’s operating businesses report subscriber numbers to
their respective regulator based on another method of calculation. For example, the Egyptian
telecommunications regulator requires operators to report subscriber statistics using a method similar to the
method outlined above, but requires operators to consider prepaid and postpaid customers terminated if a
subscriber has not made any outgoing activity or received any incoming calls within 125 days rather than 90
days.
Where subscriber numbers are presented in this Base Prospectus, the figures refer to the total number of
subscribers and not to the proportionate number of subscribers, unless otherwise specifically stated. The term
proportionate subscribers denotes the total number of subscribers in each of the Group’s mobile operations
calculated by multiplying the total number of subscribers by the Issuer’s economic interest in the respective
operator.
Churn
The rate at which mobile customers are disconnected from a network or are removed from an operating
company’s customer count due to inactivity is referred to as the company’s churn rate. The Group calculates
churn by dividing the number of voluntary and involuntary deactivations in a given period by the average
number of customers for the same period. See “— Customers”.
ARPU
The Group believes that ARPU provides useful information concerning the appeal and usage patterns of its
rate plans and service offerings and its performance in attracting and retaining high-value customers.
ARPU is the measure of total service revenues for a given period, divided by the number of months in that
period and divided again by that period’s average total customers (calculated by dividing the aggregate
number of customers at the beginning and end of the relevant period by two). The Group’s calculation of
mobile ARPU includes outgoing voice revenue, subscription fees and net customer roaming revenue.
Interconnect revenue is not included in mobile ARPU. The Group calculates mobile ARPU for both prepaid
and postpaid customers. Blended mobile ARPU is calculated by multiplying each of prepaid mobile ARPU
and postpaid mobile ARPU by the number of prepaid and postpaid mobile subscribers for the period,
respectively, adding the resulting figures together and then dividing by the total number of mobile
9
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
subscribers for the period. Fixed-line ARPU includes outgoing voice revenue and line rental charges. Both
ARPU measures are calculated monthly and include residential as well as business customers.
Market Share
The market share data of Etisalat’s and the Group’s competitors as calculated by management and included
in this Base Prospectus may differ from the market share data obtained from the telecommunications
authorities in the UAE and other jurisdictions in which the Group operates, which is reported to those
authorities by Etisalat’s and the Group’s competitors. In certain markets, the regulatory authority provides
no uniform definition or criteria for measuring either prepaid or postpaid subscribers within the market, and
therefore the market share data provided to the regulatory authority by our operating subsidiaries’
competitors may not be measured by the same definitions and criteria which management applies in
measuring the market share and subscriber data of Etisalat’s and the Group’s competitors (especially if the
competitor is using a different or more relaxed churn rule). In Pakistan and Egypt, the Group’s operations
use the market share data of their competitors in those markets as provided by these competitors to the
relevant national regulatory authority. However, other of the Group’s operations use their own methods of
calculating the market share of their competitors. We cannot assure you of the comparability of Etisalat’s or
the Group’s competitors’ criteria for measuring market share data to the methods used by management, as a
third party using different methods to assemble, analyze or calculate market data may not obtain or generate
the same results.
No Representation or Warranty
Market data and certain industry data, forecasts and statements regarding the position of Etisalat and its
subsidiaries, associates and joint ventures in the telecommunications industry in its various markets included
in this Base Prospectus are based on the internal estimates of Etisalat and its subsidiaries, associates and joint
ventures and, in some cases, on industry data collected by the relevant national regulator or the industry.
While the Issuer believes the statements contained in this Base Prospectus, including customer and market
share information, to be reliable and to provide fair and adequate estimates of the size of its markets and
fairly reflect the Group’s competitive position within those markets, these statements have not been
independently verified, and the Issuer does not make any representation or warranty as to the accuracy or
completeness of such information set forth in this Base Prospectus.
In addition, the Issuer has made statements in this Base Prospectus regarding the telecommunications
industry, the markets in which its operating businesses operate, the position of those operating businesses in
the industry and the market shares of various industry participants based on the Group’s experience and its
own investigation of market conditions (in particular, based on its internal data collected from its operating
businesses’ networks, monitoring traffic and customer activations). The Issuer cannot assure you that any of
its assumptions are accurate or correctly reflect the operating businesses’ position in the industry, and none
of the Group’s internal surveys or information has been verified by any independent sources.
The customer, churn, ARPU and market share data contained in this Base Prospectus are not part of the
Group’s financial statements or financial accounting records and have not been audited or otherwise
reviewed by external auditors, consultants or independent experts.
PRESENTATION OF STATISTICAL INFORMATION
The statistical information in the section entitled “Overview of the UAE” has been derived from a number of
different identified sources. All statistical information provided in that section may differ from that produced
by other sources for a variety of reasons, including the use of different definitions and cut-off times. GDP
data is not final and may be subject to revision in future periods and certain other historical data set out in
that section may also be subject to future adjustment.
10
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
CERTAIN DEFINED TERMS AND CONVENTIONS
Capitalised terms which are used but not defined in any particular section of this Base Prospectus will have
the meaning attributed thereto in “Terms and Conditions of the Notes” or any other section of this Base
Prospectus.
Certain figures and percentages included in this Base Prospectus have been subject to rounding adjustments;
accordingly figures shown in the same category presented in different tables may vary slightly and figures
shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
References in this Base Prospectus to one gender shall be deemed to include the other except where the
context does not permit.
All references in this Base Prospectus to U.S. dollars, U.S.$ and $ refer to United States dollars being the
legal currency for the time being of the United States of America and all references to dirham and AED
refer to United Arab Emirates dirham being the legal currency for the time being of the UAE. In addition, all
references to Sterling and £ refer to pounds sterling being the legal currency for the time being of the United
Kingdom and to euro and € refer to the currency introduced at the start of the third stage of European
economic and monetary union pursuant to the Treaty establishing the European Community, as amended.
References to a billion are to a thousand million.
“We,” “us” and “our” are references to the Group or Etisalat, as the context requires.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some statements in this Base Prospectus are or may be deemed to be forward looking statements. Forward
looking statements are all statements in this Base Prospectus that do not relate to historical facts and events.
Forward looking statements include statements concerning the Issuer’s and the Group’s plans, objectives,
goals, strategies, future operations and performance, and the assumptions underlying these forward looking
statements. When used in this Base Prospectus, the words “anticipates”, “estimates”, “expects”, “believes”,
“intends”, “plans”, “aims”, “seeks”, “may”, “will”, “should” and any similar expressions generally identify
forward looking statements. These forward looking statements are contained in the sections entitled “Risk
Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the
Group” and “Description of the Group” and other sections of this Base Prospectus. The Issuer has based
these forward looking statements on the current view of its management with respect to future events and
financial performance. Such forward looking statements are based on assumptions and current factors and
are subject to risks and uncertainties, the non-occurrence or occurrence of which could cause the Group’s
actual results, including the Group’s financial condition and profitability, to differ materially from or be more
negative than those expressly or implicitly assumed or described by such forward looking statements.
Although the Issuer believes that the expectations, estimates and projections reflected in its forward looking
statements are reasonable as of the date of this Base Prospectus, if one or more of the risks or uncertainties
materialise, including those identified below or which the Issuer has otherwise identified in this Base
Prospectus, or if any of the Issuer’s underlying assumptions prove to be incomplete or inaccurate, the
Group’s actual results of operations may vary from those expected, estimated or predicted. You are therefore
strongly advised to read the sections “Risk Factors”, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Group” and “Description of the Group”, which include a more
detailed description of the factors that might have an impact on the Group’s business development and on
the industry sector in which the Group operates.
The risks and uncertainties referred to above include:
•
changes in economic, financial and political conditions in markets served by operations of the Group
that would adversely affect the level of demand for telecommunications services;
•
•
greater than anticipated competitive activity, from both existing competitors and new market entrants;
the impact of investment in network capacity and the deployment of new technologies, or the
obsolescence of existing technologies;
11
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
•
the Group’s ability successfully to execute its investments, whether in greenfield development or
update of incumbent operations;
•
the effects of, and changes in, laws, regulations or governmental policies affecting the Group’s
business activities;
•
•
•
slower than expected customer growth, increased churn and reduced customer retention;
•
the Group’s ability to obtain and maintain necessary regulatory approvals and licences for its
businesses;
•
the Group’s ability to realise the benefits it expects from existing and future investments it is
undertaking or plans to or may undertake;
•
the Group’s ability to obtain external financing or maintain sufficient capital to fund its existing and
future investments;
•
•
the Group’s ability to stabilise churn and ARPU; and
changes in the spending patterns of new and existing customers;
any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future
acquisitions or dispositions and the integration of acquired companies and investments into the
Group’s existing operations;
changes in tax legislation in the jurisdictions in which the Group operates.
Additional factors that could cause actual results, performance or achievements to differ materially include,
but are not limited to, those discussed under “Risk Factors”.
Any forward looking statements contained in this Base Prospectus speak only as of the date of this Base
Prospectus. Without prejudice to any requirements under applicable laws and regulations, the Issuer
expressly disclaims any obligation or undertaking to disseminate after the date of this Base Prospectus any
updates or revisions to any forward looking statements contained herein to reflect any change in expectations
thereof or any change in events, conditions or circumstances on which any such forward looking statement
is based.
12
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:47 – eprint6 – 4224 Intro
TABLE OF CONTENTS
Page
Risk Factors ..................................................................................................................................
14
Overview of the Programme ........................................................................................................
39
Form of the Notes ........................................................................................................................
44
Applicable Final Terms ................................................................................................................
47
Terms and Conditions of the Notes ..............................................................................................
59
Use of Proceeds ............................................................................................................................
92
Overview of the UAE....................................................................................................................
93
Capitalisation of the Group ..........................................................................................................
95
Selected Financial Information for the Group ..............................................................................
96
Management’s Discussion and Analysis of Financial Condition and Results of Operations
of the Group ................................................................................................................................
103
Description of the Group ..............................................................................................................
143
Management and Employees ........................................................................................................
183
Book-Entry Clearance Systems ....................................................................................................
192
Taxation ........................................................................................................................................
196
Subscription and Sale and Transfer and Selling Restrictions ......................................................
204
General Information......................................................................................................................
212
Definitions and Glossary ..............................................................................................................
214
Index to Consolidated Financial Statements ................................................................................
F-1
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the
Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable
Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of
the Notes at a level higher than that which might otherwise prevail. However, there is no assurance
that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake
stabilisation action. Any stabilisation action or over-allotment may begin on or after the date on which
adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if
begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue
date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant
Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant
Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with
all applicable laws and rules.
13
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
RISK FACTORS
The Issuer believes that the following non-exhaustive list of factors may affect its ability to fulfil its
obligations under Notes issued under the Programme. All of these factors are contingencies which may or
may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency
occurring.
In addition, a list of factors which are material for the purpose of assessing the market risks associated with
Notes issued under the Programme is also described below. Additional risks and uncertainties not presently
known or currently deemed immaterial may also have a material adverse effect on the Group's business,
results of operations, financial condition or prospects.
If any of the risks described below actually materialise, the Group’s business, financial condition, results of
operations or prospects could be materially adversely affected. If that were to happen, the trading price of
the Notes could decline and investors could lose all or part of their investment.
The Issuer believes that the factors described below represent the principal risks of investing in Notes issued
under the Programme, but the inability of the Issuer to pay interest, principal or other amounts on or in
connection with any Notes may occur for other reasons which may not be considered significant risks by the
Issuer based on information currently available to it or which it does not or may not currently anticipate.
Prospective investors should read the detailed information set out elsewhere in this Base Prospectus and
reach their own views prior to making any investment decision. See “Presentation of Financial and Other
Information — Cautionary Statement Regarding Forward Looking Statements”.
FACTORS THAT MAY AFFECT THE ISSUER’S ABILITY TO FULFIL ITS OBLIGATIONS
UNDER NOTES ISSUED UNDER THE PROGRAMME
Risks Relating to Etisalat and the Group
Etisalat’s financial obligations are not guaranteed by the UAE Government
The Federal Government of the UAE (the UAE Government) is Etisalat’s most significant shareholder,
holding 60 per cent. of Etisalat’s ordinary shares through the Emirates Investment Authority as of the date
of this Base Prospectus. Pursuant to Article 7 of UAE Federal Law No. 1 of 1991 (the Etisalat Law), the
UAE Government’s Shareholding in Etisalat may not be less than 60 per cent. Although the UAE
Government is a majority shareholder, Etisalat is an independent commercial enterprise and, in the absence
of an explicit guarantee from the UAE Government in respect of any of its borrowings, none of its financial
obligations (including its obligations under the Notes) or those of its subsidiaries, affiliates or joint ventures
are guaranteed by the UAE Government. Accordingly, Etisalat’s financial obligations, including its
obligations under the Notes, are not and should not be regarded as obligations of the UAE Government.
Etisalat’s ability to meet its financial obligations under the Notes is solely dependent on Etisalat’s ability to
fund such amounts from its profits and cash flows, or from other, non-UAE Government, sources of
financing. Therefore, any decline in Etisalat’s operations, its profits or cash flows, or any difficulty in
securing external funding, may have a material adverse effect on Etisalat’s ability to satisfy its payment
obligations to Noteholders irrespective of UAE Government ownership.
The Group’s revenues, profits and cash flows are concentrated in the UAE
The Group relies, to a significant extent, on the revenue generated by its operations in the UAE to make
principal and interest payments on its indebtedness (which would include the Notes upon issuance), pay
operating expenses, fund its international expansion and capital expenditures and meet its other obligations
that may arise from time to time. For the years ended 31 December 2008 and 2009, the Group’s UAE
telecommunications operations carried out by Etisalat accounted for 90 per cent. and 85 per cent. of the
Group’s consolidated revenue, respectively, and all of the Group’s profit for both years, in both cases under
IFRS. Although the Group’s recent international acquisitions and investments have reduced its UAE
operations’ relative contribution to the Group’s revenue, the Group’s UAE operations continue to be the
14
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
primary contributor to the Group’s revenue and profitability and the Group expects this situation to continue
to be the case in the short and medium-term.
The Group relies on its UAE operations for a significant portion of its revenue, profits and cash flows.
Consequently, any persistent weakness or a further economic downturn in the UAE could materially and
adversely affect the Group’s overall performance. Etisalat’s blended mobile ARPU in the UAE has decreased
over the past three years, from AED 176 to AED 167 (under Etisalat GAAP) for the years ended
31 December 2007 and 2008, respectively, and from AED 166 to AED 138 (under IFRS) for the years ended
31 December, 2008 and 2009, respectively. Etisalat’s blended mobile ARPU continued to decrease during
the first nine months of 2010; blended mobile ARPU decreased from AED 146 to AED 118 (a decrease of
19.2 per cent.) for the nine months ended 30 September 2009 and 2010, respectively. Because 37 per cent.
of the Group’s revenue for the nine months ended 30 September 2010 was attributable to the provision of
mobile services in the UAE, should blended mobile ARPU continue to decrease, the Group will need to rely
increasingly on offerings of new services to maintain its market share and its current profitability in the UAE.
See “— The Group may face increased competition from established telecommunications operations or new
entrants in the markets in which it operates, both in the UAE and in its international operations” and “— If
the Group does not continue to provide telecommunications or related services that are useful and attractive
to customers, it may not remain competitive, and its business, financial condition, results of operations and
prospects may be adversely affected”.
In addition, the events leading up to the restructuring of Dubai World and the subsequent ratings downgrade
of DP World and a number of other UAE entities may affect the UAE’s reputation as a centre of investment
in the Middle East. See “— A downgrade in Etisalat’s credit ratings could adversely affect the Group’s
ability to access the debt capital markets and may increase its borrowing costs”, “— Risks Relating to the
Countries in Which the Group Operates — The Group is subject to political and economic conditions in the
UAE and the Middle East” and “Overview of the UAE”. Because of the importance of the UAE to the Group’s
revenue and profitability, any material adverse effect on the Group’s operations in the UAE may have a
material adverse effect on the Group’s business, financial condition, results of operations and prospects.
The Group may face increased competition from established telecommunications operations or new
entrants in the markets in which it operates, both in the UAE and in its international operations
The Group operates in an increasingly competitive environment across its markets. The Group’s competitors
fall into three broad categories: (1) international diversified telecommunications companies; (2) state owned
and partly state owned telecommunications companies; and (3) local and regional telecommunications
companies. Some of the Group’s global competitors have substantially greater financial, personnel,
technical, marketing and other resources. In a number of countries, the Group’s competitors are also
government-owned entities or major local business participants, and may have the advantage of being an
incumbent service provider. Local and regional operators may be able to leverage their knowledge of the
local markets more efficiently than the Group.
The continuing trend toward business combinations and strategic alliances in the telecommunications
industry may create increased competition. Although new laws and regulatory initiatives may provide the
Group with increased business opportunities by removing or substantially reducing certain barriers to
competition, in so doing they also create a more competitive business environment and may encourage new
entrants, which could adversely affect the Group’s key performance indicators such as ARPU.
Increased competition may also lead to increased churn, a reduction in the rate at which the Group is able to
add new customers or to a decline in customer numbers and a decrease in the Group’s market share as
customers purchase telecommunications services, or other competing services, from other providers and/or
increasingly switch between providers based on pricing and the products and services that are offered.
Increasing competition has also led, in certain markets, to declines in the prices the Group is able to charge
for its services and may lead to further price declines in the future, which could adversely affect the Group’s
overall profitability.
The competitive focus in the UAE in particular (as discussed further below) continues to shift from acquiring
new customers to retaining existing high-value customers and increasing usage by existing customers as a
15
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
result of increased penetration of the mobile telecommunications market and increased competition. There
can be no assurance that the Group will not experience increases in churn rates, reflecting increased numbers
of customer deactivations, particularly as competition for existing customers intensifies. An increase in churn
rates may result in lower revenue and higher costs resulting from the need to replace customers and may
consequently have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects.
The UAE
Etisalat had the exclusive right to provide domestic and international fixed-line and mobile
telecommunications services throughout the UAE until the introduction of Federal Law by Decree No. 3 of
2003 Regarding the Organisation of the Telecommunications Sector, which was subsequently amended by
Federal Laws by Decree No.1 of 2005 and No.5 of 2008 (the Telecom Law). In February 2007, Emirates
Integrated Telecommunication Company PJSC, operating under the brand name “du” (du), began operations
as the UAE’s second telecommunications network operator. Competition from du may result in an overall
reduction in the Group’s revenues or cause the Group to lose customers, fail to attract new customers or incur
increased costs to maintain its customer base or to maintain revenues from such customer base.
In order to maintain and grow its current level of profitability in the UAE following du’s entry into the
market, the Group has been, and will continue to be, required to provide its customers in the UAE with
attractive services and pricing policies and to adapt its pricing, bundling, service and branding strategies to
respond to competitive pressure. However, as the UAE is a heavily regulated market, Etisalat is required to
obtain regulatory pre-approval of its tariffs and service offerings, which may limit its ability rapidly to adapt
its products and services to changing market conditions. For example, Etisalat does not currently have
regulatory approval to offer mobile and fixed-line services in a single bundled tariff; however, regulatory
approvals have been obtained for other types of bundled services, such as bundles with fixed-line and internet
services. See “— Significant Factors Affecting Financial Condition and Results of Operations — Royalties
and Tax in the UAE”. Accordingly, sustained price competition with du may lead to price deterioration and/or
increased marketing costs, increased competition for personnel, the loss of market share, or the Group’s
failure to adequately respond to competition from du more generally, which may negatively impact Etisalat’s
profitability in the UAE and may have a material adverse effect on its business, financial condition, results
of operations and prospects.
In addition to du, Etisalat also faces competition from illegal and unlicensed voice over internet protocol
(VoIP) services that operate in the UAE and which permit customers in the UAE to make fixed-line and
mobile phone calls at very low rates or without cost. Although the UAE Government and Etisalat actively
seek to restrict access to these illegal and unlicensed services, there is no assurance their efforts will be
successful, particularly as such services typically rapidly update their access points and any broad-based
attempt to restrict such services would likely lead to blocking access to permitted services. Etisalat’s
international direct dialling (IDD) services also face competition from international fixed-line and mobile
operators that offer lower per minute rates to the UAE than Etisalat is currently able to offer for IDD to such
countries. For example, for the years ended 31 December 2008 and 2009, the total number of IDD minutes
used by Etisalat customers declined from approximately 3.7 billion to 3.4 billion minutes, respectively, or 10
per cent. Etisalat is now empowered to offer its own VoIP services, including international VoIP services.
However, if customers continue to utilise illegal and unlicensed VoIP services and/or if Etisalat cannot offer
competitive IDD rates compared with its international and local competitors, this may have a material
adverse effect on its business, financial condition, results of operations and prospects.
International Operations
The Group currently has a presence in 17 countries outside the UAE and is subject to various levels of
competition in each of these jurisdictions. In Egypt, for example, the Group’s competitors consist both of
local and regional companies (the Egyptian Company for Mobile Services S.A.E. (Mobinil)) as well as
international diversified companies (Vodafone Group Plc (Vodafone)), both of which have commercial
operations in Egypt with a greater market share than that of the Group. The risk of increased competition
exists in the Group’s smaller markets as well, in particular as local regulators grant new licences. For
16
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
example, the Government of Benin has granted a GSM licence to Globacom Limited and, in Côte d’Ivoire,
the Comium Group has begun commercial operations under the brand name “Koz”. In India, where the
Group has commenced limited operations, NTT Docomo, Inc., which commenced operations in the second
half of 2009, has offered what management believes to be the lowest mobile rate per minute in all of India.
Generally, as a new entrant in its international markets (with the exception of Pakistan and Sri Lanka), the
Group seeks to compete aggressively to gain market share as it does not have the benefit of an incumbent
customer base. In addition, the Group typically faces high start-up costs in terms of paying for licence and/or
acquisition costs, network development and marketing. Together, the cost of competition and the high rollout costs may create a situation where the Group incurs losses beyond those historically experienced in the
telecommunications industry. Any failure of the Group to compete successfully in its international markets
may have a material adverse effect on its business, financial condition, results of operations and prospects.
The Group has rapidly expanded internationally in recent years
Since 2004 the Group has significantly expanded its international operations (in terms of geography and
scope) through both its subsidiary and associate entities: (1) the acquisition of new licences and building its
own network infrastructure and (2) purchasing interests in existing businesses. For example, the Group
commenced telecommunications operations in Saudi Arabia in 2005 with the acquisition of a new licence
(through its associate Mobily) and in Egypt in 2007 with the acquisition of a new licence (through its
subsidiary Etisalat Misr), and has commenced limited operations in India following the acquisition of a
controlling interest in Etisalat DB India (formerly known as Swan Telecom). See “Description of the Group
— International Operations”.
The Group’s ability to manage its increased scope of operations and to achieve future growth and
profitability depends upon a number of factors, including its ability:
•
to effectively increase the scope of its management, operational and financial systems and controls to
handle the increased complexity, expanded breadth and geographic area of its operations;
•
•
to recruit, train and retain qualified staff to manage and operate its growing business;
•
•
to accurately judge market dynamics, demographics, growth potential and competitive environment;
•
to maintain and obtain necessary permits, licences, spectrum allocation and approvals from
governmental and regulatory authorities and agencies.
to accurately evaluate the contractual, financial, regulatory, environmental and other obligations and
liabilities associated with its international acquisitions and investments, including the appropriate
implementation of financial oversight and internal controls and the timely preparation of financial
statements that are in conformity with the Group’s accounting policies, based on IFRS;
to effectively determine, evaluate and manage the risks and uncertainties in entering new markets and
acquiring new businesses through its due diligence and other processes, particularly given the
heightened risks in emerging markets (see “— Risks Relating to the Countries in Which the Group
Operates — The Group is subject to the risks of political, social and economic instability associated
with countries and regions in which it operates or may seek to operate”); and
Any difficulties in addressing these issues or integrating one or more of its existing or future international
operations could have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects. In addition, the value of the Group’s investments in associates (operating
companies in which it has less than a controlling stake) could decline, requiring the Group to record
impairments to those assets in its financial statements.
The Group’s continued growth in profitability depends in part on its ability to continue to grow
internationally through organic expansion and/or further acquisitions
As of 30 September 2010, of the Group’s international telecommunications subsidiaries, only Etisalat Misr
had made a positive contribution to the Group’s consolidated operating profit. If profits from the Group’s
17
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
operations in the UAE continue to decrease, the Group’s continued growth in profitability will depend on its
ability to continue to grow its international operations through organic expansion and/or further acquisitions.
The success of the Group’s acquisition and investment strategy depends on the ability of management to
identify and compete for suitable acquisition and investment targets, to assess the value, strengths,
weaknesses, contingent or other liabilities and potential profitability of such acquisitions and investments, to
negotiate acceptable purchase terms and, in some cases, the selection of appropriate international and local
partners, and the continued contributions by certain of its key management and technical personnel. The
Group’s acquisition and investment strategy also depends on its ability to obtain the appropriate regulatory
and governmental approvals, licences, spectrum allocation and registrations and may be limited by
regulatory constraints in the countries in which it operates due to antitrust laws, asset control laws or political
conflicts. For example, Etisalat’s binding conditional offer to purchase a 46 per cent. interest (representing
51 per cent. of total share capital and voting rights) in Mobile Telecommunications Company K.S.C. (Zain)
remains conditional on, among other things, both Etisalat and Zain obtaining necessary approvals from
various regulators in several jurisdictions. See “— Current and future antitrust and competition laws in the
countries in which the Group operates may limit its growth and subject it to antitrust and other investigation
or legal proceedings”. In addition, the success of the Group’s acquisitions and investments will depend on,
and may be limited by, the Group’s ability to finance acquisitions and investments, which may be limited by
restrictions contained in its debt instruments and its other existing and future financing arrangements. For a
description of the Group’s primary credit facilities, see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and Capital Resources — Indebtedness”.
Once targets are acquired, the success of the Group’s acquisitions and investments is dependent on the ability
of the Group’s management and employees to integrate the acquired businesses and/or implement an
effective management structure given the terms of the investment (particularly in cases where Etisalat has
only a minority interest), realise the benefits of expected planned synergies (such as branding, marketing and
equipment sourcing) and successfully execute operations in new jurisdictions (such as rolling out a new
network, managing vendors, establishing billing systems and addressing security concerns). These risks can
be particularly significant in emerging markets, where it is difficult to assess the regulatory environment
given limited history and precedent and other economic and political factors. See “— Risks Relating to the
Countries in Which the Group Operates — The Group is subject to the risks of political, social and economic
instability associated with countries and regions in which it operates or may seek to operate”.
There can be no assurance that the Group will be able to identify and effectuate future acquisitions or
investments on appropriate terms and at an acceptable cost or that it will successfully execute its acquisition,
investment or roll-out plans. The Group cannot give any assurance that its recent rate of growth will be
maintained in the future or that demand for the Group’s services will continue to grow at rates sufficient to
achieve a satisfactory return on any acquisitions or investments that it makes. The Group’s inability to expand
its existing business internationally, or to find and complete suitable acquisitions or investments, could have
a material adverse effect on its business, financial condition, results of operations and prospects.
The Group’s ability to exercise control over its subsidiaries, associates and joint ventures is, in some
cases, dependent upon the consent and cooperation of other participants who are not under its control.
Disagreements or terms in the agreements governing the Group’s subsidiaries, associates and joint
ventures could adversely affect its business, financial condition, results of operations and prospects
The Group currently operates mobile operations in countries outside the UAE through subsidiaries,
associates and joint ventures. The Group’s level of ownership of each of its subsidiaries, associates and joint
ventures varies from market to market, and it does not always have a majority interest. Although the terms
of its investments vary, the Group’s business, financial condition, results of operations and prospects may be
materially and adversely affected if disagreements develop with its partners. In particular, the Group is
currently engaged in two disputes with the local shareholders of its operations in Sub-Saharan Africa: one
with Telecel Benin and one with Telecel Faso. There is also a dispute regarding certain terms of the PTCL
Shareholders’ Agreement. See “Description of the Group — Litigation”.
The Group’s ability to withdraw funds, including dividends, from its participation in, and to exercise
management control over, subsidiaries, associates and joint ventures depends, in some cases, on the consent
18
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
of its other partners in these entities. Further, failure to resolve any disputes with its partners in certain of the
Group’s operating subsidiaries, associates and joint ventures could restrict payments made by these operating
entities to Etisalat and have a material adverse effect on Etisalat’s business, financial condition, results of
operations and prospects.
Etisalat enters into management agreements with certain of its subsidiaries, associates and joint ventures, and
collects annual fees for the services it provides under those agreements. For the year ended 31 December
2009, Etisalat had AED 220.9 million in management fee income, including AED 124.5 million from PTCL,
AED 36.7 million from Mobily, AED 31.8 million from Etisalat Misr and AED 10.3 million from Atlantique
Telecom. In addition, agreements governing these management arrangements contain, in some cases, change
of control and similar provisions which if triggered could give other participants in these investments the
ability to purchase the Group’s interests or enact other penalties. Any failure of the Group to achieve or
maintain positive working relationships with its business partners could have a material adverse affect on its
business, financial condition, results of operations and prospects.
Current and future antitrust and competition laws in the countries in which the Group operates may
limit its growth and subject it to antitrust and other investigations or legal proceedings
The antitrust and competition laws and related regulatory policies in many of the countries in which the
Group operates generally favour increased competition in the telecommunications industry and may prohibit
the Group from making further acquisitions or continuing to engage in particular practices to the extent that
it holds a significant market share in such countries. In addition, violations of such laws and policies could
expose the Group to administrative proceedings, civil lawsuits or criminal prosecution, including fines and
imprisonment, and to the payment of punitive damages.
Regulators are particularly focused on establishing rules and a regulatory framework for interconnection
between fixed and mobile networks, including mobile termination (i.e., the ability of a telecommunications
provider to terminate a call on another operator’s network (i.e., calling between networks)) and the related
pricing mechanisms (i.e., mobile termination rates). In fixed-line networks, although the incumbent provider
has generally been obliged by the regulator to offer access to its network for the purposes of interconnection
or call termination at prices which have usually been set by the regulator to equal cost, such pricing could
also be set well below cost. Decisions by any of the Group’s relevant regulators requiring the Group to
provide mobile termination and interconnection services well below current rates, which is more likely to be
required in countries in which the Group is viewed or designated by the local regulator as having significant
market power, could prevent the Group from realising a significant amount of revenue and have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects. See
“Description of the Group — UAE Operations — Regulation” and “Description of the Group —
International Operations”.
In addition, antitrust and competition laws are subject to change and existing or future laws may be
implemented or enforced in a manner that is materially detrimental to the Group. The Group cannot predict
the effect that current or any future lawsuits, appeals or investigations by regulatory bodies or by any third
party in any of the countries in which it operates will have on its business, financial condition, results of
operations or prospects. Although to date the Group has not been subject to any material antitrust or
competition related lawsuits, there can be no assurance that these lawsuits will not occur and as a result cause
the Group material losses and expenses. In addition, any fines, or other penalties on the Group imposed by
an antitrust or competition authority as a result of any such investigation, or any prohibition on the Group
engaging in certain types of business in one or more of the regions in which it operates, could have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects.
If the Group does not continue to provide telecommunications or related services that are useful and
attractive to customers, it may not remain competitive, and its business, financial condition, results of
operations and prospects may be adversely affected
The telecommunications industry is characterised by technological changes, including an increasing pace of
change in existing mobile systems, and industry standards and ongoing improvements in the capacity and
19
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
quality of technology. The Group’s commercial success depends on providing telecommunications services
that provide its customers with attractive products and services at a competitive cost. As new technologies
develop, the Group’s equipment may need to be replaced or upgraded, or its networks may need to be rebuilt
in whole or in part in order to sustain the Group’s competitive position as a market leader. Continuing
technological advances, ongoing improvements in the capacity and quality of digital technology and short
development cycles also contribute to the need for continual upgrading and development of the Group’s
equipment, technology and operations. To respond successfully to technological advances, the Group may
require substantial capital expenditures and access to related or enabling technologies in order to integrate
the new technology with its existing technology. If the Group is unable to anticipate customer preferences or
industry changes, or if it is unable to modify its networks on a timely and cost-effective basis, it may lose
customers.
Many of the services the Group offers are technology-intensive and the development or acceptance of new
technologies may render such services non-competitive, replace such services or reduce prices for such
services. In addition, as convergence of services accelerates, the Group has made and will have to continue
to make additional investments in new technologies to remain competitive. The Group’s operating results
would also suffer if its new products and services are not responsive to the needs of its customers, are not
appropriately timed with market opportunities or are not effectively brought to market. The new technologies
the Group chooses may not prove to be commercially successful or profitable. For example, the Group plans
to expand and deploy Group-wide 3G technology once the licence/spectrum is available in each jurisdiction
in which it operates. However, the success of such deployment and customer acceptance of 3G products and
services is dependent on licence availability, spectrum, bandwidth capacity on the network, availability of
3G-compatible customer-premises equipment and devices that are affordable and the offering of 3G products
and services that are attractive to customers.
As telecommunications technology continues to develop, the Group’s competitors may be able to offer
telecommunications products and services that are, or that are perceived to be, substantially similar or better
than those offered by the Group. This could have a material adverse effect on the Group’s business, financial
condition, results of operations and prospects. If the Group is not successful in anticipating and responding
to technological change and resulting consumer preferences in a timely and cost-effective manner, the
Group’s quality of services, business, financial condition, results of operations and prospects could be
materially adversely affected.
As a result, the Group cannot be certain that existing, proposed or as yet undeveloped technologies will not
become dominant in the future and render the technologies it uses less commercially viable or profitable or
that the Group will be successful in responding in a timely and cost-effective way to keep up with new
developments.
If the Group fails to attract and retain qualified and experienced employees, its business may be harmed
If the Group is unable to attract and retain experienced, capable and reliable personnel, especially senior and
middle management with appropriate professional qualifications, or if the Group fails to recruit skilled
professional and technical staff at a pace consistent with its growth, its business, financial condition, results
of operations and prospects may be materially adversely affected. Experienced and capable personnel in the
telecommunications industry remain in high demand and there is continuous competition for their talents.
The Group may not be able to successfully recruit, train or retain the necessary qualified personnel in the
future. The loss of some members of the Group’s senior management team or any significant number of its
mid-level managers and skilled professionals may result in a loss of organisational focus, poor execution of
operations and corporate strategy or an inability to identify and execute potential strategic initiatives such as
expansion of capacity or acquisitions and investments. These adverse consequences could, individually or in
the aggregate, have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects.
20
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
Telecommunications businesses require substantial capital investment and the Group may not have
sufficient capital to make future capital expenditure and other investments that the Group deems
necessary or desirable
The Group operates in a capital-intensive industry that requires substantial amounts of capital and other longterm expenditures, including those relating to the development and acquisition of new networks and the
expansion or improvement of existing networks. In the past, the Group has financed these expenditures
through a variety of means, primarily through internally generated cash flows, and to a lesser extent, through
joint ventures and partnerships, external borrowings and capital contributions. In the future, the Group
expects to utilise a combination of these sources, including banking and capital markets transactions, to
manage its balance sheet and meet its financing requirements. Some of the Group’s operating companies,
such as Etisalat Misr and Atlantique Telecom, have entered into financing agreements on their own.
However, if these international operations are unable to acquire external financing on their own, the Group
may be required to supply additional funding to these and any of its other international operations. There can
be no assurance that such sources of capital will be available to the Group on acceptable terms, if at all.
The Group’s ability to arrange external financing, and the cost of such financing, depends on numerous
factors, including the Group’s future financial condition and results of operations, general economic and
capital markets conditions, interest rates, credit availability from banks or other lenders, investor confidence
in the Group, applicable provisions of tax and securities laws and political and economic conditions in any
relevant jurisdiction. Several companies in the UAE, including Etisalat, have had their credit ratings
downgraded following the recent financial difficulty of Dubai World on the basis of the relative level of
financial support that might be expected to be provided to such entities from the UAE Government. See
“— A downgrade in Etisalat’s credit ratings could adversely affect the Group’s ability to access the debt
capital markets and may increase its borrowing costs”. There can be no assurance that the Group will not be
subject to any additional material adverse consequences resulting from the financial crisis of Dubai World,
including reduced interest by investors in investing in the UAE. Accordingly, there can be no assurance that
the Group will be able to arrange external financing on commercially reasonable terms, if at all.
The Group is exposed to certain risks in respect of the development, expansion and maintenance of its
telecommunications networks
The Group’s ability to increase its subscriber base depends in part upon the success of the expansion and
management of its telecommunications networks and upon its ability to obtain sufficient financing to
facilitate these plans. The build-out of the Group’s networks is subject to risks and uncertainties which could
delay the introduction of services in some areas and increase the cost of network construction. Among the
Group’s new projects is the development of a WiMAX network in the UAE and the replacement of the
existing fixed-line network in the UAE with “fibre to the home” (FTTH) technology. In the future, the Group
is also considering adopting a fourth generation network (referred to as long term evolution (LTE)) in the
UAE, Egypt, Saudi Arabia and the Group’s other networks, which is designed to provide faster data transfer
speeds and increased capacity. Network expansion and infrastructure projects, including those in the Group’s
development pipeline, typically require substantial capital expenditure throughout the planning and
construction phases and it may take months or years before the Group can obtain the necessary permits and
approvals and the new sites become operational. During the planning and expansion process, the Group is
subject to a number of construction, financing, operating, regulatory and other risks beyond its control,
including, but not limited to:
•
•
shortages or unavailability of materials, equipment and skilled and unskilled labour;
•
•
•
increases in capital and/or operating costs, including as a result of foreign exchange rate movements;
an inability on the Group’s part to obtain necessary financing on terms favourable to the Group, if at
all;
changes in demand for the Group’s services;
labour disputes and disputes with contractors and sub-contractors;
21
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
•
inadequate engineering, project management, capacity or infrastructure, including as a result of failure
by third parties to fulfil their obligations relating to the provision of utilities and transportation links
that are necessary or desirable for the successful operation of a project;
•
electricity and power interruptions due to electricity load shedding and/or blackouts, and energy
shortages;
•
•
•
•
•
regulatory regimes impacting the business;
•
•
•
•
•
•
political, social and economic conditions;
failure to complete projects according to specifications;
failure to meet licence obligations;
adverse weather conditions and natural disasters;
environmental regulations, including the need to perform feasibility studies and conduct remedial
activities;
fraud;
accidents;
terrorist action;
changes in laws, rules, regulations, governmental priorities and regulatory regimes; and
an inability to obtain and maintain project development permission or requisite governmental
licences, permits or approvals.
The occurrence of one or more of these events may have a material adverse effect on the Group’s ability to
complete its current or future network expansion projects on schedule or within budget, if at all, and may
prevent the Group from achieving the projected revenues, internal rates of return or capacity associated with
such projects. There can be no assurance that the Group will be able to generate revenues or profits from its
expansion projects that meet its planned targets and objectives, or that such revenues will be sufficient to
cover the associated construction and development costs, either of which could have a material adverse effect
on the Group’s business, financial condition, results of operations and prospects.
The Group’s investment plans are based on models that are themselves based on management’s
predictions of market conditions in the markets in which the Group seeks to operate. There can be no
assurance that such models will correctly anticipate actual investment results
The Group’s investment plans, including in particular its acquisitions and greenfield roll-out plans are
influenced by its modelling of anticipated investment returns. The Group uses the results of its modelling to
identify and execute potential investment strategies, such as acquisitions or greenfield network development.
These models rely on certain assumptions of market fundamentals, such as pricing and competition in the
relevant markets, in determining a given investment’s timing, cost and expected profitability for the Group.
If actual market conditions deviate from the assumptions underlying these models, the Group could be
required to modify, scale-back or delay its acquisition and expansion plans. For example, the roll-out of
Etisalat DB India’s mobile telecommunications network and service offerings was based on a model that
relied on assumptions regarding pricing and competition. While the Group was building out its Indian
network but before it commenced operations, a number of established mobile service providers in India
lowered mobile tariffs to levels that made it difficult for many telecommunications providers to operate at a
profit. These changes in market fundamentals also diverged from the assumptions used in the Group's
investment plan for Etisalat DB India. As a result, Etisalat DB India delayed the full launch of its services in
India and commenced only preliminary operations in 2010 in accordance with its licence requirements.
Changing market fundamentals in other regions could likewise affect the Group's ability to adhere to its
22
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
acquisition and expansion plans in ways that could have a material adverse effect on the Group's business,
financial condition, results of operations and prospects.
A failure in the continuing operations of the Group’s networks, gateways to its networks or the networks
of other operators could adversely affect the Group’s business, financial condition, results of operations
and prospects
The Group depends to a significant degree on the uninterrupted operation of its networks to provide its
services. From time to time, customers of certain operating companies within the Group have experienced
blocked or dropped calls because of network capacity constraints. The Group cannot assure investors that
these relevant networks can be improved or maintained at current levels.
The Group also relies to a certain extent on interconnection to the networks of other telecommunications
operators to carry calls from its customers to the customers of fixed-line operators and other mobile
operators, both within a given country and internationally. While the Group has interconnection and
international roaming agreements in place with many other telecommunications operators, it has no direct
control over the quality of these networks and the interconnections and international roaming services they
provide. Any difficulties or delays in interconnecting with other networks and services, or the failure of any
operator to provide reliable interconnections or roaming services to the Group on a consistent basis, could
result in a loss of subscribers or a decrease in traffic, which could adversely affect the Group’s business,
financial condition, results of operations and prospects.
In addition, the Group’s network, including its information systems, information technology and
infrastructure and the networks of other operators with whom its customers interconnect, are vulnerable to
damage or interruptions in operation from a variety of sources including earthquake, fire, flood, power loss,
equipment failure, network software flaws, transmission cable disruption or similar events. Any interruption
of the Group’s operations or the provision of any service, whether from operational disruption, natural
disaster or otherwise, could damage the Group’s ability to attract and retain customers, cause significant
customer dissatisfaction and have a material adverse effect on its business, financial condition, results of
operations and prospects.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that either the
Issuer or the Group will be unable to comply with its obligations as a company with securities admitted to
the Official List.
Continued cooperation between the Group and its equipment and service providers is important to
maintain the Group’s telecommunications operations
Once a manufacturer of telecommunications equipment has designed and installed its equipment within a
system, the operator of the system will often be reliant on such manufacturer for continued service and
supply. The Group’s ability to maintain and grow its subscriber base depends in part on its ability to source
adequate supplies of network equipment and on its ability to source adequate supplies of mobile handsets,
software and content on a timely basis. For example, the Group has made substantial equipment purchases
from, and has entered into vendor financing arrangements with, Ericsson and Huawei. Continued
cooperation with these equipment and service providers is essential for the Group to maintain its operations.
The Group does not have direct operational or financial control over its key suppliers and has limited
influence with respect to the manner in which its key suppliers conduct their businesses. The Group’s
subsidiaries’, associates’ and joint ventures’ reliance on these suppliers subjects them and the Group to risks
resulting from any delays in the delivery of services. The Group cannot assure investors that its suppliers will
continue to provide equipment and services to its subsidiaries, associates and joint ventures at attractive
prices or that the Group will be able to obtain such equipment and services in the future from these or other
providers on the scale and within the time frames required, if at all. The inability or unwillingness of key
suppliers to provide the Group’s operations with adequate equipment and supplies on a timely basis and at
attractive prices could materially and adversely impact these operations’ ability to retain and attract
subscribers or offer attractive product offerings, either of which could materially and negatively impact the
Group’s business, financial condition, results of operations and prospects.
23
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
The Group may not be able to adequately protect its intellectual property, which could harm the value
of the Group’s brand and branded products and adversely affect its business, financial condition, results
of operations and prospects
The Group depends on its brands and branded products described under “Description of the Group —
Intellectual Property” and believes that these brands are important to its business. The Group relies primarily
on trademarks and similar intellectual property rights to protect its brands and branded products. The success
of the Group’s business depends on its ability to use its existing trademarks in order to increase brand
awareness and further develop its branded products and services in its markets. The Group has registered
certain trademarks and has other trademark registrations pending. The Group has sought to register all of the
trademarks that it currently uses in the markets in which they are used, though in many cases the Group
cannot be certain that these trademarks have not been registered by another party in the past. The Group may
not be able to adequately protect its trademarks and its use of these trademarks may result in liability for
trademark infringement, trademark dilution or unfair competition.
The UAE Government exerts significant control over Etisalat and its interests may conflict with those of
Noteholders and/or of Etisalat itself
The UAE Government is Etisalat’s most significant shareholder, owning 60 per cent. of Etisalat’s outstanding
ordinary shares as of the date of this Base Prospectus through the Emirates Investment Authority. Pursuant
to the Etisalat Law, the UAE Government’s shareholding in Etisalat may not be less than 60 per cent. In
addition, the Group is required to pay an annual royalty payment to the UAE Government, currently equal
to 50 per cent. of the Group’s consolidated net profits. This royalty payment represents a significant
proportion of the UAE Government’s total revenues, amounting to 30 per cent. of the UAE Government’s
total budgeted revenues in 2009.
The composition of Etisalat’s Board of Directors (the Board) is provided for in the Etisalat Law, and has
been amended by the Telecom Law. The Board is comprised of eleven directors of which seven (including
the Chairman of the Board) represent the UAE Government and are appointed by Federal Decree. The four
remaining directors are elected by Etisalat’s non-UAE Government shareholders. Amendments to Etisalat’s
Articles of Association require both a resolution of a General Meeting of shareholders, with a 66 per cent.
majority of total votes of the shareholders, as well as a resolution of the UAE Federal Cabinet.
Given the UAE Government’s ownership of 60 per cent. of Etisalat’s shares, and that the UAE Government
controls amendments to the Etisalat Law and Etisalat’s Articles of Association, the UAE Government has the
ability to determine the outcome of certain votes by shareholders of Etisalat, including but not limited to the
appointment of a majority of Etisalat’s directors and, in turn, the selection of Etisalat’s management,
Etisalat’s business policies and strategies, budget approval, the issuance of equity and debt securities,
mergers, acquisitions and disposals of Etisalat’s assets or businesses, the payment of dividends and other
matters. The interests of the UAE Government and investors in the Notes may conflict, and there can be no
assurance that the resolution of any matter that may involve the interests of the UAE Government will be
resolved in what investors would consider to be their best interests or the best interests of the Group. In
addition, the UAE Government could make changes to the Etisalat Law that would enable it to change or
eliminate any minimum shareholding requirement. There can be no assurance that the UAE Government will
not change such law, and the impact of any such change on investors in the Notes cannot be predicted. See
“Management and Employees — Management — Board of Directors”.
The Group is involved in disputes, litigation and/or ongoing discussions with regulators, shareholders in
its subsidiaries, affiliates and joint ventures, competitors and other parties, the ultimate outcome of
which is uncertain
The Company is subject to numerous risks relating to legal and regulatory proceedings to which it or its
subsidiaries, associates and joint ventures are currently a party or which could develop in the future. The
Group is currently engaged in two formal disputes with its partners: one with Telecel Benin over ownership
of its operational licence, and one with Telecel Faso over ownership of its operations. The Group is
withholding the balance of payments to the Government of Pakistan pending completion of certain conditions
24
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
set forth in its share purchase agreement. In addition, an inactive constitutional case remains pending in
Pakistan regarding the nature of certain agreements between Etisalat International Pakistan Limited, the
holding company for the Group’s investment in Pakistan, and the Government of Pakistan. Etisalat is also
subject to litigation brought by an individual claimant in the UAE, as well as litigation in Iran. For a
description of current litigation and disputes, see “— Current and future antitrust and competition laws in
the countries in which the Group operates may limit its growth and subject it to antitrust and other
investigations or legal proceedings” and “Description of the Group — Litigation”.
The Group’s involvement in litigation and regulatory proceedings may adversely affect its reputation.
Furthermore, litigation and regulatory proceedings are unpredictable and legal or regulatory proceedings in
which the Group is or becomes involved (or settlements thereof) may have a material adverse effect on its
business, financial condition, results of operations and prospects.
A downgrade in Etisalat’s credit ratings could adversely affect the Group’s ability to access the debt
capital markets and may increase its borrowing costs
Etisalat’s credit ratings, which are intended to measure its ability to meet its debt obligations as they mature,
are an important factor in determining Etisalat’s cost of borrowings. The interest rates of the Group’s
borrowings are partly dependent on its credit ratings. As of the date of this Base Prospectus, Etisalat’s
corporate ratings were assessed A+ by Fitch Ratings Ltd. (Fitch), Aa3 by Moody’s Investors Service Limited
(Moody’s) and AA- by Standard & Poor’s Rating Services (S&P). On 13 October 2009, Fitch revised its
view of the UAE sovereign’s ability to support Federal Government entities and as a result, Etisalat’s
corporate rating was impacted and subsequently downgraded by Fitch from AA- to A+. Fitch reaffirmed this
rating on 31 May 2010. Furthermore, on 4 March 2010, Moody’s downgraded Etisalat’s credit rating from
Aa2 to Aa3 in conjunction with Moody’s review and downgrade of several Abu Dhabi and UAE governmentrelated entities in the absence of an explicit guarantee from the government as required by Moody’s. On 28
May 2010, S&P raised its rating of Etisalat from A+ to AA-. There can be no assurance that Fitch or Moody’s
will similarly reassess their ratings of Etisalat, or that any of Etisalat's ratings will remain the same in the
future.
A downgrade of Etisalat’s credit ratings (or announcement of a negative ratings watch) may increase its cost
of borrowing and may also limit its or its subsidiaries’ or associates’ ability to raise capital. Moreover, actual
or anticipated changes in Etisalat’s credit ratings or the credit ratings of the Notes (if applicable) generally
may affect the market value of the Notes. In addition, ratings assigned to the Notes (if applicable) may not
reflect the potential impact of all risks related to the transaction, the market or any additional factors
discussed in this Base Prospectus and other factors may affect the value of the Notes. A securities rating is
not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal at any
time by the assigning rating organisation and each rating should be evaluated independently of any other
rating.
Fluctuations in currency exchange rates could materially and adversely affect the Group’s business,
financial condition, results of operations and prospects
As the Group presents its financial statements in UAE dirhams, it is exposed to risks related to the translation
of assets and liabilities denominated in other currencies, particularly given that none of the Group’s
operations outside the UAE uses the dirham as their reporting or transactional currency. As a result, the
Group is exposed to risks related to the translation of assets and liabilities denominated in foreign currencies
and currency fluctuations could have an impact on its balance sheet.
Further, the movement in the value of the UAE dirham against other currencies may materially adversely
affect the Group’s business, financial condition, results of operations and prospects as the Group is exposed
to transactional foreign exchange risk. This is a result of the currency composition of its revenues, expenses,
assets and liabilities, which the Group has been, and expects to continue to be, exposed to foreign exchange
rate fluctuations. Fluctuations in exchange rates could also significantly impact the comparability of the
Group’s operating results between financial periods. For the year ended 31 December 2009, the Group
derived, in aggregate, 12 per cent. of its revenue from Etisalat Misr, whose revenues are largely denominated
25
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
in the Egyptian Pound, and Atlantique Telecom, whose revenues are largely denominated in the West African
CFA franc. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations
of the Group — Disclosure About Risk — Market Risk — Foreign Currency Risk”.
The Group does not currently have foreign currency hedging contracts, and if it enters such contracts in the
future, it cannot guarantee that these arrangements will fully protect its results of operations, assets and
liabilities and cash flows from the effect of exchange rate fluctuations. There can be no assurance that future
exchange rate fluctuations between the UAE dirham and the currencies of countries in which the Group
operates will not have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects.
The Group’s business may be adversely affected if the UAE dirham/U.S. dollar peg were to be removed
or adjusted
The Group maintains its accounts, and reports its results, in UAE dirham. Currently, the UAE dirham
remains pegged to the U.S. dollar. However, there can be no assurance that the UAE dirham will not be depegged in the future or that the existing peg will not be adjusted in a manner that negatively impacts the
valuation of Etisalat’s international investments. Any such de-pegging or adjustment could have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects which could
therefore affect the ability of the Issuer to perform its obligations in respect of any Notes.
Fluctuations in interest rates could increase debt service costs to Etisalat and its subsidiaries, associates
and joint ventures
Interest rates are highly sensitive to many factors beyond the Group’s control, including the interest rate,
exchange rate and other monetary policies of governments and central banks in the jurisdictions in which the
Group operates. The floating rate portion of the Group’s loans and borrowings is subject to interest rate risk
resulting from fluctuations in the relevant reference rates underlying such debt. Consequently, because a
significant portion of the Group’s debt is subject to floating interest rates, any increase in such reference rates
will result in an increase in the Group’s interest rate expense and may have a material adverse effect on the
Group’s financial condition, results of operations and prospects. Any future unhedged interest rate risk may
result in an increase in the Group’s interest expense and may have a material adverse effect on the Group’s
business, its financial conditions and results of operations. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market
Risk — Interest Rate Risk”.
U.S. persons investing in Notes may have indirect contact with countries sanctioned by the Office of
Foreign Assets Control of the U.S. Department of Treasury as a result of the Group’s activities in and
business with countries on the sanctions list
The Office of Foreign Assets Control of the U.S. Department of Treasury (OFAC) administers regulations
that restrict the ability of U.S. persons to invest in, or otherwise engage in business with, certain countries,
including Iran and Sudan, and specially designated nationals (together Sanction Targets). As the Group is
not itself a Sanction Target, OFAC regulations do not prohibit U.S. persons from investing in, or otherwise
engaging in business with the Group. However, to the extent that the Group invests in, or otherwise engages
in business with, Sanction Targets, U.S. persons investing in the Group may incur the risk of indirect contact
with Sanction Targets. The Group’s current practice is to segregate any funding from U.S. persons from its
operations in Sanctions Targets. The Group has generated 1.09 per cent., 1.01 per cent. and 1.12 per cent. of
its revenues in each of 2009, 2008 and 2007 from Sanction Targets, primarily through its operations in Sudan
and interconnection revenues. However, to the extent that the Group substantially increases its investments
in or business with Sanction Targets, U.S. persons investing in Notes issued by the Group may increase their
risk of indirect contact with Sanction Targets and possible violations of OFAC sanctions.
26
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
Risks Relating to the Telecommunications Industry
Because the Group operates in heavily regulated business environments, the implementation of existing
laws by regulators and government authorities as well as changes in laws, regulations or governmental
policy affecting its business activities could adversely affect the Group’s business, financial condition,
results of operations and prospects
Because the Group has ventures in a large number of jurisdictions, it must comply with an extensive range
of laws and regulations pertaining to the licensing, construction and operation of telecommunications
networks and services, as implemented by relevant agencies or other regulatory bodies. Among the most
significant of these laws and regulations are those governing tariffs, the ability to offer and/or bundle
products and services, the allocation of frequency spectrum, interconnection and access, and those governing
the regulatory agencies that monitor and enforce regulation and competition laws that apply to the
telecommunications industry. In particular, in the UAE, the Telecommunications Regulatory Authority
(TRA) has significant power and latitude to regulate all aspects of Etisalat’s business, from pricing and
competition to network infrastructure. In the fixed-line market, for example, the TRA may require Etisalat
to offer to other licensed operators a bitstream access product. Etisalat is currently in discussion with du and
with the TRA on the nature of a bitstream access product which would require Etisalat and du to provide
each other with internet protocol two-way transmission over their customer access lines and a connection to
each other’s core networks. This would allow du to provide a retail internet access service to customers who
are directly connected to Etisalat’s fixed-line network and vice versa. See “Description of the Group — UAE
Operations — Regulation”.
In many of the countries in which the Group operates, local regulators have significant latitude in the
administration and interpretation of telecommunications licences and laws, rules and regulations. In addition,
the actions taken by these regulators in the administration and interpretation of these licences and laws, rules
and regulations may be influenced by local political and economic pressures. Decisions by regulators
regarding the grant, amendment or renewal of licences, to the Group or to third parties, or regarding laws,
rules, and regulations, could materially and adversely affect the Group’s operations in these geographic
areas. The Group cannot provide any assurance that governments or regulatory bodies in the countries in
which it operates will not issue telecommunications licences to new operators whose services will compete
with those services provided by the Group. For example, in the UAE, the TRA has recently issued a new
public access mobile radio licence (commonly referred to as the TETRA system) to Nedaa Corporation
(Nedaa), for ten years effective from 15 September 2009, and licences to Al Yah Satellite Communications
Services (Yahsat) and its subsidiaries, a specialised operator providing satellite-based telecommunications
services. In addition, in Egypt, the National Telecommunications Regulatory Authority (NTRA) recently
rescinded Etisalat Misr’s exclusive right to provide international calling plans, which may lead to increased
competition for Etisalat Misr and adversely affect its revenue.
In addition, other changes in the regulatory environment concerning the use of mobile phones may lead to a
reduction in the usage of mobile phones or otherwise adversely affect the Group. Decisions by regulators and
new legislation, including in relation to retail, wholesale and interconnect price regulation, could adversely
affect the pricing of, or adversely affect the revenue from, the services the Group offers. Decisions by
regulators may include limiting the Group’s pricing flexibility, raising its costs, reducing its retail or
wholesale revenues or conferring greater pricing flexibility on the Group’s competitors. See “Description of
the Group — UAE Operations — Regulation ” and “Description of the Group — International Operations”.
The Group’s telecommunications licences, permits and frequency allocations are subject to finite terms,
ongoing review and/or periodic renewal, any of which may result in modification or early termination.
In addition, the Group’s inability to obtain new licences and permits could adversely affect its business
The terms of the Group’s licences, permits and frequency allocations are subject to finite terms, ongoing
review and/or periodic renewal and, in some cases, are subject to modification or early termination or may
require renewal with the applicable government authorities. While Etisalat does not expect that it or any of
its subsidiaries, associates or joint ventures will be required to cease operations at the end of the term of their
business arrangements or licences, and while many of these licences provide for terms on which they may
27
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
be renewed, there can be no assurance that these business arrangements or licences will in all cases be
renewed on equivalent or satisfactory terms, or at all. Upon termination, the licences and assets of these
companies may revert to the local governments or local telecommunications operators, in some cases without
any or adequate compensation being paid.
The Group has in the past paid significant amounts for certain of its GSM telecommunications licences and
the competition for these licences has historically been high, although such competition has been somewhat
more limited during the current global slowdown. Nevertheless, the Group anticipates that it may have to
continue to pay substantial licence fees in certain markets, particularly those with high anticipated growth
rates, and incur substantial costs to meet specified network build-out requirements that the Group commits
to in acquiring such licences. There can be no assurance that the Group will be successful in obtaining or
funding these licences, or, if licences are awarded, that they can be obtained on terms acceptable to the
Group. If the Group obtains or renews further licences, it may need to seek future funding through additional
borrowings or equity offerings and there can be no assurance that such funding will be obtained on
satisfactory terms, or at all. Failure to obtain financing on satisfactory terms or at all may have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects.
Domestic, regional or global economic changes may adversely affect the Group’s businesses
Economic conditions can have a material adverse effect on telecommunications businesses, including a
material adverse effect on the quality and growth of their customer base and service offerings. For example,
customers may decide that they can no longer afford mobile services, or that they can no longer afford the
data services and value-added services that are instrumental in maintaining or increasing total revenue
generated per subscriber, and, in turn, increasing the Group’s revenues. A continued economic downturn in
the Middle East, Africa and South Asia could have a material adverse effect on the Group’s business,
financial condition, results of operations and prospects.
In addition, the current global economic conditions, which have had an adverse effect on credit conditions,
could continue to cause an economic slowdown or contraction in the countries in which the Group operates.
High rates of inflation in some of the countries in which the Group operates may also cause consumer
purchasing power to decrease, which may reduce consumer demand for the Group’s services.
A loss of investor confidence in the financial systems of emerging as well as mature markets may cause
increased volatility in the financial markets in the countries and regions in which the Group operates and a
slowdown in economic growth or economic contraction in those countries and regions. Any such increased
volatility or slowdown could have a material adverse effect on the Group’s business, financial condition,
results of operations and prospects.
The Group’s operations could be adversely affected by natural disasters or other catastrophic events
beyond the Group’s control
The Group’s business operations, technical infrastructure (including its network infrastructure) and
development projects could be adversely affected or disrupted by natural disasters (such as earthquakes,
floods, tsunamis, hurricanes, fires or typhoons) or other catastrophic or otherwise disruptive events,
including, but not limited to:
•
•
•
•
changes to predominant natural weather, hydrologic and climatic patterns;
major accidents, including chemical or other material environmental contamination;
power loss; and
strike or lock-out or other industrial action by workers or employers.
The occurrence of any of these events, or a similar such event, at one or more of the Group’s facilities or in
the regions in which the Group operates may cause disruptions to the Group’s operations in part or in whole,
may increase the costs associated with providing services as a result of, among other things, costs associated
with remedial work, may subject the Group to liability or impact the Group’s brands and reputation and may
28
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
otherwise hinder the normal operation of the Group’s business, which could materially adversely affect its
business, financial condition, results of operations and prospects.
In addition, the Group’s technical infrastructure is vulnerable to damage or interruption from information and
telecommunication technology failures, acts of war, terrorism, intentional wrongdoing, human error and
similar events. Unanticipated problems at the Group’s facilities, system failures, hardware or software
failures, computer viruses or hacker attacks could affect the quality of its services and cause service
interruptions. Any of these occurrences could result in reduced user traffic and reduced revenues and could
harm the Group’s operations.
The effect of any of these events on the Group’s business, financial condition, results of operations and
prospects may be worsened to the extent that any such event involves risks for which the Group is uninsured
or not fully insured, or which are not currently insurable, such as acts of war and terrorism. See “Description
of the Group — Insurance”.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that either the
Issuer or the Group will be unable to comply with its obligations as a company with securities admitted to
the Official List.
Failure in the Group’s information and technology systems could result in interruptions of the Group’s
business operations
The Group’s information and technology systems are designed to enable the Group to use its infrastructure
resources as effectively as possible and to monitor and control all aspects of its operations. Any failure or
breakdown in these systems could interrupt the normal business operations and result in a significant
slowdown in operational and management efficiency for the duration of such failure or breakdown. Any
prolonged failure or breakdown could dramatically impact the Group’s ability to offer services to its
customers, which could have a material adverse effect on the Group’s business, financial condition, results
of operations and prospects. For example, the Group depends on certain technologically sophisticated
management information systems and other systems, such as its customer billing system, to enable it to
conduct its operations. Any significant delays or interruptions in providing services could negatively impact
the Group’s reputation as an efficient and reliable telecommunications provider.
In addition, the Group relies on third-party vendors to supply and maintain much of its information
technology. In the event that one or more of the third-party vendors that the Group engages to provide
support and upgrades with respect to components of the Group’s information technology ceased operations
or became otherwise unable or unwilling to meet its needs, the Group cannot assure investors that it would
be able to replace any such vendor promptly or on commercially reasonable terms, if at all. Delay or failure
in finding a suitable replacement could materially adversely affect the Group’s business, financial condition,
results of operations and prospects.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that either the
Issuer or the Group will be unable to comply with its obligations as a company with securities admitted to
the Official List.
Actual or perceived health risks or other problems relating to mobile handsets or transmission and/or
network infrastructure could lead to litigation or decreased mobile communications usage
The effects of any damage caused by exposure to an electromagnetic field have been and continue to be the
subject of careful evaluations by the international scientific community, but to date there is no conclusive
scientific evidence of harmful effects on health. However, the Group cannot rule out that exposure to
electromagnetic fields or other emissions originating from wireless handsets or transmission infrastructure is
not, or will not be found to be, a health risk.
The Group’s mobile communications business may be harmed as a result of these alleged or actual health
risks. For example, the perception alone of these health risks could result in a lower number of customers,
reduced usage per customer or potential customer liability. In addition, these concerns may cause regulators
29
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
to impose greater restrictions on the construction of base station towers or other infrastructure, which may
hinder the completion of network build-outs and the commercial availability of new services and may require
additional investments.
Industrial action or adverse labour relations could disrupt the Group’s business operations and have an
adverse effect on operating results
Certain of the Group’s non-UAE operations are currently and may in the future be subject to collective
bargaining, union or similar labour agreements. For example, the Group’s operations in Pakistan depend on
employees who have established a union and signed a collective labour agreement with strong unions
representing over 85 per cent. of total staff. In addition, the Group’s employees also benefit from local laws
regarding employee rights and benefits. If the Group is unable to negotiate acceptable labour agreements or
maintain satisfactory employee relations, the results could include work stoppages, strikes or other industrial
action or labour difficulties (including higher labour costs) at its facilities, which individually or in the
aggregate could have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects.
Risks Relating to the Countries in Which the Group Operates
The Group is subject to political and economic conditions in the UAE and the Middle East
The majority of the Group’s current operations are located in the UAE. The Group’s results of operations are,
and will continue to be, significantly affected by financial, economic and political developments in or
affecting the UAE and the Middle East and, in particular, by the level of economic activity in the UAE and
the Middle East. It is not possible to predict the occurrence of events or circumstances, such as war or
hostilities, or the impact of such occurrences, and no assurance can be given that the Group would be able
to sustain the operation of its business if adverse financial, economic, political or other events or
circumstances were to occur. A continued economic downturn in the UAE or the regional economy, or
certain sectors thereof, could have a material adverse effect on the Group’s business, financial condition,
results of operations and prospects. Investors should also note that the Group’s business and financial
performance could be adversely affected by political, financial, economic or related developments both
within and outside the Middle East because of inter-relationships within the global financial markets. In
addition, the implementation by the UAE Government or any local government of the UAE of regulations
adverse to the Group’s interests, including changes with respect to royalty payments, taxation or
telecommunications regulations, or changes to grants and licences of properties used by the Group in the
UAE, could have a material adverse effect on the Group’s business, financial condition, results of operations
and prospects and thereby adversely affect the Group’s ability to perform its obligations in respect of any
Notes.
While the UAE is seen as a relatively stable political environment, certain other jurisdictions in the Middle
East are not. Instability in the Middle East may result from a number of factors, including government or
military regime change, civil unrest or terrorism. Within the Middle East, extremists have engaged in a
campaign, sometimes violent, against various governments in the region and terrorists have struck both
military and civilian targets. There can be no assurance that extremists or terrorist groups will not escalate
violent activities in the Middle East or that the governments of the Middle East will be successful in
maintaining the prevailing levels of domestic order and stability. Any of the foregoing circumstances could
have a material adverse effect on the political and economic stability of the Middle East and, in particular,
could impact the numbers of tourists that choose to visit the UAE and the level of economic activity in the
UAE and, consequently, could have a material adverse effect on the Group’s business, financial condition,
results of operations and prospects, and thereby adversely affect the Group’s ability to perform its obligations
in respect of any Notes.
30
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
The Group is subject to the risks of political, social and economic instability associated with countries
and regions in which it operates or may seek to operate
Overview
The Group conducts its business in a number of countries and regions with developing economies, many of
which do not have firmly established legal and regulatory systems and some of which from time to time have
experienced economic, social or political instability. For example, the Group operates in Afghanistan and
Pakistan, each of which has suffered from regional political instability, armed conflict and general social and
civil unrest in recent years. Some of these countries are also in the process of transitioning to a market
economy and, as a result, are experiencing changes in their economies and their government policies that can
affect the Group’s investments in these countries. For example, the licences that Atlantique Telecom holds in
relation to its operations in Sub-Saharan Africa do not contain automatic rights of renewal, and the licensing
authorities may decide not to renew them. There is also a higher risk that the Group’s operations in those
countries could be expropriated by the relevant government or regulatory authorities, either by formal change
in ownership, revocation of an operating licence or by changes in regulatory or financial policies that have
an equivalent effect. Governments in these jurisdictions and countries, as well as in more developed
jurisdictions and countries, may be influenced by political or commercial considerations outside of the
Group’s control, and may act arbitrarily, selectively or unlawfully, including in a manner that benefits the
Group’s competitors. In addition, the Group may from time to time enter into business relationships with
entities subject to European, United States or other international sanctions. By doing so, the Group could
experience adverse publicity, which may in turn result in reputational harm in certain jurisdictions.
Specific country risks that may have a material adverse effect on the Group’s business, financial condition,
results of operations and prospects include, among other things:
•
•
•
political instability, riots or other forms of civil disturbance or violence;
•
•
changing fiscal, regulatory and tax regimes;
•
•
•
•
inflation in local economies;
war, terrorism, invasion, rebellion or revolution;
government interventions, including expropriation or nationalisation of assets, increased
protectionism and the introduction of tariffs or subsidies;
arbitrary or inconsistent government action, including capricious application of tax laws and selective
tax audits;
difficulties and delays in obtaining requisite governmental licences, permits or approvals;
cancellation, nullification or unenforceability of contractual rights; and
underdeveloped industrial and economic infrastructure.
Changes in investment policies or shifts in the prevailing political climate in any of the countries in which
the Group operates, or seeks to operate, could result in the introduction of increased government regulations
with respect to, among other things:
•
•
•
•
•
•
price controls;
export and import controls;
income and other taxes;
environmental legislation;
customs and immigration;
foreign ownership restrictions;
31
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
•
•
foreign exchange and currency controls; and
labour and welfare benefit policies.
Political climate
The Middle East, Africa and South Asia have all experienced varying degrees of political instability over the
past 50 years. Future armed conflicts or political instability in those regions could impact the Group’s
operations. In addition, particularly in Afghanistan and Pakistan, terrorist groups have engaged in campaigns
against their respective governments and allies, including the United States, and have struck both military
and civilian targets resulting in continued risk to the Group’s operations. There can be no assurance that
terrorist groups will not escalate violent activities or that the relevant governments will be successful in
maintaining the prevailing levels of domestic order and stability.
Investing in countries that are politically and economically undeveloped or developing, as the Group has and
expects to continue to do, is risky and uncertain. Any changes in the political, social, economic or other
conditions in such countries, or in countries that neighbour such countries, could have a material adverse
effect on the investments that the Group has made or may make in the future, which in turn could have a
material adverse effect on the Group’s business, financial condition, results of operations and prospects.
The Group operates in locations where there are high security risks, which could result in harm to its
employees and contractors or substantial costs
Some of the Group’s subsidiaries, associates and joint ventures operate in high-risk locations, such as
Nigeria, Sudan, Indonesia, Pakistan and Afghanistan where the country or location is suffering from
political, social or economic instability, or war or civil unrest. In those locations where the Group has
employees, assets or operations, those subsidiaries, associates and joint ventures may incur substantial costs
to maintain the safety of their personnel and to protect their assets. Despite these precautions, the safety of
the Group’s personnel in these locations may continue to be at risk. In addition, network maintenance and
expansion projects in these areas could be delayed or cancelled due to the need for heightened security for
employees and contractors operating in these areas. For example, in May 2010, unidentified men carried out
attacks on several cellular towers owned by Etisalat Afghanistan and MTN in northern Afghanistan.
Although none of the Group’s employees were injured in these attacks, the security situation in Afghanistan
and other regions in which the Group operates remains unstable and could have a material adverse effect on
the Group's business, financial condition, results of operations and prospects.
FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET
RISKS ASSOCIATED WITH NOTES ISSUED UNDER THE PROGRAMME
The Notes May Not Be a Suitable Investment for All Investors
Each potential investor in the Notes must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
•
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits
and risks of investing in the Notes and the information contained or incorporated by reference in this
Base Prospectus or any applicable supplement;
•
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have on its
overall investment portfolio;
•
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes,
including Notes with principal or interest payable in one or more currencies, or where the currency
for principal or interest payments is different from the potential investor’s currency;
•
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
indices and financial markets; and
32
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
•
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not
purchase complex financial instruments as stand-alone investments. They purchase complex financial
instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of
risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial
instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes
will perform under changing conditions, the resulting effects on the value of the Notes and the impact this
investment will have on the potential investor’s overall investment portfolio.
Risks Related to the Structure of a Particular Issue of Notes
A wide range of Notes may be issued under the Programme. A number of these Notes may have features
which contain particular risks for potential investors. Set out below is a description of the most common such
features:
The Notes may be subject to optional redemption by the Issuer
An optional redemption feature of Notes is likely to limit their market value. During any period when the
Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above
the price at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the
Notes. At those times, an investor may not be able to reinvest the redemption proceeds at an effective interest
rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly
lower rate. Potential investors should consider reinvestment risk in light of other investments available at that
time.
The Notes may be Redeemed Prior to their Final Maturity Date for Tax Reasons
If the Issuer becomes obliged to pay any additional amounts in respect of the Notes as provided or referred
to in Condition 9 of the Notes as a result of any change in, or amendment to, the laws or regulations of a Tax
Jurisdiction (as defined in Condition 9) or any change in the application or official interpretation of such laws
or regulations, which change or amendment becomes effective on or after the date on which agreement is
reached to issue the first Tranche of the Notes, the Issuer may redeem all but not some only of the
outstanding Notes of such Tranche in accordance with Condition 8.2 of the Notes.
Index Linked Notes and Dual Currency Notes are subject to additional market risks
The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to
changes in the prices of securities or commodities, to movements in currency exchange rates or other factors
(each, a Relevant Factor). In addition, the Issuer may issue Notes with principal or interest payable in one
or more currencies which may be different from the currency in which the Notes are denominated. Potential
investors should be aware that:
•
•
•
•
•
the market price of such Notes may be volatile;
they may receive no interest;
payment of principal or interest may occur at a different time or in a different currency than expected;
they may lose all or a substantial portion of their principal;
a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in
interest rates, currencies or other indices;
33
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
•
if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains
some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable
likely will be magnified; and
•
the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average
level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the
greater the effect on yield.
The historical experience of an index should not be viewed as an indication of the future performance of such
index during the term of any Index Linked Notes. Accordingly, each potential investor should consult its own
financial and legal advisers about the risk entailed by an investment in any Index Linked Notes and the
suitability of such Notes in light of its particular circumstances.
Partly-paid Notes are subject to additional risks
The Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay any
subsequent instalment could result in an investor losing all of his investment.
Variable rate Notes with a multiplier or other leverage factor are subject to increased volatility
Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or
other leverage factors, or caps or floors, or any combination of those features or other similar related features,
their market values may be even more volatile than those for securities that do not include those features.
Inverse Floating Rate Notes are subject to increased volatility
Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference
rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other
conventional floating rate debt securities based on the same reference rate (and with otherwise comparable
terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only
decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which
further adversely affects the market value of these Notes.
Fixed/Floating Rate Notes are subject to additional risks
Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from
a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the
secondary market and the market value of the Notes since the Issuer may be expected to convert the rate
when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a
floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than
the prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the
new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating
rate to a fixed rate in such circumstances, the fixed rate may be lower than the prevailing rates on its Notes.
Notes issued at a substantial discount or premium are subject to increased volatility
The market values of securities issued at a substantial discount or premium from their principal amount tend
to fluctuate more in relation to general changes in interest rates than do prices for conventional interestbearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility
as compared to conventional interest-bearing securities with comparable maturities.
Risks Related to the Notes Generally
Set out below is a brief description of certain risks relating to the Notes generally:
34
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
The Notes are subject to modification by a majority of Noteholders without the consent of all
Noteholders
The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters
affecting their interests generally. These provisions permit defined majorities to bind all Noteholders
including Noteholders who did not attend or vote at the relevant meeting and Noteholders who voted in a
manner contrary to the majority.
The Trustee may exercise certain discretions in relation to the Notes without the consent of all
Noteholders
The conditions of the Notes also provide that the Trustee may, without the consent of Noteholders, agree to
(i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the
provisions of Notes subject as provided in the Trust Deed or (ii) determine without the consent of the
Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the
substitution of another company, being a Subsidiary of the Issuer, as principal debtor under any Notes in
place of the Issuer, if in the opinion of the Trustee such modification, waiver, authorisation or determination
or substitution is not materially prejudicial to the interests of the Noteholders in the circumstances described
in Condition 16.
European Monetary Union may cause Notes denominated in certain currencies to be redenominated in
euro
If Notes are issued under the Programme which are denominated in the currency of a country which, at the
time of issue, has not adopted the euro as its sole currency and, before the relevant Notes are redeemed, the
euro becomes the sole currency of that country, a number of consequences may follow including, but not
limited to: (i) all amounts payable in respect of the relevant Notes may become payable in euro, (ii)
applicable law may allow or require such Notes to be redenominated into euro and additional measures to
be taken in respect of such Notes and (iii) there may no longer be available published or displayed rates for
deposits in such currency used to determine the rates of interest on such Notes. Any of these or any other
consequences could adversely affect the holders of the relevant Notes.
The EU Savings Directive may give rise to withholding on certain Notes
Under EC Council Directive 2003/48/EC on the taxation of savings income (the Savings Directive),
Member States, including Belgium from 1 January 2010, are required to provide to the tax authorities of
another Member State details of payments of interest (or similar income) paid by a person within its
jurisdiction to an individual resident in that other Member State or to certain limited types of entity
established in that other Member State. However, for a transitional period, Belgium, Luxembourg and
Austria are instead required (unless during that period they elect otherwise) to operate a withholding system
in relation to such payments (the ending of such transitional period being dependent upon the conclusion of
certain other agreements relating to information exchange with certain other countries). A number of non EU
countries and territories including Switzerland have agreed to adopt similar measures (a withholding system
in the case of Switzerland) with effect from the same date.
If a payment were to be made or collected through a Member State which has opted for a withholding system
and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any
Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as
a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a
Member State that will not be obliged to withhold or deduct tax pursuant to the Savings Directive.
On 15 September 2008 the European Commission issued a report to the Council of the European Union on
the operation of the Savings Directive, which included the Commission’s advice on the need for changes to
the Savings Directive. On 13 November 2008 the European Commission published a more detailed proposal
for amendments to the Savings Directive, which included a number of suggested changes. The European
Parliament approved an amended version of this proposal on 24 April 2009. If any of those proposed changes
35
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
are made in relation to the Savings Directive, they may amend or broaden the scope of the requirements
described above.
A change of law may adversely affect the Notes
The conditions of the Notes are based on English law in effect as of the date of this Base Prospectus. No
assurance can be given as to the impact of any possible judicial decision or change to English law or
administrative practice after the date of this Base Prospectus.
Certain Bearer Notes the denominations of which involve integral multiples may be illiquid and difficult
to trade
In relation to any issue of Bearer Notes which have denominations consisting of a minimum Specified
Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such
Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination.
In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the
minimum Specified Denomination in his account with the relevant clearing system at the relevant time may
not receive a definitive Bearer Note form in respect of such holding (should such Notes be printed) and
would need to purchase a principal amount of Notes such that its holding amounts to a Specified
Denomination.
If definitive Bearer Notes are issued, holders should be aware that definitive Notes which have a
denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and
difficult to trade.
Investors in the Notes must rely on DTC, Euroclear and Clearstream, Luxembourg procedures
Notes issued under the Programme will be represented on issue by one or more Global Notes that may be
deposited with a common depositary for Euroclear and Clearstream, Luxembourg or may be deposited with
a nominee for DTC (each as defined under “Form of the Notes”). Except in the circumstances described in
each Global Note, investors will not be entitled to receive Notes in definitive form. Each of DTC, Euroclear
and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of
the beneficial interests in each Global Note held through it. While the Notes are represented by a Global
Note, investors will be able to trade their beneficial interests only through the relevant clearing systems and
their respective participants.
While the Notes are represented by Global Notes, the Issuer will discharge its payment obligations under the
Notes by making payments through the relevant clearing systems. A holder of a beneficial interest in a
Global Note must rely on the procedures of the relevant clearing system and its participants in relation to
payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or
payments made in respect of, beneficial interests in any Global Note.
Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes so
represented. Instead, such holders will be permitted to act only to the extent that they are enabled by the
relevant clearing system and its participants to appoint appropriate proxies.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review
or regulation by certain authorities. Each potential investor should consult its legal advisers to determine
whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for
various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial
institutions should consult their legal advisers or the appropriate regulators to determine the appropriate
treatment of Notes under any applicable risk-based capital or similar rules.
36
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
Risks Related to Enforcement
Investors may experience difficulty in enforcing arbitration awards and foreign judgments in the UAE
The payments under the Notes are dependent upon the Issuer making payments to investors in the manner
contemplated under the Notes. If the Issuer fails to do so, it may be necessary to bring an action against the
Issuer to enforce its obligations and/or to claim damages, as appropriate, which may be costly and time
consuming.
Under current laws of the UAE, the UAE courts are unlikely to enforce an English or United States court
judgment without re-examining the merits of the claim and may not observe the choice by the parties of
English law as the governing law of the transaction. In the UAE, foreign law is required to be established as
a question of fact and the interpretation of English law, by a court in the UAE, may not accord with the
interpretation of an English court. In principle, courts in the UAE recognise the choice of foreign law if they
are satisfied that an appropriate connection exists between the relevant transaction agreement and the foreign
law which has been chosen. They will not, however, honour any provision of foreign law which is contrary
to public policy, order or morals in the UAE, or to any mandatory law of, or applicable in, the UAE.
The UAE is a civil law jurisdiction and judicial precedents in the UAE have no binding effect on subsequent
decisions. In addition, court decisions in the UAE are generally not recorded. These factors create greater
judicial uncertainty.
The Notes, the Trust Deed and the Agency Agreement (as defined in “Terms and Conditions of the Notes”)
and the Programme Agreement (as defined in “Subscription and Sale and Transfer and Selling Restrictions”)
are governed by English law and the parties to such documents have agreed to refer any unresolved dispute
in relation to such documents to arbitration under the Arbitration Rules of the London Court of International
Arbitration in London, England.
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New
York Convention) entered into force in the UAE on 19 November 2006. Any arbitration award rendered in
London should therefore be enforceable in the UAE in accordance with the terms of the New York
Convention. Under the New York Convention, the UAE has an obligation to recognise and enforce foreign
arbitration awards, unless the party opposing enforcement can prove one of the grounds under Article V of
the New York Convention to refuse enforcement, or the UAE courts find that the subject matter of the dispute
is not capable of settlement by arbitration or enforcement would be contrary to the public policy of the UAE.
In practice, however, whether the UAE courts will enforce a foreign arbitration award in accordance with the
terms of the New York Convention has yet to be tested.
The Issuer’s waiver of immunity may not be effective under UAE law
The Issuer has waived its rights in relation to sovereign immunity; however, there can be no assurance as to
whether such waivers of immunity from execution or attachment or other legal process by it under the Trust
Deed, the Agency Agreement, the Programme Agreement and the Notes are valid and binding under the laws
of the UAE as applicable in Abu Dhabi.
Risks Related to the Market Generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk,
interest rate risk and credit risk:
A secondary market may not develop for any Notes
Notes may have no established trading market when issued, and one may never develop. If a market does
develop, it may not be liquid. The liquidity of any market for the Notes that may develop depends on a
number of factors, including:
•
the method of calculating the principal and interest in respect of the Notes;
37
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:53 – eprint6 – 4224 Section 01
•
•
•
•
•
the time remaining to the maturity of the Notes;
the outstanding amount of the Notes;
the redemption features of the Notes;
the amount of other debt securities linked to the index or formula applicable to the Notes; and
the level, direction and volatility of market interest rates generally.
Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield
comparable to similar investments that have a developed secondary market. This is particularly the case for
Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific
investment objectives or strategies or have been structured to meet the investment requirements of limited
categories of investors. These types of Notes generally would have a more limited secondary market and
more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the
market value of Notes.
Notes may be subject to exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks
relating to currency conversions if an investor’s financial activities are denominated principally in a currency
or currency unit (the Investor’s Currency) other than the Specified Currency. These include the risk that
exchange rates may significantly change (including changes due to devaluation of the Specified Currency or
revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s
Currency may impose or modify exchange controls which could adversely affect an applicable exchange
rate. The Issuer does not have any control over the factors that generally affect these risks, such as economic,
financial and political events and the supply and demand for applicable currencies. In recent years, exchange
rates between certain currencies have been volatile and volatility between such currencies or with other
currencies may be expected in the future. However, fluctuations between currencies in the past are not
necessarily indicative of fluctuations that may occur in the future. An appreciation in the value of the
Investor’s Currency relative to the Specified Currency would decrease (1) the Investor’s Currency-equivalent
yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3)
the Investor’s Currency equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that
could adversely affect an applicable exchange rate as well as the availability of a specified foreign currency
at the time of any payment. As a result, investors may receive less interest or principal than expected, or no
interest or principal. Even if there are no actual exchange controls, it is possible that the Specified Currency
for any particular Note may not be available at such Note’s maturity.
Fixed Rate Notes are subject to interest rate risks
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may
adversely affect the value of the Fixed Rate Notes.
Credit ratings may not reflect all risks
One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not
reflect the potential impact of all risks related to structure, market, additional factors discussed above, and
other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or
hold securities and may be revised or withdrawn by its assigning rating agency at any time.
38
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
OVERVIEW OF THE PROGRAMME
The following overview does not purport to be complete and is taken from, and is qualified in its entirety
by, the remainder of this Base Prospectus and, in relation to the terms and conditions of any particular
Tranche of Notes, the applicable Final Terms. The Issuer and any relevant Dealer may agree that Notes
shall be issued in a form other than that contemplated in the Terms and Conditions, in which event a new
Base Prospectus or a supplement to the Base Prospectus, if appropriate, will be made available which will
describe the effect of the agreement reached in relation to such Notes.
This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of
Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive.
Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” shall have
the same meanings in this overview.
Issuer:
Emirates Telecommunications Corporation.
Emirates Telecommunications Corporation is a federal entity
incorporated in the United Arab Emirates with limited
liability in 1976 by the UAE Federal Government Decree No.
(78), which was revised by the UAE Federal Act No. (1) of
1991 and further amended by Decretal Federal Code No. (3)
of 2003 concerning the regulation of the telecommunications
sector in the UAE. The address of the Issuer’s registered
office is P.O. Box 3838, Abu Dhabi, United Arab Emirates.
Risk Factors:
There are certain factors that may affect the Issuer’s ability to
fulfil its obligations under Notes issued under the
Programme. In addition, there are certain factors which are
material for the purpose of assessing the market risks
associated with Notes issued under the Programme. See
“Risk Factors”.
Description:
Global Medium Term Note Programme.
Arrangers:
Citigroup Global Markets Limited
The Royal Bank of Scotland plc
Dealers:
Citigroup Global Markets Limited
The Royal Bank of Scotland plc
and any other Dealers appointed in accordance with the
Programme Agreement.
Certain Restrictions:
Each issue of Notes denominated in a currency in respect of
which particular laws, guidelines, regulations, restrictions or
reporting requirements apply will only be issued in
circumstances which comply with such laws, guidelines,
regulations, restrictions or reporting requirements from time
to time (see “Subscription and Sale and Transfer and Selling
Restrictions”) including the following restrictions applicable
at the date of this Base Prospectus.
Notes having a maturity of less than one year will, if the
proceeds of the issue are accepted in the United Kingdom,
constitute deposits for the purposes of the prohibition on
accepting deposits contained in section 19 of the Financial
Services and Markets Act 2000 unless they are issued to a
39
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
limited class of professional investors and have a
denomination of at least £100,000 (or, if the Notes are
denominated in a currency other than sterling, the equivalent
amount in such currency), see “Subscription and Sale and
Transfer and Selling Restrictions”.
Trustee:
Citicorp Trustee Company Limited.
Issuing and Principal Paying Agent:
Citibank, N.A.
Registrar:
Citigroup Global Markets Deutschland AG.
Programme Size:
Up to U.S.$7,000,000,000 (or its equivalent in other
currencies calculated as described in the Programme
Agreement) outstanding at any time. The Issuer may increase
the amount of the Programme in accordance with the terms
of the Programme Agreement.
Notes will be issued in Series. Each Series may comprise one
or more Tranches issued on different issue dates. The Notes
of each Series will all be subject to identical terms, except
that the issue date and the amount of the first payment of
interest may be different in respect of the different Tranches.
The Notes of each Tranche will all be subject to identical
terms in all respects, save that a Tranche may comprise Notes
of different denominations.
Distribution:
Notes may be distributed by way of private or public
placement and in each case on a syndicated or nonsyndicated basis.
Currencies:
Subject to any applicable legal or regulatory restrictions,
Notes may be denominated in any currency agreed between
the Issuer and the relevant Dealer.
Redenomination:
The applicable Final Terms may provide that certain Notes
may be redenominated in euro. The relevant provisions
applicable to any such redenomination are contained in
Condition 5.
Maturities:
The Notes will have such maturities as may be agreed
between the Issuer and the relevant Dealer, subject to such
minimum or maximum maturities as may be allowed or
required from time to time by the relevant central bank (or
equivalent body) or any laws or regulations applicable to the
Issuer or the relevant Specified Currency.
Issue Price:
Notes may be issued on a fully-paid or a partly-paid basis
and at an issue price which is at par or at a discount to, or
premium over, par. The price and amount of Notes to be
issued will be determined by the Issuer and the relevant
Dealer at the time of issue in accordance with prevailing
market conditions.
Form of Notes:
The Notes will be issued in bearer or registered form as
described in “Form of the Notes”. Registered Notes will not
be exchangeable for Bearer Notes and vice versa.
40
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
Fixed Rate Notes:
Fixed interest will be payable on such date or dates as may
be agreed between the Issuer and the relevant Dealer and, on
redemption, will be calculated on the basis of such Day
Count Fraction as may be agreed between the Issuer and the
relevant Dealer.
Floating Rate Notes:
Floating Rate Notes will bear interest at a rate determined:
(a)
on the same basis as the floating rate under a notional
interest rate swap transaction in the relevant Specified
Currency governed by an agreement incorporating the
2006 ISDA Definitions (as published by the
International Swaps and Derivatives Association, Inc.,
and as amended and updated as of the Issue Date of
the first Tranche of the Notes of the relevant Series);
or
(b)
on the basis of a reference rate appearing on the
agreed screen page of a commercial quotation service;
or
(c)
on such other basis as may be agreed between the
Issuer and the relevant Dealer.
The margin (if any) relating to such floating rate will be
agreed between the Issuer and the relevant Dealer for each
Series of Floating Rate Notes.
Index Linked Notes:
Payments of principal in respect of Index Linked
Redemption Notes or of interest in respect of Index Linked
Interest Notes will be calculated by reference to such index
and/or formula or to changes in the prices of securities or
commodities or to such other factors as the Issuer and the
relevant Dealer may agree.
Other provisions in relation to Floating
Rate Notes and Index Linked Interest
Notes:
Floating Rate Notes and Index Linked Interest Notes may
also have a maximum interest rate, a minimum interest rate
or both.
Interest on Floating Rate Notes and Index Linked Interest
Notes in respect of each Interest Period, as agreed prior to
issue by the Issuer and the relevant Dealer, will be payable on
such Interest Payment Dates, and will be calculated on the
basis of such Day Count Fraction, as may be agreed between
the Issuer and the relevant Dealer.
Dual Currency Notes:
Payments (whether in respect of principal or interest and
whether at maturity or otherwise) in respect of Dual
Currency Notes will be made in such currencies, and based
on such rates of exchange, as the Issuer and the relevant
Dealer may agree.
Zero Coupon Notes:
Zero Coupon Notes will be offered and sold at a discount to
their nominal amount and will not bear interest.
Redemption:
The applicable Final Terms will indicate either that the
relevant Notes cannot be redeemed prior to their stated
maturity (other than in specified instalments, if applicable, or
for taxation reasons or following an Event of Default) or that
41
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
such Notes will be redeemable at the option of the Issuer
and/or the Noteholders upon giving notice to the Noteholders
or the Issuer, as the case may be, on a date or dates specified
prior to such stated maturity and at a price or prices and on
such other terms as may be agreed between the Issuer and the
relevant Dealer. The terms of any such redemption, including
notice periods, any relevant conditions to be satisfied and the
relevant redemption dates and prices will be indicated in the
applicable Final Terms.
The applicable Final Terms may provide that Notes may be
redeemable in two or more instalments of such amounts and
on such dates as are indicated in the applicable Final Terms.
Notes having a maturity of less than one year may be subject
to restrictions on their denomination and distribution, see
“Certain Restrictions” above.
Denomination of Notes:
The Notes will be issued in such denominations as may be
agreed between the Issuer and the relevant Dealer save that
the minimum denomination of each Note will be such
amount as may be allowed or required from time to time by
the relevant central bank (or equivalent body) or any laws or
regulations applicable to the relevant Specified Currency (see
“Certain Restrictions” above) and save that the minimum
denomination of each Note admitted to trading on a regulated
market within the European Economic Area or offered to the
public in a Member State of the European Economic Area in
circumstances which require the publication of a prospectus
under the Prospectus Directive will be €100,000 (or, if the
Notes are denominated in a currency other than euro, the
equivalent amount in such currency).
The minimum aggregate principal amount of Notes which
may be purchased by a QIB pursuant to Rule 144A is
U.S.$100,000 (or, if the Notes are denominated in a currency
other than dollars, the equivalent amount in such currency).
Taxation:
All payments in respect of the Notes will be made without
deduction for or on account of withholding taxes imposed by
any Tax Jurisdiction as provided in Condition 9. In the event
that any such deduction is made, the Issuer will, save in
certain limited circumstances provided in Condition 9, be
required to pay additional amounts to cover the amounts so
deducted.
Negative Pledge:
The terms of the Notes will contain a negative pledge
provision as further described in Condition 4.
Cross Default:
The terms of the Notes will contain a cross-default provision
as further described in Condition 11.
Status of the Notes:
The Notes will constitute direct, unconditional,
unsubordinated and (subject to the provisions of Condition 4)
unsecured obligations of the Issuer and will rank pari passu
among themselves and (save for certain obligations required
to be preferred by law) equally with all other unsecured
42
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
obligations (other than subordinated obligations, if any) of
the Issuer, from time to time outstanding.
Rating:
The rating of certain Series of the Notes to be issued under
the Programme may be specified in the applicable Final
Terms.
Listing and admission to trading:
Application has been made to the UK Listing Authority for
Notes issued under the Programme to be admitted to the
Official List and to the London Stock Exchange for such
Notes to be admitted to trading on the London Stock
Exchange’s regulated market.
Notes may be listed or admitted to trading, as the case may
be, on other or further stock exchanges or markets agreed
between the Issuer and the relevant Dealer in relation to the
Series. Notes which are neither listed nor admitted to trading
on any market may also be issued.
The applicable Final Terms will state whether or not the
relevant Notes are to be listed and/or admitted to trading and,
if so, on which stock exchanges and/or markets.
Governing Law:
The Notes and any non-contractual obligations arising out of
or in connection with the Notes will be governed by, and
construed in accordance with, English law.
Clearing Systems:
Euroclear and/or Clearstream, Luxembourg and/or DTC or,
in relation to any Tranche of Notes, any other clearing
system.
Selling Restrictions:
There are restrictions on the offer, sale and transfer of the
Notes in the United States, the European Economic Area
(including the United Kingdom), Japan, the United Arab
Emirates (excluding the Dubai International Financial
Centre), the Dubai International Financial Centre, the
Kingdom of Saudi Arabia, the Kingdom of Bahrain, the State
of Qatar, Hong Kong and Singapore and such other
restrictions as may be required in connection with the
offering and sale of a particular Tranche of Notes, see
“Subscription and Sale and Transfer and Selling
Restrictions”.
United States Selling Restrictions:
Regulation S, Category 2. Rule 144A. TEFRA C/TEFRA
D/TEFRA not applicable, as specified in the applicable Final
Terms.
43
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
FORM OF THE NOTES
The Notes of each Series will be in either bearer form, with or without interest coupons attached, or
registered form, without interest coupons attached. Bearer Notes will be issued outside the United States in
reliance on Regulation S and Registered Notes will be issued both outside the United States in reliance on
the exemption from registration provided by Regulation S and within the United States in reliance on Rule
144A or otherwise in private transactions that are exempt from the registration requirements of the Securities
Act.
Bearer Notes
Each Tranche of Bearer Notes will be initially issued in the form of a temporary global note (a Temporary
Bearer Global Note) or, if so specified in the applicable Final Terms, a permanent global note (a Permanent
Bearer Global Note and, together with a Temporary Bearer Global Note, each a Bearer Global Note)
which, in either case, will be delivered on or prior to the original issue date of the Tranche to a common
depositary (the Common Depositary) for Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking,
société anonyme (Clearstream, Luxembourg).
Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest
(if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined
below) will be made against presentation of the Temporary Bearer Global Note only to the extent that
certification (in a form to be provided) to the effect that the beneficial owners of interests in the Temporary
Bearer Global Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as
required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and
Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the
certifications it has received) to the Principal Paying Agent.
On and after the date (the Exchange Date) which is 40 days after a Temporary Bearer Global Note is issued,
interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as
described therein either for (i) interests in a Permanent Bearer Global Note of the same Series or (ii) for
definitive Bearer Notes of the same Series with, where applicable, receipts, interest coupons and talons
attached (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer Notes, to
such notice period as is specified in the applicable Final Terms), in each case against certification of
beneficial ownership as described above unless such certification has already been given, provided that
purchasers in the United States and certain U.S. persons will not be able to receive definitive Bearer Notes.
The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest,
principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the
Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer
Notes is improperly withheld or refused.
Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be
made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may
be) of the Permanent Bearer Global Note without any requirement for certification.
The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of
charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts, interest
coupons and talons attached upon either (a) not less than 60 days’ written notice given at any time from
Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such
Permanent Bearer Global Note) to the Principal Paying Agent as described therein or (b) only upon the
occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of Default
(as defined in Condition 11) has occurred and is continuing, (ii) the Issuer has been notified that both
Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days
(other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease
business or have in fact done so and no successor clearing system satisfactory to the Trustee is available or
(iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the
Notes represented by the Permanent Bearer Global Note in definitive form and a certificate to such effect
44
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
signed by two Directors of the Issuer is given to the Trustee. The Issuer will promptly give notice to
Noteholders in accordance with Condition 15 if an Exchange Event occurs. In the event of the occurrence of
an Exchange Event, Euroclear and/or Clearstream, Luxembourg or the common depositary on their behalf
(acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) or the Trustee
may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an
Exchange Event as described in (iii) above, the Issuer may also give notice to the Principal Paying Agent
requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the
first relevant notice by the Principal Paying Agent.
The following legend will appear on all Bearer Notes which have an original maturity of more than one year
and on all receipts and interest coupons relating to such Notes:
“ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.”
The sections referred to provide that U.S. holders, with certain exceptions, will not be entitled to deduct any
loss on Bearer Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any
gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest
coupons.
Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules
and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.
Registered Notes
The Registered Notes of each Tranche offered and sold in reliance on Regulation S, which will be sold to
persons who are not U.S. persons outside the United States, will initially be represented by a global note in
registered form (a Regulation S Global Note). Prior to expiry of the distribution compliance period (as
defined in Regulation S) applicable to each Tranche of Notes, beneficial interests in a Regulation S Global
Note may not be offered or sold to, or for the account or benefit of, a U.S. person save as otherwise provided
in Condition 2 and may not be held otherwise than through Euroclear or Clearstream, Luxembourg and such
Regulation S Global Note will bear a legend regarding such restrictions on transfer.
The Registered Notes of each Tranche offered and sold in the United States or to U.S. persons may only be
offered and sold in private transactions to persons reasonably believed to be QIBs. The Registered Notes of
each Tranche sold to QIBs will be represented by a global note in registered form (a Rule 144A Global Note
and, together with a Regulation S Global Note, each a Registered Global Note).
Registered Global Notes will either (i) be deposited with a custodian for, and registered in the name of a
nominee of, the Depository Trust Company (DTC) or (ii) be deposited with a common depositary for, and
registered in the name of a common nominee of, Euroclear and Clearstream, Luxembourg, as specified in
the applicable Final Terms. Persons holding beneficial interests in Registered Global Notes will be entitled
or required, as the case may be, under the circumstances described below, to receive physical delivery of
definitive Notes in fully registered form.
Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the
absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition
7.4) as the registered holder of the Registered Global Notes. None of the Issuer, any Paying Agent, the
Trustee or the Registrar will have any responsibility or liability for any aspect of the records relating to or
payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or
for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will,
in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant
Record Date (as defined in Condition 7.4) immediately preceding the due date for payment in the manner
provided in that Condition.
45
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 02
Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for
definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of
an Exchange Event. For these purposes, Exchange Event means that (i) an Event of Default has occurred
and is continuing, (ii) in the case of Notes registered in the name of a nominee for DTC, either DTC has
notified the Issuer that it is unwilling or unable to continue to act as depository for the Notes or DTC has
ceased to constitute a clearing agency registered under the Exchange Act and, in either case, no alternative
clearing system satisfactory to the Trustee is available, (iii) in the case of Notes registered in the name of a
nominee for a common depositary for Euroclear and Clearstream, Luxembourg, the Issuer has been notified
that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of
14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently
to cease business or have in fact done so and, in any such case, no successor clearing system satisfactory to
the Trustee is available or (iv) the Issuer has or will become subject to adverse tax consequences which
would not be suffered were the Notes represented by the Registered Global Note in definitive form and a
certificate to that effect signed by two Directors of the Issuer is given to the Trustee. The Issuer will promptly
give notice to Noteholders in accordance with Condition 15 if an Exchange Event occurs. In the event of the
occurrence of an Exchange Event, DTC, Euroclear and/or Clearstream, Luxembourg or any person acting on
their behalf (acting on the instructions of any holder of an interest in such Registered Global Note) or the
Trustee may give notice to the Registrar requesting exchange and, in the event of the occurrence of an
Exchange Event as described in (iv) above, the Issuer may also give notice to the Registrar requesting
exchange. Any such exchange shall occur not later than ten days after the date of receipt of the first relevant
notice by the Registrar.
Transfer of Interests
Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be
transferred to a person who wishes to hold such interest in another Registered Global Note. No beneficial
owner of an interest in a Registered Global Note will be able to transfer such interest, except in accordance
with the applicable procedures of DTC, Euroclear and Clearstream, Luxembourg, in each case to the extent
applicable. Registered Notes are also subject to the restrictions on transfer set forth therein and will
bear a legend regarding such restrictions, see “Subscription and Sale and Transfer and Selling
Restrictions”.
General
Pursuant to the Agency Agreement, the Principal Paying Agent shall arrange that, where a further Tranche
of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of
such further Tranche shall be assigned a common code and ISIN and, where applicable, a CUSIP and CINS
number which are different from the common code, ISIN, CUSIP and CINS assigned to Notes of any other
Tranche of the same Series until at least the expiry of the distribution compliance period (as defined in
Regulation S) applicable to the Notes of such Tranche.
Any reference herein to Euroclear and/or Clearstream, Luxembourg and/or DTC shall, whenever the context
so permits, be deemed to include a reference to any additional or alternative clearing system specified in the
applicable Final Terms or as may otherwise be approved by the Issuer, the Principal Paying Agent and the
Trustee.
No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer unless
the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure
shall be continuing. In addition, holders of interests in such Global Note credited to their accounts with DTC
may require DTC to deliver definitive Notes in registered form in exchange for their interest in such Global
Note in accordance with DTC’s standard operating procedures.
The Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms
and Conditions of the Notes herein, in which event a new Base Prospectus or a supplement to the Base
Prospectus, if appropriate, will be made available which will describe the effect of the agreement reached in
relation to such Notes.
46
Level: 10 – From: 10 – Thursday, November 11, 2010 – 17:24 – eprint3 – 4224 Section 03
APPLICABLE FINAL TERMS
Final Terms which will be completed for each Tranche of Notes issued under the Programme.
[Date]
Emirates Telecommunications Corporation
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]
under the U.S.$7,000,000,000
Global Medium Term Note Programme
PART A – CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the
Base Prospectus dated 12 November 2010 which constitutes a base prospectus for the purposes of the
Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive). This document constitutes the
Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and
must be read in conjunction with the Base Prospectus. Full information on the Issuer and the offer of the
Notes is only available on the basis of the combination of these Final Terms and the Base Prospectus. The
Base Prospectus is available for viewing at the registered office of the Issuer during normal business hours
at Etisalat Head Office, Airport Road, Abu Dhabi, United Arab Emirates and copies may be obtained from
the registered office of the Principal Paying Agent during normal business hours at Citigroup Centre, Canada
Square, Canary Wharf, London E14 5LB, United Kingdom.
[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering
should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or
subparagraphs. Italics denote directions for completing the Final Terms.]
[When adding any other final terms or information consideration should be given as to whether such terms
or information constitute “significant new factors” and consequently trigger the need for a supplement to
the Base Prospectus under Article 16 of the Prospectus Directive.]
[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination
may need to be £100,000 or its equivalent in any other currency.]
1.
Issuer:
Emirates Telecommunications Corporation
2.
(a)
Series Number:
[
]
(b)
Tranche Number:
[
]
(If fungible with an existing Series, details of that
Series, including the date on which the Notes become
fungible)
3.
Specified Currency or Currencies:
4.
Aggregate Nominal Amount:
5.
[
]
(a)
Series:
[
]
(b)
Tranche:
[
]
Issue Price:
[ ] per cent. of the Aggregate Nominal Amount
[plus accrued interest from [insert date] (if
applicable)]
47
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
6.
(a)
Specified Denominations:
(in the case of Registered Notes this
means the minimum integral amount
in which transfers can be made)
[
]
(Note – where Bearer Notes with multiple
denominations above €100,000 or equivalent are
being used the following sample wording should be
followed:
“[€100,000] and integral multiples of [€1,000] in
excess thereof up to and including [€199,000]. No
Notes in definitive form will be issued with a
denomination above [€199,000].”
N.B. If an issue of Notes is (i) NOT admitted to
trading on an European Economic Area exchange,
and (ii) only offered in the European Economic Area
in circumstances where a prospectus is not required
to be published under the Prospectus Directive, the
€100,000 or equivalent minimum denomination is
not required.)
(b)
Calculation Amount:
[
]
(If only one Specified Denomination, insert the
Specified Denomination. If more than one Specified
Denomination, insert the highest common factor.
Note: There must be a common factor in the case of
two or more Specified Denominations.)
7.
(a)
Issue Date:
[
]
(b)
Interest Commencement Date:
[specify/Issue Date/Not Applicable]
(N.B. An Interest Commencement Date will not be
relevant for certain Notes, for example Zero Coupon
Notes.)
8.
Maturity Date:
[Fixed rate – specify date/Floating rate – Interest
Payment Date falling in or nearest to [specify month
and year]]
9.
Interest Basis:
[[ ] per cent. Fixed Rate]
[[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate]
[Zero Coupon]
[Index Linked Interest]
[Dual Currency Interest]
[specify other]
(further particulars specified below)
10.
Redemption/Payment Basis:
[Redemption at par]
[Index Linked Redemption]
[Dual Currency Redemption]
[Partly Paid]
[Instalment]
[specify other]
(N.B. If the Final Redemption Amount is other than
[100] per cent. of the nominal value the Notes will
be derivative securities for the purposes of the
Prospectus Directive and the requirements of
48
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
Annex XII to the Prospectus Directive Regulation will
apply.)
11.
Change of Interest Basis or
Redemption/Payment Basis:
[Specify details of any provision for change of Notes
into another Interest Basis or Redemption/Payment
Basis]
12.
Put/Call Options:
[Investor Put]
[Issuer Call]
[(further particulars specified below)]
13.
(a)
Status of the Notes:
Senior
(b)
[Date [Board] Approval
Issuance of Notes Obtained:
14.
for
Method of distribution:
[
] [and [
], respectively]]
(N.B. Only relevant where Board (or similar)
authorisation is required for the particular Tranche
of Notes)
[Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
15.
Fixed Rate Note Provisions:
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(a)
Rate(s) of Interest:
[ ] per cent. per annum [payable [annually/
semi-annually/quarterly/other (specify)] in arrear]
(If payable other than annually, consider amending
Condition 6)
(b)
Interest Payment Date(s):
[[
] in each year up to and including the
Maturity Date]/[specify other]
(N.B. This will need to be amended in the case of
long or short coupons)
(c)
Fixed Coupon Amount(s):
(Applicable to Notes in definitive
form.)
[
(d)
Broken Amount(s):
(Applicable to Notes in definitive
form.)
[ ] per Calculation Amount, payable on the Interest
Payment Date falling [in/on] [ ]
(e)
Day Count Fraction:
[30/360 or Actual/Actual (ICMA) or [specify other]]
(f)
Determination Date(s):
[[
] per Calculation Amount
] in each year] [Not Applicable]
(Insert regular interest payment dates, ignoring issue
date or maturity date in the case of a long or short
first or last coupon
N.B. This will need to be amended in the case of
regular interest payment dates which are not of equal
duration
N.B. Only relevant where Day Count Fraction is
Actual/Actual (ICMA))
49
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
(g)
16.
Other terms relating to the method of
calculating interest for Fixed Rate
Notes:
Floating Rate Note Provisions:
[None/Give details]
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(a)
Specified Period(s)/Specified Interest
Payment Dates:
[
(b)
Business Day Convention:
[Floating Rate Convention/Following Business Day
Convention/Modified Following Business Day
Convention/Preceding Business Day
Convention/[specify other]]
(c)
Additional Business Centre(s):
[
(d)
Manner in which the Rate of Interest
and Interest Amount is to be
determined:
[Screen Rate Determination/ISDA Determination/
specify other]
(e)
Party responsible for calculating the
Rate of Interest and Interest Amount
(if not the Principal Paying Agent):
[
]
(f)
Screen Rate Determination:
[
]
•
Reference Rate:
]
]
(Either LIBOR, EURIBOR or other, although
additional information is required if other –
including fallback provisions in the Agency
Agreement)
•
Interest Determination Date(s): [
]
(Second London business day prior to the start of
each Interest Period if LIBOR (other than Sterling or
euro LIBOR), first day of each Interest Period if
Sterling LIBOR and the second day on which the
TARGET2 System is open prior to the start of each
Interest Period if EURIBOR or euro LIBOR)
•
Relevant Screen Page:
[
]
(In the case of EURIBOR, if not Reuters
EURIBOR01 ensure it is a page which shows a
composite rate or amend the fallback provisions
appropriately)
(g)
ISDA Determination:
•
•
•
(h)
Floating Rate Option:
[
]
Designated Maturity:
[
]
Reset Date:
[
]
Margin(s):
[+/-] [ ] per cent. per annum
50
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
17.
(i)
Minimum Rate of Interest:
[
] per cent. per annum
(j)
Maximum Rate of Interest:
[
] per cent. per annum
(k)
Day Count Fraction:
[Actual/Actual (ISDA)
Actual/365 (Fixed)
Actual/365 (Sterling)
Actual/360
30/360
30E/360
30E/360 (ISDA)
Other]
(See Condition 6 for alternatives)
(l)
Fallback provisions, rounding
provisions and any other terms
relating to the method of
calculating interest on Floating
Rate Notes, if different from those
set out in the Conditions:
[
Zero Coupon Note Provisions:
]
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
18.
(a)
Accrual Yield:
[ ] per cent. per annum
(b)
Reference Price:
[
]
(c)
Any other formula/basis of
determining amount payable:
[
]
(d)
Day Count Fraction in relation to
Early Redemption Amounts and late
payment:
[Conditions 8.5(c) and 8.10 apply/specify other]
Index Linked Interest Note Provisions:
(Consider applicable day count fraction if not U.S.
dollar denominated)
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than
[100] per cent. of the nominal value the Notes will
be derivative securities for the purposes of the
Prospectus Directive and the requirements of
Annex XII to the Prospectus Directive Regulation will
apply.)
(a)
Index/Formula:
[give or annex details]
(b)
Calculation Agent:
[give name (and, if the Notes are derivative
securities to which Annex XII of the Prospectus
Directive Regulation applies, address)]
51
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
19.
(c)
Party responsible for calculating the
Rate of Interest (if not the
Calculation Agent) and Interest
Amount (if not the Principal Paying
Agent):
[
(d)
Provisions for determining Coupon
where calculation by reference to
Index and/or Formula is impossible
or impracticable:
[need to include a description of market disruption
or settlement disruption events and adjustment
provisions]
(e)
Specified Period(s)/Specified
Interest Payment Dates:
[
(f)
Business Day Convention:
[Floating Rate Convention/Following Business Day
Convention/Modified Following Business Day
Convention/Preceding Business Day
Convention/specify other]
(g)
Additional Business Centre(s):
[
(h)
Minimum Rate of Interest:
[ ] per cent. per annum
(i)
Maximum Rate of Interest:
[ ] per cent. per annum
(j)
Day Count Fraction:
[
Dual Currency Interest Note Provisions:
]
]
]
]
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than
[100] per cent. of the nominal value the Notes will
be derivative securities for the purposes of the
Prospectus Directive and the requirements of
Annex XII to the Prospectus Directive Regulation will
apply.)
(a)
Rate of Exchange/method of
calculating Rate of Exchange:
[give or annex details]
(b)
Party, if any, responsible for
calculating the principal and/or
interest due (if not the Principal
Paying Agent):
[
(c)
Provisions applicable where
calculation by reference to Rate of
Exchange impossible or
impracticable:
[need to include a description of market disruption
or settlement disruption events and adjustment
provisions]
(d)
Person at whose option Specified
Currency(ies) is/are payable:
[
52
]
]
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
PROVISIONS RELATING TO REDEMPTION
20.
Issuer Call:
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(a)
Optional Redemption Date(s):
[
(b)
Optional Redemption Amount and
method, if any, of calculation of
such amount(s):
[[
] per Calculation Amount/specify other/see
Appendix]
(c)
If redeemable in part:
(d)
21.
]
(i)
Minimum Redemption
Amount:
[
] per Calculation Amount
(ii)
Maximum Redemption
Amount:
[
] per Calculation Amount
[
]
Notice period (if other than as set
out in the Conditions):
Investor Put:
(N.B. If setting notice periods which are different to
those provided in the Conditions, the Issuer is
advised to consider the practicalities of distribution
of information through intermediaries, for example,
clearing systems and custodians, as well as any
other notice requirements which may apply, for
example, as between the Issuer and the Principal
Paying Agent or the Trustee)
[Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
22.
(a)
Optional Redemption Date(s):
[
(b)
Optional Redemption Amount and
method, if any, of calculation of
such amount(s):
[[
] per Calculation Amount/specify other/see
Appendix]
(c)
Notice period (if other than as set
out in the Conditions):
[
Final Redemption Amount:
]
]
(N.B. If setting notice periods which are different to
those provided in the Conditions, the Issuer is
advised to consider the practicalities of distribution
of information through intermediaries, for example,
clearing systems and custodians, as well as any
other notice requirements which may apply, for
example, as between the Issuer and the Principal
Paying Agent or the Trustee)
[[
] per Calculation Amount/specify other/see
Appendix]
(N.B. If the Final Redemption Amount is other than
[100] per cent. of the nominal value the Notes will
be derivative securities for the purposes of the
Prospectus Directive and the requirements of Annex
53
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
XII to the Prospectus Directive Regulation will
apply.)
23.
Early Redemption Amount payable on
redemption for taxation reasons or on event
of default and/or the method of calculating
the same (if required or if different from
that set out in Condition 8.5):
[[
] per Calculation Amount/specify other/see
Appendix]
GENERAL PROVISIONS APPLICABLE TO THE NOTES
24.
Form of Notes:
Form:
[Bearer Notes
[Temporary Global Note exchangeable for a
Permanent Global Note which is exchangeable for
Definitive Notes [on 60 days’ notice given at any
time/upon an Exchange Event]]
[Temporary Global Note exchangeable for Definitive
Notes on and after the Exchange Date]
[Permanent Global Note exchangeable for Definitive
Notes [on 60 days’ notice given at any time/upon an
Exchange Event]]
(N.B. The exchange upon notice option should not be
expressed to be applicable if the Specified
Denomination of the Notes in paragraph 6 includes
language substantially to the following effect:
“[€100,000] and integral multiples of [€1,000] in
excess thereof up to and including [€199,000]. No
Notes in definitive form will be issued with a
denomination above [€199,000].” Furthermore, such
Specified Denomination construction is not permitted
in relation to any issue of Notes which is to be
represented on issue by a Temporary Global Note
exchangeable for Definitive Notes.)
[Registered Notes:
[Regulation S Global Note registered in the name of
a nominee for [DTC/a common depositary for
Euroclear and Clearstream, Luxembourg]]
[Rule 144A Global Note registered in the name of a
nominee for [DTC/a common depositary for
Euroclear and Clearstream, Luxembourg]
25.
26
Additional Financial Centre(s) or other
special provisions relating to Payment
Days:
[Not Applicable/give details]
Talons for future Coupons or Receipts to
be attached to Definitive Notes in bearer
form (and dates on which such Talons
mature):
[Yes/No. If yes, give details]
(Note that this paragraph relates to the place of
payment and not Interest Period end dates to which
subparagraphs 16(c) and 18(g) relate)
54
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
27.
Details relating to Partly Paid Notes:
amount of each payment comprising the
Issue Price and date on which each
payment is to be made and consequences
of failure to pay, including any right of the
Issuer to forfeit the Notes and interest due
on late payment:
28.
Details relating to Instalment Notes:
29.
[Not Applicable/give details. N.B. a new form of
Temporary Global Note and/or Permanent Global
Note may be required for Partly Paid issues]
(a)
Instalment Amount(s):
[Not Applicable/give details]
(b)
Instalment Date(s):
[Not Applicable/give details]
Redenomination applicable:
Redenomination [not] applicable
(If Redenomination is applicable, specify the
applicable Day Count Fraction and any provisions
necessary to deal with floating rate interest
calculation (including alternative reference rates))
30.
Other final terms:
[Not Applicable/give details]
(When adding any other final terms consideration
should be given as to whether such terms constitute
“significant new factors” and consequently trigger
the need for a supplement to the Base Prospectus
under Article 16 of the Prospectus Directive.)
DISTRIBUTION
31.
(a)
If syndicated, names of Managers:
[Not Applicable/give names]
(If the Notes are derivative securities to which Annex
XII of the Prospectus Directive Regulation applies,
include names of entities agreeing to underwrite the
issue on a firm commitment basis and names of the
entities agreeing to place the issue without a firm
commitment or on a “best efforts” basis if such
entities are not the same as the Managers.)
(b)
Date of Subscription Agreement:
[
]
(The above is only relevant if the Notes are
derivative securities to which Annex XII of the
Prospectus Directive Regulation applies.)
(c)
Stabilising Manager(s) (if any):
[Not Applicable/give name]
32.
If non-syndicated, name of relevant Dealer:
[Not Applicable/give name]
33.
U.S. Selling Restrictions:
[Reg. S Category 2; TEFRA D/TEFRA C/TEFRA
not applicable]
34.
Additional selling restrictions:
[Not Applicable/give details]
35.
Additional U.S. Federal income tax
disclosure
[Not Applicable/give details]
55
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
PURPOSE OF FINAL TERMS
These Final Terms comprise the final terms required for issue and admission to trading on [specify relevant
regulated market (for example, the London Stock Exchange’s regulated market) and, if relevant, listing on an
official list (for example, the Official List of the UK Listing Authority)] of the Notes described herein pursuant
to the U.S.$7,000,000,000 Global Medium Term Note Programme of Emirates Telecommunications
Corporation.
RESPONSIBILITY
The Issuer accepts responsibility for the information contained in these Final Terms. [[Relevant third-party
information, for example in compliance with Annex XII to the Prospectus Directive Regulation in relation to
an index or its components] has been extracted from [specify source]. The Issuer confirms that such
information has been accurately reproduced and that, so far as it is aware and is able to ascertain from
information published by [specify source], no facts have been omitted which would render the reproduced
information inaccurate or misleading.]
Signed on behalf of Emirates Telecommunications Corporation:
By: ––––––––––––––––––––––––––––––––––––––––––––––––
Duly authorised
56
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
PART B – OTHER INFORMATION
1.
2.
LISTING AND ADMISSION TO TRADING
(i)
Listing and admission to trading:
[Application [has been][is expected to be] made by
the Issuer (or on its behalf) for the Notes to be
admitted to trading on [specify relevant regulated
market (for example, the London Stock Exchange’s
regulated market) and, if relevant, listing on an
official list (for example, the Official List of the UK
Listing Authority)] with effect from [ ].] [Not
Applicable.]
(ii)
Estimate of total Expenses related
to Admission to trading:
[
]
RATINGS
Ratings:
The Notes to be issued have been rated:
[S&P:
[Moody’s:
[Fitch:
[[Other]:
[
[
[
[
]]
]]
]]
]]
(The above disclosure should reflect the rating
allocated to Notes of the type being issued under the
Programme generally or, where the issue has been
specifically rated, that rating.)
3.
INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE
[Save for any fees payable to the [Managers/Dealer], so far as the Issuer is aware, no person involved
in the issue of the Notes has an interest material to the offer. - Amend as appropriate if there are other
interests]
(When adding any other description, consideration should be given as to whether such matters
described constitute “significant new factors” and consequently trigger the need for a supplement to
the Base Prospectus under Article 16 of the Prospectus Directive.)
4.
REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES
(i)
Reasons for the offer:
[
]
(ii)
Estimated net proceeds:
[
]
(iii)
Estimated total expenses:
[
]]
(N.B.: Delete unless the Notes are derivative
securities to which Annex XII of the Prospectus
Directive Regulation applies, in which case (i) above
is required where the reasons for the offer are different
from making profit and/or hedging certain risks and,
where such reasons are inserted in (i), disclosure of
net proceeds and total expenses at (ii) and (iii) above
are also required.)
5.
YIELD (Fixed Rate Notes only)
Indication of yield:
[
57
]
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:54 – eprint6 – 4224 Section 03
The yield is calculated at the Issue Date on the basis
of the Issue Price. It is not an indication of future
yield.
6.
PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF
INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING
THE UNDERLYING (Index-linked Notes only)
[Need to include details of where past and future performance and volatility of the index/formula can
be obtained.]
[Where the underlying is an index need to include the name of the index and a description if composed
by the Issuer and if the index is not composed by the Issuer need to include details of where the
information about the index can be obtained.]
[Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the
Prospectus Directive Regulation.]
[(When completing the above paragraphs, consideration should be given as to whether such matters
described constitute “significant new factors” and consequently trigger the need for a supplement to
the Base Prospectus under Article 16 of the Prospectus Directive.)]
The Issuer [intends to provide post-issuance information [specify what information will be reported
and where it can be obtained]] [does not intend to provide post-issuance information].
(N.B. This paragraph 6 only applies if the Notes are derivative securities to which Annex XII of the
Prospectus Directive Regulation applies.)
7.
PERFORMANCE OF RATE[S] OF EXCHANGE (Dual Currency Notes only)
[Need to include details of where past and future performance and volatility of the relevant rates can
be obtained.]
[(When completing this paragraph, consideration should be given as to whether such matters
described constitute “significant new factors” and consequently trigger the need for a supplement to
the Base Prospectus under Article 16 of the Prospectus Directive.)]
The Issuer [intends to provide post-issuance information [specify what information will be reported
and where it can be obtained]] [does not intend to provide post-issuance information].
(N.B. This paragraph 7 only applies if the Notes are derivative securities to which Annex XII of the
Prospectus Directive Regulation applies.)
8.
OPERATIONAL INFORMATION
(i)
ISIN Code:
[
]
(ii)
Common Code:
[
]
(iii)
CUSIP:
[
]
(iv)
CINS:
[
]
(v)
Any clearing system(s) other than
DTC, Euroclear and Clearstream,
Luxembourg and the relevant
identification number(s):
[Not Applicable/give name(s) and number(s)]
(vi)
Delivery:
Delivery [against/free of] payment
(vii)
Names and addresses of additional
Paying Agent(s) (if any):
[
58
]
Level: 10 – From: 10 – Thursday, November 11, 2010 – 17:25 – eprint3 – 4224 Section 04
TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes which (save for the text in italics) will be
incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter
case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the
Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note
will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms in
relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so
specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the
following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant
provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference
should be made to “Applicable Final Terms” for a description of the content of the Final Terms which will
specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by Emirates Telecommunications Corporation
(the Issuer) constituted by a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated
from time to time, the Trust Deed) dated 12 November 2010 made between the Issuer and Citicorp Trustee
Company Limited (the Trustee, which expression shall include any successor as Trustee).
References herein to the Notes shall be references to the Notes of this Series and shall mean:
(a)
in relation to any Notes represented by a global Note (a Global Note), units of each Specified
Denomination in the Specified Currency;
(b)
any Global Note;
(c)
any definitive Notes in bearer form (Bearer Notes) issued in exchange for a Global Note in bearer
form; and
(d)
any definitive Notes in registered form (Registered Notes) (whether or not issued in exchange for a
Global Note in registered form).
The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an
Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to
time, the Agency Agreement) dated 12 November 2010 and made between the Issuer, the Trustee, Citibank,
N.A. as issuing and principal paying agent and agent bank (the Principal Paying Agent, which expression
shall include any successor principal paying agent) and the other paying agents named therein (together with
the Principal Paying Agent, the Paying Agents, which expression shall include any additional or successor
paying agents) and as exchange agent (the Exchange Agent, which expression shall include any successor
exchange agent) and Citigroup Global Markets Deutschland AG as registrar (the Registrar, which
expression shall include any successor registrar) and a transfer agent and the other transfer agents named
therein (together with the Registrar, the Transfer Agents, which expression shall include any additional or
successor transfer agents). References in these Conditions to Agents shall mean the Paying Agents, the
Transfer Agents and the Exchange Agent.
Interest bearing definitive Bearer Notes have interest coupons (Coupons) and, if indicated in the applicable
Final Terms, talons for further Coupons (Talons) attached on issue. Any reference herein to Coupons or
coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons.
Definitive Bearer Notes repayable in instalments have receipts (Receipts) for the payment of the instalments
of principal (other than the final instalment) attached on issue. Registered Notes and Global Notes do not
have Receipts, Coupons or Talons attached on issue.
The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms
attached to or endorsed on this Note which supplement these Terms and Conditions (the Conditions) and
may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent
with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the
applicable Final Terms are to Part A of the Final Terms (or the relevant provisions thereof) attached to or
endorsed on this Note.
59
Level: 10 – From: 10 – Thursday, November 11, 2010 – 17:25 – eprint3 – 4224 Section 04
The Trustee acts for the benefit of the Noteholders (which expression shall mean (in the case of Bearer
Notes) the bearers of the Notes and (in the case of Registered Notes) the persons in whose name the Notes
are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided
below), the holders of the Receipts (the Receiptholders) and the holders of the Coupons (the
Couponholders, which expression shall, unless the context otherwise requires, include the holders of the
Talons), in accordance with the provisions of the Trust Deed.
As used herein, Tranche means Notes which are identical in all respects (including as to listing and
admission to trading) and Series means a Tranche of Notes together with any further Tranche or Tranches of
Notes which are (a) expressed to be consolidated and form a single series and (b) identical in all respects
(including as to listing and admission to trading) except for their respective Issue Dates (unless this is a Zero
Coupon Note), Interest Commencement Dates and/or Issue Prices.
Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business
hours at the registered office for the time being of the Trustee being at Citigroup Centre, Canada Square,
Canary Wharf, London, E14 5LB, United Kingdom and at the specified office of each of the Paying Agents.
Copies of the applicable Final Terms are available for viewing at the registered office of the Issuer and of the
Principal Paying Agent and copies may be obtained from those offices save that, if this Note is neither
admitted to trading on a regulated market in the European Economic Area nor offered in the European
Economic Area in circumstances where a prospectus is required to be published under the Prospectus
Directive, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and
such Noteholder must produce evidence satisfactory to the Issuer, the Trustee and the relevant Agent as to
its holding of such Notes and identity. The Noteholders, the Receiptholders and the Couponholders are
deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency
Agreement and the applicable Final Terms which are applicable to them. The statements in the Conditions
include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency
Agreement.
Words and expressions defined in the Trust Deed, the Agency Agreement or used in the applicable Final
Terms shall have the same meanings where used in the Conditions unless the context otherwise requires or
unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the
Agency Agreement, the Trust Deed will prevail and, in the event of inconsistency between the Trust Deed or
the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.
1.
FORM, DENOMINATION AND TITLE
The Notes are in bearer form or in registered form as specified in the applicable Final Terms and, in the case
of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes
of one Specified Denomination may not be exchanged for Notes of another Specified Denomination and
Bearer Notes may not be exchanged for Registered Notes and vice versa.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest
Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest
Basis shown in the applicable Final Terms.
This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption
Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment
Basis shown in the applicable Final Terms.
Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case
references to Coupons and Couponholders in the Conditions are not applicable.
Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to
the Registered Notes will pass upon registration of transfers in accordance with the provisions of the Agency
Agreement. The Issuer, the Trustee and any Agent will (except as otherwise required by law) deem and treat
the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note as the
absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing
60
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note,
without prejudice to the provisions set out in the next succeeding paragraph.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V.
(Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg), each person
(other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of
Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in
which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the
nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all
purposes save in the case of manifest error) shall be treated by the Issuer, the Trustee and the Agents as the
holder of such nominal amount of such Notes for all purposes other than with respect to the payment of
principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant
Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the
Issuer, the Trustee and any Agent as the holder of such nominal amount of such Notes in accordance with
and subject to the terms of the relevant Global Note and the expressions Noteholder and holder of Notes
and related expressions shall be construed accordingly.
For so long as the Depository Trust Company (DTC) or its nominee is the registered owner or holder of a
Registered Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Registered Global Note for all purposes under the Trust Deed and
the Agency Agreement and the Notes except to the extent that in accordance with DTC’s published rules and
procedures any ownership rights may be exercised by its participants or beneficial owners through
participants.
In determining whether a particular person is entitled to a particular nominal amount of Notes as aforesaid,
the Trustee may rely on such evidence and/or information and/or certification as it shall, in its absolute
discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the
absence of manifest error, be conclusive and binding on all concerned.
Notes which are represented by a Global Note will be transferable only in accordance with the rules and
procedures for the time being of DTC, Euroclear and Clearstream, Luxembourg, as the case may be.
References to DTC, Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be
deemed to include a reference to any additional or alternative clearing system specified in the applicable
Final Terms or as may otherwise be approved by the Issuer, the Principal Paying Agent and the Trustee.
2.
TRANSFERS OF REGISTERED NOTES
2.1
Transfers of interests in Registered Global Notes
Transfers of beneficial interests in Registered Global Notes will be effected by DTC, Euroclear or
Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate,
indirect participants in such clearing systems acting on behalf of transferors and transferees of such
interests. A beneficial interest in a Registered Global Note will, subject to compliance with all
applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a
beneficial interest in another Registered Global Note only in the authorised denominations set out in
the applicable Final Terms and only in accordance with the rules and operating procedures for the time
being of DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with
the terms and conditions specified in the Trust Deed and the Agency Agreement. Transfers of a
Registered Global Note registered in the name of a nominee for DTC shall be limited to transfers of
such Registered Global Note, in whole but not in part, to another nominee of DTC or to a successor
of DTC or such successor’s nominee.
2.2
Transfers of Registered Notes in definitive form
Subject as provided in Conditions 2.5, 2.6 and 2.7 below, upon the terms and subject to the conditions
set forth in the Trust Deed and the Agency Agreement, a Registered Note in definitive form may be
transferred in whole or in part (in the authorised denominations set out in the applicable Final Terms).
61
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
In order to effect any such transfer (a) the holder or holders must (i) surrender the Registered Note for
registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the
specified office of any Transfer Agent, with the form of transfer thereon duly executed by the holder
or holders thereof or his or their attorney or attorneys duly authorised in writing and (ii) complete and
deposit such other certifications as may be required by the relevant Transfer Agent and (b) the relevant
Transfer Agent must, after due and careful enquiry, be satisfied with the documents of title and the
identity of the person making the request. Any such transfer will be subject to such reasonable
regulations as the Issuer, the Trustee and the Registrar may from time to time prescribe (the initial
such regulations being set out in Schedule 4 to the Agency Agreement). Subject as provided above,
the relevant Transfer Agent will, within three business days (being for this purpose a day on which
banks are open for business in the city where the specified office of the relevant Transfer Agent is
located) of the request (or such longer period as may be required to comply with any applicable fiscal
or other laws or regulations), deliver, or procure the delivery of, at its specified office to the transferee
or (at the risk of the transferee) send by uninsured mail, to such address as the transferee may request,
a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note
(or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a
Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance
of the Registered Note not transferred will be so delivered or (at the risk of the transferor) sent to the
transferor.
2.3
Registration of transfer upon partial redemption
In the event of a partial redemption of Notes under Condition 8, the Issuer shall not be required to
register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.
2.4
Costs of registration
Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer
as provided above, except for any costs or expenses of delivery other than by regular uninsured mail
and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or
other governmental charge that may be imposed in relation to the registration.
2.5
Transfers of interests in Regulation S Global Notes
Prior to expiry of the applicable Distribution Compliance Period, transfers by the holder of, or of a
beneficial interest in, a Regulation S Global Note to a transferee in the United States or who is a U.S.
person will only be made:
(a)
upon receipt by the Registrar of a written certification substantially in the form set out in the
Agency Agreement, amended as appropriate (a Transfer Certificate), copies of which are
available from the specified office of any Transfer Agent, from the transferor of the Note or
beneficial interest therein to the effect that such transfer is being made to a person whom the
transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A;
or
(b)
otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the
Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include
an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities
laws of any State of the United States,
and, in each case, in accordance with any applicable securities laws of any State of the United States
or any other jurisdiction.
In the case of (a) above, such transferee may take delivery through a Legended Note in global or
definitive form. After expiry of the applicable Distribution Compliance Period (A) beneficial interests
in Regulation S Global Notes registered in the name of a nominee for DTC may be held through DTC
directly, by a participant in DTC, or indirectly through a participant in DTC and (B) such certification
requirements will no longer apply to such transfers.
62
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
2.6
Transfers of interests in Legended Notes
Transfers of Legended Notes or beneficial interests therein may be made:
(a)
to a transferee who takes delivery of such interest through a Regulation S Global Note, upon
receipt by the Registrar of a duly completed Transfer Certificate from the transferor to the
effect that such transfer is being made in accordance with Regulation S and that in the case of
a Regulation S Global Note registered in the name of a nominee for DTC, if such transfer is
being made prior to expiry of the applicable Distribution Compliance Period, the interests in
the Notes being transferred will be held immediately thereafter through Euroclear and/or
Clearstream, Luxembourg; or
(b)
to a transferee who takes delivery of such interest through a Legended Note where the
transferee is a person whom the transferor reasonably believes is a QIB in a transaction meeting
the requirements of Rule 144A, without certification; or
(c)
otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the
Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include
an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities
laws of any State of the United States,
and, in each case, in accordance with any applicable securities laws of any State of the United States
or any other jurisdiction.
Upon the transfer, exchange or replacement of Legended Notes, or upon specific request for removal
of the Legend, the Registrar shall deliver only Legended Notes or refuse to remove the Legend, as the
case may be, unless there is delivered to the Issuer such satisfactory evidence as may reasonably be
required by the Issuer, which may include an opinion of U.S. counsel, that neither the Legend nor the
restrictions on transfer set forth therein are required to ensure compliance with the provisions of the
Securities Act.
2.7
Exchanges and transfers of Registered Notes generally
Holders of Registered Notes in definitive form may exchange such Notes for interests in a Registered
Global Note of the same type at any time.
2.8
Definitions
In this Condition, the following expressions shall have the following meanings:
Distribution Compliance Period means the period that ends 40 days after the completion of the
distribution of each Tranche of Notes, as certified by the relevant Dealer (in the case of a
non-syndicated issue) or the relevant Lead Manager (in the case of a syndicated issue);
Legended Note means Registered Notes (whether in definitive form or represented by a Registered
Global Note) sold in private transactions to QIBs in accordance with the requirements of Rule 144A
which bear a legend specifying certain restrictions on transfer (a Legend);
QIB means a qualified institutional buyer within the meaning of Rule 144A;
Regulation S means Regulation S under the Securities Act;
Regulation S Global Note means a Registered Global Note representing Notes sold outside the
United States in reliance on Regulation S;
Rule 144A means Rule 144A under the Securities Act;
Rule 144A Global Note means a Registered Global Note representing Notes sold in the United States
or to QIBs; and
Securities Act means the United States Securities Act of 1933, as amended.
63
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
3.
STATUS OF THE NOTES
The Notes and any relative Receipts and Coupons are direct, unconditional, unsubordinated and (subject to
the provisions of Condition 4) unsecured obligations of the Issuer and rank pari passu among themselves
and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations
(other than subordinated obligations, if any) of the Issuer, from time to time outstanding.
4.
NEGATIVE PLEDGE AND OTHER COVENANTS
4.1
Negative Pledge
So long as any Note remains outstanding, the Issuer will not and will procure that no Principal
Subsidiary will create, or have outstanding, any mortgage, charge, lien, pledge or other security
interest (each a Security Interest), other than a Permitted Security Interest, upon the whole or any
part of its present or future undertaking, assets or revenues to secure any Relevant Indebtedness, or
any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior
thereto according to the Notes the same security as is created or subsisting to secure any such Relevant
Indebtedness, guarantee or indemnity or such other security as shall be approved by an Extraordinary
Resolution of the Noteholders.
4.2
Transfer of Telecommunications Licence
So long as any Note remains outstanding (a) the Issuer will not and will procure that no Prior
Transferee will transfer the Licence to any person other than a Subsidiary (the Licence Transferee)
and (b) at the same time or prior to any such transfer the Issuer will procure that the payment of
principal and interest on the Notes and all other amounts payable by the Issuer under or pursuant to
the Trust Deed or otherwise in respect of the Notes has been irrevocably and unconditionally
guaranteed by the Licence Transferee by its entry into of the Guarantee.
4.3
Definitions
In these Conditions:
EBIT means Net Revenues minus operating expenses before any federal royalty payments;
Guarantee means a guarantee substantially in the form of the supplemental trust deed set out in
schedule 5 to the Trust Deed;
Guarantor means any Licence Transferee from time to time with an outstanding Guarantee;
Licence means the licence dated 9 May 2006 issued to the Issuer by the Telecommunications
Regulatory Authority of the United Arab Emirates under the Telecom Law;
Net Revenues means gross revenues minus any sales taxes, discounts or rebates;
Non-recourse Project Financing means any financing of all or part of the costs of the acquisition,
construction or development of any project, provided that (i) any Security Interest given by the Issuer
or any Principal Subsidiary is limited solely to assets of the project, (ii) the person providing such
financing expressly agrees to limit its recourse to the project financed and the revenues derived from
such project as the principal source of repayment for the moneys advanced and (iii) there is no other
recourse to the Issuer or any Principal Subsidiary in respect of any default by any person under the
financing;
Permitted Security Interest means:
(i)
any Security Interest existing on the date on which agreement is reached to issue the first
Tranche of the Notes;
64
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(ii)
any Security Interest securing Relevant Indebtedness of a person existing at the time that such
person is merged into, or consolidated with, the Issuer or any Principal Subsidiary, provided
that such Security Interest was not created in contemplation of such merger or consolidation
and does not extend to any other assets or property of the Issuer or any Principal Subsidiary;
(iii)
any Security Interest existing on any property or assets prior to the acquisition thereof by the
Issuer or any Principal Subsidiary and not created in contemplation of such acquisition; or
(iv)
any renewal of or substitution for any Security Interest permitted by any of paragraphs (i) to
(iii) (inclusive) of this definition, provided that with respect to any such Security Interest the
principal amount secured has not increased and the Security Interest has not been extended to
any additional assets (other than the proceeds of such assets);
Principal Subsidiary means at any time a Subsidiary of the Issuer:
(a)
whose EBIT (consolidated in the case of a Subsidiary which itself has Subsidiaries) or whose
total assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) represent in
each case (or, in the case of a Subsidiary acquired after the end of the financial period to which
the then latest audited consolidated accounts of the Issuer and its Subsidiaries relate, are equal
to) not less than 10 per cent. of the consolidated EBIT of the Issuer or, as the case may be, 10
per cent. of the consolidated total assets of the Issuer and its Subsidiaries taken as a whole, all
as calculated respectively by reference to the then latest audited accounts (consolidated or, as
the case may be, unconsolidated) of such Subsidiary and the then latest audited consolidated
accounts of the Issuer and its Subsidiaries, provided that in the case of a Subsidiary of the
Issuer acquired after the end of the financial period to which the then latest audited
consolidated accounts of the Issuer and its Subsidiaries relate, the reference to the then latest
audited consolidated accounts of the Issuer and its Subsidiaries for the purposes of the
calculation above shall, until consolidated accounts for the financial period in which the
acquisition is made have been prepared and audited as aforesaid, be deemed to be a reference
to such first-mentioned accounts as if such Subsidiary had been shown in such accounts by
reference to its then latest relevant audited accounts, adjusted as deemed appropriate by the
Issuer;
(b)
to which is transferred all or substantially all of the undertaking and assets of a Subsidiary of
the Issuer which immediately prior to such transfer is a Principal Subsidiary, provided that the
transferor Subsidiary shall upon such transfer forthwith cease to be a Principal Subsidiary and
the transferee Subsidiary shall cease to be a Principal Subsidiary pursuant to this subparagraph
(b) on the date on which the consolidated accounts of the Issuer and its Subsidiaries for the
financial period current at the date of such transfer have been prepared and audited as aforesaid
but so that such transferor Subsidiary or such transferee Subsidiary may be a Principal
Subsidiary on or at any time after the date on which such consolidated accounts have been
prepared and audited as aforesaid by virtue of the provisions of subparagraph (a) above or, prior
to or after such date, by virtue of any other applicable provision of this definition; or
(c)
to which is transferred an undertaking or assets which, taken together with the undertaking or
assets of the transferee Subsidiary, generated (or, in the case of the transferee Subsidiary being
acquired after the end of the financial period to which the then latest audited consolidated
accounts of the Issuer and its Subsidiaries relate, generate EBIT equal to) not less than 10 per
cent. of the consolidated EBIT of the Issuer, or represent (or, in the case aforesaid, are equal
to) not less than 10 per cent. of the consolidated total assets of the Issuer and its Subsidiaries
taken as a whole, all as calculated as referred to in subparagraph (a) above, provided that the
transferor Subsidiary (if a Principal Subsidiary) shall upon such transfer forthwith cease to be
a Principal Subsidiary unless immediately following such transfer its undertaking and assets
generate (or, in the case aforesaid, generate EBIT equal to) not less than 10 per cent. of the
consolidated EBIT of the Issuer, or its assets represent (or, in the case aforesaid, are equal to)
not less than 10 per cent. of the consolidated total assets of the Issuer and its Subsidiaries taken
as a whole, all as calculated as referred to in subparagraph (a) above, and the transferee
65
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
Subsidiary shall cease to be a Principal Subsidiary pursuant to this subparagraph (c) on the date
on which the consolidated accounts of the Issuer and its Subsidiaries for the financial period
current at the date of such transfer have been prepared and audited but so that such transferor
Subsidiary or such transferee Subsidiary may be a Principal Subsidiary on or at any time after
the date on which such consolidated accounts have been prepared and audited as aforesaid by
virtue of the provisions of subparagraph (a) above or, prior to or after such date, by virtue of
any other applicable provision of this definition,
all as more particularly defined in the Trust Deed.
A report by two Authorised Signatories of the Issuer whether or not addressed to the Trustee that in
their opinion a Subsidiary of the Issuer is or is not or was or was not at any particular time or
throughout any specified period a Principal Subsidiary may be relied upon by the Trustee without
further enquiry or evidence and, if relied upon by the Trustee, shall, in the absence of manifest error,
be conclusive and binding on all parties.
Prior Transferee means any Subsidiary to whom the Licence has been transferred in accordance with
Condition 4.2 provided such Subsidiary shall forthwith cease to be a Prior Transferee on any further
transfer of the Licence pursuant to Condition 4.2 and shall be released from its obligations under the
Guarantee it has entered into on any such further transfer.
Relevant Indebtedness means any indebtedness, other than indebtedness incurred in connection with
a Non-recourse Project Financing or a Securitisation, which is in the form of, or represented or
evidenced by, bonds, notes, debentures, loan stock, sukuk obligations in respect of trust certificates or
other securities which for the time being are, or are intended to be or are capable of being, quoted,
listed, dealt in or traded on any stock exchange, over-the-counter or other securities market;
Securitisation means any securitisation of existing or future assets and/or revenues, provided that (i)
any Security Interest given by the Issuer or any Principal Subsidiary in connection therewith is limited
solely to the assets and/or revenues which are the subject of the securitisation; (ii) each person
participating in such securitisation expressly agrees to limit its recourse to the assets and/or revenues
so securitised as the principal source of repayment for the money advanced or payment of any other
liability; and (iii) there is no other recourse to the Issuer or any Principal Subsidiary in respect of any
default by any person under the securitisation;
Subsidiary in relation to the Issuer means, at any particular time, any person (the first person):
(a)
which is then directly or indirectly controlled by the Issuer; or
(b)
more than 50 per cent. of whose issued equity share capital (or equivalent) is then beneficially
owned by the Issuer; or
(c)
whose financial statements at any time are required by law or in accordance with generally
accepted accounting principles to be fully consolidated with those of the Issuer.
For the first person to be controlled by the Issuer means that the Issuer (whether directly or indirectly
and whether by the ownership of share capital, the possession of voting power, contract, trust or
otherwise) has the power to appoint and/or remove all or the majority of the members of the board of
directors or other governing body of that first person or otherwise controls, or has the power to
control, the affairs and policies of the first person; and
Telecom Law means Federal Decree No. 78 of 1976, as repealed and replaced by Federal Law No. 1
of 1991, as amended by Federal Law by Decree No. 3 of 2003 regarding the Regulation of the
Telecommunication Sector, Federal Law by Decree No. 1 of 2005 and Federal Law by Decree No. 5
of 2008, in each case of the United Arab Emirates and as further amended or replaced from time to
time.
66
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
5.
REDENOMINATION
5.1
Redenomination
Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may,
without the consent of the Noteholders, the Receiptholders and the Couponholders but after prior
consultation with the Trustee, on giving prior notice to the Principal Paying Agent, Euroclear and
Clearstream, Luxembourg and at least 30 days’ prior notice to the Noteholders in accordance with
Condition 15, elect that, with effect from the Redenomination Date specified in the notice, the Notes
shall be redenominated in euro.
The election will have effect as follows:
(a)
the Notes and the Receipts shall be deemed to be redenominated in euro in the denomination
of euro 0.01 with a nominal amount for each Note and Receipt equal to the nominal amount of
that Note or Receipt in the Specified Currency, converted into euro at the Established Rate,
provided that, if the Issuer determines, with the agreement of the Principal Paying Agent and
the Trustee, that the then market practice in respect of the redenomination in euro of
internationally offered securities is different from the provisions specified above, such
provisions shall be deemed to be amended so as to comply with such market practice and the
Issuer shall promptly notify the Noteholders, the stock exchange (if any) on which the Notes
may be listed and the Agents of such deemed amendments;
(b)
save to the extent that an Exchange Notice has been given in accordance with paragraph (d)
below, the amount of interest due in respect of the Notes will be calculated by reference to the
aggregate nominal amount of Notes presented (or, as the case may be, in respect of which
Coupons are presented) for payment by the relevant holder and the amount of such payment
shall be rounded down to the nearest euro 0.01;
(c)
if definitive Notes are required to be issued after the Redenomination Date, they shall be issued
at the expense of the Issuer (i) in the case of Relevant Notes in the denomination of euro
100,000 and/or such higher amounts as the Principal Paying Agent may determine and notify
to the Noteholders and any remaining amounts less than euro 100,000 shall be redeemed by the
Issuer and paid to the Noteholders in euro in accordance with Condition 7; and (ii) in the case
of Notes which are not Relevant Notes, in the denominations of euro 1,000, euro 10,000, euro
100,000 and (but only to the extent of any remaining amounts less than euro 1,000 or such
smaller denominations as the Principal Paying Agent and the Trustee may approve) euro 0.01
and such other denominations as the Principal Paying Agent shall determine and notify to the
Noteholders;
(d)
if issued prior to the Redenomination Date, all unmatured Coupons denominated in the
Specified Currency (whether or not attached to the Notes) will become void with effect
from the date on which the Issuer gives notice (the Exchange Notice) that replacement
euro-denominated Notes, Receipts and Coupons are available for exchange (provided that such
securities are so available) and no payments will be made in respect of them. The payment
obligations contained in any Notes and Receipts so issued will also become void on that date
although those Notes and Receipts will continue to constitute valid exchange obligations of the
Issuer. New euro-denominated Notes, Receipts and Coupons will be issued in exchange for
Notes, Receipts and Coupons denominated in the Specified Currency in such manner as the
Principal Paying Agent may specify and as shall be notified to the Noteholders in the Exchange
Notice. No Exchange Notice may be given less than 15 days prior to any date for payment of
principal or interest on the Notes;
(e)
after the Redenomination Date, all payments in respect of the Notes, the Receipts and the
Coupons, other than payments of interest in respect of periods commencing before the
Redenomination Date, will be made solely in euro as though references in the Notes to the
Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro
67
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
account (or any other account to which euro may be credited or transferred) specified by the
payee or, at the option of the payee, by a euro cheque;
(f)
if the Notes are Fixed Rate Notes and interest for any period ending on or after the
Redenomination Date is required to be calculated for a period ending other than on an Interest
Payment Date, it will be calculated:
(i)
in the case of the Notes represented by a Global Note, by applying the Rate of Interest
to the aggregate outstanding nominal amount of the Notes represented by such Global
Note; and
(ii)
in the case of definitive Notes, by applying the Rate of Interest to the Calculation
Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding
the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such
sub-unit being rounded upwards or otherwise in accordance with applicable market convention.
Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the
Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall
be the product of the amount (determined in the manner provided above) for the Calculation
Amount and the amount by which the Calculation Amount is multiplied to reach the Specified
Denomination without any further rounding; and
(g)
5.2
if the Notes are Floating Rate Notes, the applicable Final Terms will specify any relevant
changes to the provisions relating to interest.
Definitions
In these Conditions, the following expressions have the following meanings:
Established Rate means the rate for the conversion of the Specified Currency (including compliance
with rules relating to roundings in accordance with applicable European Community regulations) into
euro established by the Council of the European Union pursuant to Article 123 of the Treaty;
euro means the currency introduced at the start of the third stage of European economic and monetary
union pursuant to the Treaty;
Redenomination Date means (in the case of interest bearing Notes) any date for payment of interest
under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer
in the notice given to the Noteholders pursuant to Condition 5.1 above and which falls on or after the
date on which the country of the Specified Currency first participates in the third stage of European
economic and monetary union;
Relevant Notes means all Notes where the applicable Final Terms provide for a minimum Specified
Denomination in the Specified Currency which is equivalent to at least euro 100,000 and which are
admitted to trading on a regulated market in the European Economic Area; and
Treaty means the Treaty establishing the European Community, as amended.
6.
INTEREST
6.1
Interest on Fixed Rate Notes
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the
rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest
Payment Date(s) in each year up to (and including) the Maturity Date.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of
interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but
68
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest
Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so
specified.
As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest
Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest
Payment Date.
Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken
Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period
by applying the Rate of Interest to:
(a)
in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate
outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if
they are Partly Paid Notes, the aggregate amount paid up); or
(b)
in the case of Fixed Rate Notes in definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation
Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the
amount (determined in the manner provided above) for the Calculation Amount and the amount by
which the Calculation Amount is multiplied to reach the Specified Denomination, without any further
rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest, in accordance with
this Condition 6.1:
(i)
(ii)
if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:
(A)
in the case of Notes where the number of days in the relevant period from (and
including) the most recent Interest Payment Date (or, if none, the Interest
Commencement Date) to (but excluding) the relevant payment date (the Accrual
Period) is equal to or shorter than the Determination Period during which the Accrual
Period ends, the number of days in such Accrual Period divided by the product of (1) the
number of days in such Determination Period and (2) the number of Determination
Dates (as specified in the applicable Final Terms) that would occur in one calendar year;
or
(B)
in the case of Notes where the Accrual Period is longer than the Determination Period
during which the Accrual Period ends, the sum of:
(1)
the number of days in such Accrual Period falling in the Determination Period in
which the Accrual Period begins divided by the product of (x) the number of days
in such Determination Period and (y) the number of Determination Dates that
would occur in one calendar year; and
(2)
the number of days in such Accrual Period falling in the next Determination
Period divided by the product of (x) the number of days in such Determination
Period and (y) the number of Determination Dates that would occur in one
calendar year; and
if “30/360” is specified in the applicable Final Terms, the number of days in the period from
(and including) the most recent Interest Payment Date (or, if none, the Interest Commencement
Date) to (but excluding) the relevant payment date (such number of days being calculated on
the basis of a year of 360 days with 12 30-day months) divided by 360.
69
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
In these Conditions:
Determination Period means each period from (and including) a Determination Date to but
excluding the next Determination Date (including, where either the Interest Commencement Date or
the final Interest Payment Date is not a Determination Date, the period commencing on the first
Determination Date prior to, and ending on the first Determination Date falling after, such date); and
sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that
is available as legal tender in the country of such currency and, with respect to euro, one cent.
6.2
Interest on Floating Rate Notes and Index Linked Interest Notes
(a)
Interest Payment Dates
Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the
Interest Commencement Date and such interest will be payable in arrear on either:
(i)
the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or
(ii)
if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each
date (each such date, together with each Specified Interest Payment Date, an Interest Payment
Date) which falls the number of months or other period specified as the Specified Period in the
applicable Final Terms after the preceding Interest Payment Date or, in the case of the first
Interest Payment Date, after the Interest Commencement Date.
Such interest will be payable in respect of each Interest Period (which expression shall, in these
Conditions, mean the period from (and including) an Interest Payment Date (or the Interest
Commencement Date) to (but excluding) the next (or first) Interest Payment Date).
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no
numerically corresponding day on the calendar month in which an Interest Payment Date should occur
or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then,
if the Business Day Convention specified is:
(A)
in any case where Specified Periods are specified in accordance with Condition 6.2(a)(ii)
above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above,
shall be the last day that is a Business Day in the relevant month and the provisions of (b) below
shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day
which is a Business Day unless it would thereby fall into the next calendar month, in which
event (1) such Interest Payment Date shall be brought forward to the immediately preceding
Business Day and (2) each subsequent Interest Payment Date shall be the last Business Day in
the month which falls the Specified Period after the preceding applicable Interest Payment Date
occurred; or
(B)
the Following Business Day Convention, such Interest Payment Date shall be postponed to the
next day which is a Business Day; or
(C)
the Modified Following Business Day Convention, such Interest Payment Date shall be
postponed to the next day which is a Business Day unless it would thereby fall into the next
calendar month, in which event such Interest Payment Date shall be brought forward to the
immediately preceding Business Day; or
(D)
the Preceding Business Day Convention, such Interest Payment Date shall be brought forward
to the immediately preceding Business Day.
In these Conditions, Business Day means a day which is both:
(a)
a day on which commercial banks and foreign exchange markets settle payments and are open
for general business (including dealing in foreign exchange and foreign currency deposits) in
London and any Additional Business Centre specified in the applicable Final Terms; and
70
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(b)
(b)
either (1) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency (if other than
London and any Additional Business Centre and which if the Specified Currency is Australian
dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (2) in relation
to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET 2) System (the TARGET 2 System) is open.
Rate of Interest
The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked
Interest Notes will be determined in the manner specified in the applicable Final Terms.
(i)
ISDA Determination for Floating Rate Notes
Where ISDA Determination is specified in the applicable Final Terms as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the
relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if
any). For the purposes of this subparagraph (i), ISDA Rate for an Interest Period means a rate
equal to the Floating Rate that would be determined by the Principal Paying Agent under an
interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent
for that swap transaction under the terms of an agreement incorporating the 2006 ISDA
Definitions, as published by the International Swaps and Derivatives Association, Inc. and as
amended and updated as of the Issue Date of the first Tranche of the Notes (the ISDA
Definitions) and under which:
(A)
the Floating Rate Option is as specified in the applicable Final Terms;
(B)
the Designated Maturity is a period specified in the applicable Final Terms; and
(C)
the relevant Reset Date is either (1) if the applicable Floating Rate Option is based on
the London interbank offered rate (LIBOR) or on the Euro-zone interbank offered rate
(EURIBOR), the first day of that Interest Period or (2) in any other case, as specified in
the applicable Final Terms.
For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate
Option, Designated Maturity and Reset Date have the meanings given to those terms in the
ISDA Definitions.
Unless otherwise stated in the applicable Final Terms the Minimum Rate of Interest shall be
deemed to be zero.
(ii)
Screen Rate Determination for Floating Rate Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in
which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will,
subject as provided below, be either:
(A)
the offered quotation; or
(B)
the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005
being rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as
the case may be, on the Relevant Screen Page as of 11.00 a.m. (London time, in the case of
LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in
question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as
determined by the Principal Paying Agent. If five or more of such offered quotations are
71
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
available on the Relevant Screen Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest
quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for
the purpose of determining the arithmetic mean (rounded as provided above) of such offered
quotations.
The Agency Agreement contains provisions for determining the Rate of Interest in the event
that the Relevant Screen Page is not available or if, in the case of (A) above, no such offered
quotation appears or, in the case of (B) above, fewer than three such offered quotations appear,
in each case as of the time specified in the preceding paragraph.
If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the
applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect
of such Notes will be determined as provided in the applicable Final Terms.
(c)
Minimum Rate of Interest and/or Maximum Rate of Interest
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the
event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for
such Interest Period shall be such Minimum Rate of Interest.
If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in
the event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest
for such Interest Period shall be such Maximum Rate of Interest.
(d)
Determination of Rate of Interest and calculation of Interest Amounts
The Principal Paying Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case
of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of
Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case
of Index Linked Interest Notes, the Calculation Agent will notify the Principal Paying Agent of the
Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.
The Principal Paying Agent will calculate the amount of interest (the Interest Amount) payable on
the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the
Rate of Interest to:
(i)
in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a
Global Note, the aggregate outstanding nominal amount of the Notes represented by such
Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(ii)
in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the
Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form
is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be
the product of the amount (determined in the manner provided above) for the Calculation Amount and
the amount by which the Calculation Amount is multiplied to reach the Specified Denomination
without any further rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with
this Condition 6.2:
72
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(i)
if “Actual/Actual (ISDA)” or “Actual/Actual” is specified in the applicable Final Terms, the
actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest
Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest
Period falling in a leap year divided by 366 and (II) the actual number of days in that portion
of the Interest Period falling in a non-leap year divided by 365);
(ii)
if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in
the Interest Period divided by 365;
(iii)
if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days
in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap
year, 366;
(iv)
if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the
Interest Period divided by 360;
(v)
if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number
of days in the Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 – Y1)]+[30 x (M2 – M1)]+(D2 – D1)
–––––––––––––––––––––––––––––––––––––––
360
where:
Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;
Y2 is the year, expressed as a number, in which the day immediately following the last day of
the Interest Period falls;
M1 is the calendar month, expressed as a number, in which the first day of the Interest Period
falls;
M2 is the calendar month, expressed as a number, in which the day immediately following the
last day of the Interest Period falls;
D1 is the first calendar day, expressed as a number, of the Interest Period, unless such number
is 31, in which case D1 will be 30; and
D2 is the calendar day, expressed as a number, immediately following the last day included in
the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case
D2 will be 30;
(vi)
if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of
days in the Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 – Y1)]+[30 x (M2 – M1)]+(D2 – D1)
–––––––––––––––––––––––––––––––––––––––
360
where:
Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;
Y2 is the year, expressed as a number, in which the day immediately following the last day of
the Interest Period falls;
M1 is the calendar month, expressed as a number, in which the first day of the Interest Period
falls;
M2 is the calendar month, expressed as a number, in which the day immediately following the
last day of the Interest Period falls;
73
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
D1 is the first calendar day, expressed as a number, of the Interest Period, unless such number
would be 31, in which case D1 will be 30; and
D2 is the calendar day, expressed as a number, immediately following the last day included in
the Interest Period, unless such number would be 31, in which case D2 will be 30;
(vii) if “30E/360 (ISDA)” is specified in the applicable Final Terms, the number of days in the
Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 – Y1)]+[30 x (M2 – M1)]+(D2 – D1)
–––––––––––––––––––––––––––––––––––––––
360
where:
Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;
Y2 is the year, expressed as a number, in which the day immediately following the last day of
the Interest Period falls;
M1 is the calendar month, expressed as a number, in which the first day of the Interest Period
falls;
M2 is the calendar month, expressed as a number, in which the day immediately following the
last day of the Interest Period falls;
D1 is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is
the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
D2 is the calendar day, expressed as a number, immediately following the last day included in
the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or
(ii) such number would be 31, in which case D2 will be 30.
(e)
Notification of Rate of Interest and Interest Amounts
The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest
Period and the relevant Interest Payment Date to be notified to the Issuer, the Trustee, the other Paying
Agents and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest
Notes are for the time being listed and notice thereof to be published in accordance with Condition 15
as soon as possible after their determination but in no event later than the fourth London Business Day
thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended
(or appropriate alternative arrangements made by way of adjustment) without prior notice in the event
of an extension or shortening of the Interest Period. Any such amendment will be promptly notified
to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are
for the time being listed and to the Noteholders in accordance with Condition 15. For the purposes of
this paragraph, the expression London Business Day means a day (other than a Saturday or a Sunday)
on which banks and foreign exchange markets are open for general business in London.
(f)
Determination or Calculation by Trustee
If for any reason at any relevant time the Principal Paying Agent or, as the case may be, the
Calculation Agent defaults in its obligation to determine the Rate of Interest or the Principal Paying
Agent defaults in its obligation to calculate any Interest Amount in accordance with subparagraph
(b)(i) or subparagraph (b) (ii) above or as otherwise specified in the applicable Final Terms, as the case
may be, and in each case in accordance with paragraph (d) above, the Trustee shall determine the Rate
of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the
foregoing provisions of this Condition, but subject always to any Minimum Rate of Interest or
Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable
in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in
such manner as it shall deem fair and reasonable in all the circumstances and each such determination
74
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
or calculation shall be deemed to have been made by the Principal Paying Agent or the Calculation
Agent, as applicable.
(g)
Certificates to be final
All certificates, communications, opinions, determinations, calculations, quotations and decisions
given, expressed, made or obtained for the purposes of the provisions of this Condition 6.2, whether
by the Principal Paying Agent or the Calculation Agent, shall (in the absence of wilful default, bad
faith or manifest or proven error) be binding on the Issuer, the Principal Paying Agent, the Calculation
Agent, the other Agents and all Noteholders, Receiptholders and Couponholders and (in the absence
of wilful default or bad faith) no liability to the Issuer, any Guarantor, the Noteholders, the
Receiptholders or the Couponholders shall attach to the Principal Paying Agent, the Calculation Agent
or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and
discretions pursuant to such provisions.
6.3
Interest on Dual Currency Interest Notes
The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined
in the manner specified in the applicable Final Terms.
6.4
Interest on Partly Paid Notes
In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest
will accrue as aforesaid on the paid up nominal amount of such Notes and otherwise as specified in
the applicable Final Terms.
6.5
Accrual of interest
Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will
cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof,
payment of principal is improperly withheld or refused. In such event, interest will continue to accrue
until whichever is the earlier of:
(a)
the date on which all amounts due in respect of such Note have been paid; and
(b)
the date on which the full amount of the moneys payable in respect of such Note has been
received by the Principal Paying Agent or the Registrar, as the case may be, and notice to that
effect has been given to the Noteholders in accordance with Condition 15 as provided in the
Trust Deed.
7.
PAYMENTS
7.1
Method of payment
Subject as provided below:
(a)
payments in a Specified Currency other than euro will be made by credit or transfer to an
account in the relevant Specified Currency maintained by the payee with, or, at the option of
the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial
centre of the country of such Specified Currency (which, if the Specified Currency is Australian
dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and
(b)
payments in euro will be made by credit or transfer to a euro account (or any other account to
which euro may be credited or transferred) specified by the payee or, at the option of the payee,
by a euro cheque.
Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in
the place of payment, but without prejudice to the provisions of Condition 9.
75
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
7.2
Presentation of definitive Bearer Notes, Receipts and Coupons
Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made
in the manner provided in Condition 7.1 above only against presentation and surrender (or, in the case
of part payment of any sum due, endorsement) of definitive Bearer Notes, and payments of interest in
respect of definitive Bearer Notes will (subject as provided below) be made as aforesaid only against
presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons,
in each case at the specified office of any Paying Agent outside the United States (which expression,
as used herein, means the United States of America (including the States and the District of Columbia,
its territories, its possessions and other areas subject to its jurisdiction)).
Payments of instalments of principal (if any) in respect of definitive Bearer Notes, other than the final
instalment, will (subject as provided below) be made in the manner provided in Condition 7.1 above
only against presentation and surrender (or, in the case of part payment of any sum due, endorsement)
of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment
will be made in the manner provided in Condition 7.1 above only against presentation and surrender
(or, in the case of part payment of any sum due, endorsement) of the relevant Bearer Note in
accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant
instalment together with the definitive Bearer Note to which it appertains. Receipts presented without
the definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer.
Upon the date on which any definitive Bearer Note becomes due and repayable, unmatured Receipts
(if any) relating thereto (whether or not attached) shall become void and no payment shall be made in
respect thereof.
Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Notes or
Long Maturity Notes (as defined below)) should be presented for payment together with all
unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons
falling to be issued on exchange of matured Talons), failing which the amount of any missing
unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the
amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted
from the sum due for payment. Each amount of principal so deducted will be paid in the manner
mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10
years after the Relevant Date (as defined in Condition 9) in respect of such principal (whether or not
such Coupon would otherwise have become void under Condition 10) or, if later, five years from the
date on which such Coupon would otherwise have become due, but in no event thereafter.
Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity
Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will
be issued in respect thereof.
Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long
Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons
(if any) relating thereto (whether or not attached) shall become void and no payment or, as the case
may be, exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a
Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal
amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease
to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest
remaining to be paid after that date is less than the nominal amount of such Note.
If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest
(if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or,
as the case may be, the Interest Commencement Date shall be payable only against surrender of the
relevant definitive Bearer Note.
76
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
7.3
Payments in respect of Bearer Global Notes
Payments of principal and interest (if any) in respect of Notes represented by any Global Note in
bearer form will (subject as provided below) be made in the manner specified above in relation to
definitive Bearer Notes and otherwise in the manner specified in the relevant Global Note against
presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying
Agent outside the United States. A record of each payment made against presentation or surrender of
any Global Note in bearer form, distinguishing between any payment of principal and any payment
of interest, will be made on such Global Note by the Paying Agent to which it was presented and such
record shall be prima facie evidence that the payment in question has been made.
7.4
Payments in respect of Registered Notes
Payments of principal (other than instalments of principal prior to the final instalment) in respect of
each Registered Note (whether or not in global form) will be made against presentation and surrender
(or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified
office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the
Designated Account (as defined below) of the holder (or the first named of joint holders) of the
Registered Note appearing in the register of holders of the Registered Notes maintained by the
Registrar (the Register) at the close of business on the third business day (being for this purpose a day
on which banks are open for business in the city where the specified office of the Registrar is located)
before the relevant due date. Notwithstanding the previous sentence, if (a) a holder does not have a
Designated Account or (b) the principal amount of the Notes held by a holder is less than
U.S.$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead
be made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For
these purposes, Designated Account means the account (which, in the case of a payment in Japanese
yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a
Designated Bank and identified as such in the Register and Designated Bank means (in the case of
payment in a Specified Currency other than euro) a bank in the principal financial centre of the
country of such Specified Currency (which, if the Specified Currency is Australian dollars or New
Zealand dollars, shall be Sydney and Auckland, respectively) and (in the case of a payment in euro)
any bank which processes payments in euro.
Payments of interest and payments of instalments of principal (other than the final instalment) in
respect of each Registered Note (whether or not in global form) will be made by a cheque in the
Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day
in the city where the specified office of the Registrar is located immediately preceding the relevant
due date to the holder (or the first named of joint holders) of the Registered Note appearing in the
Register at the close of business on the fifteenth day (whether or not such fifteenth day is a business
day) before the relevant due date (the Record Date) at his address shown in the Register on the
Record Date and at his risk. Upon application of the holder to the specified office of the Registrar in
the city where the specified office of the Registrar is located not less than three business days before
the due date for any payment of interest in respect of a Registered Note, the payment may be made
by transfer on the due date in the manner provided in the preceding paragraph. Any such application
for transfer shall be deemed to relate to all future payments of interest (other than interest due on
redemption) and instalments of principal (other than the final instalment) in respect of the Registered
Notes which become payable to the holder who has made the initial application until such time as the
Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect
of each Registered Note on redemption and the final instalment of principal will be made in the same
manner as payment of the principal amount of such Registered Note.
Holders of Registered Notes will not be entitled to any interest or other payment for any delay in
receiving any amount due in respect of any Registered Note as a result of a cheque posted in
accordance with this Condition arriving after the due date for payment or being lost in the post. No
commissions or expenses shall be charged to such holders by the Registrar in respect of any payments
of principal or interest in respect of the Registered Notes.
77
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
All amounts payable to DTC or its nominee as registered holder of a Registered Global Note in respect
of Notes denominated in a Specified Currency other than U.S. dollars shall be paid by transfer by the
Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC
or its nominee for conversion into and payment in U.S. dollars in accordance with the provisions of
the Agency Agreement.
None of the Issuer, the Trustee or the Agents will have any responsibility or liability for any aspect of
the records relating to, or payments made on account of, beneficial ownership interests in the
Registered Global Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
7.5
General provisions applicable to payments
The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes
represented by such Global Note and the Issuer and any Guarantor will be discharged by payment to,
or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the
persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the beneficial holder
of a particular nominal amount of Notes represented by such Global Note must look solely to
Euroclear, Clearstream, Luxembourg or DTC, as the case may be, for his share of each payment so
made by the Issuer or any Guarantor to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest
in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or
interest in respect of such Notes will be made at the specified office of a Paying Agent in the United
States if:
7.6
(a)
the Issuer has appointed Paying Agents with specified offices outside the United States with the
reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars
at such specified offices outside the United States of the full amount of principal and interest
on the Bearer Notes in the manner provided above when due;
(b)
payment of the full amount of such principal and interest at all such specified offices outside
the United States is illegal or effectively precluded by exchange controls or other similar
restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(c)
such payment is then permitted under United States law without involving, in the opinion of
the Issuer or the Guarantor, as the case may be, adverse tax consequences to the Issuer or the
Guarantor, respectively.
Payment Day
If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment
Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the
relevant place and shall not be entitled to further interest or other payment in respect of such delay.
For these purposes, Payment Day means any day which (subject to Condition 10) is:
(a)
(b)
a day on which commercial banks and foreign exchange markets settle payments and are open
for general business (including dealing in foreign exchange and foreign currency deposits) in:
(i)
the relevant place of presentation;
(ii)
London;
(iii)
each Additional Financial Centre specified in the applicable Final Terms;
either (1) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency (if other than the
78
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
place of presentation London and any Additional Financial Centre and which if the Specified
Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland,
respectively) or (2) in relation to any sum payable in euro, a day on which the TARGET 2
System is open; and
(c)
7.7
in the case of any payment in respect of a Registered Global Note denominated in a Specified
Currency other than U.S. dollars and registered in the name of DTC or its nominee and in
respect of which an accountholder of DTC (with an interest in such Registered Global Note)
has elected to receive any part of such payment in U.S. dollars, a day on which commercial
banks are not authorised or required by law or regulation to be closed in New York City.
Interpretation of principal and interest
Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as
applicable:
(a)
any additional amounts which may be payable with respect to principal under Condition 9 or
under any undertaking or covenant given in addition thereto, or in substitution therefor,
pursuant to the Trust Deed;
(b)
the Final Redemption Amount of the Notes;
(c)
the Early Redemption Amount of the Notes;
(d)
the Optional Redemption Amount(s) (if any) of the Notes;
(e)
in relation to Notes redeemable in instalments, the Instalment Amounts;
(f)
in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 8.5);
and
(g)
any premium and any other amounts (other than interest) which may be payable by the Issuer
under or in respect of the Notes.
Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as
applicable, any additional amounts which may be payable with respect to interest under Condition 9
or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to
the Trust Deed.
8.
REDEMPTION AND PURCHASE
8.1
Redemption at maturity
Unless previously redeemed or purchased and cancelled as specified below, each Note (including each
Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer
at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable
Final Terms in the relevant Specified Currency on the Maturity Date.
8.2
Redemption for tax reasons
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this
Note is neither a Floating Rate Note, an Index Linked Interest Note nor a Dual Currency Interest Note)
or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index Linked Interest
Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days’ notice to
the Trustee and the Principal Paying Agent and, in accordance with Condition 15, the Noteholders
(which notice shall be irrevocable), if the Issuer satisfies the Trustee immediately before the giving of
such notice that:
79
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(a)
on the occasion of the next payment due under the Notes, the Issuer has or will become obliged
to pay additional amounts as provided or referred to in Condition 9 or any Guarantor would be
unable for reasons outside its control to procure payment by the Issuer and in making payment
itself would be required to pay such additional amounts, in each case as a result of any change
in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 9)
or any change in the application or official interpretation of such laws or regulations, which
change or amendment becomes effective on or after the date on which agreement is reached to
issue the first Tranche of the Notes; and
(b)
such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking
reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date
on which the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional
amounts were a payment in respect of the Notes then due.
Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver
to the Trustee a certificate signed by an Authorised Signatory of the Issuer or, as the case may be, the
Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of
facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and
an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the
case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of
such change or amendment and the Trustee shall be entitled to accept the certificate as sufficient
evidence of the satisfaction of the conditions precedent set out above, in which event it shall be
conclusive and binding on the Noteholders, the Receiptholders and the Couponholders.
Notes redeemed pursuant to this Condition 8.2 will be redeemed at their Early Redemption Amount
referred to in Condition 8.5 below together (if appropriate) with interest accrued to (but excluding)
the date of redemption.
8.3
Redemption at the option of the Issuer (Issuer Call)
If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:
(a)
not less than 15 nor more than 30 days’ notice to the Noteholders in accordance with Condition
15; and
(b)
not less than 15 days before the giving of the notice referred to in (a) above, notice to the
Trustee and the Principal Paying Agent and, in the case of a redemption of Registered Notes,
the Registrar;
(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or
some only of the Notes then outstanding on any Optional Redemption Date and at the Optional
Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final
Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional
Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum
Redemption Amount and not more than the Maximum Redemption Amount in each case as may be
specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be
redeemed (Redeemed Notes) will be selected individually by lot, in the case of Redeemed Notes
represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream,
Luxembourg and/or DTC, in the case of Redeemed Notes represented by a Global Note, not more than
30 days prior to the date fixed for redemption (such date of selection being hereinafter called the
Selection Date). In the case of Redeemed Notes represented by definitive Notes, a list of the serial
numbers of such Redeemed Notes will be published in accordance with Condition 15 not less than 15
days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted
during the period from (and including) the Selection Date to (and including) the date fixed for
redemption pursuant to this Condition 8.3 and notice to that effect shall be given by the Issuer to the
Noteholders in accordance with Condition 15 at least five days prior to the Selection Date.
80
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
8.4
Redemption at the option of the Noteholders
(a)
Optional Investor Put
If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the
Issuer in accordance with Condition 15 not less than 15 nor more than 30 days’ notice the Issuer will,
upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the
applicable Final Terms, such Note on the Optional Redemption Date and at the Optional Redemption
Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption
Date. Registered Notes may be redeemed under this Condition 8.4 in any multiple of their lowest
Specified Denomination. It may be that before an Investor Put can be exercised, certain conditions
and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the
applicable Final Terms.
(b)
Procedures to Exercise Put
To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in
definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified
office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered
Notes) at any time during normal business hours of such Paying Agent or, as the case may be, the
Registrar falling within the notice period, a duly completed and signed notice of exercise in the form
(for the time being current) obtainable from any specified office of any Paying Agent or, as the case
may be, the Registrar (a Put Notice) and in which the holder must specify a bank account (or, if
payment is required to be made by cheque, an address) to which payment is to be made under this
Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if
less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address
to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject
to and in accordance with the provisions of Condition 2.2. If this Note is in definitive bearer form, the
Put Notice must be accompanied by this Note or evidence satisfactory to the Paying Agent concerned
that this Note will, following delivery of the Put Notice, be held to its order or under its control.
If this Note is represented by a Global Note or is in definitive form and held through Euroclear,
Clearstream, Luxembourg or DTC, to exercise the right to require redemption of this Note the holder
of this Note must, within the notice period, give notice to the Principal Paying Agent of such exercise
in accordance with the standard procedures of Euroclear, Clearstream, Luxembourg and DTC (which
may include notice being given on his instruction by Euroclear, Clearstream, Luxembourg, DTC or
any depositary for them to the Principal Paying Agent by electronic means) in a form acceptable to
Euroclear, Clearstream, Luxembourg and DTC from time to time and, if this Note is represented by a
Global Note, at the same time present or procure the presentation of the relevant Global Note to the
Principal Paying Agent for notation accordingly.
Any Put Notice or other notice given in accordance with the standard procedures of Euroclear,
Clearstream, Luxembourg and DTC given by a holder of any Note pursuant to this Condition 8.4 shall
be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred
and the Trustee has declared the Notes to be due and payable pursuant to Condition 11, in which event
such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to
this Condition 8.4 and instead to declare such Note forthwith due and payable pursuant to
Condition 11.
8.5
Early Redemption Amounts
For the purpose of Condition 8.2 above and Condition 11, each Note will be redeemed at its Early
Redemption Amount calculated as follows:
(a)
in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final
Redemption Amount thereof;
81
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(b)
in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a
Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the
Issue Price or which is payable in a Specified Currency other than that in which the Note is
denominated, at the amount specified in, or determined in the manner specified in, the
applicable Final Terms or, if no such amount or manner is so specified in the applicable Final
Terms, at its nominal amount; or
(c)
in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in
accordance with the following formula:
Early Redemption Amount = RP x (1 + AY)y
where:
RP
means the Reference Price;
AY
means the Accrual Yield expressed as a decimal; and
y
is a fraction the numerator of which is equal to the number of days (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each) from (and including)
the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for
redemption or (as the case may be) the date upon which such Note becomes due and
repayable and the denominator of which is 360,
or on such other calculation basis as may be specified in the applicable Final Terms (the Early
Redemption Amount).
8.6
Instalments
Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case
of early redemption, the Early Redemption Amount will be determined pursuant to Condition 8.5
above.
8.7
Partly Paid Notes
Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance
with the provisions of this Condition and the applicable Final Terms.
8.8
Purchases
The Issuer or any Subsidiary may at any time purchase Notes (provided that, in the case of definitive
Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased
therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or,
at the option of the Issuer, surrendered to any Paying Agent and/or the Registrar for cancellation.
8.9
Cancellation
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts,
Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes
so cancelled and any Notes purchased and cancelled pursuant to Condition 8.8 above (together with
all unmatured Receipts, Coupons and Talons cancelled therewith) shall be forwarded to the Principal
Paying Agent and cannot be reissued or resold.
8.10 Late payment on Zero Coupon Notes
If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon
Note pursuant to Condition 8.1, 8.2, 8.3 or 8.4 above or upon its becoming due and repayable as
provided in Condition 11 is improperly withheld or refused, the amount due and repayable in respect
82
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
of such Zero Coupon Note shall be the amount calculated as provided in Condition 8.5(c) above as
though the references therein to the date fixed for the redemption or the date upon which such Zero
Coupon Note becomes due and payable were replaced by references to the date which is the earlier
of:
9.
(a)
the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(b)
the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes
has been received by the Principal Paying Agent or the Registrar or the Trustee and notice to
that effect has been given to the Noteholders in accordance with Condition 15.
TAXATION
All payments of principal and interest in respect of the Notes, Receipts and Coupons by the Issuer will be
made without withholding or deduction for or on account of any present or future taxes or duties of whatever
nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is
required by law. In such event, the Issuer will pay such additional amounts as shall be necessary in order that
the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or
deduction shall equal the respective amounts of principal and interest which would otherwise have been
receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such
withholding or deduction; except that no such additional amounts shall be payable with respect to any Note,
Receipt or Coupon:
(a)
presented for payment in a Tax Jurisdiction; or
(b)
presented for payment by or on behalf of a holder who is liable for such taxes or duties in respect of
such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction other
than the mere holding of such Note, Receipt or Coupon; or
(c)
presented for payment more than 30 days after the Relevant Date (as defined below) except to the
extent that the holder thereof would have been entitled to an additional amount on presenting the same
for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in
Condition 7.6); or
(d)
where such withholding or deduction is imposed on a payment to an individual and is required to be
made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any
law implementing or complying with, or introduced in order to conform to, such Directive; or
(e)
presented for payment by or on behalf of a holder who would have been able to avoid such
withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent
in a Member State of the European Union.
As used herein:
(i)
Tax Jurisdiction means (a) in the case of payments by the Issuer, the United Arab Emirates or any
Emirate therein or any political subdivision or any authority thereof or therein having power to tax or
(b) in the case of payments by any Guarantor, the jurisdiction of incorporation of such Guarantor or
any political subdivision or any authority thereof or therein having power to tax; and
(ii)
the Relevant Date means the date on which such payment first becomes due, except that, if the full
amount of the moneys payable has not been duly received by the Trustee or the Principal Paying Agent
or the Registrar, as the case may be, on or prior to such due date, it means the date on which, the full
amount of such moneys having been so received, notice to that effect is duly given to the Noteholders
in accordance with Condition 15.
83
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
10.
PRESCRIPTION
The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless presented
for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after
the Relevant Date (as defined in Condition 9) therefor.
There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for
payment in respect of which would be void pursuant to this Condition or Condition 7.2 or any Talon which
would be void pursuant to Condition 7.2.
11.
EVENTS OF DEFAULT AND ENFORCEMENT
11.1 Events of Default
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-fifth in
aggregate nominal amount of the Notes then outstanding or if so directed by an Extraordinary
Resolution shall (subject in each case to being indemnified and/or prefunded and/or secured to its
satisfaction) (but, in the case of the happening of any of the events described in paragraphs (b) and (d)
to (f) inclusive (other than the happening of any such events in the case of paragraphs (d) to (f)
inclusive in relation to the Issuer), only if the Trustee shall have certified in writing to the Issuer that
such event is, in its opinion, materially prejudicial to the interests of the Noteholders) give notice in
writing to the Issuer that each Note is, and each Note shall thereupon immediately become, due and
repayable at its Early Redemption Amount together with accrued interest as provided in the Trust
Deed if any of the following events (each an Event of Default) shall occur and be continuing:
(a)
if default is made in the payment of any principal or interest due in respect of the Notes or any
of them and the default continues for a period of seven days in the case of principal and 14 days
in the case of interest; or
(b)
if the Issuer or any Guarantor fails to perform or observe any of its other obligations under (i)
these Conditions or the Trust Deed or (ii) the Guarantee it has entered into, respectively and
(except in any case where, in the opinion of the Trustee, the failure is incapable of remedy when
no such continuation or notice as is hereinafter mentioned will be required) the failure
continues for the period of 30 days next following the service by the Trustee on the Issuer of
notice requiring the same to be remedied; or
(c)
(i) the holders of any Indebtedness of the Issuer, any Guarantor or any Principal Subsidiary
accelerate such Indebtedness or declare such Indebtedness to be due and payable or required to
be prepaid (other than by a regularly scheduled required prepayment or pursuant to an option
granted to the holders by the terms of such Indebtedness), prior to the stated maturity thereof
or (ii) the Issuer, any Guarantor or any Principal Subsidiary fails to pay in full any principal of,
or interest on, any of its Indebtedness when due (after expiration of any applicable grace
period) or (iii) any Security Interest given by the Issuer, any Guarantor or a Principal Subsidiary
for any Indebtedness becomes enforceable and any step is taken to enforce the Security Interest
(including the taking of possession or the appointment of a receiver, manager or other similar
person, but excluding the issue of any notification to the Issuer, the Guarantor or the relevant
Principal Subsidiary, as the case may be, that such Security Interest has become enforceable);
or (iv) any guarantee or indemnity of any Indebtedness of others given by the Issuer, any
Guarantor or any Principal Subsidiary shall not be honoured when due and called upon;
provided that no event described in this paragraph (c) shall constitute an Event of Default
unless the Indebtedness or other relative liability due and unpaid, either alone or when
aggregated (without duplication) with other amounts of Indebtedness and/or liabilities due and
unpaid relating to all (if any) of the events specified in (i) to (iv) (inclusive) above which have
occurred and are continuing, amounts to at least U.S.$50,000,000 (or its equivalent in any other
currency); or
84
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(d)
if any order is made by any competent court or resolution passed for the winding up or
dissolution of the Issuer, any Guarantor or any Principal Subsidiary, save in connection with a
Permitted Reorganisation; or
(e)
if (i) proceedings are initiated against the Issuer, any Guarantor or any Principal Subsidiary
under any applicable liquidation, insolvency, composition, reorganisation or other similar laws,
or an application is made (or documents filed with a court) for the appointment of an
administrative or other receiver, manager, administrator or other similar official, or an
administrative or other receiver, manager, administrator or other similar official is appointed,
in relation to the Issuer, any Guarantor or any Principal Subsidiary or, as the case may be, in
relation to all or substantially all of the undertaking or assets of any of them, or an
encumbrancer takes possession of all or substantially all of the undertaking or assets of any of
them, or a distress, execution, attachment, sequestration or other process is levied, enforced
upon, sued out or put in force against all or substantially all of the undertaking or assets of any
of them and (ii) in any case (other than the appointment of an administrator) is not discharged
within l4 days, save in connection with a Permitted Reorganisation; or
(f)
if the Issuer, any Guarantor or any Principal Subsidiary initiates or consents to judicial
proceedings relating to itself under any applicable liquidation, insolvency, composition,
reorganisation or other similar laws (including the obtaining of a moratorium) or makes a
conveyance or assignment for the benefit of, or enters into any composition or other
arrangement with, its creditors generally (or any class of its creditors) or any meeting is
convened to consider a proposal for an arrangement or composition with its creditors generally
(or any class of its creditors), save in connection with a Permitted Reorganisation; or
(g)
if (i) the validity of the Notes or any Guarantee is contested by the Issuer or the Guarantor,
respectively, or (ii) the Issuer or any Guarantor shall deny any of its obligations under the Notes
or the Guarantee, respectively, or (iii) as a result of any change in, or amendment to, the laws
or regulations in the United Arab Emirates or any Emirate therein or, as the case may be, the
jurisdiction of incorporation of any Guarantor, which change or amendment takes place after
the date on which agreement is reached to issue the first Tranche of the Notes or of the relevant
Guarantee, as the case may be, (A) it becomes unlawful for the Issuer or the Guarantor to
perform or comply with any of its obligations under or in respect of the (I) Notes or the Agency
Agreement or (II) Guarantee, respectively, or (B) any of such obligations becomes
unenforceable or invalid; or
(h)
if any event occurs which, under the laws of any relevant jurisdiction, has or may have, in the
Trustee’s opinion, an analogous effect to any of the events referred to in paragraphs (d) to (f)
above.
11.2 Enforcement
The Trustee may at any time, at its discretion and without notice, take such proceedings against the
Issuer as it may think fit to enforce the provisions of the Trust Deed, the Notes, the Receipts and the
Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the
Trust Deed, the Notes, the Receipts or the Coupons unless (a) it shall have been so directed by an
Extraordinary Resolution or so requested in writing by the holders of at least one-fifth in aggregate
nominal amount of the Notes then outstanding and (b) it shall have been indemnified and/or prefunded
and/or secured to its satisfaction.
No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer
unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and
the failure shall be continuing.
11.3 Definitions
For the purposes of the Conditions:
85
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
Indebtedness means all obligations, and guarantees or indemnities in respect of obligations, for
moneys borrowed or raised (whether or not evidenced by bonds, debentures, notes or other similar
instruments) other than any such obligations, guarantees or indemnities owing or given by one
member of the Group to another member of the Group;
Group means the Issuer and its subsidiaries; and
Permitted Reorganisation means:
12.
(a)
any winding-up or dissolution of a Principal Subsidiary or any Guarantor whereby the
undertaking or assets of that Principal Subsidiary or Guarantor are transferred to or otherwise
vested in the Issuer and/or any of its other Subsidiaries provided that, in the case of any
Guarantor and such transfer to or vesting in another Subsidiary, at the same time or prior to any
such transfer or vesting the payment of principal and interest on the Notes and all other
amounts payable by the Issuer under or pursuant to the Trust Deed has been guaranteed by such
other Subsidiary by its assumption of the Guarantor’s obligations under the Guarantee it has
entered into; or
(b)
any composition or other similar arrangement on terms previously approved by the Trustee or
by an Extraordinary Resolution.
REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS
Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be
replaced at the specified office of the Principal Paying Agent (in the case of Bearer Notes, Receipts or
Coupons) or the Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and
expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the
Issuer may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered
before replacements will be issued.
13.
AGENTS
The names of the initial Agents and their initial specified offices are set out below.
The Issuer is entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of
any Agent and/or appoint additional or other Agents and/or approve any change in the specified office
through which any Agent acts, provided that:
(a)
there will at all times be a Principal Paying Agent and a Registrar;
(b)
so long as the Notes are listed on any stock exchange or admitted to trading by any other relevant
authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent
(in the case of Registered Notes) with a specified office in such place as may be required by the rules
and regulations of the relevant stock exchange or other relevant authority;
(c)
so long as any of the Registered Global Notes payable in a Specified Currency other than U.S. dollars
are held through DTC or its nominee, there will at all times be an Exchange Agent with a specified
office in New York City; and
(d)
there will at all times be a Paying Agent in a Member State of the European Union that will not be
obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law
implementing or complying with, or introduced in order to conform to, such Directive.
In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in
the circumstances described in Condition 7.5. Any variation, termination, appointment or change shall only
take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30
nor more than 45 days’ prior notice thereof shall have been given to the Noteholders in accordance with
Condition 15.
86
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and any Guarantor and,
in certain circumstances specified therein, of the Trustee and do not assume any obligation to, or relationship
of agency or trust with, any Noteholder, Receiptholder or Couponholder. The Agency Agreement contains
provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated
or to which it transfers all or substantially all of its assets to become the successor agent.
14.
EXCHANGE OF TALONS
On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures,
the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of any Paying
Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include
Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it
appertains) a further Talon, subject to the provisions of Condition 10.
15.
NOTICES
All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading English
language daily newspaper of general circulation in London. It is expected that any such publication in a
newspaper will be made in the Financial Times in London. The Issuer shall also ensure that notices are duly
published in a manner which complies with the rules of any stock exchange or other relevant authority on
which the Bearer Notes are for the time being listed or by which they have been admitted to trading. Any
such notice will be deemed to have been given on the date of the first publication or, where required to be
published in more than one newspaper, on the date of the first publication in all required newspapers. If
publication as provided above is not practicable, a notice will be given in such other manner, and will be
deemed to have been given on such date, as the Trustee shall approve.
All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if
posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective
addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing
and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to trading
by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice
will be published in a daily newspaper of general circulation in the place or places required by those rules.
Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the
Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg and/or DTC, be
substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or
Clearstream, Luxembourg and/or DTC for communication by them to the holders of the Notes and, in
addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another
relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be
published in a daily newspaper of general circulation in the place or places required by those rules. Any such
notice shall be deemed to have been given to the holders of the Notes on the third day after the day on which
the said notice was given to Euroclear and/or Clearstream, Luxembourg and/or DTC.
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the
case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the
case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are
represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying
Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be,
in such manner as the Principal Paying Agent, the Registrar and Euroclear and/or Clearstream, Luxembourg
and/or DTC, as the case may be, may approve for this purpose.
16.
MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION
The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter
affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the
Notes, the Receipts, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be
convened by the Issuer, any Guarantor or the Trustee and shall be convened by the Issuer if required in
87
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
writing by Noteholders holding not less than ten per cent. in nominal amount of the Notes for the time being
remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or
more persons holding or representing not less than 50 per cent. in nominal amount of the Notes for the time
being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders
whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of
which includes the modification of certain provisions of the Notes, the Receipts or the Coupons or the Trust
Deed (including reducing or cancelling the amount payable or, where applicable, modifying, except where
such modification is in the opinion of the Trustee bound to result in an increase, the method of calculating
the amount payable or modifying the date of payment or, where applicable, the method of calculating the
date of payment in respect of any principal or interest in respect of the Notes or altering the currency of
payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or
representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at
any adjourned such meeting one or more persons holding or representing not less than one-third in nominal
amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of
the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and
on all Receiptholders and Couponholders. The expression Extraordinary Resolution is defined in the Trust
Deed to mean either (i) a resolution passed at a meeting duly convened and held by a majority consisting of
not less than three-fourths of the votes cast or (ii) a resolution in writing signed by or on behalf of the holders
of not less than three-fourths in nominal amount of the Notes.
The Trustee may agree, without the consent of the Noteholders, the Receiptholders or the Couponholders, to
any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the
provisions of the Notes or the Trust Deed (other than in respect of those matters set out in paragraph 7 of
Schedule 3 to the Trust Deed), or determine, without any such consent as aforesaid, that any Event of Default
or potential Event of Default shall not be treated as such, where, in any such case, it is not, in the opinion of
the Trustee, materially prejudicial to the interests of the Noteholders so to do or may agree, without any such
consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a
manifest error. Any such modification shall be binding on the Noteholders, the Receiptholders and the
Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition
15 as soon as practicable thereafter.
In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including,
without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard
to the general interests of the Noteholders as a class (but shall not have regard to any interests arising from
circumstances particular to individual Noteholders, Receiptholders or Couponholders whatever their
number) and, in particular but without limitation, shall not have regard to the consequences of any such
exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting
from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the
jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be
entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the
Issuer, any Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax
consequences of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to
the extent already provided for in Condition 9 and/or any undertaking or covenant given in addition to, or in
substitution for, Condition 9 pursuant to the Trust Deed.
The Trustee may, without the consent of the Noteholders, agree with the Issuer to the substitution in place
of the Issuer (or of any previous substitute under this Condition) as the principal debtor under the Notes, the
Receipts, the Coupons and the Trust Deed of another company, being a Subsidiary of the Issuer, subject to
(i) the Notes being unconditionally and irrevocably guaranteed by the Issuer, (ii) the Trustee being satisfied
that the interests of the Noteholders will not be materially prejudiced by the substitution and (iii) certain
other conditions set out in the Trust Deed being complied with.
88
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
17.
INDEMNIFICATION OF THE TRUSTEE AND TRUSTEE CONTRACTING WITH THE
ISSUER
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from
responsibility, including provisions relieving it from taking action unless indemnified and/or prefunded
and/or secured to its satisfaction.
The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into
business transactions with the Issuer and/or any of its Subsidiaries and to act as trustee for the holders of any
other securities issued or guaranteed by, or relating to, the Issuer and/or any of its Subsidiaries, (b) to exercise
and enforce its rights, comply with its obligations and perform its duties under or in relation to any such
transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences
for, the Noteholders, Receiptholders or Couponholders and (c) to retain and not be liable to account for any
profit made or any other amount or benefit received thereby or in connection therewith.
18.
FURTHER ISSUES
The Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders
or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or
the same in all respects save for the amount and date of the first payment of interest thereon and so that the
same shall be consolidated and form a single Series with the outstanding Notes. The Issuer may offer
additional notes with original issue discount (the OID) for U.S. federal income tax purposes as part of a
further issue. Purchasers of notes after the date of any further issue may not be able to differentiate between
notes sold as part of the further issue and previously issued notes. If the Issuer were to issue additional notes
with OID, purchasers of notes after such further issue may be required to accrue OID (or greater amounts of
OID than they would have otherwise accrued) with respect to their notes. This may affect the price of
outstanding Notes following a further issuance.
19.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
Other than any Guarantor, no person shall have any right to enforce any term or condition of this Note under
the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person
which exists or is available apart from that Act.
20.
GOVERNING LAW AND DISPUTE RESOLUTION
20.1 Governing law
The Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons and any
non-contractual obligations arising out of or in connection with the Trust Deed, the Agency
Agreement, the Notes (including the remaining provisions of this Condition), the Receipts and the
Coupons, are and shall be governed by, and construed in accordance with, English law.
20.2 Agreement to arbitrate
Subject to Condition 20.3, any dispute, claim, difference or controversy arising out of, relating to or
having any connection with the Notes (including any dispute as to their existence, validity,
interpretation, performance, breach or termination or the consequences of their nullity and any dispute
relating to any non-contractual obligations arising out of or in connection with them) (a Dispute) shall
be referred to and finally resolved by arbitration under the LCIA Arbitration Rules (the Rules), which
Rules (as amended from time to time) are incorporated by reference into this Condition. For these
purposes:
(a)
the seat of arbitration shall be London;
(b)
there shall be three arbitrators, each of whom shall be disinterested in the arbitration, shall have
no connection with any party thereto and shall be an attorney experienced in international
securities transactions;
89
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
(c)
the language of the arbitration shall be English; and
(d)
any requirement in the Rules to take account of the nationality of a person considered for
appointment as an arbitrator shall be disapplied and a person shall be nominated or appointed
as an arbitrator (including as Chairman) regardless of his nationality.
20.3 Option to litigate
Notwithstanding Condition 20.2 above, the Trustee may, in the alternative, and at its sole discretion,
by notice in writing to the Issuer:
(a)
within 28 days of service of a Request for Arbitration (as defined in the Rules); or
(b)
in the event no arbitration is commenced,
require that a Dispute be heard by a court of law. If the Trustee gives such notice, the Dispute to which
such notice refers shall be determined in accordance with Condition 20.4 and, subject as provided
below, any arbitration commenced under Condition 20.2 in respect of that Dispute will be terminated.
Each of the Trustee and the recipient of such notice will bear its own costs in relation to the terminated
arbitration.
If any notice to terminate is given after service of any Request for Arbitration in respect of any
Dispute, the Trustee must also promptly give notice to the LCIA Court and to any Tribunal (each as
defined in the Rules) already appointed in relation to the Dispute that such Dispute will be settled by
the courts. Upon receipt of such notice by the LCIA Court, the arbitration and any appointment of any
arbitrator in relation to such Dispute will immediately terminate. Any such arbitrator will be deemed
to be functus officio. The termination is without prejudice to:
(i)
the validity of any act done or order made by that arbitrator or by the court in support of that
arbitration before his appointment is terminated;
(ii)
his entitlement to be paid his proper fees and disbursements; and
(iii)
the date when any claim or defence was raised for the purpose of applying any limitation bar
or any similar rule or provision.
20.4 Effect of exercise of option to litigate
In the event that a notice pursuant to Condition 20.3 is issued, the following provisions shall apply:
(a)
subject to paragraph (c) below, the courts of England shall have exclusive jurisdiction to settle
any Dispute and the Issuer submits to the exclusive jurisdiction of such courts;
(b)
the Issuer agrees that the courts of England are the most appropriate and convenient courts to
settle any Dispute and, accordingly, that it will not argue to the contrary; and
(c)
this Condition 20.4 is for the benefit of the Trustee, the Noteholders, the Receiptholders and
the Couponholders only. As a result, and notwithstanding paragraph (a) above, the Trustee may
take proceedings relating to a Dispute (Proceedings) in any other courts with jurisdiction. To
the extent allowed by law, the Trustee may take concurrent Proceedings in any number of
jurisdictions.
20.5 Appointment of Process Agent
The Issuer appoints Law Debenture Corporate Services Limited, at its registered office at Fifth Floor,
100 Wood Street, London EC2V 7EX, as its agent for service of process, and undertakes that, in the
event of such agent ceasing so to act or ceasing to be registered in England, it will appoint another
person approved by the Trustee as its agent for service of process in England in respect of any
90
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted
by law.
20.6 Waiver of immunity
The Issuer hereby irrevocably and unconditionally waives with respect to the Notes, the Receipts and
the Coupons any right to claim sovereign or other immunity from jurisdiction or execution and any
similar defence and irrevocably and unconditionally consents to the giving of any relief or the issue
of any process, including without limitation, the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of any order or judgment made or given
in connection with any Proceedings.
20.7 Other documents
The Issuer has in the Trust Deed and the Agency Agreement made provision for arbitration and
appointed an agent for service of process in terms substantially similar to those set out above.
91
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 04
USE OF PROCEEDS
The net proceeds from each issue of Notes will be applied by the Issuer for its general corporate purposes.
If, in respect of any particular issue of Notes, including any Notes which are derivative securities for the
purposes of Article 15 of the Commission Regulation No. 809/2004 implementing the Prospectus Directive,
there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
92
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
OVERVIEW OF THE UAE
The UAE is a federation of seven Emirates. Formerly known as the Trucial States, they were a British
protectorate until they achieved independence in December 1971 and merged to form the United Arab
Emirates. Each Emirate has a local government headed by the Ruler of the Emirate. There is a federal
government which is headed by the President. The federal budget is principally funded by Abu Dhabi.
The federation is governed by the Supreme Council of the Rulers which consists of the Rulers of the seven
Emirates. The Supreme Council elects from its own membership the President and the Vice President (for
renewable five-year terms). H.H. Sheikh Zayed bin Sultan Al Nahyan, the late Ruler of Abu Dhabi, held the
position of President from 1971 until his death in November 2004. During his long presidency, H.H. Sheikh
Zayed bin Sultan Al Nahyan oversaw significant investment in the infrastructure of the UAE, which
transformed the country. Following his death, his son H.H. Sheikh Khalifa bin Zayed Al Nahyan took over
as Ruler of Abu Dhabi and was elected as President of the UAE.
The UAE is the third largest economy in the Middle East after Saudi Arabia and Egypt. It has a more
diversified economy than most of the other countries in the Gulf Cooperation Council (GCC). According to
OPEC data, at 31 December 2008, the UAE had approximately 7.5 per cent. of the world’s proven global oil
reserves (giving it the world’s seventh largest known oil reserves), generating 36.8 per cent. of the UAE’s
GDP in 2008 and 42.7 per cent. of its export earnings (including re-exports) in 2008, according to data
produced by the UAE Ministry of Economy. Based on International Monetary Fund data (extracted from the
World Economic Outlook (April 2010)) real GDP growth in the UAE decreased by 0.7 per cent. in 2009 after
having increased by 5.1 per cent. in 2008, 6.1 per cent. in 2007 and 8.7 per cent. in 2006.
In November 2009, Moody’s reaffirmed the UAE’s long-term credit rating of Aa2 with a stable outlook
despite the default of Dubai World, the ratings downgrade of several UAE entities (including the Group) and
the general global economic downturn. On 23 April 2010, Moody’s again reaffirmed the UAE’s long-term
credit rating of Aa2 with a stable outlook. The principal reason cited for this high investment grade rating is
the assumption that the obligations of the federal government will be fully supported by Abu Dhabi.
93
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
The table below sets out selected economic indicators for the UAE for each of 2006, 2007, 2008 and 2009.
Population (in thousands) ............................................
GDP, real (% growth) ..................................................
GDP, in current prices (AED billion) ..........................
Nominal GDP growth rate (%) ....................................
Consumer Price Index (year 2000 = 100) ..................
Total exports and re-exports (FOB) (AED billion)......
Total exports in the hydrocarbon sector (AED billion)
Total re-exports (AED billion)(4) ..................................
Total imports (FOB) (AED billion) ............................
Trade balance (FOB) (AED billion) ............................
Current account balance (AED billion) ......................
Capital and financial account balance (AED billion) ..
Balance of payments, overall (AED billion)................
Average oil price (U.S.$ per barrel) ............................
AED exchange rate for each U.S. dollar......................
Notes:
(1)
(2)
(3)
(4)
2007
2008
2009(2)
2006(1)
––––––––– ––––––––– ––––––––– –––––––––
4,229
4,488
4,764
4,907
8.7
6.1
5.1
(0.7)
602.9
661.7
962.7
839.5
9.4
6.3
7.4
(0.2)
132.9
147.7
165.8
170.0
534.67
656.02
878.51
n/a(3)
257.44
271.13
374.92
n/a(3)
172.71
259.12
345.78
n/a(3)
323.36
485.17
647.42
n/a(3)
211.30
170.85
231.09
n/a(3)
132.28
72.13
81.82
n/a(3)
(58.19)
105.42
(203.06)
n/a(3)
23.89
183.24
(172.49)
n/a(3)
64.30
71.10
97.00
61.80
3.6725
3.6725
3.6725
3.6725
Results of 2005 census.
All 2009 figures are estimates.
As of the date of this Base Prospectus, the Central Bank of the UAE has not published 2009 figures for these items.
Including re-export of non-monetary gold.
Source: IMF World Economic Database (October 2009) and Central Bank of the UAE Quarterly Statistical Bulletin (September 2008)
The UAE population is estimated to have grown during 2009 as compared to 2008, and it is now estimated
that there are almost five million people living in the UAE, with males making up approximately 73 per cent.
of the population (due in large part to expatriate labour in the construction industry).
While the UAE enjoys good relations with other states in the GCC and its regional neighbours, the UAE does
have a long-standing territorial dispute with Iran over three islands in the Gulf and, as such, is not immune
to the political risks that have overshadowed the region. The economy remains heavily protected and nearly
all utilities and most major industries are controlled by the state. However, tight restrictions placed on foreign
investment are gradually being relaxed. For example, foreigners are not permitted to have a controlling
interest in UAE businesses and corporates. As a result of this rule, many of the Emirates have established
trade and industry free zones as a means of attracting overseas investment and diversifying the economy.
Despite the UAE’s membership in the World Trade Organisation, progress towards economic liberalisation
has been slow, but trade agreements with Europe and the United States are being negotiated.
94
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
CAPITALISATION OF THE GROUP
The following table sets out the Group’s consolidated cash and cash equivalents and capitalisation as of 30
September 2010. The information has been extracted without material adjustment from the Interim Financial
Statements and should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Group” and the Interim Financial Statements included elsewhere
in this Base Prospectus.
As of 30
September
2010(1)
––––––––––––
(AED millions)
Debt:
Borrowings – bank overdrafts ................................................................................................
Borrowings – bank loans ........................................................................................................
Loans from non-controlling interests ......................................................................................
Advances from non-controlling interests ................................................................................
Vendor financing ....................................................................................................................
Other borrowings ....................................................................................................................
Finance lease obligations ........................................................................................................
Total debt(2)
62.1
3,322.1
545.2
592.2
845.1
8.1
256.1
––––––––––––
............................................................................................................................
5,631.0
––––––––––––
Equity:
Share capital ............................................................................................................................
Reserves ..................................................................................................................................
Retained earnings ....................................................................................................................
Non-controlling interests ........................................................................................................
7,906.1
25,849.0
3,099.2
4,034.9
––––––––––––
Total equity ............................................................................................................................
40,889.2
––––––––––––
Total capitalisation(3) ..............................................................................................................
46,520.2
––––––––––––
Note:
(1)
(2)
(3)
All figures are unaudited.
“Total debt” is defined as the sum of the Group’s borrowings (comprised of bank overdrafts and bank loans), loans and advances from
non-controlling interests, vendor financing, other borrowings and finance lease obligations.
“Total capitalisation” is defined as the sum of the Group’s total debt and total equity.
Except as disclosed herein, there have been no material changes in the Group’s capitalisation since 30
September 2010.
95
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
SELECTED FINANCIAL INFORMATION FOR THE GROUP
The following tables set forth the Group’s selected consolidated financial data for the periods or dates
indicated and contain financial data extracted from the financial statements set out elsewhere in this Base
Prospectus as described in “Presentation of Financial and Other Information”. The selected historical
consolidated income statement, balance sheet and cash flow data as of 30 September 2010 and for the nine
months ended 30 September 2010 and 2009 have been derived from the Interim Financial Statements, which
are prepared in accordance with IAS 34 “Interim Financial Reporting”. The selected historical consolidated
income statement, balance sheet and cash flow data as of and for the years ended 31 December 2008 and
2009 have been derived from the IFRS Financial Statements, which are prepared in accordance with IFRS.
The selected historical consolidated income statement, balance sheet and cash flow data as of and for the
years ended 31 December 2007 and 2008 have been derived from the Etisalat GAAP Financial Statements,
which are presented in accordance with Etisalat GAAP.
Deloitte & Touche and PricewaterhouseCoopers have not issued an auditors’ report in respect of the Group’s
consolidated financial statements under IFRS as of and for the year ended 31 December 2008. However, a
reconciliation of profit for the year and shareholders’ equity as of and for the year ended 31 December 2008
under Etisalat GAAP to IFRS is contained in note 37 to the IFRS Financial Statements, which have been
audited by Deloitte & Touche and PricewaterhouseCoopers. Readers should consult their own professional
advisers for an understanding of the differences between IFRS and Etisalat GAAP and how those differences
might affect the financial information included in this Base Prospectus. The results of operations for any
period are not necessarily indicative of the results to be expected for any future period.
The selected historical consolidated financial data below should be read in conjunction with the Interim
Financial Statements, the IFRS Financial Statements and the Etisalat GAAP Financial Statements, including
the notes thereto, included elsewhere in this Base Prospectus. See also “Presentation of Financial and Other
Information”, “Risk Factors”, “Capitalisation of the Group” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”.
As a result of the transition to IFRS, financial data, including revenue, expenditures, assets and liabilities,
are presented in accordance with IFRS in respect of the years ended 31 December 2008 and 2009 and are
not comparable with such data presented in accordance with Etisalat GAAP in respect of the years ended
31 December 2007 and 2008.
96
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
Income Statement
The selected financial information set out in the tables below shows certain consolidated income statement
information for the nine months ended 30 September 2009 and 2010 and the years ended 31 December 2008
and 2009 under IFRS and for the years ended 31 December 2007 and 2008 under Etisalat GAAP.
Nine months ended 30 September 2009 and 2010 – IFRS
Nine months ended
30 September
––––––––––––––––––––
2009(1)
2010(1)
––––––––– –––––––––
(AED millions)
Revenue ..................................................................................................................
Operating expenses..................................................................................................
Share of results of associates and joint ventures ....................................................
Operating profit before federal royalty ..................................................................
Federal royalty ........................................................................................................
Operating profit ....................................................................................................
Finance income........................................................................................................
Finance costs ..........................................................................................................
Taxation ..................................................................................................................
Profit for the period ..............................................................................................
Non-controlling interests ........................................................................................
Profit for the period attributable to equityholders ............................................
EBITDA (unaudited)(2) ..........................................................................................
Adjusted EBITDA (unaudited)(2) ..........................................................................
23,706.4
(10,646.4)
368.1
–––––––––
13,428.1
(6,846.6)
–––––––––
6,581.5
392.5
(279.8)
(145.3)
–––––––––
6,548.8
297.8
–––––––––
6,846.6
–––––––––
8,400.9
14,879.4
23,325.2
(13,102.8)
503.9
–––––––––
10,726.3
(5,605.8)
–––––––––
5,120.6
716.0
(307.0)
(26.7)
–––––––––
5,502.8
103.0
–––––––––
5,605.8
–––––––––
7,276.4
12,378.2
Notes:
(1)
The financial data for the nine months ended 30 September 2009 and 2010 is extracted from the Interim Financial Statements and is
unaudited.
(2)
EBITDA and Adjusted EBITDA are non-IFRS financial measures that are used by management as an additional measure of
performance. EBITDA and Adjusted EBITDA are not defined by or presented in accordance with IFRS, are not a measure of
performance and should not be considered as an alternative to other IFRS measures.
The Group defines EBITDA as net income before interest, taxes, depreciation and amortisation. The Group calculates Adjusted
EBITDA as EBITDA excluding the effects of royalties and the share of results of joint ventures and associates. For further discussion
of non-GAAP measures, see “Presentation of Financial and Other Information — Presentation of Financial Information — NonGAAP Financial Measures”. See below for a reconciliation of EBITDA and Adjusted EBITDA to profit for the period.
Profit for the period ..........................................................................................................................
Plus: tax ............................................................................................................................................
Plus: finance costs ............................................................................................................................
Less: finance income ........................................................................................................................
Plus: depreciation ..............................................................................................................................
Plus: amortisation..............................................................................................................................
EBITDA ............................................................................................................................................
Less: Share of results of joint ventures and associates ....................................................................
Plus: Royalty ....................................................................................................................................
Adjusted EBITDA............................................................................................................................
97
Nine months ended
30 September
––––––––––––––––––––––––
2009
2010
––––––––––
––––––––––
(Unaudited)
(AED millions)
(IFRS)
6,548.8
5,502.8
145.3
26.7
279.8
307.0
(392.5)
(716.0)
1,267.8
1,556.6
551.5
599.2
––––––––––
––––––––––
8,400.9
7,276.4
––––––––––
––––––––––
(368.1)
(503.9)
6,846.6
5,605.8
––––––––––
––––––––––
14,879.4
12,378.2
––––––––––
––––––––––
––––––––––
––––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
Years ended 31 December 2008 and 2009 – IFRS
Year ended 31 December
––––––––––––––––––––
2008(1)
2009
––––––––– –––––––––
(AED millions)
(IFRS)
Revenue ..................................................................................................................
Operating expenses..................................................................................................
Share of results of associates and joint ventures ....................................................
Operating profit before federal royalty ..................................................................
Federal royalty ........................................................................................................
Operating profit ....................................................................................................
Gain on disposal of shares in an associate..............................................................
Finance income........................................................................................................
Finance costs ..........................................................................................................
Taxation ..................................................................................................................
Profit for the year ....................................................................................................
Non-controlling interests ........................................................................................
Profit for the year attributable to equityholders ......................................................
EBITDA (unaudited)(2) ..........................................................................................
Adjusted EBITDA (unaudited)(2) ........................................................................
29,359.7
(14,615.4)
472.7
–––––––––
15,216.9
(8,665.0)
–––––––––
6,552.0
1,783.7
415.3
(563.8)
(187.0)
–––––––––
8,000.2
510.6
–––––––––
8,510.8
–––––––––
10,819.9
19,012.1
30,831.4
(13,862.1)
682.1
–––––––––
17,651.3
(8,836.3)
–––––––––
8,815.0
–
583.1
(571.5)
(243.8)
–––––––––
8,582.7
253.6
–––––––––
8,836.3
–––––––––
11,349.5
19,503.8
Notes:
(1)
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
(2)
EBITDA and Adjusted EBITDA are non-IFRS financial measures that are used by management as an additional measure of
performance. EBITDA and Adjusted EBITDA are not defined by or presented in accordance with IFRS, are not a measure of
performance and should not be considered as an alternative to other IFRS measures.
The Group defines EBITDA as net income before interest, taxes, depreciation and amortisation. The Group calculates Adjusted
EBITDA as EBITDA excluding the effects of royalties and the share of results of joint ventures and associates. For further discussion
of non-GAAP measures, see “Presentation of Financial and Other Information — Presentation of Financial Information — NonGAAP Financial Measures”. See below for a reconciliation of EBITDA and Adjusted EBITDA to profit for the period.
Year ended 31 December
–––––––––––––––––––––––––
2008
2009
–––––––––––
–––––––––––
(Unaudited)
(AED millions)
(IFRS)
Profit for the year ..............................................................................................................................
Plus: tax ............................................................................................................................................
Plus: finance costs ............................................................................................................................
Less: finance income..........................................................................................................................
Plus: depreciation ..............................................................................................................................
Plus: amortisation ..............................................................................................................................
EBITDA ............................................................................................................................................
Less: Share of results of joint ventures and associates......................................................................
Plus: Royalty ....................................................................................................................................
Adjusted EBITDA............................................................................................................................
98
8,000.2
187.0
563.8
(415.3)
1,591.6
892.6
–––––––––––
10,819.9
–––––––––––
(472.7)
8,665.0
–––––––––––
19,012.1
–––––––––––
–––––––––––
8,582.7
243.8
571.5
(583.1)
1,603.9
930.6
–––––––––––
11,349.5
–––––––––––
(682.1)
8,836.3
–––––––––––
19,503.8
–––––––––––
–––––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
Years ended 31 December 2007 and 2008 – Etisalat GAAP
Year ended 31 December
––––––––––––––––––––
2007
2008
––––––––– –––––––––
(AED millions)
(Etisalat GAAP)
Revenue ..................................................................................................................
Operating expenses..................................................................................................
Share of results of associates and joint ventures ....................................................
Operating profit before royalty................................................................................
Royalty ....................................................................................................................
Operating profit after royalty ..............................................................................
Finance costs ..........................................................................................................
Deferred and current taxes ......................................................................................
Other income ..........................................................................................................
Profit for the year ....................................................................................................
Minority interest ......................................................................................................
Profit for the year attributable to equityholders ......................................................
EBITDA (unaudited)(1) ..........................................................................................
Adjusted EBITDA (unaudited)(1) ........................................................................
Note:
(1)
21,339.9
(7,813.7)
380.0
–––––––––
13,906.2
(7,296.6)
–––––––––
6,609.6
(503.1)
(122.3)
736.3
–––––––––
6,720.4
576.2
–––––––––
7,296.6
–––––––––
8,571.5
15,488.1
26,119.1
(11,379.7)
472.7
–––––––––
15,212.2
(8,665.0)
–––––––––
6,547.2
(413.6)
(176.7)
2,209.5
–––––––––
8,166.4
498.6
–––––––––
8,665.0
–––––––––
10,848.5
19,040.8
EBITDA and Adjusted EBITDA are non-IFRS financial measures that are used by management as an additional measure of
performance. EBITDA and Adjusted EBITDA are not defined by or presented in accordance with IFRS, are not a measure of
performance and should not be considered as an alternative to other IFRS measures.
The Group defines EBITDA as net income before interest, taxes, depreciation and amortisation. The Group calculates Adjusted
EBITDA as EBITDA excluding the effects of royalties and the share of results of joint ventures and associates. For further discussion
of non-GAAP measures, see “Presentation of Financial and Other Information — Presentation of Financial Information — NonGAAP Financial Measures”. See below for a reconciliation of EBITDA and Adjusted EBITDA to profit for the period.
Year ended 31 December
–––––––––––––––––––––––––
2007
2008
–––––––––––
–––––––––––
(Unaudited)
(AED millions)
(Etisalat GAAP)
Profit for the year ..............................................................................................................................
Plus: tax ............................................................................................................................................
Plus: finance costs ............................................................................................................................
Less: interest income ........................................................................................................................
Plus: depreciation ..............................................................................................................................
Plus: amortisation ..............................................................................................................................
EBITDA ............................................................................................................................................
Less: Share of results of joint ventures and associates......................................................................
Plus: Royalty ....................................................................................................................................
Adjusted EBITDA............................................................................................................................
99
6,720.4
122.3
503.1
(736.3)
1,368.2
593.8
–––––––––––
8,571.5
–––––––––––
(380.0)
7,296.6
–––––––––––
15,488.1
–––––––––––
–––––––––––
8,166.4
176.7
413.6
(425.8)
1,708.3
809.3
–––––––––––
10,848.5
–––––––––––
(472.7)
8,665.0
–––––––––––
19,040.8
–––––––––––
–––––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
Balance Sheet
The selected financial information set out in the tables below shows certain consolidated balance sheet
information as of 31 December 2008 and 2009 and as of 30 September 2010 under IFRS and as of 31
December 2007 and 2008 under Etisalat GAAP.
As of 31 December 2008 and 2009 and 30 September 2010 – IFRS
Other intangible assets ......................................................................
Property, plant and equipment ..........................................................
Investments in joint ventures and associates ....................................
Total non-current assets ....................................................................
Total current assets ............................................................................
Trade and other payables (current and non-current) ........................
Current borrowings ............................................................................
Total current liabilities ......................................................................
Non-current borrowings ....................................................................
Total non-current liabilities................................................................
Total equity ........................................................................................
As of
As of 30
31 December
September
–––––––––––––––––––– –––––––––
2008(1)
2009
2010(2)
––––––––– ––––––––– –––––––––
(AED millions)
(IFRS)
13,288.5
13,650.5
12,732.4
13,101.0
17,585.4
19,893.3
15,264.1
15,722.4
15,833.8
45,494.7
51,816.0
54,948.4
17,423.2
19,562.6
19,193.3
19,542.5
722.3
21,416.4
2,644.4
5,881.8
35,619.8
21,507.5
1,079.4
23,488.4
3,421.7
7,501.0
40,389.3
Notes:
(1)
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
(2)
The financial data as of 30 September 2010 is extracted from the Interim Financial Statements and is unaudited.
100
22,636.4
4,024.6
28,467.3
1,350.2
4,785.1
40,889.2
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
As of 31 December 2007 and 2008 – Etisalat GAAP
Fixed assets..............................................................................................................
Intangibles ..............................................................................................................
Licences ..................................................................................................................
Investments in joint ventures and associates ..........................................................
Total non-current assets ..........................................................................................
Debtors and prepayments ........................................................................................
Bank and cash balances ..........................................................................................
Total current assets ..................................................................................................
Creditors and accruals ............................................................................................
Amounts payable on acquisition of investments and licences................................
Bank borrowings ....................................................................................................
Proposed dividend ..................................................................................................
Total current liabilities ............................................................................................
Bank borrowings ....................................................................................................
Advances from investment partners ........................................................................
Loans from investment partners ..............................................................................
Amounts payable on acquisition of investments and licences................................
Non-current portion of creditors ............................................................................
Total non-current liabilities ....................................................................................
Total equity..............................................................................................................
As of 31 December
––––––––––––––––––––
2007
2008
––––––––– –––––––––
(AED millions)
(Etisalat GAAP)
11,876.0
14,108.2
1,686.8
2,825.6
12,199.5
12,642.7
13,407.5
15,169.7
39,547.1
45,284.8
2,046.8
2,917.1
9,432.6
11,294.9
12,900.6
16,787.1
13,230.5
1,045.7
343.0
1,746.9
17,665.4
3,140.9
608.9
1,643.0
2,057.6
756.2
8,887.3
25,895.0
16,330.2
2,063.2
722.3
2,096.3
22,849.6
1,648.3
608.9
387.2
1,044.0
840.1
5,621.3
33,601.0
Cash Flow
The selected financial information set out in the tables below shows certain consolidated cash flow
information for the nine months ended 30 September 2009 and 2010 and the years ended 31 December 2008
and 2009 under IFRS and for the years ended 31 December 2007 and 2008 under Etisalat GAAP.
Nine months ended 30 September 2009 and 2010 – IFRS
Nine months ended
30 September
––––––––––––––––––––
2009(1)
2010(1)
––––––––– –––––––––
(AED millions)
(IFRS)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net increase/(decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Effect of foreign exchange rate changes ................................................................
Cash and cash equivalents at 30 September ......................................................
Note:
(1)
9,027.1
7,566.7
(2,842.6)
(4,321.6)
(4,631.3)
(3,800.0)
––––––––– –––––––––
1,553.1
(554.8)
11,294.9
11,309.2
14.5
(104.3)
––––––––– –––––––––
12,862.5
10,650.1
––––––––– –––––––––
The financial data for the nine months ended 30 September 2009 and 2010 is extracted from the Interim Financial Statements and is
unaudited.
101
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:55 – eprint6 – 4224 Section 05
Years ended 31 December 2008 and 2009 – IFRS
Year ended 31 December
––––––––––––––––––––
2008(1)
2009
––––––––– –––––––––
(AED millions)
(IFRS)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net increase/(decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Effect of foreign exchange rate changes ................................................................
Cash and cash equivalents at 31 December ........................................................
Note:
(1)
10,596.4
(2,902.2)
(5,641.8)
–––––––––
2,502.4
9,432.6
(190.2)
–––––––––
11,294.8
–––––––––
10,124.7
(6,770.7)
(3,407.3)
–––––––––
(53.3)
11,294.9
67.7
–––––––––
11,309.3
–––––––––
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
Years ended 31 December 2007 and 2008 – Etisalat GAAP
Year ended 31 December
––––––––––––––––––––
2007
2008
––––––––– –––––––––
(AED millions)
(Etisalat GAAP)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net (decrease)/increase in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Exchange differences on translation of overseas operations ..................................
Cash and cash equivalents at 31 December ........................................................
102
10,874.3
10,853.1
(6,012.7)
(2,902.2)
(5,924.3)
(5,898.4)
––––––––– –––––––––
(1,062.7)
2,052.5
10,304.0
9,432.6
191.2
(190.2)
––––––––– –––––––––
9,432.5
11,294.9
––––––––– –––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF THE GROUP
The following discussion is based on the Group’s Interim Financial Statements, IFRS Financial Statements
and Etisalat GAAP Financial Statements.
The financial statements as of and for the year ended 31 December 2009 and the Etisalat GAAP Financial
Statements have been audited by Deloitte & Touche and PricewaterhouseCoopers, independent auditors, to
the extent and for the periods indicated in their reports thereon. The unaudited Interim Financial Statements
as of 30 September 2010 and for the nine months ended 30 September 2010 and 2009 are presented in
accordance with IAS 34 “Interim Financial Reporting”. The audited consolidated financial statements of the
Group as of and for the financial year ended 31 December 2009 (and the unaudited consolidated
comparatives as of and for the financial year ended 31 December 2008) were prepared in accordance with
IFRS issued by the International Accounting Standards Board. The audited consolidated financial statements
of the Group as of and for the financial years ended 31 December 2007 and 2008 were prepared in
accordance with the Company’s internal accounting policies, Etisalat GAAP. Deloitte & Touche and
PricewaterhouseCoopers have not issued an auditors’ report in respect of the unaudited consolidated
comparatives as of and for the financial year ended 31 December 2008. A reconciliation of profit for the year
and shareholders’ equity as of and for the year ended 31 December 2008 under Etisalat GAAP to IFRS is
contained in note 37 to the IFRS Financial Statements.
In reviewing the information in this section, readers should be aware that the Group is not presenting three
years of consolidated historical financial information prepared under a common set of accounting
principles. As a result, the discussion below compares the Group’s results of operations (i) for the nine
months ended 30 September 2009 and 2010 and the years ended 31 December 2009 and 2008 under IFRS
and (ii) for the years ended 31 December 2008 and 2007 under Etisalat GAAP. There are significant
differences between Etisalat GAAP and IFRS and, as a consequence, results of operations under Etisalat
GAAP are not necessarily comparable with results of operations under IFRS. For a discussion of the
principal differences between IFRS and Etisalat GAAP, see note 37 to the IFRS Financial Statements.
Readers should consult their own professional advisers for an understanding of the differences between
Etisalat GAAP and IFRS and how those differences might affect the financial information included in this
Base Prospectus.
Readers should read the following information together with the sections entitled “Selected Financial
Information for the Group” and “Capitalisation of the Group” and the Interim Financial Statements and the
Annual Financial Statements included in this Base Prospectus. This discussion may include forward looking
statements, including those described in “Cautionary Statement Regarding Forward Looking Statements”,
above, that involve risks and uncertainties. The Group’s actual results could differ materially from those
anticipated in these forward looking statements as a result of various factors, including those discussed
below and elsewhere in this Base Prospectus, particularly under the headings “Cautionary Statement
Regarding Forward Looking Statements” and “Risk Factors”. Except as may be required by applicable law,
the Group does not intend to update any forward looking statements for any reason, even if new information
becomes available or other events occur in the future.
TRANSITION TO IFRS; COMPARABILITY OF INFORMATION
The Group has adopted Standards and Interpretations issued by the International Accounting Standards
Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB as
of 31 December 2009 with a transition date of 1 January 2008. The IFRS Financial Statements include
audited 2009 and unaudited 2008 comparative financial information. For a reconciliation of profit for the
year and shareholders’ equity as of and for the year ended 31 December 2008 under Etisalat GAAP to IFRS,
see note 37 to the IFRS Financial Statements. See also “— Certain Significant Accounting Policies —
Summary of the transition to IFRS”.
The auditors’ report included elsewhere in this Base Prospectus in respect of the Group’s IFRS Financial
Statements as of and for the year ended 31 December 2009 has been issued only in respect of the Group’s
103
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
consolidated financial statements prepared in accordance with IFRS as of and for the year ended 31
December 2009. The Group has prepared consolidated financial statements under IFRS as of and for the year
ended 31 December 2008 and has included such financial information, for comparative purposes only, in its
IFRS Financial Statements. However, the Group’s auditors have not issued an auditors’ report in respect of
its consolidated comparative financial statements under IFRS as of and for the year ended 31 December
2008.
As a result of the transition to IFRS, financial data, including revenue, expenditures, assets and liabilities,
are presented in accordance with IFRS in respect of the years ended 31 December 2009 and 2008 and are
not comparable with such data presented in accordance with Etisalat GAAP in respect of the years ended 31
December 2008 and 2007.
OVERVIEW
Etisalat was founded in 1976 and is the leading and incumbent telecommunications provider in the UAE,
offering a wide range of mobile, fixed-line, internet and data telecommunications services to business,
residential and government customers. Etisalat was the sole provider of mobile and fixed-line
telecommunications services in the UAE until February 2007. As of 30 June 2010, its share of the UAE
mobile, fixed-line and internet service markets was 73 per cent., 84 per cent. and 95 per cent., respectively,
in terms of numbers of subscribers (Source: TRA and Company data). The Group’s ordinary shares are listed
on the Abu Dhabi Securities Exchange and its market capitalisation was approximately AED 84.6 billion
(U.S.$23.0 billion) as of 30 September 2010.
In 2004, Etisalat began forming and acquiring interests in subsidiaries, associates and joint ventures in order
to grow and carry out its international operations. Since then, the Group has significantly expanded its
international telecommunications operations through acquisitions of existing operators as well as by
acquiring new licences and building its own operations. It now has a presence in 17 countries outside the
UAE through its subsidiaries, associates and joint ventures in Saudi Arabia, Egypt, Sub-Saharan Africa,
Nigeria, Sudan, Tanzania, Pakistan, India, Afghanistan, Indonesia and Sri Lanka.
The UAE remains the Group’s principal operating market in terms of revenue, operating cash flow and
profitability. For the years ended 31 December 2008 and 2009, the Group had consolidated revenue of AED
29.4 billion and AED 30.8 billion, of which 90 per cent. and 85 per cent., respectively, was contributed by
the Group’s UAE telecommunications operations carried out by Etisalat. For the nine months ended
30 September 2009 and 2010, the Group had consolidated revenue of AED 23.7 billion and AED 23.3
billion, of which 83 per cent. and 76 per cent., respectively, was contributed by the Group’s UAE
telecommunications operations carried out by Etisalat. Outside of the UAE, Etisalat Misr in Egypt and
Atlantique Telecom in Sub-Saharan Africa are the largest of the Group’s subsidiaries in terms of revenue,
having generated in the aggregate 7 per cent. of the Group’s consolidated revenue for the year ended 31
December 2008, 12 per cent. for the year ended 31 December 2009 and 18 per cent. for the nine months
ended 30 September 2010.
The total mobile and fixed-line subscriber base of the Group as of 31 December 2009 was approximately
9.2 million in the UAE (including Etisalat and Thuraya) and 98.7 million for its international subsidiaries,
associates and joint ventures (of which the Group’s proportionate interest was approximately 34.7 million
subscribers, based on the percentage ownership interest of the Group in each company whose subscriber
numbers are included).
104
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The table below provides summary information on the Group’s subsidiaries and their contribution to the
Group’s consolidated revenue for the nine months ended 30 September 2010 and 2009. All of these
subsidiaries are controlled by the Group and therefore fully consolidated in the Group’s consolidated
financial statements as of and for the nine months ended 30 September 2010.
Nine months ended
30 September
––––––––––––––––––––––
2009(1)
2010(1)
––––––––– –––––––––
Area of
operation
Operating business
–––––––––––––––––––––
Equity
interest
(%)(2)
Contribution Contribution
to
to
consolidated consolidated
revenue (%) revenue (%)
––––––––– ––––––––– ––––––––– –––––––––
(IFRS)
Etisalat Misr ......................................................
Atlantique Telecom ..........................................
Canar Telecom ..................................................
Etisalat Afghanistan ..........................................
Zantel ................................................................
Etisalat DB India(3) ............................................
Egypt
Sub-Saharan
Africa
Sudan
Afghanistan
Tanzania
India
66.0
100.0
7.49
4.26
12.80
4.91
89.4
100.0
65.0
44.7
1.16
0.84
0.73
–
1.03
1.87
0.73
–
Notes:
(1)
Figures for the nine months ended 30 September 2009 and 2010 are unaudited.
(2)
Includes direct and indirect interests as of 30 September 2010.
(3)
The Group accounts for Etisalat DB India as a subsidiary because it exercises control over the entity.
For the nine months ended 30 September 2010, Etisalat Misr and Atlantique Telecom remained the most
significant of the Group’s international operations in terms of contribution to consolidated revenue. Etisalat
Misr and Atlantique Telecom contributed 12.8 per cent. and 4.9 per cent., respectively, to the Group’s
consolidated revenue for the nine months ended 30 September 2010.
105
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The table below provides summary information on the Group’s share of results of associates and joint
ventures for the nine months ended 30 September 2010. These associates and joint ventures were recorded
in Etisalat’s Interim Financial Statements using the equity method, and are presented in the line item “Share
of results of associates and joint ventures” under IFRS.
Operating business
–––––––––––––––––––––––––––––––––––––––––––––––––––––
Area of
operation
As of and for the
nine months ended
30 September
––––––––––––––––––––––
Share of
results of
Effective
associates
Economic
and joint
interest (%)(1) ventures(1)
––––––––– ––––––––– –––––––––
(AED
thousands)
(IFRS)
PTCL..................................................................................................
Pakistan
Mobily .............................................................................................. Saudi Arabia
XL ...................................................................................................... Indonesia
Etisalat Nigeria ..................................................................................
Nigeria
Thuraya ..............................................................................................
UAE
Others ................................................................................................
—
Total share of results of associates and joint ventures ................
Note:
(1)
23.4
27.5
13.3
40.0
28.0
—
95,374
731,013
105,911
(393,745)
(30,201)
(4,448)
–––––––––
503,904
–––––––––
All figures are unaudited.
For the nine months ended 30 September 2010, the Group’s total share of results of associates and joint
ventures was AED 503.9 million compared to AED 368.1 million for the comparable period in 2009.
RECENT DEVELOPMENTS
In February 2010, the Group acquired the remaining shares of Atlantique Telecom it did not own from a
single local shareholder, representing 18 per cent. of the outstanding shares, for U.S.$75 million (AED 276
million), thereby increasing its ownership to 100 per cent.
In March 2010, the Group acquired additional shares representing a 14 per cent. shareholding of Zantel, thus
increasing the Group’s total shareholding from 51 to 65 per cent., for consideration of U.S.$16 million (AED
58.9 million).
During the three months ended 30 June 2010, the Group acquired, for consideration of €86 million (AED
427 million), an additional 8.6 million shares of Canar, increasing the Group’s shareholding of Canar to 89.4
per cent.
The Group acquired, for consideration of U.S.$24 million (AED 89 million) an additional one share in
Etisalat DB India. This acquisition was in relation to the purchase by Etisalat DB India of the share capital
of Allianz Infratech Private Limited.
On 3 November 2010 Etisalat made a binding conditional offer to purchase a 46 per cent. interest
(representing 51 per cent. of total share capital and voting rights) in Mobile Telecommunications Company
K.S.C., a telecommunications group operating under the brand name Zain (Zain). The proposal will
terminate unless the parties have entered into definitive transaction documents by 15 January 2011. Because
approximately 10 per cent. of Zain’s shares are treasury stock, the offer, if completed (and provided that 10
per cent. of Zain’s shares remain treasury stock), will give Etisalat a controlling majority in Zain. Etisalat is
offering 1.70 Kuwaiti Dinar per share, which values the acquisition at approximately USD 11 billion (AED
106
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
40.4 billion). The acquisition is subject to several conditions precedent including customary due diligence,
negotiations with and commitments from the selling shareholders and Zain, and both Zain and Etisalat
receiving necessary regulatory approvals.
SIGNIFICANT FACTORS AFFECTING FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As a result of the Group’s transition to IFRS, the presentation of the Group’s results of operations and the
line items in the IFRS Financial Statements are not directly comparable with those presented in the Etisalat
GAAP Financial Statements. See “Presentation of Financial and Other Information — Presentation of
Financial Information”.
Revenue Principally Derived from UAE Telecommunications Businesses
The UAE remains the Group’s principal operating market in terms of revenue, operating cash flow and
profitability, and it is this revenue that has provided the financing that historically allowed the Group to
pursue expansion opportunities in other markets. In the nine months ended 30 September 2009, 83 per cent.
of the Group’s revenue was derived from the provision of telecommunications services in the UAE by
Etisalat, compared to 76 per cent. for the comparable period in 2010 (in both cases, as presented under
IFRS). In the year ended 31 December 2008, 90 per cent. of the Group’s revenue was derived from the
provision of telecommunications services in the UAE by Etisalat, compared to 85 per cent. in 2009 (in both
years, as presented under IFRS). Of the Group’s consolidated revenue in the years ended 31 December 2008
and 2009, and the nine months ended 30 September 2010, 51 per cent., 45 per cent. and 37 per cent.,
respectively, was derived from the provision of mobile telecommunications services in the UAE (in all cases,
as presented under IFRS).
Mobile telecommunications services
Revenue from mobile telecommunications services is primarily affected by (1) the number of the Group’s
active mobile customers in the UAE, which in turn is affected by the churn among those customers (see
“Description of the Group – UAE Operations – Mobile – Churn among UAE mobile customers”) and (2) the
amount spent by those customers, as measured by ARPU in relation to outgoing voice revenue. See “—
Mobile and fixed-line ARPU among UAE customer base”. The Group does not currently measure ARPU
related to data services provided to mobile telecommunications customers, and revenue from these services
is reflected in the Group’s data services sub-segment rather than the sub-segment for mobile revenue. Mobile
customer growth in any market depends on a number of factors, including pricing, quality of service,
availability of new services, population growth, the level of competition to obtain new customers and retain
existing ones, churn and general economic conditions. Revenue from mobile customers is driven primarily
by traffic volume (both national and IDD) and tariffs. Tariffs in the UAE are driven both by the competitive
environment and the regulator, as all tariffs (including promotions) in the UAE are subject to pre-approval
by the regulator. Increasing competition has exerted increased pressure on Etisalat to propose lower tariff
structures and promotions to the regulator, though management believes that mobile tariffs will stabilise in
the near to medium term. However, regulatory developments such as mobile number portability and carrier
pre-selection, may have an impact on the tariff structures Etisalat offers to its mobile subscribers in the UAE.
See “Description of the Group – UAE Operations – Regulation”.
107
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Fixed-line, data and internet services
The Group also derives telecommunications revenue in the UAE from the provision of fixed-line services,
data services and internet services by Etisalat. The revenue and percentage contribution of Etisalat’s services
in the UAE to the Group’s total revenue are set forth in the table below.
Nine months ended 30 September
––––––––––––––––––––––––––––––––––––––––––––––
2009(1)
2010(1)
–––––––––––––––––––––– ––––––––––––––––––––––
UAE Service
% of
% of
Revenue
Group’s
Revenue
Group’s
(AED billions) Consolidated (AED billions) Consolidated
(IFRS)
Revenue
(IFRS)
Revenue
––––––––––––––––––––––––––––––––––––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Fixed-line services........................................................
2.2
9.2%
1.9
8.1%
Data services ................................................................
2.9
12.4%
2.8
11.9%
Internet services ..........................................................
1.9
8.0%
2.2
9.3%
Note:
(1)
Unaudited.
Fixed-line penetration in the UAE has remained stable at approximately 30 per cent. over the three years
ended 31 December 2009. As of 30 June 2010, fixed-line penetration in the UAE was 27.9 per cent. (Source:
TRA Statistics).
Penetration rates for internet services in the UAE were 18.5 per cent., 25.2 per cent., 26.9 per cent. and 26.6
per cent. as of 31 December 2007, 2008 and 2009 and 30 June 2010, respectively (Source: TRA Statistics;
TRA Report – “UAE Telecommunications Sector Developments and Indicators” (May 2010)). These
penetration rates are relatively low compared to North America and Western Europe. In order to increase the
penetration of internet services, Etisalat has invested and continues to invest in network infrastructure to
deploy new technologies, including fixed (GPON, FTTH) and mobile (WiMAX, 3G broadband) services,
offering significantly higher speed access for tariffs only slightly higher than previously offered and
introducing new bundled packages. See “— Significant Capital and Investment Expenditure” and
“Description of the Group — UAE Operations — Customers, products and services”.
Mobile and fixed-line ARPU among UAE customer base
In addition to the number of customers, revenue generated by the Group’s mobile and fixed-line
telecommunications services is influenced by the amount of revenue generated by each of those customers
for voice services. Data and internet revenue generated by mobile and fixed-line customers is not included
in the Group’s calculation of mobile or fixed ARPU. See “Presentation of Financial and Other Information
— Presentation of Industry, Market and Customer Data”.
The tables below show ARPU for the Group’s UAE mobile and fixed-line businesses for the nine months
ended 30 September 2009 and 2010 (presented according to IFRS), the years ended 31 December 2008 and
2009 (presented according to IFRS) and the years ended 31 December 2007 and 2008 (presented according
to Etisalat GAAP).
Nine months ended 30 September 2009 and 2010 – IFRS
Nine months ended
30 September
––––––––––––––––––––
2009
2010
––––––––– –––––––––
(AED)
(IFRS)(1)
Mobile ARPU – postpaid ........................................................................................
Mobile ARPU – prepaid..........................................................................................
294
230
126
102
––––––––– –––––––––
Blended mobile ARPU ..........................................................................................
146
118
Fixed-line ARPU ....................................................................................................
189
171
108
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Years ended 31 December 2008 and 2009 – IFRS
Year ended
31 December
––––––––––––––––––––
2008
2009
––––––––– –––––––––
(AED)
(IFRS)(1)
Mobile ARPU – postpaid ........................................................................................
Mobile ARPU – prepaid..........................................................................................
374
278
142
120
––––––––– –––––––––
Blended mobile ARPU ..........................................................................................
166
138
Fixed-line ARPU ....................................................................................................
201
185
Years ended 31 December 2007 and 2008 – Etisalat GAAP
Year ended
31 December
––––––––––––––––––––
2007
2008
––––––––– –––––––––
(AED)
(Etisalat GAAP)(1)
Mobile ARPU – postpaid ........................................................................................
Mobile ARPU – prepaid..........................................................................................
413
373
151
143
––––––––– –––––––––
Blended mobile ARPU ..........................................................................................
176
167
Fixed-line ARPU ....................................................................................................
206
201
Note:
(1)
ARPU is unaudited. See “Presentation of Financial Information” and note 37 of the IFRS Financial Statements for a description of
the differences between Etisalat GAAP and IFRS.
Market penetration for mobile customers in the UAE is relatively high, with penetration rates per 100
inhabitants of 164 at the end of 2007, 190 at the end of 2008, 204 at the end of 2009 and 197 as of 30 June
2010 (Source: TRA Statistics; TRA Report – “UAE Telecommunications Sector Developments and
Indicators” (May 2010)). Reflecting this and the fact that the vast majority of customers are prepaid
subscribers, the average usage levels of new prepaid customers tends to be lower than that for the existing
subscriber base, which in turn has caused ARPU to decline. The Group believes that several factors have
contributed to this trend, including increased usage of SMS, rather than voice services, and the various tariff
packages the Group has offered to attract new customers. SMS revenue is not included in mobile ARPU.
Many new mobile customers are younger retail customers who typically use SMS heavily, but generate less
mobile voice traffic than the Group’s existing mobile customers.
Furthermore, while the introduction of competition in the telecommunications market in the UAE resulted
in overall subscriber growth, it also led to decreases in Etisalat’s blended mobile ARPU from AED 176 to
AED 167 (a decrease of 5.1 per cent.) for the years ended 31 December 2007 and 2008 under Etisalat GAAP,
respectively, and from AED 166 to AED 138 (a decrease of 16.3 per cent.) for the years ended 31 December
2008 and 2009 under IFRS, respectively. Etisalat’s blended mobile ARPU continued to decrease, from AED
146 to AED 118 (a decrease of 19.2 per cent.) for the nine months ended 30 September 2009 and 2010,
respectively. This decline was driven principally by decreasing voice usage and IDD usage as a result of
increasing competition from du, the use of unlicensed internet telephony services, callbacks from
international destinations with relatively cheaper IDD rates than those in the UAE, weaker economic
conditions in the UAE leading to reduced population growth and fewer expatriate workers and, to a lesser
extent, by the introduction of new promotions including subsidised rates on international calls and free
minutes to subscribers. To counter this trend, Etisalat is focusing on introducing more value-added services,
such as specialised media content and enhanced mobile internet services, which management expects will
help Etisalat to increase its revenue from data services in an effort to offset the decline in its mobile ARPU
and to retain its high customer-value subscribers in a competitive market environment. See “Description of
the Group — UAE Operations — Mobile”.
109
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The overall decrease in fixed-line ARPU from 2007 to 2009, which continued during the nine months ended
30 September 2010, was driven by similar factors to the decline in mobile ARPU, in particular the decrease
in fixed-line voice usage and IDD usage, as well as fixed-to-mobile substitution, offset to some extent by an
increase in fixed-line rental revenue from fixed-lines used for internet services. Competition from du, the
second operator in the UAE telecommunications market, has been a lesser factor in this decrease as du has
only commenced fixed-line operations in a limited number of regions within the UAE. However, fixed-line
ARPU may be affected by anticipated regulatory changes such as the wholesale bitstream access service that
is being discussed between Etisalat, du and the TRA. See “Description of the Group – UAE Operations –
Regulation”.
Tariffs, both fixed-line and mobile, are required to be pre-approved by the TRA, and any changes must also
be pre-approved by the TRA. The introduction of du in 2007 led to significant changes in Etisalat’s mobile
tariff structure, including segment-targeted promotions and tariffs (such as one-country international calling
plans, peak and off-peak plans). In addition, the significant number of new promotional offers introduced by
du and Etisalat during the period from 2007 to 2009 and through 30 September 2010 led to a decline in
effective tariffs (or net tariffs after spreading the value of any promotional offers over the applicable contract
term).
Growth in International Telecommunications Businesses
Although historically the Group has derived most of its revenues from operations in the UAE, the portion of
its revenues derived from international operations has increased significantly over the past three years and
the nine months ended 30 September 2010, and the Group expects that revenue from international operations
as a percentage of consolidated revenue will continue to increase in the future. Outside of the UAE, the
Group primarily provides mobile telecommunications services (including data), although it also provides
fixed-line services in Pakistan (through its associate PTCL) and in Sudan (through its subsidiary Canar) and
is deploying internet services in certain markets such as Egypt (through its subsidiary Etisalat Misr).
Revenue from the Group’s consolidated international operations has increased both in absolute and
proportional terms over the periods under review. In 2007, this revenue, as measured under Etisalat GAAP,
amounted to AED 935 million (equal to 4.4 per cent. of total consolidated revenue in that year). In 2008, this
revenue, as measured under IFRS, was AED 2,329.7 million (equal to 7.9 per cent. of total consolidated
revenue in that year) and increased to AED 3,761.9 million in 2009 (equal to 12.2 per cent. of total
consolidated revenue in that year). The Group’s international operations accounted for AED 3,447.6 million
(or 14.5 per cent.) and AED 5,246.7 million (or 22.5 per cent.) of the Group’s consolidated revenue for the
nine months ended 30 September 2009 and 2010, respectively (in both cases, as presented under IFRS). As
a result of this growth in the Group’s international operations, the Group’s consolidated results include
significant year-on-year changes due to the inclusion of the results of entities created or developed by this
expansion.
The Group’s growth in international operations has been primarily funded through operating cash flow
generated by the Group’s UAE business, and, to a lesser extent, through financing at the level of the Group’s
subsidiaries, associates and joint ventures. The Group’s capital expenditures in its international operations
have included increasing its stake in existing subsidiaries (such as its acquisition of the balance of shares in
Atlantique Telecom, thereby increasing its ownership to 100 per cent.) and network infrastructure
construction, expansion and maintenance (primarily in Egypt, Sub-Saharan Africa, India and Nigeria). See
“— Significant Factors Affecting Financial Condition and Results of Operations — Significant Capital and
Investment Expenditure” and “— Liquidity and Capital Resources — Cash Flow”.
The Group’s principal international subsidiaries by revenue are Etisalat Misr and Atlantique Telecom.
Etisalat Misr
In May 2007, Etisalat Misr commenced operations as the third mobile telecommunications services provider
in Egypt. For the years ended 31 December 2007 and 2008, Etisalat Misr contributed 1.7 per cent. and 3.8
per cent., respectively, of the Group’s consolidated revenue, presented in accordance with Etisalat GAAP.
For the years ended 31 December 2008 and 2009 and the nine months ended 30 September 2010, Etisalat
110
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Misr contributed 4.2 per cent., 8.5 per cent. and 12.8 per cent., respectively, of the Group’s consolidated
revenue, presented in accordance with IFRS.
The following table presents certain summary information about Etisalat Misr for the periods since its
commencement of operations in 2007 and consolidation in the Group’s financial statements. See also
“Description of the Group — International Operations — Egypt – Etisalat Misr”.
Year ended 31 December
––––––––––––––––––––––––––––––––––––––––––––––––
2007(1)
2008(1)
2009(1)
––––––––––––––– ––––––––––––––– –––––––––––––––
(IFRS)
(Etisalat GAAP)
Mobile subscribers(2) ..........................................
Mobile ARPU(3) ..................................................
Capital expenditure(4)(5) ......................................
Notes:
(1)
(2)
(3)
(4)
(5)
3,115
22.0
1,451
6,812
20.3
1,288
14,243
20.0
1,729
Unaudited.
Thousands of subscribers, as of 31 December of each year.
ARPU measured in AED per month.
Presented in accordance with Etisalat GAAP for 2007 and IFRS for 2008 and 2009.
AED millions. Capital expenditure for the year ended 31 December 2007 includes net expenditures on purchases of fixed assets.
Capital expenditure for the years ended 31 December 2008 and 2009 includes net expenditures on purchases of fixed and intangible
assets.
Etisalat Misr had 17.4 million mobile subscribers and its blended mobile ARPU was AED 19.3 as of and for
the nine months ended 30 September 2010. Etisalat Misr’s capital expenditure on fixed and intangible assets
for the nine months ended 30 September 2010 was AED 519 million.
Atlantique Telecom
In April 2005, the Group acquired a 50 per cent. shareholding in Atlantique Telecom. This stake was
increased to 70 per cent. in April 2007, to 82 per cent. in May 2008 and to 100 per cent. in February 2010.
Atlantique Telecom has been consolidated in the Group’s financial results since June 2007. Starting in 2008,
the Group ceased to exercise control over the entity carrying out operations in Burkina Faso, and, pending
resolution of the dispute between the entity’s shareholders, the Group has not consolidated the results of
Burkina Faso in the results of Atlantique Telecom or the Group in the IFRS Financial Statements or the
Etisalat GAAP Financial Statements. See “Description of the Group — Litigation”. Etisalat has 100 per cent.
ownership of Etisalat Benin; however, it is managed by Atlantique Telecom and its results are included in the
results of Atlantique Telecom for convenience of presentation.
In the years ended 31 December 2007 and 2008, Atlantique Telecom contributed 2.1 per cent. and 3.4 per
cent., respectively, of the Group’s consolidated revenue (presented in accordance with Etisalat GAAP). In
the years ended 31 December 2008 and 2009 and the nine months ended 30 September 2010, Atlantique
Telecom contributed 2.9 per cent., 3.1 per cent. and 4.9 per cent., respectively, of the Group’s consolidated
revenue (presented in accordance with IFRS). This increase in contribution was driven primarily by an
increase in the revenue of Atlantique Telecom, which was driven by an increase in the number of mobile
subscribers, offset in part by significant declines in mobile ARPU.
111
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The following table presents certain summary information about Atlantique Telecom from its date of full
consolidation in 2007. See also “Description of the Group — International Operations — Sub-Saharan
Africa – Atlantique Telecom”.
Year ended 31 December
––––––––––––––––––––––––––––––––––––––––––––––––
2007(1)
2008(1)(2)
2009(1)(2)
––––––––––––––– ––––––––––––––– –––––––––––––––
(IFRS)
(Etisalat GAAP)
Mobile subscribers(3) ..........................................
Total mobile ARPU(4)(5) ......................................
Capital expenditure(5)(6) ......................................
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
2,850
47
38
3,742
40
(74)(7)
4,771
29
530
All figures are unaudited.
Does not include operations in Burkina Faso for part of 2008 and all of 2009.
Thousands of subscribers, as of 31 December in each year.
ARPU measured in AED per month.
Presented in accordance with Etisalat GAAP for 2007 and IFRS for 2008 and 2009.
AED millions. Capital expenditure for the year ended 31 December 2007 includes net expenditures on purchases of fixed assets.
Capital expenditure for the years ended 31 December 2008 and 2009 includes net expenditures on purchases of fixed and intangible
assets.
Capital expenditure is negative for the year ended 31 December 2008 due to the impact of the de-consolidation of Burkina Faso from
Atlantique Telecom.
Atlantique Telecom had 5.6 million mobile subscribers and its blended mobile ARPU was AED 25.6 as of
and for the nine months ended 30 September 2010. Atlantique Telecom’s capital expenditure on fixed and
intangible assets for the nine months ended 30 September 2010 was AED 280 million.
Transition to IFRS and Segmental Analysis
Since its transition to IFRS, the Group presents information relating to its operating segments in accordance
with IFRS 8. See note 4 to the IFRS Financial Statements. The Group views its business as being divided
into UAE and international business segments.
Segment results represent operating profit before federal royalty and the impact of IFRS adjustments earned
by each segment without allocation of finance income and finance costs.
The following table shows the Group’s revenue and results by segment for the nine months ended 30
September 2010 and 2009.
Nine months ended 30 September 2010(1)
––––––––––––––––––––––––––––––––––––––––––––––––––––
UAE
International Eliminations Consolidated
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
(AED millions)
Revenue
External sales..........................................
Inter-segment sales ................................
18,078.5
5,246.7
–
23,325.2
208.9
–
(208.9)
–
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Total revenue ..........................................
18,287.3
5,246.7
(208.9)
23,325.2
Segment result ........................................
4,715.1
10.2
395.3
5,120.6
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Finance income ......................................
716.0
Finance cost ............................................
(307.0)
––––––––––––
Profit before tax ....................................
5,529.5
––––––––––––
112
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Nine months ended 30 September 2009(1)
––––––––––––––––––––––––––––––––––––––––––––––––––––
UAE
International Eliminations Consolidated
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
(AED millions)
Revenue
External sales..........................................
Inter-segment sales ................................
20,258.8
3,447.6
–
23,706.4
19.5
–
(19.5)
–
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Total revenue ..........................................
20,278.3
3,447.6
(19.5)
23,706.4
Segment result ........................................
6,951.6
(424.9)
54.9
6,581.5
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Finance income ......................................
392.5
Finance cost ............................................
(279.8)
––––––––––––
Profit before tax ....................................
6,694.2
––––––––––––
Notes:
(1)
The financial data for the nine months ended 30 September 2009 and 2010 is extracted from the Interim Financial Statements and is
unaudited.
The following table shows the Group’s revenue and results by segment for the years ended 31 December
2009 and 2008.
Year ended 31 December 2009
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
International Eliminations Adjustments(2) Consolidated
UAE
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(AED millions)
Revenue
External sales..........................................
Inter-segment sales ................................
23,171.0
3,761.9
–
3,898.4
30,831.3
25.9
–
(25.9)
–
–
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Total revenue ..........................................
23,196.9
3,761.9
(25.9)
3,898.4
30,831.3
Segment result ........................................
8,843.2
(238.2)
66.6
143.3
8,814.9
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Finance income ......................................
583.1
Finance cost ............................................
(571.5)
–––––––––
Profit before tax ....................................
8,826.5
–––––––––
Year ended 31 December 2008(1)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
International Eliminations Adjustments(2) Consolidated
UAE
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(AED millions)
Revenue
External sales..........................................
Inter-segment sales ................................
23,789.4
2,329.7
3,240.5
29,359.6
28.8
(28.8)
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Total revenue ..........................................
23,818.2
2,329.7
(28.8)
3,240.5
29,359.6
Segment result ........................................
7,481.2
(1,023.2)
89.2
4.7
6,551.9
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Finance income ......................................
415.3
Finance cost ............................................
(563.8)
Gain on disposal of shares in an
associate..............................................
1,783.7
–––––––––
Profit before tax ....................................
8,187.2
–––––––––
Notes:
(1)
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
(2)
Effect of IFRS adjustments.
113
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
For the nine months ended 30 September 2010, the international segment recorded total revenue of AED
5,246.7 million, an increase of AED 1,799.1 million, or 52.2 per cent., from revenue of AED 3,447.6 million
for the comparable period in 2009. For the year ended 31 December 2009, the international segment recorded
total revenue before IFRS adjustments of AED 3,761.9 million, an increase of AED 1,432.1 million, or 61.5
per cent., from revenue of AED 2,329.7 million for 2008. In both cases, the increase was driven primarily by
growth in Etisalat Misr’s and Etisalat Afghanistan's revenue, and to a lesser extent, growth in Atlantique
Telecom’s revenue. See “— Growth in international telecommunications businesses”.
In terms of segment results, the international segment recorded a gain of AED 10.2 million for the nine
months ended 30 September 2010, compared to a loss of AED 424.9 million for the comparable period in
2009, an improvement of AED 435.1 million, or 102.4 per cent. The improvement in the international
segment result was attributable to the improvements in Etisalat Misr's and Etisalat Afghanistan's operations.
In terms of segment results, the international segment recorded a loss of AED 238.2 million for the year
ended 31 December 2009, compared to a loss of AED 1,023.2 million for 2008, an improvement of AED
785.0 million, or 76.7 per cent. This improvement in the segment result was due to the improvement in
Etisalat Misr’s and Atlantique Telecom’s operations. Changes in the UAE segment over the periods under
review were driven principally by the factors discussed below in “— Results of Operations”.
Royalties and Tax in the UAE
The Group pays a royalty to the UAE Government equivalent to 50 per cent. of its annual consolidated profit
as defined by UAE law. The Group’s royalty for 2008 and prior periods was calculated on the basis of the
Group’s consolidated net profit under Etisalat GAAP and for 2009 was and in subsequent periods is expected
to be calculated on the basis of IFRS consolidated net profit. The royalty liability is accrued monthly, and
the aggregate accrued amount for a fiscal year is paid to the Ministry of Finance in the following year in
monthly instalments, following the Group’s annual general meeting, from April to December.
The table below summarises the Group’s royalty charges incurred for the years ended 31 December 2007,
2008 and 2009:
Year ended 31 December
–––––––––––––––––––––––––––––––
2009
2007
2008(1)
––––––––– ––––––––– –––––––––
(AED thousands)
(Etisalat
GAAP)
Royalty charges..................................................................................
Note:
(1)
7,296,644
(IFRS)
8,664,984
8,836,346
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
Royalty for the nine months ended 30 September 2010 was AED 5,605.8 million compared to AED 6,846.6
million for the comparable period in 2009.
The Group’s operations in the UAE are not presently subject to any tax liability in the UAE on income or
assets.
The Group incurs regulatory costs in the UAE, which include licence fees, an ICT fund contribution,
spectrum fees, numbering fees, a share of costs relating to the number portability system and domain name
registration fees. See “Description of the Group — UAE Operations — Regulation — Regulation of Etisalat’s
Conduct”.
The Group incurs taxes in respect of its international operations on a country-by-country basis in accordance
with local tax laws.
Significant Capital and Investment Expenditure
The Group has a strong commitment to network quality and new technologies as reflected in the construction
and upgrading of its network infrastructure, as well as making of significant of investment expenditures to
114
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
increase its ownership in subsidiaries, associated companies and other entities and the acquisition of
telecommunications licences, including in Egypt and India. See “— Liquidity and Capital Resources — Cash
Flow” and “— Capital Expenditures”. As a result, its capital and investment expenditures, including in the
UAE, have been substantial.
The table below sets forth the Group’s capital expenditures (which include the amounts used for purchases
of fixed assets and, other than in respect of the year ended 31 December 2007, intangible assets) in the UAE
and internationally for 2007, 2008 and 2009:
Year ended 31 December
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2007(1)
2008(1)
2009(1)
––––––––––––––––––––– ––––––––––––––––––––– –––––––––––––––––––––
(Etisalat GAAP)
(IFRS)
Capital
expenditure
(AED millions)(2) % of total
Capital
expenditure
Capital
expenditure
(AED millions)(3)
% of total (AED millions)(3) % of total
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
UAE ..................................
1,590
46
1,985
54
2,544
37
International ....................
1,870
54
1,676
46
4,220
63
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Total ..................................
3,460
100
3,661
100
6,764
100
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
–––––––––
––––––––– –––––––––
Notes:
(1)
All figures are unaudited and are derived from management accounts.
(2)
Includes the Group’s net expenditures on purchases of fixed assets.
(3)
Includes the Group’s net expenditures on the purchase of fixed and intangible assets.
The Group’s capital expenditures for the nine months ended 30 September 2010 were AED 3,436 million.
The UAE expenditures amounted to AED 1,475 million or 43 per cent. of the of the Group’s total capital
expenditures for the nine months ended 30 September 2010. International expenditures accounted for AED
1,961 million, which was 57 per cent. of the Group’s total capital expenditures for the nine months ended 30
September 2010.
In each of the years ended 31 December 2007, 2008 and 2009, and the nine months ended 30 September
2010 capital expenditures were principally funded from operating cash flow. The Group expects its
depreciation charges to increase in future periods, due to the increases in the Group’s plant, property and
equipment as a result of such capital expenditures, and also expects increases in its amortisation charges,
driven by investments in licences in Egypt, Nigeria and India.
Demographic and Economic Trends
The Group’s revenue is driven by overall market demand for telecommunications services in the markets
served by the Group, which is in turn directly affected by a number of macroeconomic and other trends. In
particular, demand for the Group’s services depends primarily on a number of demographic and economic
factors, all of which are outside of its control, such as population growth and gross domestic product (GDP).
These factors vary substantially across the markets in which the Group operates and have historically
impacted the Group’s results of operations. Future changes in these demographic and economic factors could
have a material effect on the Group’s business, financial condition, results of operations and prospects.
Management believes that the UAE has a favourable demographic profile for a telecommunications operator.
It has been among the fastest growing societies in the region in terms of population during the periods under
review. Based on data provided by the CIA World Factbook, the UAE population is growing at a rate of 3.7
per cent. per year, with more than one-fifth of the population being less than 14 years old and less than 1 per
cent. 65 years old or over (2009 estimates). Further, expatriates, a group that is mainly composed of males
in the 25-45 year old age group, represented more than 70 per cent. of the total UAE population (2009
estimates) (Source: CIA World Factbook).
115
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The recent financial crisis triggered a slowdown in the UAE economy, which has resulted in expatriates
leaving the country as a result of unemployment. In addition, real GDP growth has decreased by 0.7 per cent.
in the year ended 31 December 2009 after having increased by 5.1 per cent. in 2008, 6.1 per cent. in 2007
and 8.7 per cent. in 2006. See “Overview of the UAE”. However, the Group believes that slow recovery in
economic activities should help the country to maintain its current population. Etisalat has continued to focus
mainly on retaining its higher customer-value subscribers who spend more than AED 500 per month, which
mostly comprise the local population.
PRINCIPAL DIFFERENCES BETWEEN IFRS AND ETISALAT GAAP
Information relating to the first-time adoption of IFRS, including the reconciliation of consolidated
shareholders’ equity and profit, as well as information relating to principal differences between IFRS and
Etisalat GAAP, is set out in note 37 to the IFRS Financial Statements.
The Group adopted the Standards and Interpretations issued by the International Accounting Standards
Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB as
of 31 December 2009 with a transition date of 1 January 2008.
The reconciliations set out below show the adjustments applied to the Group’s:
•
shareholders’ equity in accordance with Etisalat GAAP to derive IFRS balances as of 31 December
2008; and
•
profit in accordance with Etisalat GAAP to derive IFRS balances for the year ended 31 December
2008.
The significant adjustments impacting the results and net assets of the Group are further described below.
Reconciliation of Consolidated Shareholders’ Equity for the Year Ended 31 December 2008
As of
31 December
2008
––––––––––––
(AED thousands)
Total shareholders’ equity under previous accounting policies ........................................
Revenue recognition ................................................................................................................
Available-for-sale financial assets ..........................................................................................
Financial liabilities ..................................................................................................................
Derivative financial instruments ..............................................................................................
Lease classification..................................................................................................................
Proposed dividend ..................................................................................................................
Put options ..............................................................................................................................
Other adjustments ....................................................................................................................
Total adjustments ..................................................................................................................
Equity attributable to equityholders of the Corporation..........................................................
Non-controlling interests ........................................................................................................
Consolidated equity under IFRS..........................................................................................
116
29,044,508
(83,221)
130,972
129,409
(44,900)
(757)
2,096,325
(1,205)
160,842
––––––––––––
2,387,465
31,431,973
4,187,789
––––––––––––
35,619,762
––––––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Reconciliation of Profit for the Year Ended 31 December 2008
Year ended
31 December
2008
––––––––––––
(AED thousands)
Profit for the year under previous accounting policies ......................................................
Revenue recognition ................................................................................................................
Financial liabilities ..................................................................................................................
Derivative financial instruments ..............................................................................................
Lease reclassification ..............................................................................................................
Put options ..............................................................................................................................
Other adjustments ....................................................................................................................
8,166,416
(49,816)
(125,524)
(44,900)
(6,657)
(1,205)
61,881
––––––––––––
Total adjustments ..................................................................................................................
(166,221)
––––––––––––
Profit for the year under IFRS ............................................................................................
8,000,195
––––––––––––
Note:
The amounts in the preceding table were calculated after taxes and non-controlling interests.
Measurement And Recognition Differences
Revenue recognition
Under Etisalat GAAP the Group recognised discounts, incentives and other promotional offers relating to
certain customer service contracts in the period that they were granted to the customer. In accordance with
IFRS these amounts were measured at the fair value of the consideration received or receivable and as a
result the Group spread the value of discounts, incentives and other promotional offers relating to certain
customer contracts over the life of the contractual period or average customer relationship.
Available-for-sale financial assets
Under Etisalat GAAP, the Group measured the carrying value of investments in equity instruments at cost.
In accordance with IFRS the Group classified its investments in equity instruments as ‘available-for-sale’
financial assets as defined by IAS 39. As a result the Group measured these assets at fair value at each
reporting date with movements in fair value taken directly to equity.
Financial liabilities
Under Etisalat GAAP the Group recognised amounts payable on the acquisition of investments and licences
at cost. In accordance with IFRS such financial liabilities are required to be classified as either financial
liabilities at fair value with any change in value recorded through profit and loss or other financial liabilities
recorded at amortised cost. As a result, the Group’s two separate amounts payable on the acquisition of
investments and licences were classified as other financial liabilities at amortised cost.
Derivative financial instruments
During the year ended 31 December 2008 the Group took out a derivative financial instrument to hedge the
foreign currency exchange risk of the acquisition of an investment.
Under Etisalat GAAP the loss made on the hedge was included within goodwill. In accordance with IFRS,
given that the Group did not designate a formal hedging relationship in respect of this transaction, the loss
was recorded directly in the income statement.
117
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Proposed dividend
Under Etisalat GAAP, the Group recognised a liability for dividends that were proposed in respect of a prior
accounting period, even if the formal authorisation of the dividend did not take place until after the year-end.
In accordance with IFRS dividends are only recognised when there is a present obligation at the statement
of financial position date.
CRITICAL ESTIMATES AND JUDGMENTS
The preparation of the Group’s financial statements in conformity with IFRS requires the use of certain
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
Management bases its estimates and judgments on historical experience, available information, future
expectations and other factors and assumptions that management believes are reasonable under the
circumstances and provide a basis for making judgments about the carrying value of assets and liabilities.
Management reviews its estimates and judgments on an ongoing basis and revises them when necessary.
Actual results may differ from those estimates under different assumptions or conditions.
Management has identified below those of its accounting estimates that they believe could potentially
produce materially different results under different underlying assumptions, estimates, judgments and
conditions.
The below estimates and judgments are based on IFRS. The principal differences between Etisalat GAAP
and IFRS are described in note 37 to the IFRS Financial Statements.
Fair value of intangible assets
On acquisition of mobile network operators, identifiable intangible assets may include licences, customer
bases and brands. Management determines the fair value of these assets by discounting estimated future net
cash flows generated by the asset, where no active market for the assets exists. The use of different
assumptions for the expectations of future cash flows and the discount rate would change the valuation of
the intangible assets, and such change in valuation could be material.
The relative size of the Group’s intangible assets, excluding goodwill, makes the judgements surrounding the
estimated useful lives critical to the Group’s financial position and performance.
The useful life used to amortise intangible assets relates to the future performance of the assets acquired and
management’s judgement of the period over which economic benefit will be derived from the asset.
Such judgment considers obsolescence, physical damage, significant changes to the manner in which an
asset is used, worse than expected economic performance, a drop in revenues or others external indicators.
The fair value and useful lives of intangible assets impact the amount of amortisation expense and,
accordingly, a change in these assumptions would impact the amount of amortisation in the consolidated
income statement.
Impairment of goodwill and associates
Determining whether goodwill is impaired requires management to estimate the fair value less costs to sell
of the cash-generating unit to which the goodwill has been allocated. The fair value less costs to sell
calculation for goodwill and associates requires management to estimate the future cash flows expected to
arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
In calculating the net present value of future cash flows, certain assumptions are required to be made in
respect of highly uncertain matters, including management’s expectations of:
•
•
•
long-term growth rates in cash flows;
timing and amount of future capital expenditure;
selling prices and direct costs; and
118
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
•
the selection of discount rates to reflect the risks involved.
Changing the assumptions used by management, in particular the discount rate and growth rate assumptions
used in the cash flow projections, could have a material effect on the Group’s results.
Property, plant and equipment
Property, plant and equipment represents a significant proportion of the total assets of the Group. Therefore,
the estimates and assumptions made to determine their carrying value and related depreciation are critical to
the Group’s financial position and performance. The charge in respect of periodic depreciation is derived
after determining an estimate of an asset’s expected useful life and the expected residual value at the end of
its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge
in the consolidated income statement.
Allowance for bad and doubtful debts
The allowance for bad and doubtful debts reflects management’s estimate of losses arising from the failure
or inability of the Group’s customers to make required payments. The estimate is based on the ageing of
customers’ accounts, customer credit worthiness and the Group’s historical write-off experience. Changes to
the allowance may be required if the financial condition of the Group’s customers improves or deteriorates.
An improvement in financial condition may result in lower actual write-offs.
Revenue – incentives with multiple deliverables
Incentives are provided to customers in various forms and are usually offered on signing a new contract or
as part of a promotional offering. These are becoming a more significant strategy of the Group following
increased competition in the UAE.
Where these incentives relate to revenue arrangements including more than one deliverable, the deliverables
are assigned to one or more separate units of accounting and the arrangement consideration is allocated to
each unit of accounting based on its relative fair value.
Management generally determines the fair value of individual elements based on prices at which the
deliverable is regularly sold on a standalone basis. This determination can require complex estimates due to
the nature of goods and services provided.
Associates and joint ventures
Associates and joint ventures are those companies which the Group jointly controls or over which it exercises
significant influence but it does not control. In assessing whether it has control management considers its
representation on the board of directors, ability to appoint key management personnel, and any conditions
that would result in an impediment to the Group’s ability to control an entity. A change in these factors could
potentially result in the consolidation of an associate in future periods.
119
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
RESULTS OF OPERATIONS
Nine Months Ended 30 September 2009 and 2010 – IFRS
The following is a discussion and analysis of the Group's results of operations for the nine months ended 30
September 2010 and 2009 (unaudited) based on IFRS. The following discussion and analysis should be read
in conjunction with the information in “Presentation of Financial Information and Other Information” and
the Group’s Interim Financial Statements included herein. This information is not comparable to the
financial information included elsewhere in this Base Prospectus prepared in accordance with Etisalat
GAAP.
Revenue
The Group’s revenue for the nine months ended 30 September 2010 was AED 23,325.2 million compared to
AED 23,706.4 million for the same period in 2009, a decrease of AED 381.2 million, or 1.6 per cent. This
decrease was driven principally by decreases in IDD usage by mobile and fixed-line subscribers in the UAE
and the effect of increased competition from du as further described in more detail below. This decrease was
offset in part by continued growth in revenue from the Group’s international operations, primarily from
Etisalat Misr, Atlantique Telecom and Etisalat Afghanistan as well as the inclusion of revenue for Etisalat
Lanka since its acquisition in 2009 and continued increases in revenue from internet services for the Group.
The following table sets forth a breakdown of the Group’s revenue for the nine months ended 30 September
2010 and 2009 by principal business area, in AED millions and as a percentage of revenue.
Period ended 30 September
––––––––––––––––––––––––––––––––––––––––––––––
2009(1)
2010(1)
–––––––––––––––––––––– ––––––––––––––––––––––
Revenue
% of
Revenue
Change
(AED millions) of revenue (AED millions) of revenue (AED millions)
%
Change
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(IFRS)
Mobile ..............................
Fixed-line ..........................
Internet ..............................
Data services ....................
Interconnect ......................
Other..................................
12,802.4
54
12,143.4
52
(659.0)
2,196.1
9
1,894.9
8
(301.2)
1,982.4
8
2,251.1
10
268.7
3,019.7
13
2,887.8
12
(131.9)
2,463.8
10
2,477.3
11
13.5
1,242.0
6
1,670.7
7
428.7
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Total ..................................
23,706.4
100
23,325.2
100
(381.2)
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Note:
(1)
(5)
(14)
14
(4)
1
35
(2)
The financial data for the nine months ended 30 September 2009 and 2010 is unaudited.
Mobile revenue: Revenue generated by the Group’s mobile telecommunications businesses for the nine
months ended 30 September 2010 was AED 12,143.4 million compared to AED 12,802.4 million for the
comparable period in 2009, a decrease of AED 659.0 million, or 5.1 per cent. Overall, the decrease in mobile
revenue was principally attributable to a decrease in IDD usage by subscribers in the UAE and competition
from du, offset in part by an increase in subscriber numbers across the Group, principally in the Group’s
international operations and notably Etisalat Misr. In addition, the decrease in mobile revenue was offset by
an increase in the number of postpaid customers in the UAE.
Fixed-line revenue: Revenue generated by the Group’s fixed-line telecommunications businesses for the nine
months ended 30 September 2010 decreased to AED 1,894.9 million from AED 2,196.1 million for the
comparable period in 2009, a decrease of AED 301.2 million, or 13.7 per cent. This decrease was principally
a result of continued declines in fixed-line revenue in the UAE as a result of a continuation of the trends that
existed during 2009, including continued weakness in macroeconomic conditions in the UAE, which led to
lower levels of usage overall, and in particular, decreasing IDD usage (due to, among other things,
120
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
international callbacks to the UAE from jurisdictions with cheaper IDD rates, use of internet telephony and
other substitute services) and continued fixed-to-mobile substitution by customers.
Internet revenue: Revenue generated by the Group’s internet services for the nine months ended 30
September 2010 increased to AED 2,251.1 million compared to AED 1,982.4 million for the comparable
period in 2009, an increase of AED 268.7 million, or 13.6 per cent. This increase principally reflects an
increase in the usage of high-speed internet services by subscribers in the UAE and an increase in the number
of subscribers for Etisalat’s eLife bundled services.
Data services: Revenue generated by the Group’s data services for the nine months ended 30 September
2010 decreased to AED 2,887.8 million compared to AED 3,019.7 million for the comparable period in
2009, an decrease of AED 131.9 million, or 4.4 per cent. This decrease principally reflects an adjustment
made directly to revenue required to account for expenses that were not accounted for in 2009. Despite the
decrease in revenue due to this adjustment, revenue generated by the usage of data services (such as SMS,
MMS and mobile internet) increased over the period.
Interconnect revenue: Revenue generated by the Group’s interconnect services for the nine months ended 30
September 2010 increased to AED 2,477.3 million from the AED 2,463.8 million for the comparable period
in 2009, an increase of AED 13.5 million, or 0.5 per cent. This increase was principally due to the usage
growth between the Group’s networks and those of its competitors as the Group has grown its subscriber
base outside of the UAE and within the UAE as du has increased its subscriber base.
Operating expenses
The following table sets forth the Group’s operating expenses (before federal royalty) for the nine months
ended 30 September 2010 and 2009.
Nine months ended 30 September
–––––––––––––––––––––––––––––––
2009(1)
2010(1)
% Change
––––––––– ––––––––– –––––––––
(AED millions)
(IFRS)
Staff costs ..........................................................................................
Interconnect costs ..............................................................................
Depreciation ......................................................................................
Amortisation ......................................................................................
Regulatory expenses ..........................................................................
Allowance for doubtful debts ............................................................
Foreign exchange gain / (loss) ..........................................................
Other operating expenses ..................................................................
(2,982.0)
(3,127.9)
(2,943.6)
(3,032.1)
(1,267.8)
(1,556.6)
(551.5)
(599.2)
(524.2)
(626.9)
392.3
(132.4)
74.5
(133.2)
(2,844.1)
(3,894.5)
––––––––– –––––––––
Total operating expenses (before federal royalty) ........................
(10,646.4) (13,102.8)
––––––––– –––––––––
Note:
(1)
4.9
3.0
22.8
8.6
19.6
133.7
278.8
36.9
23.1
Figures for the nine months ended 30 September 2009 and 2010 are extracted from the Interim Financial Statements and are
unaudited.
The primary operating expenses shown in the table above are staff costs; interconnect costs; depreciation and
amortisation; and other operating expenses, each of which is discussed further below.
Staff costs: Staff costs, which include salaries, pensions and provision for end of service benefits, were AED
3,127.9 million for the nine months ended 30 September 2010 compared to AED 2,982.0 million for the
comparable period in 2009, an increase of AED 145.9 million, or 4.9 per cent. This increase was driven by
an increase in the number of the Group’s employees due to the expansion of the Group's international
operations, principally in India and Sri Lanka. Staff costs in the UAE increased slightly due to incremental
raises paid to staff.
121
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Interconnect costs: Interconnect costs for the nine months ended 30 September 2010 were AED 3,032.1
million compared to AED 2,943.6 million for the comparable period in 2009, an increase of AED 88.5
million or 3.0 per cent. This increase was due to increased usage by Etisalat Misr’s subscribers, as well as
usage attributable to Etisalat Lanka.
Depreciation and amortisation: Depreciation for the nine months ended 30 September 2010 was AED
1,556.6 million compared to AED 1,267.8 million for the same period in 2009, an increase of AED 288.8
million, or 22.8 per cent. The increase in depreciation charges was mainly driven by an increase in the total
assets of the Group between the nine months ended 30 September 2010 and 2009, principally as a result of
the expansion of its international operations in India and to a lesser extent in Sri Lanka, and continued capital
investments in the UAE, including the FTTH network.
Amortisation for the nine months ended 30 September 2010 was AED 599.2 million compared to AED 551.5
million for 2009, an increase of AED 47.7 million, or 8.6 per cent. The increase in amortisation in 2010 was
principally due to amortization of the licences held by Etisalat DB India and Etisalat Lanka.
Other operating expenses: Other operating expenses for the nine months ended 30 September 2010 were
AED 3,894.5 million compared to AED 2,844.1 million for the comparable period in 2009, an increase of
AED 1,050.4 million, or 36.9 per cent. This increase was driven by a number of factors, principally an
increase in the cost of equipment (primarily iPhone and Blackberry mobile handsets in the UAE), increased
repair and maintenance costs in the UAE and increases in the Group’s other operating costs in the UAE,
Egypt (Etisalat Misr) and Sri Lanka (Etisalat Lanka).
Share of results of associates and joint ventures
Share of results of associates and joint ventures for the nine months ended 30 September 2010 was AED
503.9 million compared to AED 368.1 million for the comparable period in 2009, an increase of AED 135.8
million or 36.9 per cent. This increase was principally due to an improvement in the performance of the
Group’s associates, principally due to Mobily in Saudi Arabia (which experienced strong growth in mobile
prepaid revenues and also revenues from international and roaming services as a result of promotional
activities) and XL in Indonesia (with the Group’s share of results increasing to AED 106 million from
AED 54 million between the relevant periods of 2010 and 2009), as well as a small improvement in PTCL’s
results.
These increases were offset in part by decreases in the Group’s share of results from Etisalat Nigeria, which
was expanding the scope of its operations during the nine months ended 30 September 2010. In addition,
during the nine months ended 30 September 2010, the Group finalised its capital structure of Emerging
Market Telecommunications Services BV, the holding company for the Group’s investment in Nigeria, which
resulted in the inclusion of an amount of AED 305 million as a loan to associates (with an effective interest
rate of 7.75 per cent.), together with an additional AED 914 million that has also been accounted for as a
loan to associates (with an effective interest rate of 14.22 per cent.) (together, the Etisalat Nigeria
Shareholder Loans). The accrued interest on the Etisalat Nigeria Shareholder Loans was recognised as an
interest expense by Etisalat Nigeria during 2010, which further reduced Etisalat Nigeria’s contribution to
share of results of associates and joint ventures for the nine months ended 30 September 2010.
Operating profit before federal royalty
Taking these operating costs into account, the Group’s operating profit before federal royalty for the nine
months ended 30 September 2010 was AED 10,726.3 million compared to AED 13,428.1 million for the
comparable period in 2009, a decrease of AED 2,701.8 million, or 20.1 per cent.
Royalty
Royalty for the nine months ended 30 September 2010 was AED 5,605.8 million compared to AED 6,846.6
million for the comparable period in 2009, a decrease of AED 1,240.8 million, or 18.1 per cent., reflecting
the decrease in operating profit. See “— Factors Affecting Financial Condition and Results of Operations —
Royalties and tax in the UAE”.
122
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Finance costs and income
Finance costs for the nine months ended 30 September 2010 were AED 307.0 million compared to AED
279.8 million for the same period in 2009, an increase of AED 27.2 million, or 9.7 per cent. This increase in
finance costs during the nine months ended 30 September 2010 was due to the inclusion of finance costs
attributable to Etisalat Lanka, which was acquired in October 2009 and whose costs do not appear in the
Group’s finance costs for the nine months ended 30 September 2009.
Finance income for the nine months ended 30 September 2010 was AED 716.0 million, compared to AED
392.5 million for the comparable period in 2009, an increase of AED 323.5 million or 82.4 per cent. This
increase reflected the inclusion of accrued interest income as a result of the reclassification of the Etisalat
Nigeria Shareholder Loans as well as the inclusion of interest income of Etisalat DB India generated as a
result of a substantial cash deposit held in Etisalat DB India for purposes of funding deferred vendor
payments.
Taxation
Taxation for the nine months ended 30 September 2010 was AED 26.7 million compared to AED 145.3
million for the comparable period in 2009, a decrease of AED 118.6 million, or 81.6 per cent. This decrease
in taxation primarily reflected the inclusion of a tax credit at Etisalat DB India that was available as result of
the launch of mobile telecommunications services in India during the first nine months of 2010 and a
reduction of tax liabilities at Etisalat Misr.
Profit for the period
Reflecting the factors described above, the Group’s profit for the nine months ended 30 September 2010 was
AED 5,502.8 million compared to AED 6,548.8 million for the comparable period in 2009, a decrease of
AED 1,046.1 million, or 16 per cent.
The Group’s profit attributable to equity holders of Etisalat for the nine months ended 30 September 2010
was AED 5,605.8 million compared to AED 6,846.6 million for the comparable period in 2009, a decrease
of AED 1,240.9 million or 18.1 per cent.
Years Ended 31 December 2009 and 2008 – IFRS
The following is a discussion and analysis of the Group’s results of operations for the years ended 31
December 2009 and 2008 (unaudited) based on IFRS. The following discussion and analysis should be read
in conjunction with the information in “Presentation of Financial Information” and the IFRS Financial
Statements included herein. This information is not comparable to the financial information included
elsewhere in this Base Prospectus prepared in accordance with Etisalat GAAP.
Revenue
The Group’s revenue for 2009 was AED 30,831.4 million compared to AED 29,359.7 million for 2008,
increasing by AED 1,471.7 million, or 5.0 per cent. This increase was driven principally by continued strong
growth in revenue from data and internet services as well as increases in the number of mobile subscribers
in the UAE and internationally, offset in part by declines in mobile ARPU, notably in relation to the UAE.
123
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The following table sets forth a breakdown of the Group’s revenues for the years ended 31 December 2009
and 2008 by principal business area, in AED and as a percentage of revenue.
Year ended 31 December
––––––––––––––––––––––––––––––––––––––––––––––
2008(1)
2009
–––––––––––––––––––––– ––––––––––––––––––––––
Revenue
Percentage
Revenue
Percentage
Change
(AED millions) of revenue (AED millions) of revenue (AED millions)
%
Change
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(IFRS)
Mobile....................................
Fixed-line ..............................
Internet ..................................
Data services..........................
Interconnect ..........................
Other ......................................
Total ......................................
Note:
(1)
16,244.6
3,102.8
2,082.4
3,164.6
1,399.3
3,366.0
55
11
7
11
5
11
16,478.5
2,854.4
2,680.8
3,650.8
2,014.8
3,152.1
53
9
9
12
7
10
29,359.7
100
30,831.4
100
234.1
(248.4)
598.4
486.2
615.5
(213.9)
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1,471.7
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1
(9)
29
15
44
(6)
5
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
Mobile revenue: Revenue generated by the Group’s mobile telecommunications businesses for the year
ended 31 December 2009 was AED 16,478.5 million compared to AED 16,244.6 million for 2008, an
increase of AED 234.1 million, or 1.4 per cent. Overall, the limited growth in mobile revenue was principally
attributable to an increase in subscriber numbers across the Group; UAE mobile subscribers increased from
approximately 7,285 thousand to 7,741 thousand, Etisalat Misr’s mobile subscribers increased from 6,812
thousand to 14,243 thousand and Atlantique Telecom’s mobile subscribers increased from 3,742 thousand to
4,771 thousand, in each case as of 31 December 2008 and 2009, respectively. Mobile revenue growth was
also attributable to an increase in revenue from the Group’s international operations. The additional revenue
attributable to the increase in subscribers and the Group’s international operations was offset to a significant
extent by declining mobile revenue in the UAE, evidenced by declining mobile ARPU due to increasing
competition from du as well as decreasing IDD usage on mobile telephones as a result of the use of
unlicensed internet telephony services (whereby customers often use WiFi access from mobile telephones to
access these services), callbacks from international destinations with relatively cheaper IDD rates to the UAE
and weaker economic conditions in the UAE leading to reduced population growth and fewer expatriate
workers.
Fixed-line revenue: Revenue generated by the Group’s fixed-line telecommunications businesses in the UAE
and Sudan for the year ended 31 December 2009 was AED 2,854.4 million compared to AED 3,102.8 million
for 2008, a decrease of AED 248.4 million, or 8.7 per cent. This decline was principally a result of declines
in fixed-line revenue in the UAE as a result of fixed-line to mobile substitution, customers decreasing IDD
usage as a result of the use of unlicensed internet telephony services, callbacks from international
destinations with relatively cheaper IDD rates to the UAE, weaker economic conditions in the UAE leading
to reduced population growth and fewer expatriate workers and, to a lesser extent, increased competition
from du.
Internet revenue: Revenue generated by the Group’s internet services for the year ended 31 December 2009
was AED 2,680.8 million compared to AED 2,082.4 million for the same period in 2008, an increase of AED
598.4 million, or 28.7 per cent. This increase principally reflects the growth in the number of subscribers for
broadband internet services in the UAE, which increased from 511,333 to 622,581 as of 31 December 2008
and 2009, respectively.
Data services: Revenue generated by the Group’s data services for the year ended 31 December 2009 was
AED 3,650.8 million compared to AED 3,164.6 million for 2008, an increase of AED 486.2 million, or 15.4
per cent. This increase principally reflects the increased usage of data services (such as SMS, MMS and
mobile internet) both as a replacement for traditional voice services and due to their increased popularity,
with a wider range of services, including mobile broadband, being offered by the Group. For the year ended
124
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
31 December 2009, data services revenue from the UAE accounted for AED 3,537 million (or 96.9 per cent.)
of total data services revenue, compared to AED 3,100 million (or 98.0 per cent.) for 2008.
Interconnect revenue: Revenue generated by the Group’s interconnect services for the year ended 31
December 2009 was AED 2,014.8 million compared to AED 1,399.3 million for 2008, an increase of AED
615.5 million, or 44.0 per cent., principally due to the usage growth between Etisalat and du customers, as
du has increased its market share in the UAE, as well as increased interconnect revenue in the Group’s
international operations. For the year ended 31 December 2009, interconnect revenue from the Group’s UAE
operations accounted for AED 785 million (or 39.0 per cent.) of total interconnect revenue, compared to
AED 552 million (or 39.5 per cent.) in 2008.
Operating expenses
The following table sets forth the Group’s operating expenses (before federal royalty) for the years ended 31
December 2009 and 2008.
Year ended 31 December
–––––––––––––––––––––––––––––––
2008(1)
2009
% Change
––––––––– ––––––––– –––––––––
(AED millions)
(IFRS)
Staff costs ..........................................................................................
Interconnect costs ..............................................................................
Depreciation ......................................................................................
Amortisation ......................................................................................
Regulatory expenses ..........................................................................
Other operating expenses ..................................................................
(3,811.5)
(3,919.6)
(3,319.5)
(3,840.4)
(1,591.6)
(1,603.9)
(892.6)
(930.6)
(667.5)
(489.7)
(4,332.8)
(3,077.9)
––––––––– –––––––––
Total operating expenses (before federal royalty) ........................
(14,615.5) (13,862.1)
––––––––– –––––––––
Note:
(1)
2.8
15.7
0.8
4.3
(26.6)
(29.0)
(5.2)
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
The primary operating expenses shown in the table above are staff costs; interconnect costs; depreciation and
amortisation; and other operating expenses, each of which is discussed further below.
Staff costs: Staff costs, which include salaries, pensions and provision for end of service benefits, were AED
3,919.6 million for the year ended 31 December 2009 compared to AED 3,811.5 million for 2008, an
increase of AED 108.1 million, or 2.8 per cent. This increase was driven primarily by an increase in the
number of the Group’s employees due to the expansion of the Group’s international operations, including the
staff costs from the Group’s operations in India for the full year in 2009, since its acquisition in December
2008. Staff costs in the UAE remained relatively flat as Etisalat limited new hiring and salary increases due
to the weakening economic environment in the UAE.
Interconnect costs: Interconnect costs for the year ended 31 December 2009 were AED 3,840.4 million
compared to AED 3,319.5 million for 2008, an increase of AED 520.9 million or 15.7 per cent. This increase
was principally due to the usage growth between Etisalat and du customers, as du has increased its market
share in the UAE.
Depreciation and amortisation: Depreciation for the year ended 31 December 2009 was AED 1,603.9
million compared to AED 1,591.6 million for 2008, an increase of AED 12.3 million, or 0.8 per cent. The
increase in depreciation charges was mainly driven by an increase in the capital assets of the Group over the
year.
Amortisation for the year ended 31 December 2009 was AED 930.6 million compared to AED 892.6 million
for 2008, an increase of AED 38.0 million, or 4.3 per cent. The increase in amortisation in 2009 reflected the
amortisation of licences, in particular the licences held by Atlantique Telecom, Etisalat Misr and Canar.
125
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Other operating expenses: Other operating expenses for the year ended 31 December 2009 were AED
3,077.9 million compared to AED 4,332.8 million for 2008, decreasing by AED 1,254.9 million, or 29.0 per
cent. This decrease was driven by an exchange loss recorded in 2008 caused by the drop in the value of AED
compared to both the euro and the Egyptian Pound, as well as a decrease in provisions for doubtful debts of
customers in the UAE from 2008 to 2009 as competition with du stabilised and Etisalat experienced less
pressure to increase overall credit limits extended to customers.
Share of results of associates and joint ventures
The share of results of associates and joint ventures for the year ended 31 December 2009 was AED 682.0
million compared to AED 472.7 million for 2008, an increase of AED 209.3 million or 44.3 per cent.,
principally due to an improvement in the performance of the Group’s associates in Saudi Arabia (Mobily)
and Indonesia (XL).
Operating profit before federal royalty
Taking these operating costs into account, the Group’s operating profit before federal royalty for the year
ended 31 December 2009 was AED 17,651.3 million compared to AED 15,216.9 million for 2008, an
increase of AED 2,434.4 million, or 16.0 per cent. Operating profit before federal royalty for the year ended
31 December 2008 did not include an amount of AED 1,783.7 million attributable to the gain on disposal of
shares in Mobily, which disposal was required under Saudi Arabian law.
Royalty
Royalty for the year ended 31 December 2009 was AED 8,836.3 million compared to AED 8,665.0 million
for 2008, increasing by AED 171.3 million, or 2.0 per cent., reflecting the increase in operating profit before
federal royalty. See “— Significant Factors Affecting Financial Condition and Results of Operations —
Royalties and Tax in the UAE”. The federal royalty for 2008 included an amount of AED 891.8 million
attributable to the gain on disposal of shares in Mobily.
Finance costs and income
Finance costs for the year ended 31 December 2009 were AED 571.5 million compared to AED 563.8
million for 2008, increasing by AED 7.7 million, or 1.4 per cent. This increase in finance costs during 2009
reflected an increase in net borrowing by the Group’s international subsidiaries. Finance income for the year
ended 31 December 2009 was AED 583.1 million, compared to AED 415.3 million for 2008, an increase of
AED 167.8 million or 40.4 per cent. This increase reflected the inclusion of interest income of Etisalat DB
India in 2009 generated as a result of a substantial cash deposit held in Etisalat DB India for purposes of
funding deferred vendor payments.
Taxation
Taxation for the year ended 31 December 2009 was AED 243.8 million compared to AED 187.0 million for
2008, an increase of AED 56.8 million, or 30.4 per cent. This increase in tax primarily reflected the higher
levels of local tax for the Group’s international operations, which was due to higher temporary differences
in deferred tax liabilities at those entities.
Profit for the period
Reflecting the factors described above, the Group’s profit for the year ended 31 December 2009 was
AED 8,582.7 million compared to AED 8,000.2 million for 2008, an increase of AED 582.5 million, or
7.3 per cent. Profit for the year ended 31 December 2008 included AED 891.8 million, representing the gain
on the disposal of 25 per cent. of the Group’s shares in Mobily, net of royalty payable. Excluding this item
in 2008, profit amounted to AED 7,108.4 million, resulting in an increase of AED 1,474.4 million or 21 per
cent. for 2009.
126
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Profit attributable to equity holders for the year ended 31 December 2009 was AED 8,836.3 million
compared to AED 8,510.8 million for 2008, an increase of AED 325.5 million or 3.8 per cent.
Years Ended 31 December 2008 and 2007 – Etisalat GAAP
The following is a discussion and analysis of the Group’s results of operations for the years ended 31
December 2008 and 2007 based on Etisalat GAAP. The following discussion and analysis should be read in
conjunction with the information in “Presentation of Financial Information” and the Etisalat GAAP
Financial Statements included herein. This information is not comparable to the financial information
included elsewhere in this Base Prospectus prepared in accordance with IFRS.
Revenue
The Group’s revenue for 2008 was AED 26,119.1 million compared to AED 21,339.9 million for 2007, an
increase of AED 4,779.2 million, or 22.4 per cent.
The following table sets forth a breakdown of the Group’s revenue for each of 2007 and 2008 by principal
business area in AED and as a percentage of total revenue.
Year ended 31 December
––––––––––––––––––––––––––––––––––––––––––––––
2007
2008
–––––––––––––––––––––– ––––––––––––––––––––––
Revenue
Percentage
Revenue
Percentage
Change
(AED millions) of revenue (AED millions) of revenue (AED millions)
%
Change
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(Etisalat GAAP)
Mobile....................................
Fixed-line ..............................
Internet ..................................
Data services..........................
Interconnect ..........................
Other ......................................
Total ......................................
13,552.2
3,043.0
1,462.3
2,038.2
176.7
1,067.5
63
14
7
10
1
5
15,546.4
3,120.1
2,083.6
3,168.0
969.9
1,231.1
60
12
8
12
4
4
1,994.2
77.1
621.3
1,129.8
793.2
163.6
15
3
42
55
449
15
21,339.9
100
26,119.1
100
4,779.2
22
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Mobile revenue: Revenue generated by the Group’s mobile telecommunications businesses for the year
ended 31 December 2008 was AED 15,546.4 million compared to AED 13,552.2 million for 2007, an
increase of AED 1,994.2 million, or 14.7 per cent. This increase principally reflected increases in the number
of mobile telephone subscribers at Etisalat and its subsidiaries during both 2007 and 2008; mobile
subscribers increased from approximately 6,372 thousand to 7,285 thousand in the UAE, from
approximately 6,812 thousand to 14,252 thousand in Egypt and from approximately 3,742 thousand to 4,771
thousand in the regions served by Atlantique Telecom, in each case as of 31 December 2007 and 2008,
respectively. The increase was also attributable to a related increase in the total number of minutes used by
the Group’s mobile subscriber base. These increases were offset in part by slightly lower mobile ARPUs
between 2007 and 2008 due to the increase in competition in the UAE as well as the Group’s efforts to
increase its subscriber base in its international subsidiaries by offering lower tariffs and/or low introductory
promotional offers.
Fixed-line revenue: Revenue generated by the Group’s fixed-line telecommunications businesses for the year
ended 31 December 2008 was AED 3,120.1 million compared to AED 3,043.0 million for 2007, an increase
of AED 77.1 million, or 2.5 per cent. This increase principally reflects moderate growth in the number of
subscribers in the UAE and Sudan between 2007 and 2008, which led to an increase in the minutes of use
for UAE operations, as well as the inclusion of a full year of fixed-line revenue from Canar for 2008 (which
was first consolidated in September 2007).
Internet revenue: Revenue generated by the Group’s internet services for the year ended 31 December 2008
was AED 2,083.6 million compared to AED 1,462.3 million for 2007, an increase of AED 621.3 million, or
42.5 per cent. This increase principally reflects the growth in the number of subscribers at Etisalat and its
127
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
subsidiaries in both 2007 and 2008 as well as customers shifting to relatively more expensive and/or faster
broadband internet plans from dial-up services, as a result of the wider availability of these services,
principally in the UAE.
Data services: Revenue generated by the Group’s data services for the year ended 31 December 2008 was
AED 3,168.0 million compared to AED 2,038.2 million for 2007, an increase of AED 1,129.8 million or 55.4
per cent. This increase principally reflects the growth in the number of subscribers for data services at
Etisalat and the Group’s subsidiaries in both 2007 and 2008 and increased popularity of data services both
as a replacement for voice calls and due to an increasing number of value-added services, such as specialised
media content and enhanced mobile internet services, being available. For the year ended 31 December 2008,
data services revenue in the UAE accounted for AED 3,100 million (98.0 per cent.) of total data services
revenue, compared to AED 2,036 million (99.9 per cent.) in 2007.
Interconnect revenue: Revenue generated by the Group’s interconnect services for the year ended 31
December 2008 was AED 969.9 million compared to AED 176.7 million for 2007, an increase of AED 793.2
million, or 448.9 per cent., principally due to the usage growth between Etisalat and du customers, as well
as growth in the Group’s international subsidiaries. For the year ended 31 December 2008, interconnect
revenue in the UAE accounted for AED 123 million (12.7 per cent.) of total interconnect revenue, compared
to AED 77 million (43.8 per cent.) in 2007.
Share of results of associates and joint ventures
The share of results of associates and joint ventures for the year ended 31 December 2008 was AED 472.7
million compared to AED 380.0 million for 2007, an increase of AED 92.7 million or 24.4 per cent.,
principally due to the performance of its associates in Saudi Arabia (Mobily) and Pakistan (PTCL and
Ufone).
Operating expenses
The following table sets forth the Group’s operating expenses (before federal royalty) for each of 2008 and
2007.
Year ended 31 December
–––––––––––––––––––––––––––––––
2007
2008
% Change
––––––––– ––––––––– –––––––––
(AED millions)
(Etisalat GAAP)
Staff costs ..........................................................................................
Depreciation ......................................................................................
Amortisation ......................................................................................
Regulatory expenses ..........................................................................
Contract costs ....................................................................................
Other operating expenses ..................................................................
(2,615.2)
(3,806.8)
(1,368.2)
(1,708.3)
(593.8)
(809.3)
(644.3)
(667.5)
(73.2)
(92.1)
(2,519.0)
(4,295.7)
––––––––– –––––––––
Total operating expenses ................................................................
(7,813.7) (11,379.7)
––––––––– –––––––––
45.6
24.9
36.3
3.6
25.8
70.5
45.6
The principal expenses shown in the table above are staff costs; depreciation and amortisation; and other
operating expenses, each of which is discussed further below.
Staff costs: Staff costs, which include salaries, pensions and provision for end of service benefits, were AED
3,806.8 million for the year ended 31 December 2008 compared to AED 2,615.2 million for 2007, an
increase of AED 1,191.6 million, or 45.6 per cent. This increase was driven primarily by an increase in the
number of employees at Etisalat and the Group’s international operations (the total number of the Group’s
employees increased from 12,513 to 15,607 as of 31 December 2007 and 2008, respectively) as well as an
increase in the levels of salaries paid to employees in the UAE. In 2008, Etisalat adopted a new compensation
and benefit scheme as a result of increases in the overall level of salaries paid in the UAE generally, which
resulted in an increase in levels of compensation for UAE staff. In addition, in 2008, the Group significantly
128
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
expanded its international operations, principally driven by growth in Etisalat Misr and full-year
consolidation of Zantel and Canar, which were consolidated for only part of 2007 (Zantel was consolidated
from July 2007 and Canar from September 2007).
Depreciation and amortisation: Depreciation for the year ended 31 December 2008 was AED 1,708.3
million compared to AED 1,368.2 million for 2007, an increase of AED 340.1 million, or 24.9 per cent. The
increase in depreciation charges for 2008 was mainly driven by the expansion of the Group’s UAE
operations, as well as the full-year consolidation of the results of operations of Zantel and Canar and the
significant expansions at Etisalat Misr and Etisalat Afghanistan during 2008.
Amortisation for the year ended 31 December 2008 was AED 809.3 million compared to AED 593.8 million
for 2007, an increase of AED 215.5 million, or 36.3 per cent. The significant increase in amortisation was
principally a result of the amortisation of a new licence in Afghanistan.
Other operating expenses: Other operating expenses for the year ended 31 December 2008 were AED
4,295.7 million compared to AED 2,519.0 million for 2007, an increase of AED 1,776.7 million, or 70.5 per
cent. This increase was driven principally by increases in repairs and maintenance, increased regulatory
expense and the high rate of growth in provisions for doubtful debts when compared to the immediately
preceding annual period, because Etisalat increased the overall credit limit that was extended to each
customer as a result of competitive pressure in the UAE market.
The Group’s operating profit before federal royalty for the year ended 31 December 2008 was AED 15,212.2
million compared to AED 13,906.2 million for 2007, an increase of AED 1,306.0 million, or 9.4 per cent.
Royalty
Royalty for the year ended 31 December 2008 was AED 8,665.0 million compared to AED 7,296.6 million
for 2007, increasing by AED 1,368.3 million, or 18.8 per cent, as a result of the increase in consolidated
net profit. See “— Significant Factors Affecting Financial Condition and Results of Operations — Royalties
and Tax in the UAE”.
Finance costs
Finance costs for the year ended 31 December 2008 were AED 413.6 million compared to AED 503.1
million for 2007, a decrease of AED 89.6 million, or 17.8 per cent. In both 2007 and 2008, the Group was a
net re-payer of debt, resulting in aggregate borrowings (including advances and loans from investment
partners) outstanding of AED 5,735.7 million at 31 December 2007 and AED 3,366.7 million at 31
December 2008.
Deferred and current taxes
Deferred and current taxes for the year ended 31 December 2008 were AED 176.7 million compared to AED
122.3 million for 2007, an increase of AED 54.4 million, or 44.5 per cent. This increase reflected the higher
levels of amortisation of intangible assets and depreciation of fixed assets for purposes of calculating local
tax for the Group’s international operations, which resulted in higher temporary differences and an increase
in deferred tax liabilities.
Other income
Other income for the year ended 31 December 2008 was AED 2,209.5 million compared to AED 736.3
million for 2007, an increase of AED 1,473.2 million, or 200.1 per cent. In 2007, other income primarily
comprised interest income earned by the Group on its investments. In 2008, in addition to interest income
earned of AED 425.8 million, other income also included a gain of AED 1,783.7 million on the disposal of
shares in Mobily, which disposal was required pursuant to the terms of Saudi Arabian law.
129
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Profit for the year
As a result of the factors described above, the Group’s profit for the year ended 31 December 2008 was AED
8,166.4 million compared to AED 6,720.4 million for 2007, increasing by AED 1,446.0 million, or 21.5 per
cent.
The Group’s profit for the year attributable to equity holders for the year ended 31 December 2008 was AED
8,665.0 million compared to AED 7,296.6 million for 2007, an increase of AED 1,368.3 million or 18.8 per
cent.
LIQUIDITY AND CAPITAL RESOURCES
The Group’s principal source of funding for each of the periods under review has been cash flow from
operations.
Cash Flow
Nine months ended 30 September 2010 and 2009 – IFRS
The following table sets out certain information about the Group’s consolidated cash flows for the nine
months ended 30 September 2010 and 2009, presented in accordance with IFRS.
Nine months ended
30 September
––––––––––––––––––––
2009(1)
2010(1)
––––––––– –––––––––
(AED millions)
(IFRS)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net increase/(decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Effect of foreign exchange rate changes ................................................................
Cash and cash equivalents at 30 September ......................................................
Note:
(1)
9,027.1
(2,842.6)
(4,631.3)
–––––––––
1,553.1
11,294.9
14.5
–––––––––
12,862.5
–––––––––
7,566.7
(4,321.6)
(3,800.0)
–––––––––
(554.8)
11,309.2
(104.3)
–––––––––
10,650.1
–––––––––
Figures for the nine months ended 30 September 2009 and 2010 are extracted from the Interim Financial Statements and are
unaudited.
Net cash from operating activities
Net cash from operating activities for the nine months ended 30 September 2010 was AED 7,566.7 million
compared to AED 9,027.1 million for the comparable period in 2009. Net cash from operating activities
principally reflects operating profit and working capital management. It should be noted that net cash from
operating activities is presented after the payment of the UAE federal royalty, since the royalty is deducted
from operating profit. The decrease in net cash from operating activities between the nine months ended 30
September 2010 and 2009 was principally due the decrease in the Group's operating profit.
Net cash used in investing activities
Net cash used in investing activities for the nine months ended 30 September 2010 was AED 4,321.6 million
compared to AED 2,842.6 million for the comparable period in 2009. This increase was primarily
attributable to the reclassification of the Etisalat Nigeria Shareholder Loans when this financing was
130
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
reclassified as a loan rather than an advance to an associate. In addition, the Group increased its stake in four
of its international investments, as noted below, and made AED 1,611.1 million of loans to associates.
During the nine months ended 30 September 2010, the Group’s principal investments were the following:
•
€86 million (AED 427 million) for the acquisition of additional shares in Canar, increasing the
Group’s total shareholding in Canar from 82 per cent. to 89.37 per cent.;
•
AED 276 million (U.S.$75 million) for the acquisition of the remaining 18 per cent. of shares in
Atlantique Telecom, increasing the Group’s total shareholding in Atlantique Telecom from 82 per
cent. to 100 per cent.;
•
•
AED 89 million (U.S.$24 million) for the acquisition of an additional share in Etisalat DB India; and
AED 58.9 million (U.S.$16 million) for the acquisition of additional shares in Zantel, increasing the
Group’s total shareholding in Zantel from 51 per cent. to 65 per cent.
Net cash used in financing activities
Net cash used in financing activities for the nine months ended 30 September 2010 was AED 3,800.0 million
compared to net cash used of AED 4,631.3 million for the comparable period in 2009.
The Group’s proceeds from borrowings (net of repayments) for the nine months ended 30 September 2010
were AED 961.5 million compared to AED 226.7 million during the comparable period in 2009. This
increase was due to new borrowings, principally drawdowns made under existing debt facilities by Etisalat
Misr, Etisalat Afghanistan, Etisalat Lanka and Atlantique Telecom, which were higher than loan repayments
during the relevant periods.
The Group paid AED 221.9 million and AED 252.3 million in finance costs for the nine months ended
30 September 2010 and 2009, respectively.
The Group paid AED 4,492.1 million and AED 3,893.2 million in dividends for the nine months ended
30 September 2010 and 2009, respectively.
Years ended 31 December 2009 and 2008 – IFRS
The following table sets out certain information about the Group’s consolidated cash flows for the years
ended 31 December 2009 and 2008, presented in accordance with IFRS. These figures are not directly
comparable with the figures for 2008 and 2007 that have been prepared in accordance with Etisalat GAAP.
Year ended 31 December
––––––––––––––––––––
2008(1)
2009
––––––––– –––––––––
(AED millions)
(IFRS)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net increase/(decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Effect of foreign exchange rate changes ................................................................
Cash and cash equivalents at 31 December ........................................................
Note:
(1)
10,596.4
(2,902.2)
(5,641.8)
–––––––––
2,052.4
9,432.6
(190.2)
–––––––––
11,294.8
–––––––––
Figures for the year ended 31 December 2008 are unaudited and presented for comparative purposes only.
131
10,124.7
(6,770.7)
(3,407.3)
–––––––––
(53.3)
11,294.9
67.7
–––––––––
11,309.3
–––––––––
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Net cash from operating activities
Net cash from operating activities for the year ended 31 December 2009 was AED 10,124.7 million
compared to AED 10,596.4 million for 2008. Net cash from operating activities principally reflects operating
profit and working capital management. The decrease in net cash from operating activities between 2009 and
2008 was principally due to a decrease in the Group’s working capital position, which was attributable to the
increase of receivables compared to payables, despite an increase in operating profit.
Net cash used in investing activities
Net cash used in investing activities for year ended 31 December 2009 was AED 6,770.7 million compared
to AED 2,902.2 million for 2008, reflecting the substantial acquisition of fixed assets and international
investments noted below.
In 2009, the Group’s principal investments were:
•
AED 5,546.5 million for the acquisition of fixed assets, principally as a result of the build-out of the
FTTH network in the UAE as well as network expansion by Etisalat Misr and the build-out of Etisalat
DB India’s network;
•
AED 1,251.7 million for the acquisition of intangible assets, including licences by Atlantique Telecom
in Togo and Etisalat Misr;
•
•
AED 644.9 million for advances to associates, principally to Etisalat Nigeria; and
AED 320.4 million for the investment in shares of Sark Corporation N.V. (Sark) and Allianz Infratech
Private Limited.
−
On 15 October 2009, the Group entered into an agreement to acquire a 100 per cent. equity
interest in Sark for total consideration of U.S.$207 million (AED 761 million). The amount
comprised U.S.$40 million (AED 147 million) as cash consideration to acquire the equity
interest and the remaining U.S.$167 million (AED 614 million) as trade payables and other
liabilities assumed by the Group. Sark is the holding company of Tigo (Private) Limited
(together with Sark, Etisalat Lanka), a mobile telecom operator in Sri Lanka.
−
On 17 March 2009, Etisalat DB India acquired a 100 per cent. equity interest in Allianz
Infratech Private Limited, a company incorporated in India, for cash consideration of AED 79.9
million.
Net cash from/(used in) financing activities
Net cash used in financing activities for the year ended 31 December 2009 was AED 3,407.3 million
compared to AED 5,641.8 million for 2008, reflecting the repayment of net borrowings of AED 1,983.9
million in the year ended 31 December 2008 and net borrowings of AED 871.4 million in 2009, including
additional vendor financing for Etisalat Misr and borrowing for Zantel.
The Group paid AED 400.6 million in finance costs and paid dividends of AED 3,893.2 million during the
year ended 31 December 2009. During the year ended 31 December 2008, the Group paid AED 413.6
million in finance costs and paid dividends of AED 3,244.3 million.
132
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Years ended 2008 and 2007 – Etisalat GAAP
The following table sets out certain information about the Group’s consolidated cash flows for the years
ended 31 December 2007 and 2008, presented in accordance with Etisalat GAAP. These figures are not
directly comparable with the figures for 2009 and 2008 that have been prepared in accordance with IFRS.
Year ended 31 December
––––––––––––––––––––
2007
2008
––––––––– –––––––––
(AED millions)
(Etisalat GAAP)
Net cash from operating activities ..........................................................................
Net cash used in investing activities ......................................................................
Net cash used in financing activities ......................................................................
Net increase/(decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at 1 January ..................................................................
Effect of foreign exchange rate changes ................................................................
Cash and cash equivalents at 31 December ........................................................
10,874.3
(6,012.7)
(5,924.3)
–––––––––
(1,062.7)
10,304.0
191.2
–––––––––
9,432.5
–––––––––
10,853.1
(2,902.2)
(5,898.4)
–––––––––
2,052.5
9,432.6
(190.2)
–––––––––
11,294.9
–––––––––
Net cash from operating activities
Net cash from operating activities for the year ended 31 December 2008 was AED 10,853.1 million
compared to AED 10,874.3 million for 2007, principally as a result of stable operating profit between 2008
and 2007, an increase in depreciation and amortisation and a favourable change in working capital in 2008
(attributable primarily to an increase in payables compared to receivables), which was less than the
favourable change in working capital in 2007.
Net cash used in investing activities
Net cash used in investing activities for the year ended 31 December 2008 was AED 2,902.2 million
compared to AED 6,012.7 million for 2007.
In 2008, the Group’s principal investments were:
•
AED 3,661.2 million for the acquisition of fixed assets relating to the development of the FTTH
network in the UAE and network expansion by Etisalat Misr in Egypt; and
•
AED 2,128.2 million for investments in shares of Mobily, Atlantique Telecom and Etisalat Nigeria, as
further described below:
−
In October 2008, Etisalat participated in the rights issue of Mobily at 2 shares for every 5 shares
held (52,500,000 shares) and subscribed to 8,466,050 shares (AED 233.2 million) from the
unsubscribed portion of the rights issue, increasing its shareholding to 27 per cent. as of 31
December 2008. Total consideration for this transaction was AED 749.8 million. In April of
2008, the Group reduced its respective ownership in Mobily from 35 per cent. to 26 per cent.
A gain on the disposal of these shares amounting to AED 1,784 million was recognised in other
income during the year ended 31 December 2008. See “Description of the Group —
International Operations — Key Associates and Joint Ventures — Saudi Arabia – Mobily”.
−
On 11 February 2008, the Group acquired a 40 per cent. equity interest in MDC-NG B.V., a
holding company for the Group’s investment in Etisalat Nigeria, for consideration of AED
969.9 million. This acquisition related to the purchase of shares in MDC-NG B.V. and
assignment of the right to receive 40 per cent. of the loan provided by Mubadala Holdings
Cyprus Limited to MDC- NG B.V. in the amount of AED 1,176 million.
133
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
−
On 12 May 2008, the Group acquired an additional 12 per cent. of the equity of Atlantique
Telecom, resulting in a total equity interest of 82 per cent., for total consideration of AED 251.3
million.
During the year ended 31 December 2008, the Group also acquired a 44.7 per cent. controlling interest in
Etisalat DB India (formerly Swan Telecom), an entity incorporated in India, for total consideration of AED
2,518.2 million. This acquisition does not appear in the Group’s consolidated cash flow information for the
year ended 31 December 2008 (as presented under Etisalat GAAP) due to the fact that the consideration for
this acquisition was satisfied by an equity contribution rather than cash.
In 2007, the Group’s principal investments were:
•
AED 3,460.3 million for the acquisition of fixed assets, principally for GPON (FTTH) network by
Etisalat UAE, network roll-out by Etisalat Misr and network construction by Etisalat Afghanistan,
Canar and Zantel;
•
AED 2,488.9 million for investments in XL (formerly PT Excelcomindo Pratama TBK), PTCL and
Zantel, as described below;
•
•
−
On 12 December 2007, the Group acquired 15.97 per cent. of the issued equity shares in XL,
a GSM operator in Indonesia, for consideration of AED 1,610 million.
−
The Group made payments totalling AED 881 million on account of semi-annual payments due
under a shareholders’ agreement between Etisalat International Pakistan Limited (EIPL) and
the Government of Pakistan dated 12 April 2006 (the PTCL Shareholders’ Agreement). The
PTCL Shareholders’ Agreement requires that the balance of payments for the acquisition of the
Group’s interest in PTCL be paid in six equal semi-annual instalments, two of which were
made during the year ended 31 December 2007.
−
On 23 July 2007, the Group acquired an additional 17 per cent. (122,400 shares) of the equity
of Zantel resulting in a controlling majority interest. The total consideration for the 17 per cent.
acquisition was AED 55.3 million.
AED 754.5 million for the acquisition of subsidiaries (net of cash acquired), namely Atlantique
Telecom and Canar, as described below;
−
On 11 April 2007, the Group acquired an additional 20 per cent. of the equity of Atlantique
Telecom resulting in a total controlling equity interest of 70 per cent. The total consideration
for the 20 per cent. acquisition amounted to AED 418.8 million.
−
On 26 September 2007, the Group contributed AED 191 million cash as additional equity into
Canar (and also elected to convert its shareholder loan of AED 392.7 million to equity in Canar,
which was accounted for as a balance sheet transaction only), thereby raising its equity holding
from 37 per cent. to 82 per cent. and acquiring a controlling interest in Canar.
AED 126.7 million for licence fee payments.
Net cash from/(used in) financing activities
Net cash used in financing activities for 2008 was AED 5,898.4 million compared to AED 5,924.3 million
for 2007.
In the year ended 31 December 2008, the Group paid dividends of AED 3,244.3 million and made net
repayments of bank borrowings in the amount of AED 2,164.5 million, including the full repayment of the
outstanding balance of AED 2.76 billion under its U.S.$3 billion revolving bank facility. The Group also paid
finance costs of AED 413.6 million and repaid AED 256.6 million related to balances due to its associates
in the year ended 31 December 2008.
In the year ended 31 December 2007, the Group paid dividends of AED 2,835.9 million and made net
repayments of bank borrowings in the amount of AED 4,132.0 million. It also paid finance costs of AED
134
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
443.5 million and received AED 1,174.6 million from associates, including AED 900.4 million from Mobily
and AED 274.2 million from EIPL, the holding company of PTCL.
Indebtedness
As of 30 September 2010, the Group had outstanding borrowings of AED 5,374.8 million, compared to AED
4,501.0 million as of 31 December 2009 and AED 3,366.7 million as of 31 December 2008.
The following table presents the Group’s outstanding indebtedness as of 31 December 2008 and 2009 and
as of 30 September 2010 (presented in accordance with IFRS).
Bank overdrafts..................................................................
Bank loans ........................................................................
Other borrowings ..............................................................
Loans from non-controlling interests ............................
Advances from non-controlling interests ......................
Vendor financing............................................................
Other ..............................................................................
Total ..................................................................................
As of 31 December
–––––––––––––––––––––––––
2009
2008(1)
–––––––––––– ––––––––––––
64.5
85.9
2,306.1
2,829.3
996.1
1,585.8
387.2
525.3
608.9
601.0
–
414.3
–
45.3
–––––––––––– ––––––––––––
3,366.7
4,501.0
–––––––––––– ––––––––––––
As of
30 September
––––––––––––
2010(2)
––––––––––––
62.1
3,322.1
1,990.6
545.2
592.2
845.1
8.1
––––––––––––
5,374.8
––––––––––––
Notes:
(1)
Figures as of 31 December 2008 are unaudited and presented for comparative purposes only.
(2)
Figures as of 30 September 2010 are unaudited.
Bank borrowings
Etisalat had no outstanding bank borrowings as of 30 September 2010. As of 30 September 2010, the Group
had bank borrowings with a carrying value of AED 3,384.2 million, which consisted of the bank borrowings
of the Group’s subsidiaries, details of which are set out below. Of these bank borrowings, AED 3,043.0
million were designated as current as of 30 September 2010. As of 30 September 2010, Etisalat had not
guaranteed the bank borrowings of any of its subsidiaries, associates or joint ventures. The most significant
of the Group’s bank borrowings are described below.
Etisalat Misr: Etisalat Misr entered into a syndicated loan agreement dated 13 December 2007 with a number
of banks. This agreement comprises a long-term loan facility, denominated in Egyptian Pounds (portion A)
amounting to AED 1.4 billion, a revolving credit facility, also denominated in Egyptian Pounds (portion B)
amounting to AED 0.7 billion and a U.S.$ long-term loan facility amounting to AED 1,102 million (portion
C and, together with portion A and portion B, the Etisalat Misr Syndicated Loans). The Etisalat Misr
Syndicated Loans are repayable in full on 13 January 2011. Interest on the Etisalat Misr Syndicated Loans is
charged at the mid-corridor rate plus a margin of 0.5 per cent. for portions A and B and U.S.$ LIBOR plus a
margin of 0.75 per cent. for portion C, reflecting the currencies in which the Etisalat Misr Syndicated Loans
may be drawn. As of 30 September 2010, Etisalat Misr had outstanding AED 1,055.9 million under portions
A and B and AED 1,109.5 million under portion C of the Etisalat Misr Syndicated Loan.
The Etisalat Misr Syndicated Loans are secured by a commercial mortgage over Etisalat Misr’s fixed assets,
a pledge over its bank accounts, a real estate mortgage and an assignment of its rights under an insurance
contract.
Etisalat Misr is currently in discussions to refinance the Etisalat Misr Syndicated Loans with a number of the
lenders under the current facility. Management expects these negotiations to be completed prior to
13 January 2011 (the date the Etisalat Misr Syndicated Loans are repayable in full).
The Group’s current borrowings as of 30 September 2010 increased significantly compared to 31 December
2009 as a portion of Etisalat Misr’s bank borrowings, amounting to AED 2,186 million, are due for
135
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
repayment within the next 12 months from 30 September 2010 and have been transferred from non-current
borrowings to current borrowings.
Zantel: Zantel had a number of loans outstanding totalling AED 244.4 million as of 30 September 2010 (as
of 31 December 2009: AED 499.3 million; as of 31 December 2008: AED 70 million), of which AED 64.5
million was due within one year. Loans obtained at fixed rates carried interest of 14 per cent. per annum,
whereas loans obtained at variable rates carried interest ranging from U.S.$ LIBOR plus 4.5 to 5.5 per cent.
per annum, in both cases, as of 30 September 2010. Bank borrowings are secured by a fixed and floating
charge over Zantel’s fixed assets, both present and future, including a charge over its escrow accounts.
Atlantique Telecom: Atlantique Telecom had AED 827.8 million in outstanding bank borrowings as of 30
September 2010, of which AED 742.7 million was classified as current. In November 2007, Atlantique
Telecom entered into a loan agreement with a bank under which it had, as of 31 December 2009, outstanding
amounts totalling €100 million (AED 559 million) in two equal tranches of €50 million, borrowed in May
and November 2008, respectively (together, the Atlantique Telecom Loans). The Atlantique Telecom Loans
mature in December 2010 and bear interest at a rate equal to EURIBOR plus a margin of 8.72 per cent.
Atlantique Telecom has also entered into a number of other loans including overdrafts of AED 62.4 million
as well as short terms loans of AED 0.7 million and a non-current loan of AED 85.1 million, in each case as
of 30 September 2010. Interest on these loans and overdrafts ranged between 9 per cent. to 15 per cent. per
annum as of 30 September 2010. Amounts borrowed by Atlantique Telecom are secured by a charge on the
fixed assets of Atlantique Telecom and a portion of these loans are denominated in CFA franc. In addition,
as of 31 December 2009, 383,789 shares in Atlantique Telecom owned by the Group are subject to a lien in
favour of Islamic Development Bank, Saudi Arabia, to secure certain borrowings by Atlantique Telecom.
Other borrowings
Other borrowings consists of loans from non-controlling interests, advances from non-controlling interests,
vendor financing and other.
Loans from non-controlling interests in the aggregate amount of AED 545.2 million under IFRS as of 30
September 2010 represented the minority share of a shareholders’ loan advanced to Etisalat Misr (as of 31
December 2009: AED 525.3 million; as of 31 December 2008: AED 387.2 million (IFRS)). This loan carries
interest at a fixed rate of 10 per cent. per annum. In 2007, the shareholders of Etisalat Misr resolved to extend
the loan repayment to 2011 and accordingly as of 31 December 2009 this was classified as a non-current
liability.
At the extraordinary general meeting of Etisalat Misr held on 26 August 2008, the shareholders of Etisalat
Misr resolved to convert into equity 75 per cent. of the shareholders’ loan together with interest as of 31 July
2008. This resulted in the conversion of Etisalat’s portion of this loan (amounting to AED 2.8 billion) to
equity. The conversion included a premium of 25 per cent. of the nominal value of the shares at the time of
issuance and was approved by the Egyptian Capital Markets Authority (now known as the Egyptian Financial
Services Authority).
Loans from non-controlling interests in the aggregate amount of AED 1,643.0 million as of 31 December
2007 included the minority share of a shareholders’ loan advanced to Etisalat Misr amounting to AED
1,588.0 million (in both cases, under Etisalat GAAP). In addition, this aggregate amount as of 31 December
2007 included the minority share of a shareholders’ loan advanced to Atlantique Telecom amounting to AED
55 million under Etisalat GAAP, which share carried interest at a fixed rate of 7 per cent. per annum.
Advances from non-controlling interests of AED 592.2 million as of 30 September 2010 (as of 31 December
2009: AED 601 million; as of 31 December 2008 and 2007: AED 608.9 million) (all figures presented under
IFRS) represented advances paid by the minority shareholder of EIPL towards EIPL’s acquisition of a 26 per
cent. stake in PTCL, net of repayments. The amount is interest free, does not have any fixed repayment terms
and is not repayable within twelve months of 30 September 2010. Accordingly, the full amount was carried
in non-current liabilities as of 30 September 2010.
136
Level: 10 – From: 10 – Friday, November 12, 2010 – 08:51 – eprint6 – 4224 Section 06
Vendor financing as of 30 September 2010 included AED 412.8 million (under IFRS) in respect of Etisalat
Misr relating to the acquisition of network equipment. The financing is due to expire in 2011 and interest is
payable at a fixed rate ranging from 2 per cent. to 14 per cent. per year. The Group’s non-current borrowings
as of 30 September 2010 included vendor financing amounting to AED 311 million under IFRS.
The balance of other borrowings as of 30 September 2010 was attributable primarily to other borrowings by
Etisalat Misr.
Contractual Obligations
The following table sets out the payments due by period under the Group’s contractual obligations excluding
(i) trade and other payables, (ii) derivative financial instruments, (iii) end of service benefits, (iv) capital
projects and investment expenditures and (v) guarantees, as of 31 December 2009 under IFRS.
Payments due by period
as of 31 December 2009(1)
––––––––––––––––––––––––––––––
Less than
More than
1 year
1-5 years
5 Years
Total(1)
––––––––– ––––––––– ––––––––– –––––––––
(AED millions) (IFRS)
Interest bearing loans and borrowings ........................
Finance leases ..............................................................
Licence costs payable ..................................................
Operating lease obligations ..........................................
4,501.2
1,079.4
2,813.7
608.0
181.5
56.7
124.8
–
2,945.3
2,903.3
42.3
–
2,187.8
240.3
1,947.5
–
––––––––– ––––––––– ––––––––– –––––––––
Total ............................................................................
9,185.8
4,279.7
4,928.3
608.0
––––––––– ––––––––– ––––––––– –––––––––
Note:
(1)
All figures are unaudited and are derived from management accounts.
The Group is subject to a put option that runs until 31 December 2020 that would allow one of its investment
partners to sell and transfer 5 per cent. of its shares in Etisalat DB India to the Group. In addition, the Group
holds a call option to purchase shares in Etisalat DB India from another of its investment partners. See
“Description of the Group – International Operations – Other key subsidiaries, associates and joint ventures
– India – Etisalat DB India” for a description of these obligations.
CAPITAL EXPENDITURES
The following table sets out the capital expenditures (which includes amounts used for purchases of fixed
assets and, other than in respect of the year ended 31 December 2007, intangible assets) made by the Group
for the year ended 31 December 2007 in accordance with Etisalat GAAP and for the years ended
31 December 2008 and 2009 in accordance with IFRS.
Year ended 31 December
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(1)
2007
2008(1)
2009(1)
––––––––––––––––––––– ––––––––––––––––––––– –––––––––––––––––––––
Capital
Capital
Capital
expenditure
expenditure
expenditure
(AED
(AED
(AED
millions)(2)
% of total
millions)(3)
% of total
millions)(3)
% of total
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(Etisalat GAAP)
(IFRS)
UAE ..................................
International ......................
1,590
46
1,985
54
2,544
37
1,870
54
1,676
46
4,220
63
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Total ..................................
3,460
100
3,661
100
6,764
100
–––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
Notes:
(1)
All figures are unaudited and are derived from management accounts.
(2)
Includes the Group’s net expenditures on purchases of fixed assets.
(3)
Includes the Group’s net expenditures on the purchase of fixed and intangible assets.
137
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
The Group’s capital expenditures for the nine months ended 30 September 2010 were AED 3,436 million
compared to AED 3,507 million for the comparable period in 2009, a decrease of AED 71 million or 2.0 per
cent. The Group’s capital expenditures in the UAE accounted for AED 1,475 million during the nine months
ended 30 September 2010, compared to AED 1,566 million for the comparable period in 2009, a decrease
of AED 91 million or 5.8 per cent. The Group’s capital expenditures related to international operations
amounted to AED 1,961 million during the nine months ended 30 September 2010, compared to AED 1,941
million for the comparable period in 2009, an increase of AED 20 million or 1.0 per cent.
Capital expenditures for the nine months ended 30 September 2010 were principally the result of the
continued expansion of the FTTH network in the UAE, as well as continued capital expenditures required to
increase the capacity of and maintain the Group’s existing telecommunication networks. In the year ended
31 December 2009, the Group’s capital expenditure amounted to AED 6,764 million, compared to AED
3,661 million for the year ended 31 December 2008 (in both cases, as presented under IFRS), an increase of
AED 3,103 million, which was principally due to the Group’s build-out of its networks in Egypt and India
and the purchase of operating licences in Togo and India. In 2007, under Etisalat GAAP, the Group’s capital
expenditures (in this case, limited to fixed assets only) amounted to AED 3,460 million.
The Group’s capital expenditures have principally related to the expansion of the coverage, capacity and
network quality of the Group’s mobile networks and the deployment of new technologies. In addition to the
costs incurred for the purchase of fixed and intangible assets, the Group has made substantial expenditures
relating to the expansion of its networks, including amounts for acquisitions of subsidiaries, associates and
other investments. See “— Significant Factors Affecting Financial Condition And Results Of Operations —
Significant Capital and Investment Expenditure” and “— Liquidity and Capital Resources — Cash Flow”.
The Group expects to incur substantial capital expenditures in future periods for network construction,
expansion and maintenance, primarily in the UAE, Egypt, India and by Atlantique Telecom, although the
Group currently expects that capital expenditures in the UAE will decrease following the completion of the
FTTH network. As of 31 December 2009, the Group had approved future capital projects and investment
commitments to the extent of AED 6,787 million, of which AED 3,351 million was committed at 31
December 2009.
OFF-BALANCE SHEET ARRANGEMENTS
The Group does not have any off-balance sheet arrangements that have or are reasonably expected to have a
material current or future effect on its financial condition, revenue, expenses, results of operations, liquidity,
capital expenditures or capital resources. See “Liquidity and Capital Resources — Contractual Obligations”
for a description of the Group’s outstanding contractual obligations.
RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries have been eliminated on consolidation in the Annual
Financial Statements and the Interim Financial Statements.
In the nine months ended 30 September 2010, the Company entered into the following significant related
party transaction with associates and joint ventures:
•
Mobily: Pursuant to the Communications and Information Technology Commission (Saudi Arabia)
(CITC) licensing requirements, Mobily entered into a management agreement with the Company as
its operator (the Mobily Management Agreement) from 14 August 2004. For the nine months ended
30 September 2010, the Company charged an amount of AED 53 million in management fees and fees
for staff secondments provided under the Mobily Management Agreement. The term of the Mobily
Management Agreement is for a period of seven years and can be automatically renewed for
successive periods of five years unless the Company serves a 12-month notice of termination or
Mobily serves a six-month notice of termination prior to the expiry of the applicable period.
•
Thuraya Satellite Telecommunications Company PJSC: The Company has provided a primary
gateway facility to Thuraya including maintenance and support services. For the nine months ended
138
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
30 September 2010, a total amount of AED 24 million was charged to Thuraya for the use of this
facility and other services.
•
Pakistan Telecommunication Company Limited: Pursuant to the shareholders’ agreement entered into
between Etisalat International Pakistan and the Government of Pakistan dated 12 April 2006, the
Company entered into an agreement for the provision of technical services and know-how with PTCL
(the PTCL Services Agreement) with effect from 10 October 2006. For the nine months ended 30
September 2010, the Company recognised service fee income of AED 111 million pursuant to the
PTCL Services Agreement. Under the terms of the PTCL Services Agreement, the Company is
entitled to an annual service fee of 3.5 per cent. of the gross consolidated revenue of PTCL for that
year. The PTCL Services Agreement is valid for a period of five years and limits the annual service
fee to U.S.$50 million per annum.
•
Etisalat Nigeria: For the nine months ended 30 September 2010, the Company charged Etisalat
Nigeria for AED 141 million in annual management fees, fees for staff secondments and other
services.
In 2009, the Company entered into the following significant related party transactions with associates and
joint ventures:
•
Mobily: For the year ended 31 December 2009, the Company charged an amount of AED 63.9 million
(2008: AED 78 million) in annual management fees, fees for staff secondments and other services
provided under the Mobily Management Agreement.
•
Thuraya: The Company has provided a primary gateway facility to Thuraya including maintenance
and support services. For the year ended 31 December 2009, a total amount of AED 29.4 million
(2008: AED 21 million) was charged to Thuraya for the use of this facility and other services.
•
PTCL: For the year ended 31 December 2009, the Company recognised service fee income of AED
124 million (2008: AED 143 million) pursuant to the PTCL Services Agreement.
•
Etisalat Nigeria: For the year ended 31 December 2009, the Company paid an amount of AED 645
million (2008: AED 257 million) to Etisalat Nigeria as an advance (the accounting treatment of which
was not finalised as of 31 December 2009, but which has subsequently been classified and presented
as a shareholder loan). In the same period, the Company charged Etisalat Nigeria for AED 96.4
million in annual management fees, fees for staff secondments and other services.
In 2008, the Company entered into the following significant related party transactions with associates and
joint ventures (all figures presented in accordance with Etisalat GAAP):
•
Mobily: For the year ended 31 December 2008, the Company charged an annual management fee of
AED 36.7 million (U.S.$10 million) for services provided under the Mobily Management Agreement.
Advances to Mobily were fully repaid in 2007 and, accordingly, no interest was received during 2008
(2007: AED 16 million).
•
Thuraya: The Company provided a primary gateway facility to Thuraya including maintenance and
support services. For the year ended 31 December 2008, a total amount of AED 21.3 million (2007:
AED 20.4 million) was charged to Thuraya for the use of the facility.
•
PTCL: For the year ended 31 December 2008, the Company recognised service fee income under the
PTCL Services Agreement in the amount of AED 142.7 million (2007: AED 151 million).
In 2007, the Company entered into the following significant related party transactions with associates and
joint ventures (all figures presented in accordance with Etisalat GAAP):
•
Mobily: For the year ended 31 December 2007, the Company charged an annual management fee of
AED 36.7 million (U.S.$10 million) for services provided under the Mobily Management Agreement.
During the year ended 31 December 2007, the Company received interest amounting to AED 16
million on amounts advanced to Mobily.
139
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
•
Thuraya: The Company provided a primary gateway facility to Thuraya including maintenance and
support services. For the year ended 31 December 2007, a total amount of AED 20.4 million was
charged to Thuraya for the use of this facility.
•
PTCL: For the year ended 31 December 2007, the Company recognised service fee income under the
PTCL Services Agreement in the amount of AED 151 million.
DISCLOSURES ABOUT RISK
Financial Risk Management Objectives
The Group’s corporate finance function has overall responsibility for monitoring the domestic and
international financial markets and managing the financial risks relating to the operations of the Group. Any
significant decisions about whether to invest, borrow funds or enter into derivative financial instruments are
approved by either the executive committee or the board of directors of either Etisalat or of the individual
subsidiary. The Group’s risk includes market risk, credit risk and liquidity risk.
Market Risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates, interest rates and price risks on equity investments.
Foreign currency risk
The Group has limited transactional exposure to exchange rate risk as it generally enters into contracts in the
functional currency of the entity. These currencies include Indian Rupees, Egyptian Pounds and West African
CFA francs. The Group also enters into contracts in U.S.$ in the UAE and in euro in its Sub-Saharan African
operations as the currencies of these countries (AED and West African CFA francs, respectively) are pegged
to the U.S.$ and euro and therefore management believes these contracts result in limited exposure. At 31
December 2009, the Group had financial assets and liabilities in Egypt that were in U.S.$ and other limited
financial liabilities in Tanzania that are in currencies other than its respective functional currency. In
instances where the Group has a foreign currency transactional exposure, such as Egypt, it considers whether
to purchase derivative financial instruments to manage the exposure and reassess this conclusion based on
the level of exposure. The Group’s exposure to transactional exchange rate risk has not historically resulted
in material impacts on profitability.
In addition to transactional foreign currency exposure, the Group is exposed to risk upon the translation of
the Group’s foreign subsidiaries into AED. The Group recognises the impact of the translation as a
movement in shareholders’ equity.
Foreign currency sensitivity
As discussed above, the Group’s only significant exposure to transactional foreign exchange risk is in Egypt.
The following table presents the Group’s sensitivity to a 10 per cent. change in the AED against the Egyptian
Pound as of 31 December 2009. The impact has been determined by assuming the change in the rate of 10
per cent. occurred at the beginning of the period and was held constant throughout the reporting period. If
the AED were to strengthen against the Egyptian Pound this would result in an increase in profit and equity,
whereas if the AED were to weaken against the Egyptian Pound, this would result in a decrease in profit and
equity.
As of
31 December 2009
–––––––––––––––
(AED thousands)
Profit for the year ..............................................................................................................
Equity ................................................................................................................................
140
43,588
43,588
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
Interest rate risk
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating
interest rates, detailed in note 23 to the IFRS Financial Statements. The Group monitors market interest rates
in comparison to its current borrowing rates and determines whether or not it believes it should take action
related to the current interest rates. This includes a consideration of the current cost of borrowing, projected
future interest rates, the cost and availability of derivative financial instruments that could be used to alter
the nature of the interest and the term of the debt and, if applicable, the period for which the interest rate is
currently fixed.
Interest rate sensitivity
Based on the borrowings outstanding at 31 December 2009, if interest rates had been 2 per cent. higher or
lower during the year and all other variables were held constant, the Group’s net profit and equity would have
decreased or increased by AED 18 million. This impact is primarily attributable to the Group’s exposure to
interest rates on its variable rate borrowings.
Other price risk
The Group is exposed to equity price risks arising from its equity investments. Equity investments are held
for strategic rather than trading purposes. The Group does not actively trade these investments. See note 16
to the IFRS Financial Statements for further details on the carrying value of these investments.
Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group and arises principally from the Group’s bank balances and trade and other
receivables. The Group has adopted a policy of only dealing with counterparties it believes to be
creditworthy and obtaining sufficient collateral, where management believes it is appropriate, as a means of
mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its
counterparties are monitored and the aggregate value of transactions concluded is spread amongst approved
counterparties.
For cash held in banks, the Group considers various factors in determining with which banks to invest its
money including whether the bank is owned by and/or has received government support, the rating of the
bank by rating agencies and the level of security by way of governmental deposit guarantees. In addition, the
Group has established a policy of not investing more than a set amount in any individual bank, which at 31
December 2009 was AED 1 billion. Banks are, and the amount to be invested in each bank is, assessed
annually or when there are significant changes in the marketplace. At 31 December 2009, the Group’s bank
balances were invested 83 per cent. in the UAE and 17 per cent. outside of the UAE. Of the amounts in the
UAE, an aggregate of AED 2.9 billion was with banks rated A+ by Fitch, AED 1 billion with banks rated A
by Fitch and AED 743 million with banks rated A- by Standard and Poor’s.
The Group’s trade receivables consist of a large number of customers, spread across diverse industries and
geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable
and, where management believes it is appropriate, collateral is sought from customers usually in the form of
a cash deposit.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represents the Group’s maximum exposure to credit risk at the date of the financial statements, without
taking account of the value of any collateral obtained.
Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with Etisalat’s Board of Directors, which has
established a liquidity risk management framework for the management of the Group’s short, medium and
long-term funding and liquidity management requirements. The Group manages liquidity risk by
141
Level: 10 – From: 10 – Thursday, November 11, 2010 – 12:58 – eprint6 – 4224 Section 06
maintaining reserves, banking facilities and reserve borrowing facilities, by regularly monitoring forecast
and actual cash flows and seeking to match the maturity profiles of financial assets and liabilities. The details
of the available undrawn facilities that the Group had at its disposal at 31 December 2009 to further reduce
liquidity risk are included in note 23 to the IFRS Financial Statements.
The majority of the Group’s financial liabilities at 31 December 2009 as detailed in the IFRS Financial
Statements were due within one year. Further information related to the Group’s borrowings due in more
than one year is provided in note 23 to the IFRS Financial Statements.
142
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
DESCRIPTION OF THE GROUP
Overview
Etisalat was founded in 1976 and is the leading and incumbent telecommunications provider in the UAE,
offering a wide range of mobile, fixed-line, internet and data telecommunications services to business,
residential and government customers. Etisalat was the sole provider of mobile and fixed-line
telecommunications services in the UAE until February 2007. As of 30 June 2010, its share of the UAE
mobile, fixed-line and internet service markets was 73 per cent., 84 per cent. and 95 per cent., respectively,
in terms of numbers of subscribers (Source: TRA and Company data). The Group is listed on the Abu Dhabi
Securities Exchange and its market capitalisation was approximately AED 84.6 billion (U.S.$23.0 billion) as
of 30 September 2010.
In 2004, Etisalat began forming and acquiring interests in subsidiaries, associates and joint ventures in order
to grow and carry out its international operations. Since then, the Group has significantly expanded its
international telecommunications operations through acquisitions of existing operators as well as by
acquiring new licences and building its own operations. The Group now has a presence in 17 countries
outside the UAE through its subsidiaries, associates and joint ventures in Saudi Arabia, Egypt, Sub-Saharan
Africa, Nigeria, Sudan, Tanzania, India, Pakistan, Afghanistan, Indonesia and Sri Lanka.
The UAE remains the Group’s principal market in terms of revenue, cash flow and profitability. For the years
ended 31 December 2008 and 2009, the Group had consolidated revenue of AED 29.4 billion and AED 30.8
billion, of which 90 per cent. and 85 per cent., respectively, was contributed by the Group’s UAE
telecommunications operations carried out by Etisalat. For the nine months ended 30 September 2009 and
2010, the Group had consolidated revenue of AED 23.7 billion and AED 23.3 billion, of which 83 per cent.
and 76 per cent., respectively, was contributed by the Group’s UAE telecommunications operations carried
out by Etisalat. Outside the UAE, Etisalat Misr in Egypt and Atlantique Telecom in Sub-Saharan Africa are
the most significant of the Group’s subsidiaries, having generated in the aggregate 7 per cent. of the Group’s
consolidated revenue for the year ended 31 December 2008, 12 per cent. for the year ended 31 December
2009 and 18 per cent. for the nine months ended 30 September 2010.
The total mobile and fixed-line subscriber base of the Group as of 31 December 2009 was approximately 9.2
million in the UAE (including Etisalat and Thuraya) and 98.7 million for its international subsidiaries,
associates and joint ventures (of which the Group’s proportionate interest was approximately 34.7 million,
based on the percentage ownership interest of the Group in each company whose subscriber numbers are
included).
Under the Group’s current structure, Etisalat is both the operating company in the UAE as well as the holding
company for the Group’s subsidiaries, associates and joint ventures. As of the date of this Base Prospectus,
the UAE Government is Etisalat’s controlling shareholder, holding 60 per cent. of Etisalat’s ordinary shares
through the Emirates Investment Authority. Pursuant to Article 7 of the Etisalat Law, the UAE Government’s
shareholding in Etisalat may not be less than 60 per cent. The composition of Etisalat Board of Directors (the
Board) is provided for in the Etisalat Law, and has been amended by the Telecom Law. The Board of Etisalat
is comprised of eleven directors, of which seven (including the Chairman of the Board) represent the UAE
Government and are appointed by Federal Decree. The four remaining directors are elected by Etisalat’s nonUAE Government shareholders. See “— UAE Operations — Regulation”.
The following table lists the Group’s subsidiaries and associates involved in its telecommunications
operations, the effective economic ownership interest of the Group’s entities and data regarding each entity’s
operations.
143
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Operating Company
––––––––––––––––––
Middle East
Emirates
Telecommunications
Incorporated (Etisalat)(5) ..........
Population
in millions
Number of
Country of
Current
(network
Penetration
subscribers
Market
Licence types
operation
ownership(1)
coverage)(2)
rate(2)
in millions(3)
share(4)
(expiry dates)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Mobile: 197%
Fixed-line: 28%
5 (100%)
Internet: 27%
Mobile: 7.8
Mobile: 73%
Fixed-line: 1.3 Fixed-line: 84%
Internet: 1.3
Internet: 95%
Mobile
(2G/3G)
Fixed-line
Internet (all
2026)
UAE
–
Saudi Arabia
27%
28 (98%)
Mobile: 27%
Mobile: 19.1
Mobile
Mobile: 41% (2G/3G) (2029)
Africa
Etisalat Misr (Etisalat
Misr)(7) ......................................
Egypt
66%
82 (98%)
Mobile: 76%
Mobile: 17.4
Mobile
Mobile: 22% (2G/3G) (2031)
Atlantique Telecom S.A.
(Atlantique Telecom)(8)............
Sub-Saharan
Africa
100%
74 (65%)
Mobile: 43%
(average across
all countries)
Mobile: 5.6
Emerging Market
Telecommunications Services
Limited (Etisalat Nigeria)(9) ....
Nigeria
40%
152 (28%)
Mobile: 48%
Mobile: 2.7
Canar Telecommunications Co.
Limited (Canar)(10) ..................
Sudan
89%
Etihad Etisalat Company
(Mobily)(6) ..................................
Zanzibar Telecom Ltd
(Zantel)(11) ................................
Tanzania
65%
42 (45%) Fixed-line: 37%
42 (24%)
Varies by
market
Mobile
Mobile: 4% (2G/3G) (2022)
Fixed-line: 0.1 Fixed-line: 61%
Mobile: 38%
Fixed-line:
Mobile: 1.4
0.4% Fixed-line: 0.02
Mobile (2G)
(various)
Fixed wireless
(2020)
Mobile: 8%
Fixed-line: 9%
Mobile
(2G)(2032)
Fixed (2032)
Mobile: 19%
Fixed-line: 76%
Mobile: 18.6
Internet:
Fixed-line: 4.6
unavailable
Mobile
(2G)(2013)
Fixed-line
(2020)
Internet (2024)
Asia
Pakistan Telecommunications
Company Limited (PTCL and
Ufone)(12) ..................................
Pakistan
23%
172 (90%)
Mobile: 59%
Fixed-line: 2%
Internet:
unavailable
Etisalat DB Telecom Private
Limited (Etisalat DB India)(13)
India
45%
1,200 (84%)(14)
Mobile: 43%
n/a
n/a
Mobile
(2G)(2028)(13)
Etisalat Afghanistan (Etisalat
Afghanistan)(15) ........................
Afghanistan
100%
29 (66%)
Mobile: 34%
Mobile: 2.7
Mobile: 19%
Mobile (2G)
(2022)
PT XL Axiata TBK (XL)(16) ....
Indonesia
13%
240 (84%)
Mobile: 78%
Mobile: 31.6
Mobile: 17%
Mobile
(2G/3G) (no
stated expiry
date)
Etisalat Lanka (Etisalat
Lanka)(17) ..................................
Sri Lanka
100%
21 (65%)
Mobile: 38%
Mobile: 2.4
Mobile: 17%
Mobile
(2G)(2018)
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Figures include aggregate direct and indirect holdings as of the date of this Base Prospectus calculated on an effective ownership basis, and are rounded
to the nearest whole number.
Population and penetration rate reflect public data as of 31 December 2009 unless otherwise indicated. Network coverage refers to the percentage of the
population under licence that receives services from the operating company’s existing telecommunications network in each jurisdiction or region in
which the Group operates. Network coverage is based on public information, if available. If network coverage information is not publicly available, the
information is based on management estimates.
See “Presentation of Financial and Other Information — Presentation of Industry, Market and Customer Data — Customers” for a description of how
the Group calculates subscribers. Figures are as of 30 September 2010 unless otherwise indicated.
Market share is based on publicly available information provided by regulators, if available, as of 31 December 2009 unless otherwise indicated. If such
information is not available, market share is based on a number of factors, including public statements by the Group’s competitors and management
estimates. See “Presentation of Financial and Other Information — Presentation of Industry, Market and Customer Data — Market Share”.
Figures for penetration rates are as of 30 June 2010. Figures for number of subscribers and market share are as of 30 June 2010.
Etisalat holds a direct 27.5 per cent. interest in Mobily.
Etisalat owns its interest in Etisalat Misr through its 100 per cent. ownership interest in its subsidiary Etisalat International Egypt LLC (EIEL).
Etisalat owns its interest in Atlantique Telecom through its 100 per cent. ownership interest in its subsidiary Etisalat International Atlantique Limited
(EIAL). Atlantique Telecom has a controlling interest and consolidates the results of operators in five West African countries (Côte d’Ivoire, Togo,
Central African Republic, Gabon and Niger). In addition, Etisalat has 100 per cent. ownership of Etisalat Benin through its 100 per cent. ownership of
Etisalat International Benin Limited; Etisalat Benin managed by and consolidated with Atlantique Telecom. Atlantique Telecom also has majority
ownership of an operator in Burkina Faso. Due to an on-going shareholder dispute, the results of Burkina Faso were deconsolidated in Atlantique
Telecom’s results for the years ended 31 December 2008 and 2009. See “— Litigation”.
Etisalat holds an indirect interest in Etisalat Nigeria through its 40 per cent. ownership interest in MDC-NG B.V., which is held through Etisalat’s 100 per
cent. ownership interest in its subsidiary Etisalat International Nigeria Limited (EINL). Figures for number of subscribers and market share are as of
31 December 2009.
Etisalat holds a direct interest in Canar. Figures for number of subscribers and market share are as of 31 December 2009.
Etisalat holds a direct interest in Zantel. Figures for number of subscribers and market share are as of 31 December 2009.
Etisalat holds its interest in PTCL through Etisalat International Pakistan LLC (EIPL), which is 90 per cent. owned by Etisalat. EIPL holds a 26.0 per
cent. interest in PTCL, giving Etisalat a 23.4 per cent economic interest in PTCL. PTCL has a 100 per cent. interest in Ufone. Figure for number of
fixed-line subscribers includes internet subscribers. Figures for number of subscribers include mobile broadband subscribers.
144
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
(13)
(14)
(15)
(16)
(17)
Etisalat has 100 per cent. ownership of Etisalat International India Limited (EIIL), which has a 100 per cent. interest in Etisalat Mauritius Ltd., which
in turn has 100 per cent. ownership of Etisalat DB India. The Group accounts for Etisalat DB India as a subsidiary as it exercises control over
management. Figures for number of subscribers and market share are as of 31 December 2009.
Etisalat DB India is licensed to operate in 15 of 22 service areas (circles) in India.
Etisalat owns its interest in Etisalat Afghanistan through its 100 per cent. interest in its subsidiary Etisalat International Afghanistan Limited. The market
share figure presented for Etisalat Afghanistan is as of 30 June 2010. Figures for number of subscribers and market share are as of 31 December 2009.
Etisalat holds its 13.3 per cent. interest in XL through its 100 per cent. interest in its subsidiary Etisalat International Indonesia Limited. The market
share figure for XL is as of 30 September 2009. Figures for number of subscribers are as of 31 December 2009.
Etisalat holds its interest in Tigo (Private) Limited (Tigo) through its 100 per cent. interest in its subsidiary Etisalat International Sri Lanka Limited
(EISLL). EISLL holds its interest in Tigo through its 100 per cent. interest in Sark Corporation N.V. (Sark). In 2010, Tigo was rebranded and now
operates as Etisalat Lanka. The market share figure for Etisalat Lanka is as of 30 September 2009. Figures for number of subscribers and market share
are as of 31 December 2009.
Strengths
The Group believes that it benefits from the following competitive strengths that position it to achieve its
strategic objectives:
•
Leading and incumbent position in UAE; investment for future growth. Etisalat is the market leader
in telecommunications services in the UAE with market shares of 73 per cent. in mobile, 84 per cent.
in fixed-line and 95 per cent. in internet services, in each case measured by numbers of subscribers as
of 30 June 2010 (Source: TRA and Company data). The Group believes that the UAE is a mature
telecommunications market that provides a stable foundation for the Group’s cash flow generation
needs to support its international growth given the UAE’s relatively young and affluent population,
increasing broadband penetration rate, the demand for value-added services and bundled services and
the growth of usage driven by population growth, increasing visitor numbers and business usage that
had continued until the global economic slowdown. To support its leading position and cash flow
generation in the UAE, Etisalat has invested heavily in new technologies in order to be able to offer
higher-quality, data-intensive telecommunications services, with AED 5.5 billion spent in 2009,
principally on the construction of its FTTH network. This network allows Etisalat to deliver enhanced
bandwidth, transmission speed and more efficient and cost-effective access to high-speed internet,
telephone, digital television and other high-bandwidth services. Etisalat connected over 85 per cent.
of households in Abu Dhabi to its FTTH network in 2009. As a result of this network roll-out, Etisalat
believes that it has been able to attract new customers and retain existing ones in an increasingly
competitive environment. UAE segment revenues have remained relatively stable at AED 23,818.2
million for the year ended 31 December 2008 and AED 23,197.0 million for the year ended
31 December 2009 despite the introduction of competition in the market and challenging
macroeconomic conditions due to the global slowdown.
•
Strong and conservative financial profile; low leverage; prudent financial policy. The Group has
maintained a conservative financial profile and low indebtedness levels, enabling it to maintain its
domestic and international investment strategy and take advantage of opportunities to grow its
business in the face of challenging global financial market and economic conditions. The Group
generated cash flow from operations of AED 10,596.4 million and AED 10,124.7 million for the years
ended 31 December 2008 and 2009, respectively, maintained a net cash position at the end of each of
the last five years and had AED 11.3 billion in cash and cash equivalents as of 31 December 2009.
The Group also has relatively low debt levels, with total consolidated borrowings of AED 4.5 billion
as of 31 December 2009 compared to operating profit (after royalty) of AED 8.8 billion for the year
ended 31 December 2009.
•
Experienced management team with a proven track record of establishing new telecommunications
operations in emerging markets with significant growth potential. The Group has significant
experience in all facets of building, managing and operating successful mobile telecommunications
businesses in high growth and emerging markets, including three of the most populous countries in
the Arab world, namely the UAE, Saudi Arabia and Egypt, as well as complementary operations in
the Indian subcontinent. For example, in June 2006, the Group commenced commercial operations in
Saudi Arabia through its associate Mobily only eight months after acquiring a licence and as of
31 December 2009, Mobily had a 41 per cent. mobile subscriber market share and 18.2 million mobile
subscribers. The Group’s share of results of Mobily was AED 816.0 million for the year ended
31 December 2009 as a result of the Group’s 27.5 per cent. equity interest. The Group was able to
145
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
achieve this rapid roll-out as it was able to quickly deploy an experienced core of staff, most of whom
have been redeployed back to the UAE to assist with roll-outs in other markets. Similarly, since the
Group commenced commercial operations through its subsidiary Etisalat Misr in Egypt in May 2007,
Etisalat Misr has rapidly grown to generate revenues of AED 2,628 million in 2009, with 14.2 million
mobile subscribers as of 31 December 2009 and a market share of 22.8 per cent. in terms of
subscribers (according to public statements by its competitors and management estimates).
Management believes that this approach to managing its international operations also enables it to
maximise cost-effective technology transfer opportunities from more mature telecommunications
markets to those at different stages of development, further supporting profit growth in its
international operations. Currently, the Group is applying its expertise to develop its other
international operations, including its recently acquired operation in Sri Lanka (which has been
rebranded from Tigo to Etisalat Lanka) and in India. As a result of the Group's international
diversification, the absolute and relative revenue contribution of the Group’s international operations
has increased, from consolidated revenues of AED 2,552 million (9 per cent. of total consolidated
revenues) to consolidated revenues of AED 4,214 million (14 per cent. of total consolidated revenues)
for the years ended 31 December 2008 and 2009, respectively and from AED 3,448 million (15 per
cent. of total consolidated revenues) to AED 5,247 million (23 per cent. of total consolidated
revenues) for the nine months ended 30 September 2009 and 2010, respectively. In addition, the
Group’s share of results from its associates and joint ventures has also increased, from AED 472.7
million in 2008 to AED 682.1 million in 2009, and from AED 368.1 million to AED 503.9 million for
the nine months ended 30 September 2009 and 2010, respectively . Coupled with the strong cash flow
generated by more mature operations in the UAE, the Group believes it is well positioned for future
growth and expansion of its operations in emerging telecommunications markets. The Group also
expects that the diversification of its operations should reduce the potential effect of unfavourable
developments in a single market or currency.
•
Economies of scale and synergies across its operations. As the Group has expanded internationally,
it has pursued economies of scale and synergies from operating and standardising mobile networks in
numerous markets. In particular, the Group is able to leverage its scale by centralising contracting,
marketing and planning functions, as well as its equipment and handset procurement functions.
Centralizing these functions is expected to permit the Group to more effectively plan, build and
manage new mobile networks (including by leveraging local expertise), develop strong branding
strategies tailored to each market and introduce new product and service offerings while yielding costsavings compared to stand-alone operators. Centralizing these functions also permits the Group to
obtain more favourable terms from its suppliers, including a sufficient supply of popular handsets
which has supported its offering of market-leading services in the UAE. For example, the Group was
the first to offer BlackBerry handsets in the GCC, and continues to be a leading distributor (by net
volume) of the product in the region. The Group is also extending its centralisation of procurement
from network equipment to the creation of value-added services through content licensing, joint
ventures with media providers and similar initiatives. Such central procurement and network
standardisation have allowed the Group to leverage its negotiating power, share market intelligence
and research across the Group and coordinate technology sourcing, investment and management. The
Group has also used its scale to enter into agreements with multinational companies such as Ericsson,
Huawei, Microsoft and HP that benefit many of the Group’s operations. In addition, the Group has
utilised its scale to negotiate roaming agreements for certain of its smaller operations with global
companies (such as between Atlantique Telecom and Vodafone), offer preferential tariffs between its
international operations that have substantial cross-country calling and large expatriate populations
(e.g., as currently offered in Pakistan and Afghanistan or planned between Sri Lanka and India),
obtain more favourable rates for roaming in countries in which the Group does not have operations
and in negotiating interconnection and termination rates.
•
Strong relationship with the UAE Government. The UAE Government currently owns 60 per cent.
of Etisalat’s share capital, and pursuant to the Etisalat Law, the UAE Government’s shareholding may
not be less than 60 per cent. In addition, seven of the Group’s eleven board members, including the
Chairman, are appointed by Federal Decree and represent the UAE Government. This working
146
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
relationship with the UAE Government has helped support the Group in its international expansion
by, among other things, helping it address and mitigate political risk in the emerging markets in which
it has expanded, and into which it intends to expand in the future. Management believes that Etisalat
is an integral part of the UAE’s economy and growth strategy, as demonstrated by its significant
contribution to the UAE Government’s finances, with the royalty payment made by the Group in 2009
representing approximately 30 per cent. of the UAE Government’s total budgeted revenues for that
year.
Strategy
The Group aims to remain the leading telecommunications provider in the UAE and establish a strong
position in all its markets through service differentiation, becoming the brand of choice across the Group’s
footprint. The key components of the Group’s business strategy are as follows:
•
Maintain position as leading telecommunications operator in the UAE. Etisalat intends to maintain
its position as the leading telecommunications provider in the UAE as measured by revenue share.
Etisalat seeks to compete on the basis of the quality of its service by maintaining the highest quality
network (in terms of sound quality, signal strength, coverage and fewest dropped calls), expanding and
enhancing its range of product and service offerings, implementing marketing and promotional
strategies to increase loyalty of and usage by its existing customers, continuing to develop its
distribution channels, particularly in the highest customer-value segments of the retail and corporate
markets, and playing an important role in the community. A key component of this strategy is the
continued expansion of its FTTH network in the UAE, which has already been substantially
completed in Abu Dhabi. The UAE is expected to be the first country in the GCC to widely offer
FTTH. With enhanced bandwidth and transmission speeds, Etisalat expects that it will be wellpositioned to offer a broader range of digital content for the foreseeable future, such as e-Life doubleand triple-play packages launched in December 2009. This existing offer is intended to be
complemented in the future by movies, television programming and video gaming options.
Additionally, with higher speed data services than existing networks and enhanced savings with the
bundling of internet, fixed-line voice services and IPTV made possible by its FTTH network, Etisalat
will be placed to offer competitive products to its customers. In addition to its fixed-line offerings,
Etisalat intends to continue to defend Etisalat’s market share in the UAE, particularly with respect to
the highest customer-value segments, without eroding profitability or revenue. One element of this
strategy is to offer the latest handsets, and Etisalat was the first operator in the GCC to offer the RIM
BlackBerry in June 2006 and the Apple iPhone 3G and 3GS in February 2009. Etisalat is also
planning to launch new value-added services, such as the planned launch of mobile banking services,
which is targeted at the expatriate population and will allow customers in the UAE to remit money to
their home countries using their mobile phones. Etisalat intends to continue to tailor its product
offerings to the populations in the UAE where it believes growth (both in terms of subscriber numbers
and revenue) will be possible in the future. See “— UAE Operations”.
•
Diversify revenue sources and continue revenue growth through international expansion and
consolidation. The Group’s international strategy is to maximise the enterprise value of its existing
international businesses and continue to seek to acquire licences or existing businesses in markets
where the Group believes there is high growth potential and high potential for synergies with its
existing operations (in terms of technology, culture and language) as well as increasing its ownership
stake in its existing international operations. The Group is actively continuing to seek new licences
and acquisitions of existing telecommunications operators in emerging markets so as to offset the
anticipated negative impact of competition and the relative maturity of the UAE market on its revenue
and profit growth opportunities. In Africa and Asia, the Group’s strategy is to target markets with low
penetration rates compared to western markets that it believes have favourable economic and
demographic profiles. In the Middle East, the Group intends to take advantage of the region’s recently
liberalised telecommunications sector and to enter markets that generally exhibit favourable economic
characteristics through auctions of mobile and fixed-line licences. In evaluating investment
opportunities, the Group does not focus solely on having a majority equity or voting interest in
international opportunities (although that is an important consideration), but also considers control
147
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
over management, strategy, operations and the board (or the ability to potentially obtain such control
in the future), which can drive value creation, and the ability to take advantage of synergies. The
Group has implemented this strategy through its controlled subsidiaries Atlantique Telecom in SubSaharan Africa and Etisalat Misr in Egypt as well as associates, such as Mobily in Saudi Arabia and
PTCL in Pakistan. While the Group intends to continue to assess further expansion opportunities as
they arise on an opportunistic basis, it plans to consolidate its existing international network, increase
its ownership in its existing international operations where possible and cost-effective and improve or
stabilise its position in these markets through improved network capacity and quality; market
appropriate, innovative product offerings; improve quality of service and customer satisfaction; and
provide more value-added services.
•
Continue to be an innovation and service leader in each of its markets. The Group seeks to provide
its customers with the most technologically advanced telecommunications and information services
appropriate to each of the markets in which it operates in a cost-effective manner, adapted to the
relevant markets. In 1982 it was the first operator to provide mobile phone services in the Middle East,
and in 2003 it was first to introduce MMS and 3G services. The Group was the first mobile phone
operator in the Middle East to launch a roaming alliance between Saudi Arabia and Egypt with a fixed
rate for outbound roaming between the two countries. The Group's Egyptian operation was the first
provider to offer 3G services in Egypt. More recently, the Group was the first in the GCC to introduce
Apple iPhone and BlackBerry Storm handsets in 2009, and has also introduced the Android Google
phone in cooperation with HTC Corporation and expects to continue to deploy new technologies as
they become available. The Group is also continuing to innovate with respect to its business
customers, especially in the UAE, including the implementation of “machine-to-machine”
telecommunications solutions for enterprise customers, whereby a customer’s industrial and technical
equipment is fitted with SIM cards and mobile telecommunications equipment in order to wirelessly
communicate with central monitoring hubs (e.g., by automatically reporting meter readings). To
maintain its leading telecommunications services, the Group continues to upgrade its infrastructure in
order to improve the quality of its service and provide customers with additional value-added and
complementary products and services based on market maturity and need. For example, the Group’s
business sales division has implemented an internationally recognised account management
programme that focuses on gaining an in-depth understanding of each customer’s business in order to
offer products and solutions that meet each customer’s unique objectives.
UAE Operations
The UAE is the Group’s principal operating market in terms of revenue and profit. Etisalat was incorporated
in the UAE with limited liability in 1976 by UAE Federal Government Decree No. 78, which was replaced
by the Etisalat Law in 1991 and further amended by the Telecom Law in 2003, 2005 and 2008. The Etisalat
Law provides that the UAE Government (represented by the Etisalat Investment Authority) is required to
hold at least 60 per cent. of Etisalat’s shares and the remaining shares may only be owned by UAE national
individuals. Etisalat’s shares have been listed on the Abu Dhabi Securities Exchange since June 2002.
The Group believes that the UAE is a mature market that provides a stable foundation for the Group’s cash
flow generation needs to support its international growth. Etisalat’s customer base in the UAE comprises
consumers, SMBs, enterprise customers and government entities. Etisalat’s UAE business is divided along
geographic lines between Abu Dhabi, Dubai and the Northern Emirates (which includes the West Coast, East
Coast and Ras al Khaimah). Etisalat further delineates its customer base by reference to the nature of the
services provided: mobile (prepaid and postpaid), fixed-line, internet and data services.
As a full service telecommunications operator in the UAE, Etisalat seeks to maximise the competitive
advantage available to it from bundling services and offering multiple devices with different value-added
services to individual customers, providing high quality service at a commercially reasonable price and
building on its historical client relationships. Where permitted by the regulatory framework, Etisalat is also
increasingly bundling services within different product lines (e.g., by offering inclusive minutes and cheaper
international call rates in return for increased line rentals) in order to take advantage of cross-selling
opportunities.
148
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Telecommunication operations carried out by Etisalat contributed 90 per cent. of the Group’s revenue for the
year ended 31 December 2008 and 85 per cent. for the year ended 31 December 2009, and 83 per cent. of
the Group’s revenue for the nine months ended 30 September 2009 and 76 per cent. for the nine months
ended 30 September 2010. Within the UAE, Etisalat provides a full range of telecommunications services
and its revenue is derived from four principal areas:
•
Mobile: Includes revenue from SIM rental, handset rental and voice services (including local, national
and IDD calling, as well as revenue attributable to roaming).
•
Fixed-line: Includes revenue from fixed line rental (including the line rental revenue associated with
fixed lines used for voice and/or internet services), connection fees and fixed line voice services.
•
•
Internet: Includes revenue from fixed internet services, including dial-up and broadband services.
Data Services: Includes revenue from all data communications services, including SMS, MMS,
GPRS, 3G data and other value-added services (from both mobile and fixed-lines), as well as revenue
from SMB and enterprise services.
Mobile
Overview
Etisalat was the sole provider of mobile services in the UAE until February 2007, when du commenced
commercial operations. Etisalat’s share of the mobile services market in the UAE as of 30 June 2010 was 73
per cent. based on numbers of subscribers (Source: TRA and Company data). Mobile services in the UAE
contributed 51 per cent. of the Group’s consolidated revenue for the year ended 31 December 2008, 45 per
cent. for the year ended 31 December 2009 and 37 per cent. for the nine months ended 30 September 2010.
As of 30 September 2010, Etisalat had approximately 6.8 million prepaid subscribers and 1.0 million
postpaid subscribers in the UAE. Etisalat offers voice services, including local, national and IDD to its
mobile subscribers. Included within these service offerings are mobile value-added services (content rather
than voice-based services such as MMS and 3G/GPRS data packages) and SMS, BlackBerry and other datarelated services that are provided over the mobile network. Although these value-added services are
developed and sold by the mobile operations units, revenue generated by these services is accounted for
under data services.
Customers, products and services
Etisalat offers two types of prepaid mobile services, an annual service contract offered to UAE residents and
requiring the payment of a non-refundable subscription fee (that includes connection charges, a charge for a
SIM card and one year’s access subscription), and a more limited offering targeted at visitors to the UAE and
others desiring a shorter subscription period. Prepaid customers pay in advance for a fixed amount of airtime
and services. For annual prepaid subscribers, a customer is required to pay a renewal fee in advance in order
to retain the service for a further year.
Etisalat offers postpaid services to all UAE nationals, GCC nationals and UAE residents (including
expatriates), in each case above the age of 21. The service is provided pursuant to a contract that the customer
can terminate at any time without penalty. The customer is required to pay an initial one-time non-refundable
subscription fee and then is billed on a monthly basis (including a monthly rental charge that is currently
AED 20).
Etisalat actively encourages prepaid customers to migrate to postpaid plans. The prepaid to postpaid
migration is a free service presented to all prepaid customers that wish to migrate their lines to become
postpaid lines with the same number. Those who migrate will be eligible for a number of benefits that
prepaid users do not have access to, including monthly volume discounts on local and international calls.
The tariff structure is currently the same for all customers with the only difference being the payment
method. While postpaid customers pay in advance a monthly rental charge (currently AED 20), prepaid
customers need to recharge their account every time they run out of credit in order to keep using the service.
149
Level: 10 – From: 10 – Thursday, November 11, 2010 – 14:45 – eprint6 – 4224 Section 07
The following table presents information about the number of Etisalat’s active mobile subscribers in the UAE
as of 31 December 2007, 2008 and 2009 and as of 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
(thousands)
Mobile subscribers
Prepaid subscribers ..................................................
5,781
6,473
6,834
6,807
Postpaid subscribers ................................................
591
812
907
1,004
––––––––– ––––––––– ––––––––– –––––––––
Total ............................................................................
6,372
7,285
7,741
7,811
–––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Group
— Significant Factors Affecting Financial Condition and Results of Operations — Mobile and fixed-line
ARPU among UAE customer base” for a description of Etisalat’s mobile ARPU.
Demand for mobile services is mainly driven by price and network quality, although recently customers have
increasingly focused on purchasing handsets that will enable them to access an increasing number of valueadded data services. In this area, Etisalat has been leading the handset offering of smart phones in the UAE
with the introduction of the iPhone 3G and 3GS and the BlackBerry Storm in 2009. Etisalat also offers
handsets such as the iPhone 4, the BlackBerry Bold and the BlackBerry Torch. In addition, Etisalat services
the low income segments of the UAE population (which includes a significant number of expatriate labourers
and others) through various initiatives, including offering a lower cost Etisalat-branded handset packaged
with a prepaid SIM.
Churn among UAE mobile customers
“Churn” refers to how the Group measures mobile customer disconnections over a given period of time.
Customer disconnections can occur on a voluntary basis when customers switch to competing
telecommunications operators, which can be caused by a number of factors, such as pricing, the availability
of data and value-added service offerings and quality of service. Customer disconnections can also occur
when a customer decides that it no longer requires or cannot afford mobile telecommunications services, or
through termination for non-payment by the Group, which occurs when a customer’s account is closed on
the Group’s systems. Etisalat considers a mobile subscriber to have ceased its subscription if (1) the customer
terminates the subscription, (2) in the case of postpaid subscriptions, if Etisalat terminates the subscription
or (3) after expiry of any prepaid or postpaid contract period, if the subscriber has not made any outgoing
activity (voice, text or multimedia) or received any incoming calls within a 90-day period. Etisalat calculates
churn by dividing the number of disconnections in a given period by the average number of customers for
the same period. As a result, a certain proportion of churn occurs with a lag, as a decision by a customer to
cease using Etisalat’s services in the UAE may only be reflected in the following year after the prepaid
annual subscription has expired.
The table below shows the churn rate among the Group’s UAE mobile subscribers for the years ended
31 December 2007, 2008 and 2009 and the nine months ended 30 September 2010.
Nine months
ended 30
Year ended 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
Prepaid churn rate (%) ................................................
15
22
27
18
Postpaid churn rate (%)................................................
9
8
13
11
Blended (%) ................................................................
15
21
25
17
Etisalat’s churn is primarily driven by three factors: competition, “natural” churn as a result of expiring SIMs
from visitors or customers migrating from prepaid to postpaid plans (or vice versa) and macroeconomic
150
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
factors, such as decreased immigration of foreign workers or departure of expatriates due to the slow down
of some activities as a result of economic conditions.
Until the middle of 2007, Etisalat’s churn was primarily driven by natural factors, as economic conditions
were robust and there was no local competition. By the middle of 2007, however, competition from du
increased churn, principally in prepaid services where du was focusing its efforts. Due to the “lag” effect of
measuring disconnections, the introduction of competition in 2007 also contributed to the increase in churn
during 2008. In addition, during the latter half of 2008 and in 2009, economic factors impacted churn rates
due to a decrease in visitors purchasing new SIMs, as well as a decrease in immigration and an increase in
expatriates departing the UAE, in both cases due to worsening economic conditions (particularly as foreign
worker visas in the UAE typically expire a short time after employment is terminated).
Etisalat is actively engaged in developing new initiatives to retain its existing customers, including the
introduction of a new churn monitoring programme in December 2009, which monitors individual customer
usage patterns to provide a basis for offering new incentives. These incentives include targeted promotions
such as a reduction in long-distance rates to countries a subscriber typically calls, iPhone offers to a limited
number of Etisalat’s highest customer-value subscribers to incentivise them to switch from prepaid to
postpaid calling plans and free minutes.
Fixed-line
Etisalat was the sole provider of fixed-line services in the UAE until February 2007, when du began offering
fixed-line services. Etisalat’s share of the fixed-line services market in the UAE as of 30 June 2010 was 84
per cent. in terms of numbers of subscribers. Fixed-line services in the UAE contributed 10.4 per cent. of the
Group’s consolidated revenue for the year ended 31 December 2008, 9.2 per cent. for the year ended 31
December 2009 and 8.1 per cent. for the nine months ended 30 September 2010. Etisalat’s fixed-line
business encompasses traditional fixed-line services (Tel DEL–Telephone Direct Exchange Line and IDD)
for residential and business customers and line rental for internet customers (including dial-up, ADSL and
broadband services).
Subscriber growth for fixed-line services in the UAE has been slowly declining for the last three years, while
the fixed-line penetration rate and the overall number of fixed-line customers in the UAE have remained
relatively stable over the same period at approximately 30 per cent. and 1.6 million subscribers, respectively.
This stability has been driven primarily by increased demand for broadband services from existing
subscribers who have maintained an existing or added an additional fixed-line in order to subscribe for
internet services, offset in part by fixed-to-mobile substitution. For example, internet subscribers in the UAE
increased by 44.4 per cent. from the year ended 31 December 2007 to 2008, and by 16.9 per cent. from 2008
to 2009, which contributed to higher telecommunications spending by business and consumer customers in
terms of line rental.
Fixed-line services are offered on the basis of a retail or business contract. The service has no minimum
obligation period, is typically provided on a monthly basis and can be cancelled at any time by the customer.
Service is activated once the customer pays an installation fee that is currently AED 180 plus a quarterly
rental that is currently AED 45 for residential customers or monthly rental that is currently AED 50 for
business customers. Etisalat also offers prepaid fixed-line service through its “Maysour” branded product.
For business customers, different billing periods are available depending on the services provided, but most
services are billed quarterly. The minimum term for a business fixed-line service is one month with no
obligation period but with a two-week notice period if the service is to be cancelled. Business customers also
have the option to receive discounts on their services if they commit to maintaining the services for a specific
period of time ranging from one year to four years.
The most significant recent development for Etisalat’s fixed-line business in the UAE is the installation of a
FTTH network throughout the UAE. As of the date of this Base Prospectus, the FTTH network in Abu Dhabi
has been substantially completed. FTTH technology is expected to considerably enhance the range of
products Etisalat will be able to offer its customers through its fibre network, including double-play (fixedline telephone and broadband internet) and triple-play (fixed-line telephone, broadband internet, and IPTV)
services. See “— Internet” below for additional information.
151
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The following table presents the number of Etisalat’s fixed-line customers in the UAE as of 31 December
2007, 2008 and 2009 and as of 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
(thousands)
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
Total fixed-line subscribers(1) ........................................
1,325
1,358
1,309
1,255
–––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
Note:
(1)
Fixed-line customers are calculated by the number of active lines at the end of the period. In general, a customer is no longer counted
as a fixed-line customer if (1) the customer has voluntarily terminated the contract or (2) the customer has not made a payment on an
outstanding balance within approximately 60 days.
The majority of Etisalat’s fixed-line customers are located in Abu Dhabi and Dubai, although over onequarter of Etisalat's total fixed-line subscribers are located in the Northern Emirates.
Churn among UAE fixed-line customers
Etisalat calculates churn among its fixed-line customers in the same way it calculates churn for its mobile
customers.
The table below shows the churn rate among Etisalat’s UAE fixed-line subscribers for the years ended
31 December 2007, 2008 and 2009 and the nine months ended 30 September 2010.
Nine months
ended 30
Year ended 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
Fixed-line churn rate (%) ............................................
18
13
19
16
Internet
Etisalat was the first operator to introduce internet services into the UAE in August 1995 and was the sole
provider of internet services in the UAE until February 2007. Etisalat’s share of the internet services market
in the UAE as of 30 June 2010 was 95 per cent. based on numbers of subscribers (Source: TRA and Company
data). Internet services in the UAE contributed 7.0 per cent. of the Group’s consolidated revenue for the year
ended 31 December 2008 and 8.4 per cent. for the year ended 31 December 2009. The internet penetration
rate in the UAE as of 31 December 2009 and 30 June 2010 was estimated to be 26.9 per cent. and 26.6 per
cent., respectively (Source: TRA Statistics; TRA Report – “UAE Telecommunications Sector Developments
and Indicators” (May 2010)).
Etisalat provides internet services through dial-up, ADSL and leased lines. In addition to its current internet
service offerings, Etisalat expects to increase home broadband penetration rates by using GPON technology
(which is an enhanced standard for data transmission over fibre networks) and its FTTH network to provide
higher broadband speeds and high definition video. GPON technology also enables Etisalat to offer a wider
range of products such as IPTV by which digital television services can be delivered through the same
network infrastructure as that used for internet access. In addition to increasing penetration rates, Etisalat
also expects new services such as IPTV to increase revenue generated per subscriber and reduce churn in its
fixed-line and internet subscriber base.
For ADSL and leased lines, different bandwidth options are available at different prices. Generally, consumer
internet services are offered on the same contract terms as consumer fixed-line services.
152
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The following table presents information about the number of Etisalat’s internet subscribers in the UAE as
of 31 December 2007, 2008 and 2009 and as of 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
(thousands)
Internet subscribers
Dial up ......................................................................
Broadband(1) ..............................................................
eLife(2) ......................................................................
524
638
708
704
354
515
627
548
–
–
–
24
––––––––– ––––––––– ––––––––– –––––––––
Total ............................................................................
878
1,153
1,335
1,276
–––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
Notes:
(1)
Broadband includes Al Shamil, Business One and leased line subscribers.
(2)
eLife was launched in May 2010, however, it only began reporting subscriber numbers as of 30 September 2010.
The distribution of Etisalat’s internet subscribers is approximately equal between Abu Dhabi, Dubai and the
Northern Emirates.
Data Services
Data services include all data communications services, including SMS, MMS, 3G Data Packages and
BlackBerry service and other value-added services for mobile customers, ISDN PRI/BRI services for fixedline subscribers, as well as providing information and communication technology (ICT) services to SMB
and enterprise customers. Although Etisalat’s mobile operations have predominantly involved the provision
of voice-based services, data services accounted for 10.6 per cent., 11.5 per cent. and 11.9 per cent. of the
Group’s consolidated revenue for the years ended 31 December 2008 and 2009 and the nine months ended
30 September 2010, respectively.
Etisalat’s data services offerings in the UAE focus on mobile broadband offerings over its 3G network. The
customer requires a compatible device that works on the 3G network either by using a USB modem or a 3G
handset. The customer can use mobile broadband either on a prepaid basis or under a mobile data postpaid
subscription package. The former is billed in accordance with the amount of time the customer uses the
internet, and the latter is charged on a monthly basis at the cost of the chosen subscription package (which
includes unlimited usage packages). Etisalat also provides a range of WiFi product offerings, on either a
prepaid basis or a postpaid subscription basis, including hotspots which use the Etisalat WiFi network.
Etisalat is seeking to enhance penetration of mobile broadband services in the UAE through the introduction
of new mobile data and broadband packages in addition to further bundling of packages with handset, laptop
and netbook options offered on a postpaid as well as a prepaid basis. These packages seek to capitalise on
the high download speeds provided by Etisalat’s advanced HSPA + network.
Etisalat provides ICT services to SMB, enterprise and government customers. ICT services involve the
combination of network, hardware, software and service solutions together with support functions to achieve
a customer’s business objectives or provide a particular business solution. These services include project
management, hosting of internet service providers, training, technical documentation, support organisations
and consultancy in the areas of networks, systems, security and compliance, all of which are charged by
Etisalat at a daily rate or on a project basis. Etisalat does not undertake software development or hardware
manufacture but it works with various partners to fulfil customers’ requirements in these areas.
Etisalat aims to become a business partner to its enterprise customers by developing solutions tailored to
customers’ specific needs rather than acting as a commodity services provider. Etisalat has a dedicated
business solutions unit in the UAE that works closely with enterprise customers to provide complete end-toend telecommunications solutions, including on-site and ongoing evaluation and consultations regarding
153
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
customers’ needs and requirements, implementation and roll-out of solutions and on-going post-installation
servicing (for example, connecting UAE public schools for e-learning through the deployment of WiFi and
mobile LAN technologies).
Other non-core services
Etisalat’s non-core telecommunications services are provided by Etisalat Services Holding LLC (Etisalat
Services). The key businesses under Etisalat Services are Emirates Telecommunications and Marine
Services PJSC (e-marine), which operates submarine cable installation, maintenance and repair business;
Emirates Data Clearing House – EDCH, which provides roaming settlement services to over 76 GSM
operators in 42 countries; Ebtikar Card Systems, which manufactures SIM cards and recharge (scratch) cards
for the Group and third parties; Etisalat Facilities Management; Etisalat Academy and Etisalat Directory
Services. In addition, Etisalat is a 50 per cent. participant in two joint ventures: Ubiquitous
Telecommunications Technology, LLC (which installs and manages network systems) and Smart
Technology Services DWC – LLC (which provides ICT services).
Etisalat also provides satellite services through its interest in Thuraya Satellite Telecommunications
Company PJSC (Thuraya). Etisalat acquired its interest in Thuraya, which is incorporated in the UAE as a
private joint stock company, in 1999, and, as of the date of this Base Prospectus, it holds 28 per cent. of the
share capital of Thuraya. Thuraya provides mobile satellite services in more than 140 countries in Asia,
Africa, Europe and the Middle East using three satellites. Services provided by Thuraya include mobile voice
services that support dual GSM and satellite modes, broadband, maritime, rural telephony, fleet management
and other advanced applications.
Regulation
Etisalat’s core business in the UAE, including most of the services it provides and most of the activities it
conducts, is regulated by statute and subject to the supervision of a regulatory authority, as is the case for
Etisalat’s businesses in other countries.
Telecom Legislation
The 1976 Law which established Etisalat
Emirates Telecommunication Corporation (Etisalat) was incorporated in the UAE in 1976 by Federal Decree
No 78 of 1976 with a share capital of AED 200,000,000.
The 1991 Etisalat Law
Federal Decree No 78 of 1976 was repealed and replaced by the Etisalat Law, which established Etisalat as
a corporation under law. The Etisalat Law gave Etisalat an exclusive right to provide wired and wireless
telecommunications services in the UAE and to provide such services between the UAE and other countries.
The Etisalat Law also gave Etisalat the right to issue licences for manufacturing, owning, importing, using,
fixing or operating telecommunications equipment (i.e., a regulatory function). Etisalat’s authorised share
capital as of the date of the Etisalat Law was set at AED 3,000,000,000 and the paid up capital at AED
1,500,000,000. The Etisalat Law allows the capital to be reduced or recapitalised in accordance with the
procedures stipulated in the Articles of Association. Under the Articles of Association, these changes to
Etisalat's capital require ministerial approval. The Etisalat Law provided that the UAE Government is
required to hold at least 60 per cent. of the share capital of Etisalat and shares may otherwise only be owned
by UAE national individuals. The Etisalat Law exempted Etisalat from taxes and customs duties on
machinery, equipment, raw materials, parts and accessories and all that it requires in order to carry out its
operations, and from duties and taxes on rights of way on land which it requires for the extension of service
lines or the construction of buildings or installations necessary for the management or supervision of these
lines.
154
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The Telecom Law of 2003 and its amendments
The Etisalat Law was amended by the Telecom Law in 2003, 2005 and 2008. The Telecom Law is also the
law on which regulation of Etisalat’s telecommunications networks and services in the UAE is based. Under
the Telecom Law, Etisalat lost its monopoly on delivering fixed and wireless communications and operating,
maintaining and developing the public telecommunications system in the UAE and providing
communication services between the UAE and other countries, which it had originally been granted by the
Etisalat Law.
The Telecom Law specifies that a number of activities are to be considered regulated activities (Regulated
Activities), and therefore require a licence issued under the Telecom Law. The Telecom Law also provides
for the establishment of the regulator for the telecommunications industry, being the General Authority for
Regulating the Telecommunications Sector (the TRA). The Telecom Law gives very broad authority to the
TRA to establish regulatory policy, issue directives, instructions and regulations, to make decisions relating
to regulated activities, licence fees, the services to be offered by licensees and the prices at which they may
be offered, and to issue and revoke licences.
Regulated activities
Under the Telecom Law, the Regulated Activities that require a licence include the operation of a public
telecommunications network and the supply of telecommunications services to subscribers. The definition
of “telecommunications services” under the Telecom Law is very broad, extending to transmitting,
switching, broadcasting and receiving telecommunications, audio and visual signals, signals used in radio
and TV broadcasting, and signals used to operate or control apparatus, and also extends to installation,
maintenance and repair of network equipment, and construction, maintenance and operation of networks.
The basic licensing requirement under the Telecom Law states that no one is permitted to conduct any
Regulated Activity unless authorised by a licence or exempted in accordance with the Telecom Law. As of
the date of this Base Prospectus, there are two principal licensees under the Telecom Law: Etisalat and du.
In 2008 the TRA published a new framework for the issue of “individual licences” and “class licences”,
suggesting that the TRA may further liberalise the telecommunications sector in the UAE by issuing
additional licences. According to the TRA, in 2010, the TRA has issued four further licences under this new
framework – one to Nedaa Corporation (Nedaa), being a licence to provide communications services over a
Public Access Mobile Radio (PAMR) network, commonly referred to as the TETRA System, for ten years,
effective from 15 September 2009, one to Al Yah Satellite Communications Company (Yahsat), a specialised
provider of wholesale satellite-based communications services for a period of ten years effective from 28
February 2010, and one to Star Satellite Communications Company (Star Satellite), being a specialised
satellite services licence. The licence allows Star Satellite to provide telecommunications services of any
kind, including broadcast services, but only on a satellite network (and its associated ground facilities). The
TRA also issued a licence to Al Yah Advanced to provide telecommunications services to the UAE military,
and to sell basic satellite capacity to persons specified by the Armed Forces, or to its sister company Star
Satellite. Al Yah Advanced and Star Satellite are both related companies of Yahsat, and their licences have a
term of 10 years from 8 August 2010.
The TRA
The TRA is established as an independent legal personality (so that it is not part of a UAE federal
government ministry), with financial and administrative independence. The principal organ of the TRA is the
Board of Directors, which is appointed by a Federal Decree for four years and has the authority to carry out
the functions and powers of the TRA.
The Telecom Law, the Executive Order made under the Telecom Law, and Etisalat’s licence dated 9 May
2006 issued under the Telecom Law (the Licence) all provide for the TRA to make specific rules relating to:
the quality of the services which Etisalat provides; the prices and other terms and conditions on which
Etisalat provides its services; obligations in respect of universal service; reporting of financial accounts to
the TRA; the provision of interconnection with other operators on fair and non-discriminatory terms
(including a Reference Interconnection Offer, a standardised contract for use by UAE licensed operators);
155
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
anti-competitive conduct in the telecommunications industry; the use of VoIP technology in the UAE and the
management of content accessible via the internet in the UAE; the provision of co-location, sharing of sites,
infrastructure and facilities; the provision of national roaming to other licensed operators; technical
specifications for interoperability between telecommunications networks; allocation of numbers/spectrum;
number portability (both fixed and mobile); carrier selection and carrier pre-selection; procedures for type
approval of apparatus to be provided to Etisalat’s customers; and technical matters relating to the use of radio
frequency spectrum. The Telecom Law, from which these specific rules are derived, is technology-neutral,
so these rules and their application are adapted by the TRA as new technologies are implemented in the
telecommunications industry in the UAE.
Etisalat’s licence
The Licence held by Etisalat was issued to Etisalat on 9 May 2006. It is a broad licence, permitting Etisalat
to provide, inter alia, a wide range of telecommunications services (specifically including fixed,
international, mobile and 3G services) and to operate a public telecommunications network. The Licence is
technology neutral, although Etisalat is required to obtain government security approval through the TRA for
the introduction of new products, which reflects an obligation in its Licence to obtain TRA approval before
using a new technology in its network or for the provision of a service. In addition to the matters stated in
the Licence that are subject to regulation by the TRA (see “— The TRA”), Etisalat’s Licence also contains
prohibitions on anti-competitive conduct and obliges Etisalat to prepare and publish a code of practice for
customers (which requires approval by the TRA). The terms of the Licence also require Etisalat to pay an
annual licence fee (currently AED 1 million), fees for the use of radio frequency spectrum (which are
standardised) and fees based on a percentage of Etisalat’s total revenues (currently 1 per cent. of total
revenues) towards the establishment and operation of a telecommunications and Information and
Communication Technology development fund. Etisalat is also required to pay a royalty to the UAE
government based on its annual consolidated profit. See “— Significant Factors Affecting Financial
Condition and Results of Operations — Royalties and Tax in the UAE”.
Etisalat may provide any of its licensed services through its wholly owned affiliated companies upon
providing notification of the arrangement to the TRA, and may subcontract to third parties upon obtaining
the prior written consent of the TRA. The Licence may only be transferred, sold, assigned or pledged as a
security with the TRA’s prior approval, and any change in control of Etisalat also requires the prior written
approval of the TRA. As is usual with telecommunications licences, the Licence may be suspended or
revoked if Etisalat does not comply with its terms.
The Licence is valid for a period of 20 years from the date of its issuance on 9 May 2006, and is subject to
automatic renewal for an additional term to be determined, if Etisalat complies with certain of its key terms,
including payment of fees in a full and timely manner, compliance with competition and other regulatory
requirements and provision of telecommunications services according to the licence.
Executive Order
The Telecom Law also provides for an executive order to be made by the Board of the TRA, after approval
of the UAE Cabinet. The current executive order (the Executive Order) was put into effect by the Supreme
Committee, an entity that was established under the Telecom Law but was abolished by subsequent
amendment to the Telecom Law in 2008. The current Executive Order was issued in 2004, and is largely
concerned with specific matters relating to the operations of the TRA, including the composition and
proceedings of the TRA. The Executive Order provides specific powers to the TRA to: issue instructions or
directives to licensed operators; specify regulatory and licensing fees to be paid; specify the circumstances
in which a licence can be revoked or suspended; require the licensee to do (or not to do) specific things which
are provided for in the regulatory framework; deal with the settlement of disputes arising from a licence;
limit the shareholdings in a licensee; and require the provision of information to the TRA. The Executive
Order also extends the investigatory powers of the TRA by providing specific obligations on licensees to
cooperate with information requests. It also contains detailed technical procedures for type approval,
numbering, radio frequency spectrum management, and the conduct by licensees of civil works.
156
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Regulation of Etisalat’s conduct
One of the most significant aspects of the UAE telecommunications regulatory regime that affects the
conduct of Etisalat’s business relates to the regulation of the tariffs that licencees may charge their customers,
including requirements for prior approval of promotions offered by licencees. The regulation of procedures
and pricing for interconnection of Etisalat’s network with other UAE-licensed operators, sharing of Etisalat’s
sites, infrastructure and facilities and provision of wholesale services also has the potential to materially
affect Etisalat’s network operations and pricing. However, Etisalat already has agreed interconnection
arrangements with du, which is currently the only other licenced commercial operator with which Etisalat is
interconnected. Although carrier selection is available in the UAE and allows a fixed-line subscriber of
Etisalat to select du as its carrier for a particular call on a call-by-call basis, carrier pre-selection (which
would allow an Etisalat fixed-line subscriber to select du as its carrier for all calls or for all local, national or
international calls and an Etisalat mobile subscriber to select du as its carrier for international (but not
national) calls has not yet been implemented. Etisalat anticipates that carrier pre-selection will be introduced
in the UAE in the near future, when the necessary technical measures have been implemented between the
Etisalat and du systems to facilitate it. The effect of carrier pre-selection on Etisalat’s business has therefore
not yet developed fully. In addition, it is anticipated that by the end of 2010, mobile number portability will
be introduced in the UAE. This will allow a mobile subscriber to retain its mobile number when switching
provider, between Etisalat and du, and vice-versa. This may have an effect on churn rates or numbers of
mobile subscribers, but as it would apply equally to Etisalat and du, management cannot be sure what the
effect will be.
Regulatory costs
The Group also incurs regulatory costs in the UAE, which include licence fees, information and
communication technology (ICT) fund contribution, spectrum fees, numbering fees and number portability
system fees. The Group incurred an aggregate of AED 489.7 million of regulatory costs in the year ended
31 December 2009 and AED 667.5 million in 2008, of which AED 282.8 million and AED 496.9 million,
respectively, were attributable to the Group’s operations in the UAE.
•
•
Licence Fee is an annual fee of AED 1,000,000 for the Licence.
•
Numbering Fee is a fee for the utilisation of numbering resources such as prefixes, ranges, blocks of
numbers or individual numbers.
•
Spectrum Fee is a fee imposed on the issue or renewal by TRA of a radio frequency spectrum
authorisation. This authorisation allows the authorised user to use assigned frequency and wireless
equipment in accordance with its terms.
•
Share of Costs of Number Portability System is Etisalat’s contribution toward the implementation of
the mobile number portability system payable for a period of five years from 5 August 2009.
•
Domain Name Registration Fee is a fee imposed for registration of “.ae” domain names.
ICT Fund Contribution is an annual fee of one per cent. of total revenues earned from licensed
services in the UAE for the purpose of supporting research and development of the UAE
telecommunications sector, payable in accordance with payment procedures determined by the TRA.
Anticipated development of UAE regulation
Although the regulatory measures imposed by the TRA are implemented by a variety of regulatory
instruments, their subject matter is generally consistent with telecommunications regulatory regimes in other
developed telecommunications markets.
The scope of the powers given to the TRA under the Telecom Law and the Executive Order is very broad,
as is its discretion to make regulatory instruments. The regulatory environment in the UAE is evolving. With
only two principal licensed commercial operators providing telecommunications services, it is less
liberalised than many other markets in the GCC region. The TRA has the power under the current regulatory
instruments to issue further licences, and to introduce new policies and procedures for regulating the conduct
157
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
of Etisalat’s business. In 2008, the TRA issued a new licensing framework providing for individual and class
licences. The TRA utilised this new framework when issuing a telecommunications license to Yahsat, Star
Satellite and Al Yah Advanced in February and August 2010. The TRA may also make changes to the
regulatory environment, including by replacing the existing variety of regulatory instruments with
consolidated regulatory instruments, which may follow international standards more closely.
The TRA also has extensive powers to impose structural remedies on the telecommunications market in the
UAE. In the fixed-line market, the TRA may require Etisalat to offer to other licensed operators a bitstream
access product, access to dark fibre (Etisalat’s fibre optic cables on which another operator installs its own
transmission electronics) and access to cable ducts, all at regulated rates, or even to implement a structural
separation remedy requiring the divestment of passive network infrastructure into a separate company.
Etisalat is currently in discussions with du and with the TRA and other stakeholders on the nature and pricing
of bitstream wholesale access products which will enable both parties to provide high speed retail services
to customers who are directly connected to the other party’s fixed-line network. Etisalat anticipates that the
bitstream access service will be launched in the beginning of 2011.
In December 2009, the TRA issued a Competition Framework which elaborated on the prohibitions already
specified in Etisalat’s licence on anti-competitive conduct. The documents issued as part of the Competition
Framework, are based on definitions of anti-competitive conduct and regulatory remedies which are used in
developed international telecommunications markets, including the definition of relevant markets and
assessment of market power in those markets. They comprise regulation of competitive behaviour and
remedies both on a forward looking (ex ante) basis (industry-specific measures designed to stimulate or
create competitive conditions) and on a reactive (ex post) basis (more generic measures, designed to protect
existing competition). In September 2010, the TRA issued for consultation its proposals to define the
relevant markets in which market power will be assessed, and in July 2010, the TRA made a determination
in respect of Etisalat’s regulatory cost accounting procedures, which are used to determined the regulated
prices of some of Etisalat's products.
Competition in the UAE
As of the date of this Base Prospectus, the sole competitor for Etisalat’s core products in the UAE is du.
Etisalat does not anticipate that there will be further licensees which will compete with its core products in
the UAE telecommunications market in the near term. Both Etisalat and du are majority owned by UAE
Government-related entities. Competition in the UAE market is based on product offering and is driven
primarily by price and network quality. Other variables considered by customers are network coverage and
customer service. In the business segment, customers consider technical feasibility and quality of service as
important factors to assess before subscribing to a service, rather than only relying on price.
In the UAE, the provision and use of VoIP services are illegal unless conducted by a licensed operator or the
subject of an exemption. Under a VoIP policy issued in December 2009, the TRA allows businesses under
common ownership to utilise VoIP technology for their internal calls within the UAE, and allows certain
academic institutions and government entities to use the technology to communicate internationally, but also
only within a closed network, which does not connect to any public telecommunications network.
Individuals and businesses alike can also use VoIP if it is a service provided by a licenced operator, which
includes Etisalat and du.
There are currently no cable operators other than Etisalat and du, and no mobile virtual network operators
(i.e., a mobile service provider that does not own its own spectrum or have its own network infrastructure)
in the UAE.
Etisalat expects the effect of increasing competition from du to be partly offset by reduced regulatory
intervention and price control policies by the TRA.
Mobile telecommunications services
Etisalat had the exclusive right to provide mobile telecommunications services in the UAE until the
introduction of the Telecom Law at the end of 2006 when du was awarded its telecommunications licence
158
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
for both fixed-line and mobile operations. Etisalat ceased in practice to be the monopoly provider of mobile
telecommunications services in February 2007, when du commenced commercial operations under its
licence. As a result of the entry of du, Etisalat’s market share as measured by numbers of subscribers has
declined from 100 per cent. at the end of 2006 to 84 per cent. at the end of 2007, 73 per cent. at the end of
2008, 68 per cent. at the end of 2009 and 73 per cent. as of 30 June 2010 (Source: TRA and Company data).
To address the competitive dynamics in the UAE, the Group intends to continue its strategy of targeting high
customer-value segments through the provision of smartphones such as Apple’s iPhone and BlackBerry
handsets. In addition, the Group has launched a series of promotional offers and new services such as
discounted rates on off-peak international calls, bonus airtime offers on mobile recharges and new
connections. Competition since the entry of du into the UAE market has had an effect on market share, with
some decrease of effective tariffs, in particular in relation to international rates. The TRA has not approved
significant decreases in tariff rates following du’s entry into the market. However, in line with the decision
of Arab Telecommunications & Investor Council of Ministers taken in June 2010, the TRA has issued a
directive imposing on Etisalat and du a ceiling limit for wholesale and retail international roaming rates
(local calls and calls to the GCC) in relation to GCC countries. Phase 1 of this directive is effective as of
September 2010, and effectively reduces most of these rates. In addition, it is anticipated that by the end of
2010, mobile number portability will be introduced in the UAE.
Fixed-line and internet services
In February 2007, du commenced its fixed-line operations, including the operations it acquired from an
existing operator that had been operating in the Dubai Internet City and Dubai Media City free zone
residential areas. du’s licence extends to providing fixed-line and internet services throughout the UAE.
Some fixed line competition is also offered by du via carrier selection. In addition, it is anticipated that
carrier pre-selection will be introduced in the UAE in the near future. As of the date of this Base Prospectus,
du primarily competes with Etisalat for fixed-line subscribers in the limited geographic areas where du has
its own fixed-line networks. According to the TRA’s fixed-line subscriber figures, the market share of
Etisalat’s fixed-line business in the UAE was 98 per cent. at the end of 2007, 92 per cent. at the end of 2008
and 84 per cent. at the end of 2009 (Source: TRA and Company data). According to the TRA’s internet
subscriber figures, the market share of Etisalat’s internet services business in the UAE was 97 per cent. at
the end of 2007, 98 per cent. at the end of 2008 and 95 per cent. at the end of 2009 (Source: TRA and
Company data). Etisalat anticipates that this market share may be affected by the wholesale bitstream access
service, which is expected to be introduced in the beginning of 2011.
Notwithstanding fixed-to-mobile substitution, fixed-line penetration in the UAE has been relatively stable.
The number of Etisalat’s fixed-line subscribers remained steady at approximately 1.3 million as of
31 December 2007, 2008 and 2009, implying a stagnant fixed-line penetration level of around 30 per cent.
over the same period. The slow growth of new fixed-line subscribers has continued, largely as a result of the
strong competition and aggressive offers in the mobile market, both of which have encouraged fixed-tomobile substitution.
Future growth in fixed-line services is expected to be driven by continued residential development in the
UAE and the provision of fixed-line services bundled with other services using the FTTH network.
Customers, products and services
Etisalat’s total customer base in the UAE (comprising mobile subscribers, fixed-line subscribers and internet
subscribers) grew from 8.6 million subscribers at the end of 2007 to 9.8 million subscribers at the end of
2008 and to 10.4 million subscribers at the end of 2009. Etisalat’s total customer base decreased to 10.3
million subscribers as of 30 September 2010.
While management believes that voice communications services will remain a significant revenue generator
for Etisalat in the medium term, management also expects data and value-added services to play a role in
differentiating Etisalat from its competitors and increasing the loyalty of its fixed-line and mobile
subscribers, notably among those in the higher customer-value segments.
159
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The table below shows the number of Etisalat’s mobile, fixed-line and internet subscribers in the UAE as of
31 December 2007, 2008 and 2009 and as of 30 September 2010, together with the associated percentage
growth rates from the prior period end.
As of 31 December
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2007
2008
2009
––––––––––––––––––– ––––––––––––––––––– –––––––––––––––––––
Subscribers
%
Subscribers
%
Subscribers
%
(thousands)
growth (thousands) growth (thousands) growth
Mobile postpaid........
Mobile prepaid ........
Total mobile(1) ..........
Fixed-line..................
Internet(2) ..................
Total ........................
–––––––
591
5,781
–––––––
6,372
–––––––
–––––––
1,325
878
–––––––
8,575
–––––––
–––––––
–––––––
6.5
16.4
–––––––
15.4
–––––––
–––––––
3.1
32.6
–––––––
14.8
–––––––
–––––––
–––––––
812
6,473
–––––––
7,285
–––––––
–––––––
1,358
1,153
–––––––
9,796
–––––––
–––––––
–––––––
37.4
12.0
–––––––
14.3
–––––––
–––––––
2.5
31.3
–––––––
14.2
–––––––
–––––––
–––––––
907
6,834
–––––––
7,741
–––––––
–––––––
1,309
1,335
–––––––
10,385
–––––––
–––––––
As of 30 September
–––––––––––––––––––
2010
–––––––––––––––––––
Subscribers
%
(thousands) growth(3)
–––––––
11.7
5.6
–––––––
6.3
–––––––
–––––––
(3.6)
15.8
–––––––
6.0
–––––––
–––––––
–––––––
1,004
6,807
–––––––
7,811
–––––––
–––––––
1,255
1,276
–––––––
10,342
–––––––
–––––––
–––––––
10.7
(0.4)
–––––––
(0.9)
–––––––
–––––––
(4.1)
(4.4)
–––––––
(0.4)
–––––––
–––––––
Notes:
(1)
Mobile subscribers include active subscribers only. Active is defined to include any subscriber who has made or received a voice or
video call in the preceding 90 days, or has sent an SMS or MMS during that period.
(2)
Includes dial-up and broadband subscribers.
(3)
Percentage growth rates shown as of 30 September 2010 indicate the percentage change from 31 December 2009 to 30 September
2010.
The table below shows the total UAE penetration rates (taking into account all service providers) for mobile,
fixed-line and internet subscribers as a percentage of the population in the UAE as of 31 December 2007,
2008 and 2009.
Mobile penetration(1)(2) ........................................................................
Fixed-line penetration(2) ......................................................................
Internet penetration(2) ..........................................................................
Total UAE population (millions)(3) ....................................................
As of 31 December
––––––––––––––––––––––––––––––
2007
2008
2009
–––––––– –––––––– ––––––––
164
190
204
29
30
30
19
25
27
4.5
4.8
4.9
Notes:
(1)
Mobile subscribers used for this calculation include active subscribers only. Active is defined to include any subscriber who has made
or received a voice or video call in the preceding 90 days, or has sent an SMS or MMS during that period.
(2)
Source: TRA Report – “UAE Telecommunications Sector Developments and Indicators” (May 2010). Figures are rounded to the
nearest whole number.
(3)
Source: IMF World Economic Outlook Database (October 2009).
As of 30 June 2010, mobile, fixed-line and internet penetration rates in the UAE were 197 per cent., 28 per
cent. and 27 per cent., respectively (Source: TRA Statistics).
An increase in the number of Etisalat’s customers in the UAE has been a significant factor in the growth of
its mobile services and internet services revenues in the UAE over the period from 2007 to 2009. This
increase has been driven primarily by growth in the UAE population over the same period. While the
introduction of competition in the UAE market in February 2007 adversely impacted the growth of Etisalat’s
customer base in the UAE, management believes that the high quality of Etisalat’s network and services has
allowed it to maintain its proportionate market share of net customer additions in 2008 and 2009, with the
largest gains concentrated in prepaid mobile customers, followed by a modest gain in postpaid mobile
customers and a decrease in fixed-line subscribers. The growth of Etisalat’s subscriber base in the UAE
outpaced population growth in the UAE over the period from 2007 to 2009.
160
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The UAE mobile market is characterised by a high percentage of prepaid mobile subscribers and high IDD
usage, although IDD usage by mobile subscribers decreased from a total of 3,720 million minutes used to
3,364 million minutes used between the years ended 31 December 2008 and 2009, respectively. While the
total number of postpaid mobile subscribers increased only modestly from 2007 to 2009, Etisalat’s postpaid
mobile subscribers increased by 10.7 per cent. over the nine months ended 30 September 2010. The growth
in the number of prepaid mobile subscribers increased by 16.3 per cent. in 2007, 12.0 per cent. in 2008, 5.6
per cent. in 2009 and 0.4 per cent. in the nine months ended 30 September 2010.
Etisalat had 1.3 million fixed-line subscribers in the UAE as of 31 December 2009 giving it a market share
of approximately 84 per cent. in terms of numbers of subscribers. As of 30 September 2010, Etisalat had 1.2
million fixed-line subscribers in the UAE. Etisalat’s UAE fixed-line subscriber base declined by 3.6 per cent.
during 2009 and by 4.1 per cent. during the nine months ended 30 September 2010. IDD usage by fixed-line
subscribers also decreased during this period. The decline in fixed-line subscribers and IDD usage was driven
primarily by fixed-to-mobile substitution, increased competition for business and residential subscribers, the
use of unlicensed VoIP services and overall lower levels of economic activity in the UAE. Management
believes that demand for fixed-line services may increase as a result of increasing demand from the free zone
residential area in Dubai, which is currently not covered by Etisalat, and the deployment of FTTH
technology, which will enable Etisalat to offer double- and triple-play combinations of IPTV, internet and
fixed-line services.
Etisalat’s internet subscriber base increased to 1.3 million subscribers as of 31 December 2009, representing
a market share of 95 per cent. in terms of numbers of subscribers. As of 30 September 2010, Etisalat had 1.4
million internet subscribers in the UAE. Etisalat’s principal focus in 2008 and 2009 was to increase the
broadband subscriber base through aggressive marketing and higher-speed internet offerings. In 2009,
Etisalat doubled its offered capacity for the same price and introduced new packages, such as 1GB, 5GB and
10GB. During the nine months ended 30 September 2010, Etisalat continued to focus on offering higherspeed internet services and increasing the internet usage of its existing subscribers as a means of increasing
revenue. Etisalat believes that broadband and data markets will continue to present growth opportunities in
the UAE telecommunications market, especially as mobile market growth slows.
Internet and data services have been important contributors to revenue growth. Growth in internet subscribers
has contributed to higher telecommunications revenues from commercial and retail customers in the UAE.
Management believes that the UAE’s internet penetration rate, 26.6 per cent. as of 30 June 2010, is relatively
low compared to major western markets and provides an attractive opportunity for Etisalat. Furthermore,
internet subscribers in the UAE are gradually shifting from dial-up access toward broadband, which
generates higher revenue from monthly subscription fees. Etisalat expects to benefit from this trend as it
completes its FTTH network expansion throughout the UAE. Etisalat’s broadband subscribers in the UAE
(which form part of internet subscribers) reached 622,581 as of 31 December 2009, representing a market
share of over 90 per cent. based on numbers of subscribers.
Marketing and distribution
In the UAE, Etisalat’s direct sales channels consist of physical service centres and retail stores together with
a “virtual” customer care centre based in Ajman and Etisalat’s website. Its indirect sales channels consist of
key retailers (which are business partners with wide coverage across the UAE, such as Carrefour and Jumbo
Electronics, that offer Etisalat’s products and services at their premises), mass distributors or dealers (which
are commercial providers of mobile services with distribution networks across the UAE) and mass resellers
(which are registered agents that purchase Etisalat’s products such as SIM cards and payphone cards in bulk
and distribute them across a geographic area to small businesses, such as grocery and convenience stores).
Etisalat has created a Business Solutions Unit in the UAE, which aims to provide voice services over mobile
and fixed-line networks, as well as ICT solutions, to SMB and enterprise customers. The Business Solutions
Unit has its own direct sales channel segmented by industry, such as government and education, energy and
oil, airline and logistics.
161
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Network infrastructure
Mobile networks
Etisalat’s mobile network is designed using 2G and 3G technologies that have the ability to upgrade to
developing technologies such as Long Term Evolution (LTE). Etisalat implements the latest highperformance mobile data technologies including High-Speed Uplink Packet Access (HSUPA), High-Speed
Downlink Packet Access (HSDPA) and the advanced High-Speed Packet Access (HSPA+) on its 3G
network, and General Packet Radio Service (GPRS), enhanced data rates for GSM evolution (EDGE) and
EDGE Evolution on its 2G network. These technologies allow Etisalat’s customers to enjoy high bandwidth
(up to 28Mbps) mobile data services in the UAE and also facilitate access to high-speed mobile data services
for Etisalat’s subscribers, including those outside 3G coverage and those customers that do not have
advanced Universal Mobile Telecom System (UMTS) compliant handsets or datacards.
Etisalat has designed a cost-efficient radio access network which aims to minimise the impact of network
infrastructure on the environment by utilising extended cell features that require fewer base stations per cell,
as well as technologies that conserve energy by shutting down hardware during periods of low mobile traffic.
Etisalat uses a common technology platform to deploy over 20,000 radio base stations, all of which are
capable of supporting mixed configurations of 2G, 3G or 2G/3G with future upgrade capability to LTE that
will service future mobile bandwidth demand.
The common technology platform is designed to help ensure that 2G-only sites can easily be upgraded to
include 3G when required. Sharing radio base stations between the 2G and 3G networks reduces capital
expenditure and operating expenditure, as well as power consumption and the physical impact on the
environment. Where possible, Etisalat intends to use the same 2G and 3G base stations for its WiMAX
network, which will add to these cost and environmental benefits by requiring fewer base stations per cell
and saving energy by using less power, as described above.
Etisalat’s radio resource control features enable its 2G and 3G networks to operate as a common resource,
allowing traffic to be switched between networks to provide greater network availability and higher data
transmission rates to Etisalat’s subscribers. In the event that users find themselves outside 3G coverage, the
network automatically switches users to the 2G network.
Fixed-line and internet networks
Etisalat is currently in the process of upgrading its fixed-line network in the UAE to FTTH technology, which
involves the extension of an advanced fibre optic network to homes, businesses, and mobile base stations.
The network can be shared with multiple customers where each is allocated a bandwidth based on their needs
via GPON, or fibre can be extended directly to large customers, such as enterprises, to provide them with a
1Gbps Active Ethernet interface.
Etisalat is also developing additional advanced fixed-line technologies, including all Internet Protocol (IP)
networks to provide enhanced and interactive content and Virtual Private Network (VPN) secure internet
networks for enterprise customers.
Etisalat has also deployed a state-of-the-art Next Generation Network (NGN) to replace the legacy public
switched telephone network. The NGN network supports dual homing functionality to enhance the reliability
of the service and is at the core of Etisalat’s new fibre network in the UAE.
International Operations
Since 2004 the Group has significantly expanded its international operations and now has a presence in 17
countries outside the UAE through its subsidiaries, associates and joint ventures. Although the Group has
historically derived most of its revenue from operations in the UAE, the portion of its revenue derived from
international operations increased significantly between 2007 and 2009, and the Group expects that
international operations revenue as a percentage of consolidated revenue will continue to increase in the
future given the relative maturity of the UAE market and the growth potential of its international operations.
162
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Subsidiaries are controlled by the Group and are consolidated in its financial statements, while associates
and joint ventures represent minority positions and are accounted for on an equity basis.
The Group provides telecommunications services through controlled subsidiaries in Egypt (Etisalat Misr),
Sub-Saharan Africa (including Côte d’Ivoire, Burkina Faso, Togo, Gabon, the Central African Republic,
Niger and Benin) (Atlantique Telecom), Sudan (Canar), Tanzania (Zantel), India (Etisalat DB India, which
commenced limited commercial operations during the first half of 2010), Afghanistan (Etisalat Afghanistan)
and Sri Lanka (Etisalat Lanka). With the exception of results from the Group’s operations in Burkina Faso,
these subsidiaries are fully consolidated in the Group’s financial statements and contributed in aggregate 8
per cent. of the Group’s consolidated revenue for the year ended 31 December 2008, 14 per cent. for the year
ended 31 December 2009 and 23 per cent. for the nine months ended 30 September 2010. Although certain
of the Group’s international subsidiaries have fixed-line operations, the vast majority of the Group’s
consolidated revenue from its international operations for the years ended 31 December 2008 and 2009 was
generated by providing mobile telecommunications services.
The Group also holds minority positions in telecommunications providers located in Saudi Arabia (Mobily),
Nigeria (Etisalat Nigeria), Pakistan (PTCL) and Indonesia (XL). These associates are not controlled by the
Group and the results of their operations are accounted for on an equity basis. The Group’s share of results
of associates and joint ventures was AED 368.1 million and AED 503.9 million for the nine months ended
30 September 2009 and 2010, respectively. The Group’s associates and joint ventures was AED 472.7
million and AED 682.1 million to the Group for the years ended 31 December 2008 and 2009, respectively.
Where the Group has acquired existing operators it has often initially acquired less than a controlling interest
and then increased its interest over time, as with its interests in Atlantique Telecom, Zantel and Canar. The
Group has also demonstrated its ability to successfully establish new telecommunications businesses
together with the necessary network infrastructure. For example, in Egypt the Group was awarded the
country’s first 3G licence in August 2006, established its mobile network infrastructure by May 2007 and
within four months of Etisalat Misr’s commercial launch, had 2.5 million mobile subscribers.
Internationally, the Group operates in markets with significant competition but relatively low penetration
rates compared to major western markets and, as demonstrated by the Group in Egypt, the Group has been
successful in the past in entering new markets despite the presence of an existing dominant market
participant. The Group’s competitive position varies widely among its subsidiaries, associates and joint
ventures, depending on the number of operators in the relevant market as well as the timing of entry of the
Group’s operations relative to its competitors.
163
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The table below lists the Group’s international telecommunications subsidiaries as well as mobile ARPU and
mobile subscriber numbers as of 31 December 2008 and 2009 for those subsidiaries.
As of and for the year ended 31 December
–––––––––––––––––––––––––––––––––––––––––
2008
2009
–––––––––––––––––––– ––––––––––––––––––––
Operating Company
––––––––––––––
Etisalat ....................................
Etisalat Misr ..........................
Atlantique Telecom ................
Canar ......................................
Zantel......................................
Etisalat Afghanistan................
Etisalat Lanka ........................
Note:
(1)
Country of Operation
Mobile
ARPU(1)
Mobile
Subscribers
Mobile
ARPU(1)
Mobile
Subscribers
(AED)
(thousands)
(AED)
(thousands)
–––––––––––––––––– ––––––––– ––––––––– ––––––––– –––––––––
UAE
Egypt
Sub-Saharan Africa
Sudan
Tanzania
Afghanistan
Sri Lanka
166
21
40
146
25
18
–
7,285
6,812
3,742
172
1,049
1,195
–
139
21
28
195
16
20
11
7,741
14,252
4,771
137
1,394
2,744
2,363
ARPU figures include prepaid and postpaid subscriber revenue.
Of these subsidiaries, the largest on a revenue basis in 2008, 2009 and for the nine months ended
30 September 2010 were Etisalat Misr and Atlantique Telecom. For the years ended 31 December 2008 and
2009 and for the nine months ended 30 September 2010, operations in Egypt provided through Etisalat Misr
accounted for 4 per cent., 9 per cent. and 13 per cent., respectively, of the Group’s consolidated revenue.
Atlantique Telecom (including the Group’s operations in Benin) accounted for 3 per cent. of the Group’s
consolidated revenue for each of the years ended 31 December 2008 and 2009, and for 5 per cent. of the
Group’s consolidated revenue for the nine months ended 30 September 2010.
Egypt – Etisalat Misr
Overview
Etisalat International Egypt Limited (EIEL), which holds the Group’s investment in Etisalat Misr, was
incorporated as an offshore company with limited liability in Jebel Ali Free Zone on 6 August 2006. Etisalat
has a 100 per cent. interest in EIEL. EIEL holds the Group’s 66 per cent. interest in Etisalat Misr, which
Etisalat acquired in August 2006 when Etisalat Misr was awarded the first 3G licence in Egypt (which also
included rights to operate a 2G network) for a bid of U.S.$2.9 billion. Etisalat Misr subsequently constructed
a 2G and 3G network in Egypt.
Etisalat Misr commenced commercial operations in May 2007 and within four months had approximately
2.5 million mobile subscribers. Etisalat Misr’s subscribers grew from 3.1 million at the end of 2007 to 6.8
million at the end of 2008 and to 14.2 million as of 31 December 2009, representing a market share of
approximately 22.6 per cent. on the basis of numbers of subscribers as of 31 December 2009 (Source:
Competitors’ financial releases and Etisalat internal data). As of 30 September 2010, Etisalat Misr had 17.4
million subscribers. By the end of 2008, Etisalat Misr’s 2G network covered approximately 96 per cent. of
Egypt’s population and reached 98 per cent. coverage by 31 December 2009, while its 3G network achieved
population coverage of approximately 70 per cent. by 31 December 2008 and 92 per cent., including 160
cities, by 31 December 2009. By expanding its 3G coverage to this level, Etisalat Misr fulfilled the coverage
obligations of its 3G licence. Etisalat Misr was the first mobile services provider to operate a 3G network in
Egypt and, unlike other operators in Egypt, it offers EDGE and 3.75G services in all areas having 2G and
3G coverage, respectively.
In 2009, Etisalat Misr expanded its scope of operations by acquiring two of the four existing class A internet
service providers in Egypt, the Egyptian Company for Internet and Digital Infrastructure S.A.E. (Nile
Online) and Egyptian Company for Networks S.A.E. (EgyNet).
164
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Etisalat Misr’s revenue for the years ended 31 December 2008 and 2009 was AED 1,237 million and AED
2,628 million, respectively. For the nine months ended 30 September 2009 and 2010, Etisalat Misr’s revenue
was AED 1,776 million and AED 2,985 million, respectively. Etisalat Misr contributed 4 per cent. and 9 per
cent. of the Group’s consolidated revenue for the years ended 31 December 2008 and 2009, respectively, and
13 per cent. of the Group’s consolidated revenue for the nine months ended 30 September 2010.
Regulation
Law 10, issued in February 2003 (the Egyptian Telecommunications Law), regulates the
telecommunications sector in Egypt. The law established the National Telecom Regulatory Authority (the
NTRA), the entity charged with regulating all aspects of the telecommunications industry, including
spectrum management, interconnection, numbers, national roaming and mobile number portability. Among
other things, the Egyptian Telecommunications Law stipulates that a licence is needed in order to provide
telecommunications services or operate a telecommunications network and sets out the terms that each
licence must contain. It also establishes general rules relating to the management, licensing and use of the
frequency spectrum. Under the Egyptian Telecommunications Law, all telecommunications tariffs must be
approved by the NTRA. The NTRA validates the tariffs for various telecommunications services proposed
by the licensee and may elect to subsidise tariffs through a telecommunications service fund.
Licensees in Egypt are required to provide interconnection between their networks by adopting the general
framework required by the interconnection rules and regulations and either entering into an interconnection
agreement ratified by the NTRA or acceding to an existing interconnection agreement. The Egyptian
Telecommunications Law stipulates the basics of interconnection and provides a dispute resolution process.
In the case of a dispute, the NTRA is authorised to determine the terms of the interconnection agreement and
to arbitrate between service providers.
Etisalat Misr had previously entered into a national roaming agreement with Vodafone and Mobinil to ensure
network coverage in areas not covered by Etisalat Misr’s network under rules and regulations imposed by
the NTRA. As of June 2010, Etisalat Misr’s network had sufficiently expanded to no longer require a national
roaming agreement with Vodafone and Mobinil. Mobile number portability exists between the mobile
operators for the benefit of individual customers.
Etisalat Misr has not been classified as an operator with significant market power in Egypt and, as per its
licence, it is exempted from certain payment obligations, including payments required for scientific research,
contributions for training programmes and universal service obligations (fees that would total no more than
0.5 per cent. of Etisalat Misr’s annual gross revenues) for a period of five years from the date Etisalat Misr
commenced operations in Egypt.
Management agreements
Etisalat Misr and Etisalat have signed a Technical Assistance Agreement effective as of 5 July 2006, whereby
Etisalat Misr obtains such services from Etisalat in respect of its Egyptian mobile network. The Technical
Assistance Agreement is for a term of seven years from 5 July 2006 with an automatic five-year renewal,
subject to certain conditions. Etisalat may terminate the agreement if it no longer holds shares in Etisalat
Misr or by six months’ notice prior to the end of any contract year. Etisalat’s liability for services performed
under the agreement is limited to the fee it receives under the agreement for the year in which the liability
arises. Etisalat receives a total of 2 per cent. of Etisalat Misr’s gross revenue annually from this agreement.
Competition
In May 2007, Etisalat Misr commenced operations as the third mobile telecommunications services provider
in Egypt. As of 30 June 2010, mobile penetration in Egypt was approximately 76 per cent. (Source: NTRA).
Telecommunications services in Egypt are provided principally by Telecom Egypt, the incumbent
government-owned fixed-line operator, with respect to fixed-line services, and by three GSM mobile
operators, Mobinil, Vodafone Egypt and Etisalat Misr. Telecom Egypt owns 44.95 per cent. of Vodafone
Egypt.
165
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The NTRA has published figures indicating that as of 31 December 2009, Mobinil had a 46 per cent. market
share, Vodafone Egypt had a 42 per cent. market share and Etisalat Misr had a 12 per cent. market share, in
each case based on numbers of subscribers. According to financial releases of the various mobile operators,
Mobinil had a 40.3 per cent. market share, Vodafone Egypt had a 37.1 per cent. market share and Etisalat
Misr had a 22.8 per cent. market share, in each case based on numbers of subscribers as of 31 December
2009.
Egypt is a very competitive market, with a high degree of price competition. To effectively compete in this
region, Etisalat Misr is focusing on growing its share of the voice and data segments of the mobile
telecommunications market. In particular, Etisalat is focusing on its 3G offerings, as it was the first provider
to offer these services in Egypt.
Customers, products and services
Etisalat Misr’s strategy has been to focus on mass-market customers, while using the Etisalat brand to
distinguish itself as a high-quality and innovative mobile service provider. The initial strategy of attracting
price sensitive customers shifted six months after the launch of services to a strategy directed at attracting
the youth and young adult market. In December 2007, once network quality and coverage stabilised, Etisalat
Misr launched its corporate products. Etisalat Misr has coverage in all major cities in Egypt on its 3G
network and 98 per cent. population coverage on its 2G network. Moreover, Etisalat Misr is the only mobile
operator in Egypt that operates an international gateway that allows its customers to take advantage of
competitive international rates to destinations worldwide, and it was the first operator to offer international
voice SMS services to its customers.
Etisalat Misr offers a range of tariffs that are intended to appeal to a variety of customers. For example, in
May 2009 Etisalat Misr began offering a prepaid tariff, Ahlan Kol Elnas, that features a single flat rate for
all calls on Etisalat’s mobile network, calls across other mobile operators’ networks and calls to landlines.
Management believes that this flat rate tariff helped Etisalat Misr gain many new subscribers, including
middle- and high-value customers who have remained active subscribers despite the introduction of
competing tariffs by Etisalat Misr’s competitors later in 2009. Etisalat Misr also offers a prepaid plan tailored
to the under-25 age group that provides discounts on calls and SMS messages to preferred numbers as well
as free mobile internet on weekends. Finally, in the postpaid segment, Etisalat Misr launched a tariff that
offers unlimited voice calls, SMS messaging and mobile internet at any time of day and provides discounts
on international calls.
In addition to its broad range of prepaid and postpaid tariffs, Etisalat Misr also provides a broad range of
mobile broadband and other mobile services to its customers. As the first provider of 3G network offerings,
it is a leader in mobile broadband services, providing a range of services and tariffs that have reduced the
entry barrier for these services in Egypt. Etisalat Misr offered the first unlimited mobile broadband tariff in
the Egyptian market and the first tariff that provided unlimited usage of social community and popular email
sites. Etisalat Misr also introduced prepaid mobile broadband services tailored to those customers in need of
a more affordable mobile broadband service.
In order to further its strategy of offering integrated services, in 2009 Etisalat Misr introduced fixed
broadband service under the name of Smart ADSL and also began offering mobile broadband. In early 2009,
Etisalat Misr acquired two established internet service providers: Nile Online and EgyNet. Etisalat Misr
expects these acquisitions will support the offering of fixed and mobile broadband services to its customers.
166
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The following table presents information about Etisalat Misr’s mobile subscribers in Egypt as of
31 December 2007, 2008 and 2009 and as of 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
(thousands)
Mobile subscribers
Prepaid subscribers ..................................................
Postpaid subscribers ................................................
Broadband subscribers ............................................
2,918
6,617
13,858
16,584
197
195
385
754
–
–
9
23
––––––––– ––––––––– ––––––––– –––––––––
Total ............................................................................
3,115
6,812
14,252
17,362
––––––––– –––––––––
––––––––– –––––––––
–––––––––
–––––––––
––––––––– –––––––––
Marketing and distribution
Etisalat Misr has an extensive distribution channel that, in management’s view, allows Etisalat Misr to reach
almost all market segments in Egypt. The distribution channel has seven flagship stores in City Stars, El
Dokki, Dandy Mall, Smouha, Heliopolis, El Mansoura and Sharm El Sheikh, and 25 franchise locations, plus
six sales kiosks (permanent and seasonal) throughout Egypt. Etisalat Misr currently has more than 23,000
independent dealers authorised to sell Etisalat products throughout Egypt.
Network infrastructure
Etisalat Misr operates 2G and 3G networks in Egypt. At the end of 2009, Etisalat Misr’s 2G network covered
98 per cent. of Egypt’s population, while its 3G network achieved population coverage of approximately
72 per cent., including coverage of 160 cities.
Etisalat Misr has owned and operated an international gateway in Egypt since 2007, and it is the first and
only mobile operator in Egypt to do so.
Sub-Saharan Africa – Atlantique Telecom
Description of region
Atlantique Telecom operates in six Sub-Saharan Africa countries: Côte d’Ivoire (Ivory Coast), Burkina Faso,
Togo, Gabon, the Central African Republic and Niger. The results of a seventh operator, Etisalat Benin, are
consolidated with Atlantique Telecom due to its geography of operation. The Sub-Saharan region has a total
population of over 70 million and, as of 31 December 2009, Atlantique Telecom’s network covered
approximately 65 per cent. of that population. Macroeconomic conditions in the region have been
challenging, although the Group believes there is potential for substantial growth.
Overview
Etisalat International Atlantique Limited (EIAL), which holds the Group’s investment in Atlantique
Telecom, was incorporated as an offshore company with limited liability in Jebel Ali Free Zone on 10 April
2007. Etisalat has a 100 per cent. interest in EIAL. The Group acquired a 50 per cent. interest in Atlantique
Telecom in April 2005 and subsequently increased its holding to 70 per cent., 82 per cent. and 100 per cent.
in April 2007, May 2008 and February 2010, respectively.
The Group’s operations in Benin are carried out though Etisalat Benin. Etisalat (and not Atlantique Telecom)
holds a 100 per cent. stake in Etisalat Benin, but its results are consolidated with Atlantique Telecom for
convenience of presentation. In October 2007, Etisalat Benin acquired a licence to operate in the Republic
of Benin. However, the network infrastructure in Benin is held by Atlantique Telecom’s majority-owned
subsidiary Telecel Benin. Etisalat Benin utilises Telecel Benin’s network and employees and gains access to
167
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
its customer base pursuant to a lease agreement with Telecel Benin entered into on 15 January 2008 for a
term of five years.
Atlantique Telecom also holds a majority stake in a mobile operator based in Burkina Faso but due to a legal
conflict with the local partner, management control over this operation has temporarily been lost. The Group
has not consolidated the results of the Burkina Faso operations in the results of Atlantique Telecom since
December 2008 pending resolution of this dispute. See “— Litigation”.
Atlantique Telecom’s operations (with the exception of Burkina Faso) utilise the Moov brand and offer both
mobile voice and data services over its 2G networks to areas with high population density. Atlantique
Telecom’s revenue for the years ended 31 December 2008 and 2009 was AED 864.1 million and
AED 968.9 million, respectively. For the nine months ended 30 September 2009 and 2010, Atlantique
Telecom’s revenue was AED 1,010.6 million and AED 1,145.6 million, respectively. Atlantique Telecom
contributed 3 per cent. of the Group’s consolidated revenue for each of the years ended 31 December 2008
and 2009, and 5 per cent. of the Group’s consolidated revenue for the nine months ended 30 September 2010.
Regulation
All of Atlantique Telecom’s businesses are subject to regulation. All of the countries in which it operates have
laws specifically regulating telecommunications businesses, and requiring those businesses to hold licences
to conduct their operations and provide services. In all of the countries in which Atlantique Telecom
operates, the telecommunications regulatory authorities are not independent of government, either as a
statutory matter, or as a matter of practice. The regulatory environments that apply to Atlantique Telecom’s
operations require the payment of annual licence fees (often representing a significant percentage of the local
operation’s revenues) in addition to upfront licence fees to operate and contain discretion for the regulatory
authorities to regulate the telecommunications market in their country. This generally includes regulation of
interconnection agreements between service providers and both wholesale and retail pricing.
Certain of Atlantique Telecom’s licences contain roll-out conditions requiring the licence holder to provide
service or network coverage to a specified percentage of the population or geographical area of each country
within a specified timetable. As of the date of this Base Prospectus, some of Atlantique Telecom’s
subsidiaries have completed or are in compliance with these licence obligations.
The licences that Atlantique Telecom holds in relation to its operations are of limited duration and do not
contain automatic renewal provisions (either in the statutory rules or in the terms of the licence itself). In the
markets in which Atlantique Telecom operates, there is a risk of expropriation by the government or
regulatory authorities, either simply by revoking the licence or by making changes to the regulatory or
financial conditions in which it operates that have an equivalent effect. In these countries, the legal
environment is not sufficiently robust to provide assurance that a challenge against such an expropriation or
change in regulation would be successful.
Management agreement
Atlantique Telecom entered into a management services agreement with the Group on 20 April 2005 in
respect of the provision of technical and management services by the Group. The term of the agreement is
ten years and automatically renews for another five years thereafter unless the Group notifies Atlantique
Telecom at least six months prior to the end of the ten-year term. The Group’s liability is limited to its
remuneration under the agreement in any one year. Under the management services agreement, the Group
receives an annual payment of €2 million.
Competition
Competition in Atlantique Telecom’s markets is high. Customers have a choice of, on average, four to six
mobile service providers in each market in which Atlantique Telecom operates. Mobile penetration, however,
remains low compared to major western markets, averaging 43 per cent. across the countries covered by
Atlantique Telecom’s operations as of 31 December 2009.
168
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Atlantique Telecom competes against three pan-African operators: Mobile Telephone Networks, operating
under the brand MTN (MTN); Bharti Airtel Limited (Bharti Airtel), which recently purchased certain
African operations of Zain and still utilises the Zain brand; and France Telecom, operating under the brand
Orange (Orange). MTN is present in Côte d’Ivoire and Benin, where they have the largest share of
subscribers, Bharti Airtel dominates the market in each of Gabon and Niger with a market share (based on
subscriber numbers) above 50 per cent. and Orange is present in Côte d’Ivoire (the second largest provider
behind MTN) and entered the markets of Niger and the Central African Republic in 2008 (Source:
Operators’ internal statistics). Other smaller operators are also present in most of these countries.
Customers, products and services
As of 30 September 2010, prepaid subscribers represented 96 per cent. of Atlantique Telecom’s customer
base, with postpaid and corporate customers representing 2 per cent. Apart from voice telephony, which is
the main activity in its product portfolio, Atlantique Telecom also offers SMS and a range of value-added
services, including SMS and BlackBerry services, adapted to the market conditions of the region.
In 2009, Atlantique Telecom offered several new services and product lines, including BlackBerry services,
per second billing, e-vouchers and prepaid roaming. In addition, Atlantique Telecom launched
“Moovprivilege”, a tariff aimed at high-value customers, offering a flat rate for mobile calls and special IDD
rates based on a minimum monthly usage. The company also introduced a tariff targeted at youth markets
that offers free calls and SMS for a minimum charge.
Atlantique Telecom expects to continue to add services to its portfolio in 2010, including new content
provisions that utilise the company’s mobile internet and broadband facilities.
The following table presents information about Atlantique Telecom’s mobile subscribers as of 31 December
2007, 2008 and 2009 and as of 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
(thousands)
Mobile subscribers
Prepaid subscribers ..................................................
Postpaid subscribers ................................................
2,794
3,669
4,623
5,182
56
73
148
371
––––––––– ––––––––– ––––––––– –––––––––
Total..............................................................................
2,849
3,742
4,771
5,553
–––––––––
––––––––– –––––––––
––––––––– –––––––––
––––––––– –––––––––
–––––––––
Marketing and distribution
Atlantique Telecom operates under the brand Moov, which is owned by Atlantique Telecom. The Moov
brand was initially launched in Côte d’Ivoire in mid-2006 and then rolled out to the other Sub-Saharan
African countries from December 2006 to March 2008. Currently, it is used in all of Atlantique Telecom’s
operations with the exception of Burkina Faso. A unified brand allows Atlantique Telecom to centrally
manage the brand strategy, awareness campaigns and marketing.
Most of Atlantique Telecom’s sales are channelled through a network of key distributors and it owns only a
limited number of sales outlets which are used for brand visibility.
Network infrastructure
As of 31 December 2009, Atlantique Telecom’s 2G network covered, on average, approximately 65 per cent.
of the population in its seven markets (including Benin, where it has leased its network infrastructure to
Etisalat Benin). Ericsson is the main supplier of network equipment to Atlantique Telecom operations and
the network architecture is similar in all its markets. The business in Côte d’Ivoire has Huawei network
equipment in the northern and western parts of the country.
169
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Other key subsidiaries, associates and joint ventures
The Group has operations in Saudi Arabia and Pakistan through, respectively, a 27.5 per cent. equity interest
in Mobily and a 23.4 per cent. effective economic interest in PTCL. These businesses represent an important
element of the Group’s strategy to expand internationally by gaining a foothold in markets where the Group
believes there are opportunities for future growth and synergies with the Group’s existing businesses. The
book value of the Group’s investment as of 31 December 2009 was AED 3,580.5 million for Mobily and
AED 9,443.5 million for PTCL. These operations are consolidated using the equity method and the revenues
generated by such businesses are not included in the Group’s consolidated revenue.
The Group also has operations in India, through its subsidiary Etisalat DB India, which commenced limited
operations in 2010. The Group’s operations there remain in the initial stages, but management believes India
offers the opportunity for substantial subscriber growth in the future.
Saudi Arabia – Mobily
Overview
The Group conducts its operations in Saudi Arabia through its associate Mobily. Mobily was incorporated
on 14 December 2004, with Etisalat as one of its founding shareholders. In accordance with the Saudi Royal
Decree establishing Mobily, its founding shareholders were required to offer 20 per cent. of the initial shares
to the public within the first three years of Mobily’s incorporation. Accordingly, in April 2008 Etisalat
reduced its interest in Mobily from 35 per cent. to 26.25 per cent. In October 2008, Etisalat participated in
Mobily’s rights issue, increasing its stake to 27.5 per cent.
Mobily acquired the second GSM licence (after the incumbent, Saudi Telecom Company (STC)) to be
awarded in Saudi Arabia following a competitive auction, and commenced commercial operations in May
2005. Mobily subsequently constructed and launched its 3G and 3.5G networks in June 2006. Etisalat is the
largest single shareholder in Mobily followed by General Organisation for Social Insurance – Saudi Arabia,
Abdullah and Said M. O. Binzagr Company Limited, Al Jomaih Holding Company, Riyadh Cables Group
of Companies, Rana Investment Company and Abdulaziz Al Saghyir Commercial Investment Co. The
remaining shares are held by public shareholders via Mobily’s listing on the Saudi Stock Exchange
(Tadawul).
Mobile penetration rates in Saudi Arabia have increased from 61 per cent. in 2005 to 175 per cent. as of
31 December 2009 as estimated by the Saudi Arabia Communication & Information Technology
Commission (CITC). As of 31 December 2009, Mobily’s 2G and 3G networks covered 98 per cent. and 78
per cent., respectively, of the total populated area in Saudi Arabia (Source: Management estimates).
Mobily’s revenue for the years ended 31 December 2007, 2008 and 2009 was AED 8.3 billion,
AED 10.6 billion and AED 12.8 billion, respectively (as calculated under the accounting standards of the
Saudi Organization for Certified Public Accountants (SOCPA)).
Management arrangements
Mobily and the Group entered into a management agreement dated 23 December 2004 (the Mobily
Management Agreement) whereby the Group provides Mobily with technical and management services in
respect of its Saudi mobile network licence. Pursuant to this agreement, the Group receives an annual
management fee from Mobily of U.S.$10 million plus a variable performance fee of up to 1 per cent. per
year of net revenue. The Mobily Management Agreement is for a term of seven years from 23 December
2004 and includes a provision for automatic renewal for successive periods of five years subject to notice of
termination not being given by either party. The Group may terminate the Mobily Management Agreement
by giving notice at least 12 months prior to the end of any contract period or if it no longer holds shares in
Mobily, while Mobily can terminate the agreement by serving a six-month notice of termination prior to the
expiry under the applicable contract period.
170
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Pursuant to the Mobily Management Agreement, Etisalat must own at least a 15 per cent. interest in Mobily
for the duration of the Mobily Management Agreement. The Group is represented by four members of the
Board of Directors of Mobily (out of ten total members of the Board of Directors).
Competition
Both the fixed-line and mobile telecommunications markets in Saudi Arabia are highly competitive. STC is
the incumbent fixed-line operator and three operators provide mobile services: STC, Zain KSA and Mobily.
In addition, there are several smaller operators competing with Mobily in fixed wireless services.
As of 31 December 2009, Mobily’s market share of the mobile services in Saudi Arabia was 41 per cent. in
terms of numbers of subscribers (Source: Management estimates).
Customers, products and services
Mobily currently offers services for both residential and corporate customers, including prepaid and postpaid
mobile services as well as wireless broadband. Mobily also offers broadband services using fixed wireless
technologies through its interests in Bayanat al Oula and Zajil Internet Services, which allows it to provide
bundled offers and unique data services to its customers.
Mobily seeks to target its services to various demographic markets in Saudi Arabia. It initially attracted the
lower-value segments of the market, offering prepaid tariffs designed specifically for students, as well as
postpaid customers. Since then, its strategy has been to increase its share of the middle- and high-value users
through product offerings designed to promote mobile content as an addition to voice-only services. For
example, Mobily was the first operator in Saudi Arabia to offer the iPhone 3G and the only operator to offer
a prepaid fixed broadband service for residential customers. In addition, Mobily works with its business
customers to help tailor their use of new telecommunication technologies to reach consumers in their
respective markets.
The following table presents information about Mobily’s mobile subscribers in Saudi Arabia as of
31 December 2007, 2008 and 2009 and 30 September 2010.
As of 30
As of 31 December
September
––––––––––––––––––––––––––––––– –––––––––
2007
2008
2009
2010
––––––––– ––––––––– ––––––––– –––––––––
(thousands)
Mobile subscribers
Prepaid subscribers ..................................................
Postpaid subscribers ................................................
10,602
13,869
16,693
16,953
480
983
1,539
2,125
––––––––– ––––––––– ––––––––– –––––––––
Total..............................................................................
11,082
14,852
18,232
19,078
––––––––– –––––––––
––––––––– –––––––––
–––––––––
–––––––––
––––––––– –––––––––
Marketing and distribution
Mobily’s distribution model is based on owned and operated flagship stores, franchise locations, fully
branded outlets and co-branded outlets, plus a network of dealers and preferred dealers. By the end of 2009,
Mobily had 35 flagship stores in 20 cities (an increase from 24 flagship stores in eight cities in 2007) and
more than 7,800 customer access points including fully branded and co-branded outlets, dealers and
preferred dealers spread over more than 100 locations (compared to 62 locations in 2007).
Network infrastructure
Mobily had 2G and 3G network coverage as of 31 December 2009 of 99 per cent. and 78 per cent.,
respectively, throughout Saudi Arabia with a call drop rate of 0.43 per cent. It was the first operator in Saudi
Arabia to launch a 3.5G service. The total number of technical sites as of 31 December 2009 was 6,705 2G
sites and 3,228 3G sites.
171
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Mobily has the largest HSPA + base in the Middle East and North Africa and has one of the busiest
worldwide mobile data networks in that region. Mobily operates an extensive national fibre optic network
having more than 12,000 kilometres of cable throughout Saudi Arabia.
Pakistan – PTCL
Overview
Etisalat International Pakistan LLC (EIPL) holds the Group’s investment in Pakistan Telecommunication
Company Limited (PTCL). As of 31 December 2009, the Group held a 90 per cent. interest in EIPL, and
EIPL held a 26.0 per cent. interest in PTCL, giving the Group a 23.4 per cent. effective economic interest in
PTCL. As of 31 December 2009, the other shares of PTCL were owned by the Pakistani government (62.2
per cent.) and the public (11.8 per cent.). PTCL owns a 100 per cent. stake in Pakistan Telecom Mobile
Limited (Ufone), the Group’s mobile operator in Pakistan. Ufone was incorporated on 18 July 1998 and
started commercial operations in Pakistan on 29 January 2001.
PTCL’s revenue for the years ended 31 December 2007, 2008 and 2009 was AED 4.9 billion, AED 4.4 billion
and AED 4.5 billion, respectively. PTCL has been listed on the Karachi Stock Exchange since October 1995.
Management arrangements
The Group owns 90 per cent. of PTCL’s Class B shares which provide the Group with 53 per cent. of the
voting rights for the selection of Board members of PTCL. Under the terms of the PTCL Shareholders’
Agreement, the Group has the right to appoint five of the nine directors to the Board of Directors of PTCL
in addition to certain key management personnel. However, management believes there are certain
impediments on the Group’s control of PTCL regarding operational decision making, with the result that
PTCL is not fully consolidated in the Group’s consolidated financial statements.
Pursuant to the PTCL Shareholders’ Agreement, the Group entered into an agreement for the provision of
technical services and know-how with PTCL with effect from 1 October 2006 (the PTCL Services
Agreement) for a period of five years. Under the terms of the PTCL Services Agreement, Etisalat is entitled
to an annual service fee of 3.5 per cent. of the gross consolidated revenue of PTCL subject to a cap of
U.S.$50 million per year. For the years ended 31 December 2009, 2008 and 2007, the service fee was AED
124.5 million, AED 142.7 million and AED 150.7 million, respectively.
Competition
Both fixed-line and mobile services markets in Pakistan are highly competitive, though penetration rates
remain relatively low compared to those in major western European markets. The Pakistan
Telecommunications Authority (the PTA) estimates that, as of 31 December 2009, fixed-line penetration in
Pakistan was 4 per cent. and mobile penetration was 59.6 per cent. PTCL enjoyed a monopoly with respect
to basic fixed-line services until 2003. The PTA recently issued 14 new licences that allow holders to provide
fixed-line long distance and international services. Despite these new entrants, as of 31 December 2009,
PTCL’s market share in the fixed-line segment was approximately 76 per cent. based on numbers of
subscribers.
Telecommunications services in Pakistan are provided principally by PTCL, the incumbent fixed-line
operator. Pakistan has six mobile operators, of which one, Pakcom (Pvt.) Limited (Instaphone), provides
analogue services and five, Pakistan Mobile Communication Limited Mobilink (Mobilink), China Mobile
Pakistan (formerly known as Paktel (Pvt.) Limited and operating under the brand name Zong) (Zong),
Ufone, Telenor and Al-Warid Telecom (Al-Warid), provide digital GSM services. Accordingly, the mobile
telecommunications market is very competitive. Ufone is the fourth largest mobile operator in Pakistan, with
18.5 million subscribers as of 31 December 2009. As of 31 December 2009, the PTA reported that Mobilink
had an estimated 31.6 per cent. share in the Pakistani mobile market, Telenor an estimated 23.1 per cent.,
Warid Telecom an estimated 19.3 per cent., Ufone an estimated 19.0 per cent. and Zong an estimated 7.1 per
cent. based on numbers of subscribers. (Source: PTA).
172
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Customers, products and services
PTCL’s business strategy focuses on achieving high levels of customer satisfaction by deploying innovative
products and services based on the latest technologies. PTCL’s fixed-line operations are its core business and
according to the PTA, PTCL had a 76 per cent. market share with 4.2 million fixed-line customers as of
31 December 2009. PTCL seeks to increase its fixed-line revenues by encouraging customers to subscribe
to offers bundling fixed-line and broadband services.
Ufone’s mobile telecommunications network covered approximately 11.3 per cent. of Pakistan’s population
as of 31 December 2009. Ufone provides both prepaid and postpaid mobile services, including Blackberry,
GPRS enabled WAP, MMS and internet access. In addition, PTCL recently launched EvOD – 3G wireless
broadband and is the first such operator in Pakistan.
Internet services are a growing part of PTCL’s business and since the launch of its broadband services, PTCL
has acquired over 332,267 broadband customers in more than 170 cities and towns across Pakistan. PTCL
also operates a fixed wireless network, covering over 10,000 urban, suburban and rural villages, and having
1.3 million subscribers across Pakistan.
The following table presents information about PTCL’s fixed-line subscribers and Ufone’s mobile
subscribers in Pakistan as of 31 December 2007, 2008 and 2009 and 30 September 2010.
Fixed-line subscribers(1) ................................................
Mobile subscribers ......................................................
Prepaid subscribers..................................................
Postpaid subscribers ................................................
Total..............................................................................
Note:
(1)
As of 31 December
–––––––––––––––––––––––––––––––
2007
2008
2009
––––––––– ––––––––– –––––––––
(thousands)
5,479
4,850
4,170
9,220
13,768
18,510
8,999
13,449
18,177
221
318
334
––––––––– ––––––––– –––––––––
14,699
18,617
22,680
––––––––– –––––––––
––––––––– –––––––––
–––––––––
–––––––––
As of 30
September
–––––––––
2010
–––––––––
4,613
18,628
18,275
352
–––––––––
23,241
–––––––––
–––––––––
Includes internet subscribers.
Marketing and distribution
PTCL’s current marketing strategy focuses on promoting PTCL’s services, products and initiatives,
generating awareness about Ufone’s transformation from a basic voice service provider to a multi-faceted
telecommunications operator offering a strong brand presence and innovation in pricing and products, and
developing a widespread sales and distribution network.
Ufone has developed a pricing strategy that offers tariffs that it believes are attractive to a broad range of
customers, including prepaid and postpaid price plans targeted at corporate, youth, long caller and mass
market customers. Ufone seeks to provide value to its subscribers through the bundling of services and
tariffs. In addition to its broad range of tariffs, Ufone offers value-added services to its customers.
Ufone reaches its customers through customer service centres, franchises and thousands of retail outlets. Last
year Ufone introduced the concept of Ushop, which seeks to ensure a quality service for its subscribers by
providing retail outlets with tools and services that were once available only at the service centres and
franchises.
Network infrastructure
PTCL established itself as the first 3G wireless service provider in Pakistan by upgrading its existing fixed
wireless platform in major cities, including Azad Jammu and Kashmir, to EvOD, which is a CDMA (not
GSM) based 3G technology.
173
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
PTCL has recently executed several broadband projects, increasing its capacity in more than 200 cities across
Pakistan. To serve rural and scattered populations with broadband services, PTCL laid optical fibre cable
across Pakistan. PTCL has recently doubled the user bandwidth of its DSL customers through recent capital
investments to a speed of up to 8 Mbps. In addition to broadband services, PTCL expanded its TV offering
in 15 different cities and increased its content offering from 100 to 125 channels.
In February 2008, PTCL signed a construction and maintenance agreement for the planned India-Middle
East-Western Europe Submarine Cable System which will establish a new submarine cable network linking
Mumbai, India and Marseilles, France.
India – Etisalat DB India
The Group holds its interest in Etisalat DB Telecom Private Ltd (Etisalat DB India) through a subsidiary,
Etisalat International India Limited (EIIL), in which Etisalat holds a 100 per cent. interest. EIIL holds its
interest in Etisalat DB India through a subsidiary, Etisalat International Mauritius Ltd., in which EIIL holds
a 100 per cent. interest. The Group acquired a 44.7 per cent. interest in Swan Telecom Private Limited, which
was renamed Etisalat DB Telecom Private Ltd in March 2009. The Group accounts for Etisalat DB India as
a subsidiary because it exercises control over the entity. The balance of the shares of Etisalat DB India are
held by Dynamix Balwas Group.
The Group, through EIIL, is subject to a put option that allows Tiger Trustees Private Limited to sell and
transfer 5 per cent. of its shares in Etisalat DB India to EIIL. The put option runs from 17 December 2008
until 31 December 2020. The put option can be exercised at the discretion of Tiger Trustees Private Limited
at any time during the option period; however, exercising the put option requires Tiger Trustees Private
Limited to obtain an extensive number of approvals before any exercise would be complete. In addition, EIIL
holds a call option that gives it the right to purchase shares in Etisalat DB India from Genex Exim Ventures
Private Limited. This option was entered into on 23 September 2009 and has similar terms to the put option
described above. Both Tiger Trustees Private Limited and Genex Exim Ventures Private Limited are entities
though which Dynamix Balwas Group holds its interest in Etisalat DB India.
On 17 March 2009, Etisalat DB India acquired a 100 per cent. interest in Allianze Infratech Private Limited.
As a result of this acquisition, it now holds universal access service licences in 15 of the 22
telecommunications service areas in India, including Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka,
Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East),
Uttar Pradesh (West), Madhya Pradesh and Bihar. These licences enable Etisalat DB India to provide a full
spectrum of telecommunications services, including internet telephony and internet and broadband services,
over a 2G network covering a population of over 900 million, which represented 84 per cent. of the country’s
population as of 31 December 2009.
In accordance with the terms of its licence, Etisalat DB India commenced commercial operations under the
“Cheers” brand during the first half of 2010. Competition in the Indian mobile telecommunications market
is intense, with over ten operators providing mobile telephony services. In mid-2009, NTT Docomo, Inc.
(through its Indian joint venture with Tata under the brand name Tata DoCoMo) began offering extremely
low per minute tariffs in India, and other operators, including Bharti Airtel and Vodafone Essar, responded
by offering correspondingly low tariffs. The presence of more than ten operators has created intense price
competition has made it difficult for mobile telecommunications providers to operate at a profit in India.
The Telecom Regulatory Authority of India (TRAI) closed its auction of 3G spectrum licences for its 22
telecommunications circles (or service areas) on 19 May 2010. The total amount raised in the 3G spectrum
auction was U.S.$14.5 billion. On 11 June 2010, the TRAI closed its auction for bandwidth to provide
broadband wireless Internet services. This auction raised U.S.$8.23 billion in total. Etisalat DB India did not
win a 3G licence or bandwidth for wireless broadband services as management chose to withdraw from
bidding in the auctions as management believed the value of such licences was lower than the prices
demanded in both auctions. In order to provide its subscribers with 3G and wireless broadband services,
Etisalat DB India plans to seek to enter into an agreement or agreements with the winning mobile
telecommunications operators in India.
174
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
The TRAI has stated that any consolidation between mobile providers in India will require both parties to
make one-time payments of spectrum charges and spectrum transfer charges, and the resulting merged entity
cannot have a market share above 30 per cent. in terms of subscriber base, as well as adjusted gross revenue.
Further, following such mergers, the TRAI will require a minimum of six market participants for any
telecommunication service area. Because of these conditions, management believes that major
consolidations in the Indian mobile telecommunications market are not likely to occur in the near term.
Etisalat DB India will therefore remain focused on building out its own networks in the areas in which it
currently holds licences.
Etisalat DB India aims to create an asset-light business model and has outsourced significant portions of the
implementation and ongoing operations of its mobile network to local partners. Etisalat DB India expects its
network deployment will first cover areas that management believes offer relatively high revenue potential,
but it will also seek to attract subscribers in underserved markets. Its aim is to attract existing customers of
other operators as well as new customers across markets. Management believes that taking advantage of the
proposed number portability regime will be a key element in attracting profitable, high-value customers away
from their current providers. As network-related issues remain an important cause of churn among existing
customers of existing operators, Etisalat DB India expects to focus on consistently delivering a high-quality
network experience.
Etisalat DB India entered into a management services agreement with Etisalat on 17 December 2008,
providing for a management fee for each financial quarter during the term of the agreement equal to 4 per
cent. of Etisalat DB India’s domestic sales.
Other subsidiaries, associates and joint ventures
The Group’s other subsidiaries, associates and joint ventures consist of operations in Sudan, Tanzania, India,
Afghanistan, Indonesia and Sri Lanka. These businesses operate in markets with significant competition but
relatively low penetration rates compared to major western markets. The Group’s competitive position varies
widely among these operations, depending on the number of operators in the relevant market as well as the
timing of entry of the Group’s operations relative to its competitors. The countries in which the Group
operates have laws specifically regulating telecommunications businesses, and requiring those businesses to
hold licences to conduct their operations and provide services. In many of these markets, the
telecommunications regulatory authorities are not independent of government, either as a statutory matter or
as a matter of practice. The regulatory environments require the payment of licence fees (often representing
a significant percentage of the local operation’s revenues) and regulatory authorities have significant
discretion in how they regulate the telecommunications market in their country. This typically includes
regulation of interconnection agreements between service providers and both wholesale and retail pricing.
Africa
Nigeria. Etisalat International Nigeria Limited (EINL), a subsidiary in which Etisalat has a 100 per cent.
interest, indirectly holds the Group’s 40 per cent. interest in Etisalat Nigeria. The remaining 60 per cent. is
split equally between Mubadala Holdings Cyprus Limited (Mubadala) and Myacynth Cooperative U.A., a
company incorporated in the Netherlands.
Etisalat Nigeria holds a Unified Access Service Licence from the Nigerian Communications Commission.
Etisalat Nigeria commenced commercial operations in March 2008, offering 2G and 3G mobile services, and
its network currently covers 76 major cities across the country. As of 31 December 2009, it had a market
share of 3.6 per cent. based on numbers of mobile subscribers (Source: Nigerian Communications
Commission).
Etisalat Nigeria entered into a management agreement with Etisalat on 29 October 2008 for the provision of
technical and management services to Etisalat Nigeria in respect of telecommunication operations in Nigeria.
Sudan. Canar Telecommunications Company Limited (Canar) was incorporated in the Republic of Sudan
on 23 April 2005 and Etisalat is one of its ten founding shareholders. Etisalat initially held a 37 per cent.
interest in Canar but increased this to 82 per cent. in September 2007 and to 89.4 per cent. in 2010. Canar
175
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
was granted its licence to provide fixed wireless services with limited mobility on 10 November 2004, and
the licence expires in August 2020. The other shareholders in Canar are: the Investment Office of Dubai,
Dubai Islamic Bank, Mubadala, Al Batriq, the Armed Forces Welfare Support Organization, Mr. Al Attabani,
Al Faris Al Arabi Ltd., and Al Rawabi Holding Company.
Canar commenced commercial operations in the Sudan on 18 January 2006, and it currently provides a fixedline wireless service (including voice and data) with limited mobility. Canar’s network covered
approximately 37 per cent. of the population as of 31 December 2009 and its market share in the fixed-line
segment at that date was approximately 61.1 per cent. based on numbers of subscribers (Source:
Management estimate).
Canar entered into a management services agreement with Etisalat in 2005 for the provision of technical and
management services to Canar in relation to Canar’s licence to operate its network in Sudan.
In addition to the Group's telecommunications operations through Canar, the Group also holds small stakes
in two other entities in Sudan: the Sudan Telecommunications Company Limited (Sudatel) and the Bank of
Khartoum (formerly known as Emirates Sudan Bank). As of 31 December 2009, the net book value of the
Group’s investment in Sudatel was AED 125.8 million and the net book value of the Group's investment in
the Bank of Khartoum was AED 6.3 million.
Tanzania. The Group directly holds its interest in Zanzibar Telecom Limited (Zantel). The Group acquired
its initial 34 per cent. interest in Zantel in January 1999 and increased this to 51 per cent. in July 2007 and
65 per cent. in March 2010. The remainder is held by the Government of Zanzibar (18 per cent.) and Mecco
International Company (17 per cent.).
Zantel began operations in 1999 on the islands of Zanzibar and in 2005 entered mainland Tanzania. Zantel
provides both fixed and mobile services utilising a single GSM platform, with 99 per cent. of the subscriber
base using mobile services, and also provides data services through a CDMA platform. The current licence
was granted in 2006 for a term of 25 years. Zantel also operates an international gateway, which allows it to
carry international calls directly (as opposed to through another operator). As of 31 December 2009, Zantel’s
market share in Tanzania was approximately 8 per cent. based on numbers of mobile subscribers (Source:
TCRA statistics).
Zantel entered into a revised management services agreement with the Group on 29 July 2008 (originally
executed on 8 March 2005) relating to management services in respect of its telecommunications operations
in Tanzania.
Asia
Afghanistan. Etisalat holds a 100 per cent. interest in Etisalat International Afghanistan Limited, which was
incorporated as an offshore company with limited liability in the Jebel Ali Free Zone on 31 October 2006.
Etisalat International Afghanistan Limited holds the Group’s 100 per cent. interest in Etisalat Afghanistan.
Etisalat Afghanistan was awarded the fourth GSM licence in Afghanistan in May 2006 and commenced
commercial operations in August 2007.
Etisalat Afghanistan provides prepaid and postpaid mobile services via an EDGE and GPRS network and is
one of four mobile operators presently active in Afghanistan, with approximately 13 per cent. of the market
share as of 31 December 2009 and approximately 18.5 per cent. as of June 2010, in each case based on
numbers of mobile subscribers (Source: WCIS reports, market estimates).
Indonesia. The Group acquired a 15.97 per cent. interest in PT XL Axiata TBK (formerly PT Excelcomindo
Pratama Tbk) (XL) through Etisalat International Indonesia Limited in December 2007 and currently holds
a 13.3 per cent. interest in XL, with Axiata Group Berhad holding the remainder. Although the Group only
holds a minority interest in XL, it exerts significant influence by virtue of its representation on XL’s Board
of directors.
XL provides prepaid and postpaid mobile services for voice and data communications for both consumer and
business customers over its 2G and 3G GSM network. As of 30 September 2009, XL had a market share of
176
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
17 per cent. based on numbers of mobile subscribers, and its mobile network covered approximately 84 per
cent. of the population (Source: Third quarter 2009 WCIS report, management estimates). The Indonesian
telecommunications market is one of the largest in Southeast Asia but is fragmented with a total of eleven
companies providing mobile services, including PT Telkomunikasi Indonesia Tbk and PT Indosat Tbk.
Sri Lanka. Etisalat has a 100 per cent. interest in Etisalat International Sri Lanka Limited (EISLL), the
subsidiary through which it owns its interest in Etisalat Lanka. On 15 October 2009, the Group, through
EISLL, acquired a 100 per cent. interest in Sark Corporation N.V., the holding company of Tigo, a mobile
telecom operator in Sri Lanka. In 2010, Tigo was rebranded as Etisalat Lanka.
Etisalat Lanka provides prepaid and postpaid mobile telecommunications services over its GSM network,
which covered approximately 65 per cent. of the population as of 31 December 2009. Etisalat Lanka is one
of five mobile operators in the country (including Bharti Airtel, Dialog, Hutchison and Mobitel) and held an
approximate 17 per cent. market share as of 30 September 2009 based on numbers of mobile subscribers
(Source: Third quarter 2009 WCIS report, management estimates).
Employees
As of 31 December 2009, Etisalat and its consolidated subsidiaries had 16,680 employees. The following
table sets out the number of full-time employees at each of the Group’s principal subsidiaries of the Group
as of 31 December 2007, 2008 and 2009.
As of 31 December
––––––––––––––––––––––––––––––
2007
2008
2009
–––––––– –––––––– ––––––––
Number of employees
Etisalat (UAE)....................................................................................
Head office(1) ..................................................................................
Abu Dhabi region ..........................................................................
Dubai region ..................................................................................
North Emirates region ..................................................................
Etisalat Misr ......................................................................................
Atlantique Telecom(2)..........................................................................
Canar Telecom ..................................................................................
Zantel ................................................................................................
Etisalat Afghanistan ..........................................................................
Etisalat DB India................................................................................
Etisalat Lanka ....................................................................................
Total ..................................................................................................
Note:
(1)
(2)
8,861
4,435
1,483
1,495
1,448
1,327
1,329
385
411
200
N/A
N/A
––––––––
12,513
––––––––
10,201
5,735
1,406
1,623
1,437
1,918
2,089
355
583
419
N/A
N/A
––––––––
15,545
––––––––
10,460
6,044
1,307
1,643
1,466
2,030
1,285
326
679
443
941
516
––––––––
16,680
––––––––
Head office includes employees of Etisalat, Etisalat Services Group, PTCL secondees and employees under special contracts.
Includes employees of Etisalat Benin.
Over 25,000 employees in Pakistan at the Group’s associate PTCL belong to a union and benefit from a
collective labour agreement. Otherwise, the Group’s employees do not participate in any collective
bargaining or similar agreements.
Network Infrastructure
The Group has developed an integrated network infrastructure providing extensive coverage throughout the
countries in which it operates. The Group’s network infrastructure is fundamental to its ability to provide
mobile and fixed-line (including internet) services to its customers. The Group uses a variety of suppliers for
its infrastructure throughout its operations.
177
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Mobile networks
The Group offers mobile telecommunications services in every country in which it operates. When a voice
call or a data transmission is made on a mobile device, voice or data is transmitted by radio signals to the
nearest base station, which in turn is connected to the core network of the relevant Group operating company
via the access transmission infrastructure (wired or wireless). Each base station provides coverage over a
given geographic area, often referred to as a cell. Standard cells can be as small as an individual building or
up to 100 square kilometres using extended cell features. Each cell is equipped with its own radio transmitter
and receiver antenna. This network of cells provides, within certain limitations, coverage over the service
area. When a customer using a mobile device approaches the boundary of one cell, the mobile network
senses that the signal is becoming weak and automatically hands over the call to the base station with the
strongest signal in the area.
The principal components of a mobile telecommunications network are:
•
base transceiver stations (BTS): a transmitter and receiver and serve as a bridge between mobile users
in one cell and the mobile switching centre (MSC) via base station controllers (BSC) in the 2G
network and radio network controllers (RNC) in the 3G network;
•
base station controllers/radio network controllers: devices that connect and control the base station
within each cell site;
•
•
mobile switching centres: devices that control the BSCs and the routing of telephone calls;
•
home location register: a database residing in a local wireless network that contains service profiles
and checks the identity of a local customer and the services allowed;
•
visitor location register: a network database that holds temporary information about each customer in
a smaller geographic area within a network;
•
value-added service platforms for other mobile services: for example the SMS centre (the SMSC), the
MMS centre (the MMSC) and other application services; and
•
billing centre: a network database holding information about customer accounts and, for prepaid
customers, a real time accounting of airtime and services used.
transmission lines: lines that link the MSCs, BSCs, BTSs, other mobile network elements and fixed
telecommunications networks;
Although these components are utilised in all of the countries in which the Group operates a mobile
telecommunications network, each operating company maintains its own network infrastructure.
In addition, the Group plans to expand and deploy WiMAX technology, which is a form of wireless internet
technology that enables the provision of high speed wireless broadband services on a similar coverage basis
to other wireless networks (2G/3G) in markets where fixed-line broadband coverage is not extensive. In 2007
the Group received regulatory approval for the development of a WiMAX infrastructure in the UAE, where
it is presently used on a limited basis, for example in sparsely populated areas. The Group also received a
WiMAX licence in Pakistan in 2008 (where the technology has been deployed).
Fixed-line networks
The Group offers fixed-line telecommunications services in the UAE, Pakistan and Sudan. When
communication takes place over fixed-line networks, the traffic flows over a traditional wired infrastructure
until the point at which it reaches the Group’s access gateway where it connects to the Group’s core
transmission infrastructure.
The Group also owns international gateways in the UAE, Egypt and Tanzania. The Group’s network is
connected to all submarine cables crossing the Middle East region, and the Group owns capacity on (or has
178
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
access to) submarine cables indirectly connecting the UAE to the western and eastern coasts of North
America.
Marketing and Distribution
The key objective of the Group in marketing its products and services is to convey the Etisalat brand where
it is used (primarily in the UAE, Egypt, Nigeria, Afghanistan and Sri Lanka) and project the Group’s values
and subscriber proposals in a positive, empathetic and proactive manner in order to differentiate Etisalat from
its competitors. The guiding principles of the Group’s marketing include consolidating and aligning its brand
and services portfolio, enhancing customer experience and realising Group-wide marketing cost synergies.
Every communication from the Group into the public domain aims to convey the message that Etisalat
delivers competence, transparency, world class services and innovative excellence. The Group seeks to do
this by identifying the objectives of the relevant target markets and offering solutions to address those
objectives. In the UAE, Etisalat uses advanced marketing practices based on a multi-point profiling process
to analyse customer behaviour and requirements and to provide targeted products and customer solutions.
In order to provide a consistent message and to realise Group-wide marketing synergies, Etisalat provides
marketing services to its international operations. By providing such services it has been able to establish a
more uniform marketing programme and facilitate international operations in coordinating or moving into
other jurisdictions. The Group also evaluates, in consultation with its subsidiaries, associates and joint
venture partners whether to re-brand non-Etisalat branded international operations under the Etisalat brand,
with a view to maintaining certain strong local brands such as Moov in Africa and Mobily in Saudi Arabia.
International operations operating under the Etisalat brand are subject to branding fees. See “— Intellectual
Property”.
Insurance
Etisalat’s operations are subject to a wide variety of operational and other risks, including accidents, fire and
weather-related hazards. Etisalat maintains various types of insurance policies customary in the industry in
which it operates to protect against the financial impact arising from unexpected events when the amount of
the potential loss would be significant enough to prevent normal business operations. Etisalat cannot,
however, give any assurance that this insurance will be adequate to protect it from all expenses related to
potential future claims for personal injury and property damage or that these levels of insurance will be
available in the future at commercially reasonable prices. Etisalat does not fully insure against certain risks
to the extent that such risks may not be fully insurable or related coverage is unavailable at what it considers
to be appropriate price levels.
Etisalat has not historically experienced difficulty renewing its insurance policies and it believes that its
insurance is sufficient in light of its risks and consistent with industry standards based upon its regions and
scope of operations.
Intellectual Property
In general, each of the Group’s operations has sought to legally protect its trademarks and copyrights for its
name, logos and services in each individual market. Etisalat currently uses the “Etisalat” brand name in five
jurisdictions. The Group is moving towards a policy of central ownership and registration of trademarks with
Etisalat, and then leasing such names to its subsidiaries and associates, but such an approach was not
previously in place, with certain key trademarks (such as Mobily) owned by the relevant subsidiary or
associate.
From time to time, the Group deals with challenges to its registration or ownership of the Etisalat brand. The
Group aggressively defends its brands in these disputes, but cannot be certain that it will always be
successful in defending its ownership and use of its brands in all locations. See “Risk Factors — Risks
Relating to Etisalat and the Group — We may not be able to adequately protect our intellectual property,
which could harm the value of our brand and branded products and adversely affect our business”.
179
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
Litigation
The Group is from time to time a party to various legal actions arising in the ordinary course of its business.
The Group does not believe that the resolution of these legal actions will, individually or in the aggregate,
have a material adverse effect on its financial condition or results of operations, except as noted below.
UAE
In November 2008, a UAE-national individual brought an action for the sum of AED 100 million against
Etisalat and its supplier, Huawei Tech, alleging a breach of patent. The Court of First Instance in Abu Dhabi
has entered judgment in favour of the claimant, but Etisalat has filed an appeal in the Court of Appeal and
the case is still pending. Etisalat will be seeking to rely on an indemnity in the contract between itself and
Huawei Tech which is intended to permit Etisalat to seek compensation from Huawei Tech for losses it incurs
in relation to intellectual property rights (including breach of patent claims). Even if Etisalat is able to rely
on this indemnity, there is a chance that Etisalat will not be compensated under the indemnity until some
time after it actually incurs losses related to this claim.
Burkina Faso
Atlantique Telecom is currently in a dispute with a local shareholder, Planor Afrique S.A. (Planor Afrique),
regarding its operating subsidiary in Burkina Faso, Telecel Faso, relating to whether Planor Afrique can
block the distribution of dividends for the year 2006. This dispute began in 2006 and was inherited by
Atlantique Telecom when it purchased its interest in Telecel Faso. The Burkina Faso courts issued a
judgment in favour of Planor Afrique as late as June 2010, which would require a forced sale of Atlantique
Telecom’s shares in Telecel Faso. This judgement, however, has been declared void by the Dakar-based
OHADA Arbitral Tribunal, and Atlantique Telecom has challenged the local judgment on the basis of this
arbitral award.
In addition to the local proceedings in Burkina Faso, Etisalat instigated arbitral proceedings against the local
shareholders at the International Chamber of Commerce (the ICC) seeking to enforce a memorandum of
understanding between Planor Afrique and Atlantique Telecom which sought to settle the dispute described
above. On 9 September 2010, the ICC declared the memorandum of understanding to be valid, binding and
enforceable against Planor Afrique and ordered the closing of the transactions contemplated by the
memorandum of understanding.
Due to this dispute, Atlantique Telecom deconsolidated Telecel Faso from its results in December 2008.
Since that time, Telecel Faso’s results have been reflected in Atlantique Telecom’s results according to the
equity method.
Benin
Atlantique Telecom is currently involved in a dispute with a local shareholder, Société Anonyme (SARCI),
regarding the ownership of Telecel Benin. Atlantique Telecom was unable to resolve this dispute before
Telecel Benin’s operating licence expired in 2008, forcing it to cease operations. Etisalat Benin purchased a
new operating licence in Benin in October 2007, and entered into a lease agreement with Telecel Benin to
gain access to Telecel Benin’s employees, customers and infrastructure. Since this lease agreement, all
investment into the Group’s network and operations in Benin is being done by Etisalat Benin rather than
Atlantique Telecom or Telecel Benin.
Since Etisalat Benin acquired its operating licence, the Government of Benin has served SARCI with a tax
claim. The Government of Benin seeks to satisfy this claim by taking ownership of SARCI’s shares in
Telecel Benin. Atlantique Telecom does not dispute the government’s claim to these shares and expects that
the government will be successful in its claim against SARCI.
Pakistan
There is currently no formal dispute between the shareholders of PTCL. However, as of 31 December 2009,
Etisalat was withholding payments in the amount of AED 2,937 million from the Government of Pakistan
180
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
pending completion of certain conditions set forth in the PTCL Share Purchase Agreement. Etisalat believes
it has the right to withhold these payments until these conditions, namely the transfer to PTCL of several
plots of land by the Pakistani government, are met.
In addition to the above, there is a constitutional case lodged before the High Court of the State of Sind by
a petitioner who is an employee in PTCL and is also a member and office bearer as president of the PTCL
Lions staff union. The petition brings claims against 11 respondents, including the Government of Pakistan,
the Privatization Commission of Pakistan, PTCL and EIPL, the entity through which Etisalat holds its
interest in PTCL. The petition challenges the process and conduct of the Privatization Commission of
Pakistan and the Pakistan Ministry of Information and Technology, as well as the execution of the documents
and agreements made between the Government of Pakistan and EIPL on the grounds that these documents
were not made public. The case has been inactive for the last three years but it is still pending before the
High Court of the State of Sind.
Iran
Although the Group does not have any operations in Iran, Etisalat is currently defending an action brought
against it by the Communications Regulatory Authority of Iran (the CRA). This action arises out of the
disqualification by the CRA of Etisalat and its consortium partner M/s Tamim Telecom from the bidding for
the third mobile licence in Iran.
In July 2010, the Tehran Public Court rendered a judgment in favour of the CRA, awarding it an amount
equal to approximately €30 million as liquidated damages (the original amount of the bid bond), and
requiring Etisalat to pay 49 per cent. of the total amount (proportionate to its participation in the consortium),
plus 49 per cent. of the CRA’s legal costs, expenses and any accrued interest. Etisalat has filed an appeal
against this judgment before the Court of Appeal of Tehran and the case is still pending.
Environmental Matters
The Group is subject to a broad range of environmental laws and regulations. These laws and regulations
impose increasingly stringent environmental obligations in relation to, among other things, radiation
emissions, zoning, the protection of employees’ health and safety, noise, and historic and artistic
preservation. The Group could therefore be exposed to costs and liabilities, including liabilities associated
with past activities.
The Group’s operations are subject to obligations to obtain environmental permits, licences and/or
authorisations, or to provide prior notification to the appropriate authorities. The Group’s objective is to
comply in all material respects with applicable environmental and health control laws and all related permit
requirements. The Group believes that the principal environmental risks arising from its current operations
relate to the potential for electromagnetic pollution and for damage to cultural and environmental assets. In
the UAE, the regulations for use of radio frequencies in Etisalat’s mobile telecommunications business
follow the maximum limits in the guidelines of the International Commission on Non-Ionizing Radiation
Protection, which is one of the most commonly-accepted standards for radio frequency emissions. The
Group deploys various network infrastructure strategies in order to achieve radiation emission ranges lower
than the maximum levels required by applicable regulations.
Commercial Property
The principal property, plant and equipment of the Group consist of all of the assets located throughout the
jurisdictions in which it operates. This includes administrative and commercial office buildings, business
centers, and technical properties, which consist of switching, international exchanges, mobile switching
centers, transmission equipment, satellite earth stations, mobile base stations, data centers, cabling, power
plant and other technical ancillaries. Other properties include stores and warehouses, technical workshops, a
training center, a customer call center, a smart card factory and submarine cable depots.
In the UAE, the Group uses its properties for operational purposes through grants and ownership from the
respective local governments. Generally, land in the UAE is owned by the individual emirates and is granted
181
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:05 – eprint6 – 4224 Section 07
to users as these emirates deem appropriate, typically for a particular use or enjoyment. Although there is no
centralised or standard method of recording such grants across the UAE, land granted by individual emirates
is subject to registration with the relevant land department or land registration division. The Group has such
licences and grants to use properties in the UAE, including its corporate headquarters and the sites used for
its network infrastructure, as it believes to be necessary. Although no assurance can be given, management
does not anticipate that these land use arrangements will change, and expects to be able to continue using
these properties in its operations in the future.
182
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
MANAGEMENT AND EMPLOYEES
Management
Board of Directors
The Issuer is managed by a Board of Directors presided over by the Chairman and consists of eleven
members including the Chairman, seven of whom including the Chairman, represent the Federal
Government of the United Arab Emirates and the remaining four of whom are elected by Etisalat’s non-UAE
Government shareholders. Except for the term of the Chairman, the term of office of both groups of Directors
is three years from the date of their appointment or election, as the case may be. Etisalat’s Articles of
Association provide that the Board of Directors carries out the Issuer’s business and, for that purpose,
exercises all of Etisalat’s powers except those reserved by law or the Articles of Association for the General
Assembly of Etisalat.
The Board currently comprises the eleven directors listed below:
Name
––––––––––––––––––––––––––––––––––––––
H.E. Mohammad Hassan Omran
Title
Date of Birth
Term Expires
–––––––––––– –––––––––––––––– –––––––––––––––
Chairman
2 January 1953
19 October 2011
H.E. Khalaf Bin Ahmed Al Otaiba
Vice Chairman
H.E. Sheikh Ahmed Mohammad Sultan
Bin Suroor Al Dhaheri
31 December 1943
22 March 2012
Director
3 May 1971
22 March 2012
H.E. Hamad Mohammad Al Hurr Al Suwaidi
Director
12 April 1965
19 October 2011
H.E. Mubarak Rashed Al Mansoori
Director
6 August 1966
19 October 2011
H.E. Abdulla Mohammad Saeed Al Ghobash
Director
1 July 1957
19 October 2011
H.E. Saeed Mohamed Al Sharid
Director
1 November 1958
19 October 2011
H.E. Shoaib Mir Hashim Khoory
Director
23 January 1962
19 October 2011
H.E. Abdul Rahman Al Rostomani
Director
31 December 1943
22 March 2012
H.E. Omar Saif Bin Mohammad Al Huraiz
Director
16 January 1962
19 October 2011
H.E. Ahmad Bin Eisa Al Serkal
Director
20 February 1968
22 March 2012
The Issuer’s Articles of Association require that at least four Board of Directors meetings should be held in
each year. The quorum at each meeting is six directors.
The business address of each of the members of the Board of Directors is P.O. Box 3838, Abu Dhabi, United
Arab Emirates.
The Board of Directors guides the strategic direction of the Issuer and regularly reviews the Issuer’s operating
and financial position. The Board of Directors is responsible for ensuring that the necessary resources are in
place to enable the Issuer to meet its strategic objectives and the Board also monitors the performance of
management and aims to ensure that the strategy, policies and procedures adopted are in line with the Issuer’s
mandate under UAE law. Brief biographies of each of the members of the Board are set out below.
H.E. Mohammad Hassan Omran
Mohammed Hassan Omran was re-appointed Chairman and Managing Director of Etisalat in 2008. having
previously served as Chairman and Chief Executive Officer. He also serves as the Chairman of Thuraya, a
position he has held since 1997. Mr. Omran joined Etisalat in 1977, one year after it was formed. He achieved
his first senior position as the Area Manager in Ras Al Khaimah in 1982. He was then appointed Deputy
General Manager for Etisalat in 1984 and became Etisalat’s Senior Executive Vice President in 1999. He was
later named the Issuer’s Chief Executive Officer in 2004 and was first named Chairman in 2005.
Under his leadership, Etisalat has been named best telecommunications provider in the Middle East five
times in the last three years and was named “Best International Carrier” at the 2008 World Communications
183
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
Awards. Mr Omran has received awards for his contribution to the sector at the Abu Dhabi Economic Forum,
Telecom World Middle East Awards and Comms MEA Awards. Mr. Omran received an Engineering Degree
in Electronics and Communications from Cairo University, Egypt in June 1977.
H.E. Khalaf Bin Ahmed Al Otaiba
Khalaf Bin Ahmed Al Otaiba has been Vice Chairman of the Board of Etisalat since March 2009. Mr. Al
Otaiba is Chairman and General Manager, and was also a founding shareholder of Abu Dhabi National
Insurance Company. Mr. Al Otaiba is Vice Chairman of the National Bank of Abu Dhabi, of which he is also
a founding shareholder. He was the first UAE Minister of the Economy, and has also served in the UAE
Consultative Council. Mr. Al Otaiba has been a Director of Investcorp Bank B.S.C. since September 2004
and has also served as a Director of Emirates Development Bank.
H.E. Sheikh Ahmed Mohammad Sultan Bin Suroor Al Dhaheri
Sheikh Ahmed Mohammad Sultan Bin Suroor Al Dhaheri is a Board Member of Etisalat. He is Chairman
and CEO of Bin Suroor Holding LLC in Abu Dhabi and Managing Director of Al Dhaheri Group, Abu
Dhabi, where he is responsible for real estate, stock investment, and the representation of international
companies. In addition, Mr. Al Dhaheri is Vice President of Abu Dhabi Refreshments Company (PepsiCo)
and is a board member of Abu Dhabi National Hotels Company, National Bank of Abu Dhabi, National
Consultative Council, Abu Dhabi and Abu Dhabi Aviation. Mr. Al Dhaheri graduated from UAE University
– Al Ain with a Bachelor’s Degree in Civil Engineering Science in 1993.
H.E. Hamad Mohammad Al Hurr Al Suwaidi
Hamad Mohammad Al Hurr Al Suwaidi is a Board Member of Etisalat. He is also the Undersecretary of the
Department of Finance of the UAE, having held this position since 1996. Mr. Al Suwaida started his career
at the Abu Dhabi Investment Authority by serving first as an Assistant Analyst then as a Senior Analyst, and
later served in their London office as Assistant Director; he then became Executive Director. He is Chairman
of the Abu Dhabi Water and Electricity Authority, a Member of the Board of Directors of Mubadala
Development Company and a Member of the Board of Directors of the International Petroleum Investment
Company. He holds an MBA from California State University in San Bernardino and a Bachelor’s Degree in
Business Administration from Dominican University of San Rafael.
H.E. Mubarak Rashed Al Mansoori
Mubarak R. Al Mansoori is a Board Member of Etisalat. He started his career at the Abu Dhabi Investment
Authority from 1991 – 2000 in the Equities Department. Mr. Al Mansoori has served as Director General of
Abu Dhabi Retirement & Pension Fund since its establishment in 2000, and he was responsible for the
creation of the Pension Fund, which provides civil retirement pensions and benefits for UAE nationals. Mr.
Al Mansoori is a Board Member in Etisalat, The Central Bank of UAE, The Arab International Bank (AIB)
in Egypt and the Director of Abu Dhabi National Co. for Building Materials (BILDCO). He has also held
directorships in a number of organisations including Arab Banking Corporation (ABC) in Bahrain, Egypt
and Jordan, Banco Atlantico in Spain, Tabreed and Abu Dhabi Holding Company. Mr. Al Mansoori
graduated from the University of West Florida in the United States with a Bachelor’s Degree and MBA in
Finance.
H.E. Abdulla Mohammad Saeed Al Ghobash
Abdulla Mohammad Saeed Al Ghobash is a Board member of Etisalat. He currently serves as the Regional
Manager Northern Emirates of the National Bank of Abu Dhabi. Mr. Al Ghobash has also worked at the UAE
Central Bank. Mr. Al Ghobash also serves as a director of the Emirates Banks Association, Borse Dubai,
Nasdaq Dubai and Awqaf & Minor Affairs Foundation. Mr. Al Ghoabsh has a Bachelor's Degree in Public
Administration from the UAE University.
184
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
H.E. Saeed Mohamed Al Sharid
Saeed Mohamed Al Sharid assumed his current position as Chief of the Advisory Office – Emirates
Transport in December 2007. This followed his 20-year tenure as Director General of Emirates Transport.
Currently, Mr. Al Sharid is also Chairman of Emirates Transport in addition to his membership on Etisalat’s
Board of Directors and his Chairmanship of the Audit Committee of Etisalat. He is a member of the General
Assembly of the UAE Accountants & Auditors Association. Mr. Al Sharid graduated from UAE University
with a Bachelor’s degree in Business Administration and Accounting in 1981.
H.E. Shoaib Mirhashim Khoory
Shoaib Mirhashim Khoory is a Board Member of Etisalat. Mr. Khoory currently serves as the Chairman of
the Board of Directors of M.A.H.Y. Khoory and as the Managing Director and a Board Member of
Mirhashem Khoory LLC. He is a Board Member of Jebel Ali Cement and is the Chairman of the Board of
Directors of the Lycée Français International de Dubai. Mr. Khoory started his career at the Middle East
Bank – Dubai as a Bank Officer and then joined Emirates Airlines in a managerial position in Planning,
Commercial and Procurement, and most recently was a Senior Vice President in Procurement and Logistics.
He served as a Board Member of the National Bank of Dubai. Mr. Khoory graduated from UAE University
– Al Ain with a Bachelor’s Degree in Accounting and Business and also completed coursework at San Diego
State University.
H.E. Abdul Rehman Al Rostomani
Abdul Rehman Al Rostomani is a Board Member of Etisalat. Mr. Al Rostomani was the Undersecretary at
the UAE Ministry of State for Cabinet Affairs until 2008. He is also a member of the board of directors for
Gulf News. Mr. Al Rostomani graduated from Cairo University with a Bachelor’s Degree in 1970.
H.E. Omar Saif Bin Mohammad Al Huraiz
Omar Saif Bin Mohammad Al Huraiz is a Board Member of Etisalat. He has been a Member of the Board
of Directors of the Emirates Diving Association since 1991, and is the Head of its Technical Committee. Mr
Al Huraiz received a Master’s Degree in Military Science from the Command and Staff College in 1995.
H.E. Ahmad Bin Eisa Al Serkal
Ahmad Bin Eisa Al Serkal acts as Chairman of Alserkal Group and Managing Director of Nasser Bin
Abdullatif Alserkal Est. Mr. Al Serkal established the Alserkal Group in 1991. Alserkal Group deals with
trading, real estate, engineering and maintenance and private investments. Mr. Al Serkal assumed the post of
Managing Director of the Nasser Bin Abdullatif Alserkal Establishment – Bridgestone Tyres Division in
1990, a family owned company that engages in general trading, real estate, engineering services, travel and
tourism, and private investments.
Mr. Al Serkal has varied business and professional affiliations, serving as a board member of Dubai
Refreshment, Al Burj Real Estate / USOS and Dubai Insurance, and is the Chairman of Dubai Projects. He
is also involved in various community organisations, including acting as Vice President of Emirates Philatelic
Association, the founder of Alserkal Cultural Foundation, a board member of the Beit Al Khair Society and
the Dubai Autism Center, and a member of Young Arab Leaders. Mr. Al Serkal graduated from UAE
University with a Bachelor’s Degree in Business Administration and Management.
Executive Committee
Oversight of the conduct by the Management team of the day-to-day business operations of the Issuer is
entrusted to the Executive Committee, whose members have been appointed on the basis of their expertise
and experience.
185
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
As of the date of this Base Prospectus, the current members of the Executive Committee are as follows:
Name
––––––––––––––––––––––––––––––––––––––
H.E. Mohammad Hassan Omran
Title
–––––––––––––––––––––
Chairman
Term Expires
––––––––––––––––
19 October 2011
H.E. Sheikh Ahmed Mohammad Sultan
Bin Suroor Al Dhaheri
Director
22 March 2012
H.E. Mubarak Rashed Al Mansoori
Director
19 October 2011
H.E. Shoaib Mir Hashim Khoory
Director
19 October 2011
H.E. Ahmed Bin Eisa Al Serkal
Director
22 March 2012
Please see the biographies of each of the members of the Executive Committee set out above.
Senior Management
The Chief Executive Officer is authorised to represent the Issuer in all matters necessary or convenient for
the proper management, supervision and direction of the Issuer’s business and affairs.
The CEO of Etisalat provides direction and leadership toward the achievement of Etisalat’s mission, strategy,
annual goals and objectives. He defines and guides the implementation of the strategy for development,
marketing, sales and provisioning of Etisalat’s services and the required network and IT infrastructure. He
acts as the representative of Etisalat to assure that the mission, programs, products and services of Etisalat
are consistently presented in a strong and positive image to relevant stakeholders. He is also accountable to
the Executive Committee and the Board of Directors for running Etisalat’s affairs in accordance with the
policies determined by the Board of Directors.
The business address of each of the members of senior management named below is P.O. Box 3838, Abu
Dhabi, United Arab Emirates.
The members of the Issuer’s senior executive management comprise:
Name
––––––––––––––––––––––––––
Mohammad Khalfan Al Qamzi
Title
–––––––––––––––––––––––––––––––––––––
Chief Executive Officer – Etisalat UAE
Ahmad Abdulkarim Julfar
Group Chief Operating Officer
Nasser Bin Obood
Acting Chief Executive Officer – Etisalat UAE
Group Chief Corporate Affairs Officer;
Date of Birth
––––––––––––––––
1 August 1959
11 September 1961
5 May 1963
Salem Al Sharhan
Group Chief Financial Officer
Essa Al Haddad
Group Chief Marketing Officer
Jamal Al Jarwan
Group Chief International Investment Officer
Abdul Aziz Al Sawaleh
Group Chief Human Resources Officer
Abdulrahim Al Nooryani
Group Chief Procurement and
Administration Officer
10 July 1955
Isam Meccawi Sulaiman Akrat
Corporate Secretary & Group General Counsel
19 May 1959
Ali Al Sharhan
Group Chief Information Officer
Ali Al Ahmed
Group Chief Strategy Officer & Chief
Corporate Communications Officer
Saeed Al Bahhar
Group Chief Carrier Services Officer
Amaru Chavez Puyol
Group Chief Technology Officer
10 December 1966
1 January 1956
15 June 1963
31 December 1960
2 June 1962
28 December 1965
1 January 1963
26 June 1966
The Group Chief Marketing Officer, Group Chief Information Officer, Group Chief Carrier Services Officer
and Group Chief Technology Officer report to the Group Chief Operating Officer.
186
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
Brief biographies of each of the members of senior management are set out below.
Mohammed Khalfan Al Qamzi
Mr. Al Qamzi was appointed Chief Executive Officer (CEO) of Etisalat in April 2006 and he provides the
general direction for the expansion of current services and projects and developed the strategy of the Group.
He commenced his career at Etisalat in 1997 and held various positions, including General Manager Abu
Dhabi and Executive Vice President Engineering, prior to becoming CEO in 2006. Mr. Al Qamzi’s
qualifications and training include a Business and Technology Education Council Higher National Diploma
in Engineering from the Hastings College of Arts and Technology, UK in 1987 and several management and
technical courses, seminars, conferences and workshops locally and overseas. Previous experience includes
22 years in the Armed Forces (UAE Air Force). In February 2010, Mr. Al Qamzi stepped down as CEO of
Etisalat for health reasons.
Ahmad Abdulkarim Julfar
Mr. Julfar is the Group Chief Operations Officer (GCOO) of Etisalat. He commenced his career at Etisalat
in 1986 and held various positions, including General Manager Dubai, prior to becoming GCOO in 2006.
His qualifications include a Bachelor of Science Degree in Civil Engineering (with a minor in Computer
Science) from Gonzaga University, USA in 1985. In his role as GCOO, Mr. Julfar is responsible for leading
and directing the development and implementation of strategic plans and guidelines for the effective,
systematic and integrated functioning of the entire Group’s operations. He also provides comprehensive
direction for the development and review of the Group’s network and IT roadmaps. Moreover, he advises
management on the prioritisation of Group-wide strategic projects in respect of the network, IT and carrier
services functions.
Nasser Bin Obood
Mr. Obood is the Acting CEO and the Group Chief Corporate Affairs Officer (GCCAO) of Etisalat. He began
his career at Etisalat in 1986 and held various positions, including Deputy Chief Executive Officer, prior to
becoming GCCAO in 2006 and Acting CEO in 2010. his qualifications include a Bachelor of Science Degree
in Electrical Engineering from the UAE University. As GCCAO of Etisalat, Mr. Obood has focused on
defining Group-wide corporate communications policies, which include advising management on various
communication tactics for the overall Group and for specific new events as well as overseeing the corporate
website of the Group. In addition to this, he is responsible for supporting the Group and its subsidiaries on
major regulatory issues.
Salem Ali Al Sharhan
Mr. Al Sharhan is the Group Chief Financial Officer (GCFO) of Etisalat. He joined Etisalat in 1988 and held
various positions, including General Manager Finance and Executive Vice President Finance, prior to
becoming GCFO in 2006. His qualifications include a Bachelor’s degree in Accounting (minoring in
Business Administration) from the UAE University in 1988. As GCFO of Etisalat, Mr. Sharhan defines
Group-wide financial policies and oversees the budget planning, treasury and financial risk assessment
functions. In addition, he provides strategic financial advice on key project investment opportunities,
decisions and issues.
Essa Al Haddad
Mr. Al Haddad is the Group Chief Marketing Officer (GCMO) of Etisalat. He commenced his career at
Etisalat in 1978 and held various positions, including Executive Vice President Engineering and Executive
Vice President Marketing, prior to becoming GCMO in 2006. His qualifications include a Master’s Degree
in Business Administration from Oxford Brookes University, UK in 1995, Chartered Engineer Member of
the Engineering Council and various City & Guilds Telecom Technicians Certificates from 1973 to 1977. In
his role as GCMO of Etisalat, Mr. Essa Al Haddad is responsible for providing comprehensive leadership
and direction in implementing Group-wide marketing strategies and plans, including defining and reviewing
187
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
the overall branding strategy, determining multi-channel growth plans and planning for the expansion of
existing and future businesses.
Jamal Al Jarwan
Mr. Al Jarwan is the Group Chief International Investments Officer (GCIIO) of Etisalat. He commenced his
career at Etisalat in 1988 before joining Thuraya in 1996, where he served as the company’s Chief
Commercial Officer, before returning to Etisalat in 2006. His qualifications include a Bachelor’s degree in
Business from Dayton University in the United States and a Master’s degree in Business Administration
(MBA) in International Management Development (IMD) from Lausanne University, Switzerland. Mr.
Jarwan is responsible for establishing international expansion strategies, guidelines and procedures in close
collaboration with the Group’s management. He also advises management on targeted opportunities based
on due diligence processes and coordinates portfolio performance which he reports on to the Group’s
Executive Committee & Board of Directors.
Abdul Aziz Al Sawaleh
Mr. Al Sawaleh is the Group Chief Human Resources Officer (GCHRO) of Etisalat. He commenced his
career at Etisalat in 1986 and held various positions, including Executive Vice President Human Resources,
prior to becoming GCHRO in 2006. His qualifications include a Master’s degree in Business Administration
(in Global Leadership & Management) from the UAE University in 2004 and a Bachelor’s degree in
Business Administration from Columbus College, USA in 1984. Mr. Sawaleh is responsible for defining
overall strategies and overseeing the proper management of all aspects of the Group’s human resources
functions such as talent management, recruitment, training and development, performance management,
compensation and benefits, and manpower planning.
Abdulrahim Al Nooryani
Mr. Al Nooryani is the Group Chief Procurement & Administrative Officer (GCP&AO) of Etisalat. He joined
Etisalat as a graduate trainee in 1979 and over the years has taken on new responsibilities and roles. He
assumed the role of Executive Vice President of Contracts & Administration in 1999. His qualifications
include a Bachelor’s degree in Business Administration and International Commerce from Helwan
University, Cairo, Egypt.
Isam Meccawi Sulaiman Akrat
Mr. Akrat is the Corporate Secretary and Group General Counsel (CS&GGC) of Etisalat. He started his
career at Etisalat as a Legal Adviser in 2005, became the General Manager for Legal Affairs a year later and
was appointed Corporate Secretary and Group General Counsel in May 2006. His qualifications include a
Bachelor of Law degree from the University of Khartoum as well as a Master of Law degree from the
University of London.
Ali Al Sharhan
Mr. Al Sharhan is the Group Chief Information Officer (GCIO) of Etisalat. Mr. Al Sharhan joined Etisalat in
1987 as a graduate trainee, and has worked in Etisalat’s head office since 1990. He took the role of IT
Services Manager in 1998 and in the following year took over as Executive Vice President of IT. His
qualifications include a Bachelor’s degree in Computer Science from Indiana State University, USA.
Ali Al Ahmed
Mr. Al Ahmed is the Group Chief Strategy Officer and Chief Corporate Communications Officer of Etisalat.
He started his career at Etisalat working with its commercial division where he was part of the launch of
major telecommunication services such as internet and mobile telephony (GSM) in the UAE. Mr. Al Ahmed
also played a key role in the planning, launch and establishment of E-Vision, the first cable TV company in
the Middle East based on advanced fibre optic technology. Subsequently, he moved to the media industry as
188
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
Managing Director of Abu Dhabi TV assuming responsibility over Emirates Media and its television
channels from 2001 until 2007. Ali Al Ahmed has a total of 11 years’ experience in the telecommunications
sector and 7 years’ experience within the television industry. He is a graduate of Eastern Washington
University, USA where he majored in Business Management.
Saeed Al Bahhar
Mr. Al Bahhar is the Group Chief Carrier Services Officer (GCCSO) of Etisalat. Prior to this role, he headed
the International Business department and oversaw all commercial dealings with foreign carriers doing
business with Etisalat. He represents the Issuer and its interests at international and regional telecom industry
meetings. In addition to representing Etisalat, he also headed a GCC delegation to many countries during the
early 1990s to foster telecom relations between the GCC countries and the operators in the Indian
Subcontinent. His qualifications include a Bachelor’s degree in Economics from Jacksonville University,
USA.
Amaru Chavez Puyol
Amaru Chavez Puyol is the Group Chief Technology Officer. Mr. Puyol has held this position since 2009, in
which he is responsible for setting the strategic direction and defining the roadmap for network strategy and
technology partnerships, as well as ensuring network quality and performance. He holds a Master’s Degree
in Engineering from the University of Louisville in Kentucky.
Compensation of Directors and Senior Management
The compensation paid or accrued to the Board of Directors as a group for the year ended 31 December 2009
was AED 42 million, including director fees, bonuses and telephone rebates. The compensation paid or
accrued to Senior Management as a group was AED 39.5 million for the year ended 31 December 2009,
which included salaries, bonuses and allowances.
Conflicts
There are no conflicts of interest between the duties of the members of the Board of Directors and senior
management listed above to the Issuer and their private interests or other duties.
Corporate Governance
The Board of Directors believes that the governance of the Group is best achieved through the delegation of
certain elements of its authority for executive management to the Chief Executive Officer, subject to
monitoring by the Board of Directors and its various relevant committees.
The Board of Directors’ governance mandate deals with its relationship with its shareholders and executive
management, the conduct of the Board of Directors’ affairs and the tasks and requirements of committees of
the Board of Directors. The Board of Directors also monitors the Group’s focus and commitment to activities
that promote its shareholders’ interests, including in particular the active consideration of strategy, risk
management and compliance.
The Issuer is in the process of developing a standard set of comprehensive corporate governance and
compliance principles to govern both the Issuer and its joint ventures, based on best practice. As of the date
of this Base Prospectus, Etisalat has an exemption from and is not currently in compliance with the UAE
Corporate Governance Law. Etisalat’s exemption expires at the end of 2010.
The General Assembly
The General Assembly is composed of all shareholders of the Issuer. The General Assembly is entrusted with
approving the Board Annual Report on the Issuer’s activities and financial position during the preceding
financial year. The Assembly is also entrusted with approving the report of the external auditors, discussing
and approving the balance sheet and the profit and loss account for the previous financial year, appointing
189
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
external auditors and examining the Board’s recommendations regarding the allocation of profit. The
General Assembly exercises all powers of the Issuer within the limits of the law and the Articles of
Association.
The Board of Directors
Etisalat is managed by a Board of Directors presided over by the Chairman and consisting of eleven
members, including the Chairman, seven of whom, including the Chairman, represent the Federal
Government of the United Arab Emirates, and the remaining four of whom are elected by Etisalat’s non-UAE
Government shareholders. Except for the term of the Chairman, the term of office of both groups of Directors
is three years. Etisalat’s Articles of Association provide that the Board of Directors carries out the Issuer’s
business and, for that purpose, exercises all powers of the Issuer, except those reserved by Law or the Articles
of Association for the General Assembly of Etisalat.
The compensation paid or accrued to the Board of Directors as a group for the year ended 31 December 2009
was AED 42 million, including director fees, bonuses and telephone rebates. The compensation paid or
accrued to Senior Management as a group was AED 39.5 million for the year ended 31 December 2009,
which included salaries, bonuses and allowances.
The Executive Committee
The Executive Committee is appointed by the Board of Directors pursuant to Section 20 of the Articles of
Association. The Executive Committee’s functions and powers include organisational matters of the Issuer
(such as overseeing statutory, organisational and employment matters and corporate performance), planning
and development (overseeing development plans and projects, and approval of the budget prior to submission
to the Board), operations (reviewing the efficiency of service and laying down policies concerning
investments of surplus funds), projects (setting the terms for the project agreements, approving relevant
tenders over AED 50 million and approving project overruns and variations over AED 10 million),
procurement (approving purchases over AED 50 million) and investments (including international
investments and expansion projects).
The Audit & Risk Management Committee
The Audit & Risk Management Committee is established as a subcommittee of the Board of Directors. It
consists of three members, two of whom are Board members and one who is an external non-Board member,
and meets at least four times a year. The primary responsibility of the Audit & Risk Management Committee
is to monitor the Issuer’s overall financial performance and the integrity of its financial statements. It also
assesses the adequacy and application of financial governance internal control policies and procedures, and
oversees the Issuer’s financial risks. It also oversees and monitors the effectiveness of the internal audit
function, and monitors the performance and independence of the external auditors, recommending their
appointment or removal to the Board. In fulfilling its role, the Committee maintains free and open
communications with the directors, the external auditors, the internal auditors, and the financial management
of the Issuer.
The Investment Committee
The Investment Committee is composed of five members of the Board of Directors, and is responsible for
making certain decisions in connection with Etisalat’s investments and projects whether in the UAE or
abroad. The committee shall meet no less than four times a year or whenever the need arises and/or upon the
invitation of the Board of Directors, its Chairman or the Executive Management of the Corporation.
The main duties of the Investment Committee are to develop and review the Group’s Investment Strategy,
review progress on all investment projects, ensure a continuous healthy financial position of Etisalat, review
proposed investment opportunities and submit appropriate recommendations to the Board of Directors for
approval.
190
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:07 – eprint6 – 4224 Section 08
The Compensation Committee
The Compensation Committee is a subcommittee of the Board of Directors. It is composed of four members,
comprising three Board members and a senior member of the management team of the Issuer. The
Committee’s primary responsibility is to provide comprehensive direction on all compensation and benefits
matters for Etisalat’s staff. It aims to ensure that its employment packages are externally competitive and
internally equitable to support the Issuer’s strategy to attract, retain and motivate a competent and resultoriented workforce.
Employees
As of 31 December 2009, the Issuer had 10,460 full-time employees distributed within the UAE as follows:
•
•
•
•
Head Office:
6,044
Abu Dhabi Region:
1,307
Dubai Region:
1,643
North Emirates Region:
1,466
Head office includes employees of Etisalat, Etisalat Services Group, PTCL secondees and employees under
special contracts.
There is a performance-linked bonus programme for employees which depends on corporate, department and
individual performance, set against targets. There is also a long term incentive programme aimed at retaining
key and critical talent and this programme is also linked to corporate performance indicators.
All employees are subject to employment contracts in compliance with UAE labour law requirements.
Etisalat is committed to increasing the proportion of staff who are UAE nationals and to develop their
training and expertise. For the year ended 31 December 2009, UAE nationals made up approximately 34 per
cent. of Etisalat’s workforce. Although the UAE Government does not impose a mandatory quota on the
number of UAE nationals Etisalat must employ, Etisalat has taken initiatives to involve more UAE nationals
in its business. For example, Etisalat has developed training programmes for different levels of graduates,
and these last from one to two years. These training courses equip the trainees with the skills required for a
fulfilling career at Etisalat.
In accordance with the laws of the UAE, the Issuer provides end of service benefits to non-UAE national
employees. Under UAE law, the entitlement to these benefits is based upon the employee’s length of service
and the completion of a minimum service period. The expected costs of these benefits are accrued over the
period of employment.
With respect to UAE national employees, the Issuer contributes to the UAE Federal Pension Scheme an
amount calculated as a percentage of the UAE national employees’ salaries. These obligations are limited to
these contributions, which are expensed when due.
The Issuer aims to continue to invest in human capital, training and development in order to carry out its
planned expansion and growth in years to come.
191
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
BOOK-ENTRY CLEARANCE SYSTEMS
The information set out below is subject to any change in or reinterpretation of the rules, regulations and
procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the Clearing Systems) currently in
effect. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the
continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the
Issuer, the Trustee or any other party to the Agency Agreement will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the
Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
BOOK-ENTRY SYSTEMS
DTC
DTC has advised the Issuer that it is a limited purpose trust company organised under the New York Banking
Law, a member of the Federal Reserve System, a “banking organisation” within the meaning of the New York
Banking Law, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and
a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its
participants (Direct Participants) deposit with DTC. DTC also facilitates the settlement among Direct
Participants of securities transactions, such as transfers and pledges, in deposited securities through
electronic computerised book-entry changes in Direct Participants’ accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organisations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are
registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
System is also available to others such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect
Participants and, together with Direct Participants, Participants). More information about DTC can be
found at www.dtcc.com and www.dtc.org.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the DTC Rules),
DTC makes book-entry transfers of Registered Notes among Direct Participants on whose behalf it acts with
respect to Notes accepted into DTC’s book-entry settlement system (DTC Notes), as described below, and
receives and transmits distributions of principal and interest on DTC Notes. The DTC Rules are on file with
the Securities and Exchange Commission. Direct Participants and Indirect Participants with which beneficial
owners of DTC Notes (Owners) have accounts with respect to the DTC Notes are similarly required to make
book-entry transfers and receive and transmit such payments on behalf of their respective Owners.
Accordingly, although Owners who hold DTC Notes through Direct Participants or Indirect Participants will
not possess Registered Notes, the DTC Rules, by virtue of the requirements described above, provide a
mechanism by which Direct Participants will receive payments and will be able to transfer their interest in
respect of the DTC Notes.
Purchases of DTC Notes under the DTC system must be made by or through Direct Participants, which will
receive a credit for the DTC Notes on DTC’s records. The ownership interest of each actual purchaser of
each DTC Note (Beneficial Owner) is in turn to be recorded on the Direct and Indirect Participant’s records.
Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the DTC Notes are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in DTC Notes, except in the event that use of the
book-entry system for the DTC Notes is discontinued.
192
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
To facilitate subsequent transfers, all DTC Notes deposited by Participants with DTC are registered in the
name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorised
representative of DTC. The deposit of DTC Notes with DTC and their registration in the name of Cede &
Co. or such other DTC nominee effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the DTC Notes; DTC’s records reflect only the identity of the Direct Participants
to whose accounts such DTC Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the DTC Notes within an issue are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to DTC Notes
unless authorised by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose
accounts the DTC Notes are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal and interest payments on the DTC Notes will be made to Cede & Co., or such other nominee as
may be requested by an authorised representative of DTC. DTC’s practice is to credit Direct Participants’
accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the relevant
agent (or such other nominee as may be requested by an authorised representative of DTC), on the relevant
payment date in accordance with their respective holdings shown in DTC’s records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or registered in “street name”, and
will be the responsibility of such Participant and not of DTC or the Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Issuer, disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Under certain circumstances, including if there is an Event of Default under the Notes, DTC will exchange
the DTC Notes for definitive Registered Notes, which it will distribute to its Participants in accordance with
their proportionate entitlements and which, if representing interests in a Rule 144A Global Note, will be
legended as set forth under “Subscription and Sale and Transfer and Selling Restrictions”.
A Beneficial Owner shall give notice to elect to have its DTC Notes purchased or tendered, through its
Participant, to the relevant agent, and shall effect delivery of such DTC Notes by causing the Direct
Participant to transfer the Participant’s interest in the DTC Notes, on DTC’s records, to the relevant agent.
The requirement for physical delivery of DTC Notes in connection with an optional tender or a mandatory
purchase will be deemed satisfied when the ownership rights in the DTC Notes are transferred by Direct
Participants on DTC’s records and followed by a book-entry credit of tendered DTC Notes to the relevant
agent’s DTC account.
DTC may discontinue providing its services as depository with respect to the DTC Notes at any time by
giving reasonable notice to the Issuer or the relevant agent. Under such circumstances, in the event that a
successor depository is not obtained, DTC Note certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a
successor securities depository). In that event, DTC Note certificates will be printed and delivered to DTC.
193
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
Since DTC may only act on behalf of Direct Participants, who in turn act on behalf of Indirect Participants,
any Owner desiring to pledge DTC Notes to persons or entities that do not participate in DTC, or otherwise
take actions with respect to such DTC Notes, will be required to withdraw its Registered Notes from DTC
as described below.
Euroclear and Clearstream, Luxembourg
Euroclear and Clearstream, Luxembourg each holds securities for its customers and facilitates the clearance
and settlement of securities transactions by electronic book-entry transfer between their respective account
holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several
countries through established depository and custodial relationships. Euroclear and Clearstream,
Luxembourg have established an electronic bridge between their two systems across which their respective
participants may settle trades with each other.
Euroclear and Clearstream, Luxembourg customers are world-wide financial institutions, including
underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect
access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or
maintain a custodial relationship with an account holder of either system.
BOOK-ENTRY OWNERSHIP OF AND PAYMENTS IN RESPECT OF DTC NOTES
The Issuer may apply to DTC in order to have any Tranche of Notes represented by a Registered Global Note
accepted in its book-entry settlement system. Upon the issue of any such Registered Global Note, DTC or
its custodian will credit, on its internal book-entry system, the respective nominal amounts of the individual
beneficial interests represented by such Registered Global Note to the accounts of persons who have
accounts with DTC. Such accounts will initially be designated by or on behalf of the relevant Dealer.
Ownership of beneficial interests in such a Registered Global Note will be limited to Direct Participants or
Indirect Participants, including, in the case of any Regulation S Global Note, the respective depositories of
Euroclear and Clearstream, Luxembourg. Ownership of beneficial interests in a Registered Global Note
accepted by DTC will be shown on, and the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to the interests of Direct Participants) and the records of
Direct Participants (with respect to interests of Indirect Participants).
Payments in U.S. dollars of principal and interest in respect of a Registered Global Note accepted by DTC
will be made to the order of DTC or its nominee as the registered holder of such Note. In the case of any
payment in a currency other than U.S. dollars, payment will be made to the Exchange Agent on behalf of
DTC or its nominee and the Exchange Agent will (in accordance with instructions received by it) remit all
or a portion of such payment for credit directly to the beneficial holders of interests in the Registered Global
Note in the currency in which such payment was made and/or cause all or a portion of such payment to be
converted into U.S. dollars and credited to the applicable Participants’ account.
The Issuer expects DTC to credit accounts of Direct Participants on the applicable payment date in
accordance with their respective holdings as shown in the records of DTC unless DTC has reason to believe
that it will not receive payment on such payment date. The Issuer also expects that payments by Participants
to beneficial owners of Notes will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers, and will be the responsibility of such Participant and
not the responsibility of DTC, the Principal Paying Agent, the Registrar or the Issuer. Payment of principal,
premium, if any, and interest, if any, on Notes to DTC is the responsibility of the Issuer.
TRANSFERS OF NOTES REPRESENTED BY REGISTERED GLOBAL NOTES
Transfers of any interests in Notes represented by a Registered Global Note within DTC, Euroclear and
Clearstream, Luxembourg will be effected in accordance with the customary rules and operating procedures
of the relevant clearing system. The laws in some States within the United States require that certain persons
take physical delivery of securities in definitive form. Consequently, the ability to transfer Notes represented
194
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
by a Registered Global Note to such persons may depend upon the ability to exchange such Notes for Notes
in definitive form. Similarly, because DTC can only act on behalf of Direct Participants in the DTC system
who in turn act on behalf of Indirect Participants, the ability of a person having an interest in Notes
represented by a Registered Global Note accepted by DTC to pledge such Notes to persons or entities that
do not participate in the DTC system or otherwise to take action in respect of such Notes may depend upon
the ability to exchange such Notes for Notes in definitive form. The ability of any holder of Notes
represented by a Registered Global Note accepted by DTC to resell, pledge or otherwise transfer such Notes
may be impaired if the proposed transferee of such Notes is not eligible to hold such Notes through a direct
or indirect participant in the DTC system.
Subject to compliance with the transfer restrictions applicable to the Registered Notes described under
“Subscription and Sale and Transfer and Selling Restrictions”, cross-market transfers between DTC, on the
one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear accountholders, on the
other, will be effected by the relevant clearing system in accordance with its rules and through action taken
by the Registrar, the Principal Paying Agent and any custodian (Custodian) with whom the relevant
Registered Global Notes have been deposited.
On or after the Issue Date for any Series, transfers of Notes of such Series between accountholders in
Clearstream, Luxembourg and Euroclear and transfers of Notes of such Series between participants in DTC
will generally have a settlement date three business days after the trade date (T+3). The customary
arrangements for delivery versus payment will apply to such transfers.
Cross-market transfers between accountholders in Clearstream, Luxembourg or Euroclear and DTC
participants will need to have an agreed settlement date between the parties to such transfer. Because there
is no direct link between DTC, on the one hand, and Clearstream, Luxembourg and Euroclear, on the other,
transfers of interests in the relevant Registered Global Notes will be effected through the Registrar, the
Principal Paying Agent and the Custodian receiving instructions (and, where appropriate, certification) from
the transferor and arranging for delivery of the interests being transferred to the credit of the designated
account for the transferee. In the case of cross-market transfers, settlement between Euroclear or
Clearstream, Luxembourg accountholders and DTC participants cannot be made on a delivery versus
payment basis. The securities will be delivered on a free delivery basis and arrangements for payment must
be made separately.
DTC, Clearstream, Luxembourg and Euroclear have each published rules and operating procedures designed
to facilitate transfers of beneficial interests in Registered Global Notes among participants and
accountholders of DTC, Clearstream, Luxembourg and Euroclear. However, they are under no obligation to
perform or continue to perform such procedures and such procedures may be discontinued or changed at any
time. None of the Issuer, the Trustee, the Agents or any Dealer will be responsible for any performance by
DTC, Clearstream, Luxembourg or Euroclear or their respective direct or indirect participants or
accountholders of their respective obligations under the rules and procedures governing their operations and
none of them will have any liability for any aspect of the records relating to or payments made on account
of beneficial interests in the Notes represented by Registered Global Notes or for maintaining, supervising
or reviewing any records relating to such beneficial interests.
SETTLEMENT OF PRE-ISSUE TRADES
It is expected that delivery of Notes will be made against payment therefore on the Issue Date, which could
be more than three business days following the date of pricing. Under Rule 15c6-1 under the Exchange Act,
trades in the United States secondary market generally are required to settle within three business days
(T+3), unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Notes in the United States on the date of pricing or the next
succeeding business days until three days prior to the Issue Date will be required, by virtue of the fact the
Notes initially will settle beyond T+3, to specify an alternate settlement cycle at the time of any such trade
to prevent a failed settlement. Settlement procedures in other countries will vary.
Purchasers of Notes may be affected by such local settlement practices and purchasers of Notes between the
relevant date of pricing and the Issue Date should consult their own advisers.
195
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
TAXATION
GENERAL
Prospective purchasers of Notes are advised to consult their tax advisers as to the consequences, under the
tax laws of the countries of their respective citizenship, residence or domicile, of a purchase of Notes,
including, but not limited to, the consequences of receipt of payments under the Notes and their disposal or
redemption.
UNITED ARAB EMIRATES
The following summary of the anticipated tax treatment in the UAE in relation to payments on the Notes is
based on the taxation law in force at the date of this Base Prospectus, and does not constitute legal or tax
advice. Prospective investors should be aware that the relevant fiscal rules and practice and their
interpretation may change.
There is currently in force in the Emirates of Abu Dhabi and Dubai legislation establishing a general
corporate taxation regime (the Abu Dhabi Income Tax Decree 1965 (as amended) and the Dubai Income Tax
Decree 1969 (as amended)). The regime is, however, not enforced save in respect of companies active in the
hydrocarbon industry, some related service industries and branches of foreign banks operating in the UAE.
It is not known whether the legislation will or will not be enforced more generally or within other industry
sectors in the future. Under current legislation, there is no requirement for withholding or deduction for or
on account of UAE, Abu Dhabi or Dubai taxation in respect of payments made under the Notes. In the event
of the imposition of any such withholding, the Issuer has undertaken to gross-up any payments subject to
certain limited exceptions.
The Constitution of the UAE specifically reserves to the Federal Government of the UAE the right to raise
taxes on a federal basis for purposes of funding its budget. It is not known whether this right will be exercised
in the future.
The UAE has entered into double taxation arrangements with certain other countries, but these are not
extensive in number.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE (IRS) CIRCULAR 230,
EACH TAXPAYER IS HEREBY NOTIFIED THAT: (A) ANY TAX DISCUSSION HEREIN IS NOT
INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY THE TAXPAYER FOR
THE PURPOSE OF AVOIDING U.S. FEDERAL INCOME TAX PENALTIES THAT MAY BE
IMPOSED ON THE TAXPAYER; (B) ANY SUCH TAX DISCUSSION WAS WRITTEN TO
SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED HEREIN; AND (C) THE TAXPAYER SHOULD SEEK ADVICE BASED ON THE
TAXPAYER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.
The following is a summary of certain U.S. federal income tax considerations relevant to U.S. Holders (as
defined below) acquiring, holding and disposing of Notes. This summary addresses only the U.S. federal
income tax considerations for initial purchasers of Notes at their issue price (as defined below) that will hold
the Notes as capital assets (generally, property held for investment). This summary is based on the U.S.
Internal Revenue Code of 1986 (the Code), final, temporary and proposed U.S. Treasury regulations,
administrative and judicial interpretations, all of which are subject to change, possibly with retroactive effect.
This summary does not address the material U.S. federal income tax consequences of every type of Note
which may be issued under the Programme, and the relevant Final Terms may contain additional or modified
disclosure concerning the material U.S. federal income tax consequences relevant to such type of Note as
appropriate. This summary does not discuss all aspects of U.S. federal income taxation that may be relevant
to investors in light of their particular circumstances, such as investors subject to special tax rules (including,
without limitation: (i) financial institutions; (ii) insurance companies; (iii) dealers or traders in stocks,
196
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
securities, or currencies or notional principal contracts; (iv) regulated investment companies; (v) real estate
investment trusts; (vi) tax-exempt organisations; (vii) partnerships, pass-through entities, or persons that hold
Notes through pass-through entities; (viii) investors that hold Notes as part of a straddle, hedge, conversion,
constructive sale or other integrated transaction for U.S. federal income tax purposes; (ix) investors that have
a functional currency other than the U.S. Dollar and (x) U.S. expatriates and former long-term residents of
the United States), all of whom may be subject to tax rules that differ significantly from those summarised
below. This summary does not address U.S. federal estate, gift or alternative minimum tax considerations, or
non-U.S., state or local tax considerations. This discussion applies only to holders of Registered Notes.
Bearer Notes are not being offered to U.S. Holders. A U.S. Holder who owns a Bearer Note may be subject
to limitations under U.S. federal income tax laws, including the limitations provided in Section 165(j) and
1287 of the Code. Moreover, the summary deals only with Notes with a term of 30 years or less. The U.S.
federal income tax consequences of owning Notes with a longer term may be discussed in the applicable
Final Terms.
For the purposes of this summary, a U.S. Holder is a beneficial owner of Notes that is for U.S. federal
income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) a corporation
created in, or organised under, the laws of the United States or any state thereof, including the District of
Columbia, (iii) an estate the income of which is includible in gross income for U.S. federal income tax
purposes regardless of its source or (iv) a trust that is subject to U.S. tax on its worldwide income regardless
of its source.
This summary should be read in conjunction with any discussion of U.S. federal income tax consequences
in the applicable Final Terms. To the extent there is any inconsistency in the discussion of U.S. federal
income tax consequences to holders between this Base Prospectus and the applicable Final Terms, holders
should rely on the consequences described in the applicable Final Terms instead of this Base Prospectus. The
Issuer generally intends to treat Notes issued under the Programme as debt, unless otherwise indicated in the
applicable Final Terms. Certain Notes, however, such as certain Index Linked Notes, may be treated as equity
for U.S. federal income tax purposes. The tax treatment of Notes to which a treatment other than as debt may
apply may be discussed in the applicable Final Terms. The following disclosure applies only to Notes that
are treated as debt for U.S. federal income tax purposes.
Payments of Interest
General
Interest on a Note, including the payment of any additional amounts, whether payable in U.S. Dollars or a
currency, composite currency or basket of currencies other than U.S. Dollars (a foreign currency), other than
interest on a Discount Note that is not qualified stated interest (each as defined below under "Original Issue
Discount — General"), will be taxable to a U.S. Holder as ordinary income at the time it is received or
accrued, in accordance with the holder's method of accounting for tax purposes. Interest paid by the Issuer
on the Notes and OID (as defined below), if any, accrued with respect to the Notes (as described below under
"Original Issue Discount") and payments of any additional amounts will generally constitute income from
sources outside the United States.
Foreign Currency Denominated Interest
If a qualified stated interest payment is denominated in, or determined by reference to, a foreign currency,
the amount of income recognised by a cash basis U.S. Holder will be the U.S. Dollar value of the interest
payment, based on the exchange rate in effect on the date of receipt, regardless of whether the payment is in
fact converted into U.S. Dollars.
An accrual basis U.S. Holder may determine the amount of income recognised with respect to an interest
payment denominated in, or determined by reference to, a foreign currency in accordance with either of two
methods. Under the first method, the amount of income accrued will be based on the average exchange rate
in effect during the interest accrual period (or, with respect to an accrual period that spans two taxable years
of a U.S. Holder, the part of the period within the taxable year).
197
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
Under the second method, the U.S. Holder may elect to determine the amount of income accrued on the basis
of the exchange rate in effect on the last day of the accrual period or, in the case of an accrual period that
spans two taxable years, the exchange rate in effect on the last day of the part of the period within the taxable
year. Additionally, if a payment of interest is actually received within five business days of the last day of the
accrual period or taxable year, an electing accrual basis U.S. Holder may instead translate the accrued
interest into U.S. Dollars at the exchange rate in effect on the day of actual receipt. Any such election will
apply to all debt instruments held by the U.S. Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the U.S. Holder, and will be irrevocable without the consent of the
IRS.
Upon receipt of the interest payment (including a payment attributable to accrued but unpaid interest upon
the sale or other disposition of a Note) denominated in, or determined by reference to, a foreign currency,
the U.S. Holder will recognise U.S. source exchange gain or loss (taxable as ordinary income or loss) equal
to the difference, if any, between the amount received (translated into U.S. Dollars at the spot rate on the date
of receipt) and the amount previously accrued, regardless of whether the payment is in fact converted into
U.S. Dollars.
Original Issue Discount
General
The following is a summary of the principal U.S. federal income tax consequences of the ownership of Notes
issued with original issue discount (OID). The following summary does not discuss Notes that are
characterised as contingent payment debt instruments for U.S. federal income tax purposes. In the event that
the Issuer issues contingent payment debt instruments, the applicable Final Terms may describe the material
U.S. federal income tax consequences thereof.
A Note, other than a Note with a term of one year or less (a Short-Term Note), will be treated as issued with
OID (a Discount Note) if the excess of the Note’s “stated redemption price at maturity” over its issue price
is at least a de minimis amount (0.25% of the Note's stated redemption price at maturity multiplied by the
number of complete years to its maturity). An obligation that provides for the payment of amounts other than
qualified stated interest before maturity (an instalment obligation) will be treated as a Discount Note if the
excess of the Note’s stated redemption price at maturity over its issue price is equal to or greater than 0.25%
of the Note’s stated redemption price at maturity multiplied by the weighted average maturity of the Note.
A Note’s weighted average maturity is the sum of the following amounts determined for each payment on a
Note (other than a payment of qualified stated interest): (i) the number of complete years from the issue date
until the payment is made multiplied by (ii) a fraction, the numerator of which is the amount of the payment
and the denominator of which is the Note’s stated redemption price at maturity. Generally, the issue price of
a Note under the applicable Final Terms will be the first price at which a substantial amount of such Notes
included in the issue of which the Note is a part is sold to persons other than bond houses, brokers or similar
persons or organisations acting in the capacity of underwriters, placement agents, or wholesalers. The stated
redemption price at maturity of a Note is the total of all payments provided by the Note that are not
payments of “qualified stated interest”. A qualified stated interest payment is generally any one of a series
of stated interest payments on a Note that are unconditionally payable at least annually at a single fixed rate
(with certain exceptions for lower rates paid during some periods), or a variable rate (in the circumstances
described below under “Variable Interest Rate Notes”), applied to the outstanding principal amount of the
Note. Solely for the purpose of determining whether a Note has OID, the Issuer will be deemed to exercise
any call option that has the effect of decreasing the yield on the Note, and the U.S. Holder will be deemed
to exercise any put option that has the effect of increasing the yield on the Note. If a Note has de minimis
OID, a U.S. Holder must include the de minimis amount in income as stated principal payments are made
on the Note, unless the holder makes the election described below under “—Election to Treat All Interest as
Original Issue Discount”. A U.S. Holder can determine the includible amount with respect to each such
payment by multiplying the total amount of the Note’s de minimis OID by a fraction equal to the amount of
the principal payment made divided by the stated principal amount of the Note.
198
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
U.S. Holders of Discount Notes must generally include OID in income calculated on a constant-yield method
before the receipt of cash attributable to the income, and will generally have to include in income
increasingly greater amounts of OID over the life of the Discount Notes. The amount of OID includible in
income by a U.S. Holder of a Discount Note is the sum of the daily portions of OID with respect to the
Discount Note for each day during the taxable year or portion of the taxable year on which the U.S. Holder
holds the Discount Note (accrued OID). The daily portion is determined by allocating to each day in any
"accrual period" a pro rata portion of the OID allocable to that accrual period. Accrual periods with respect
to a Note may be of any length selected by the U.S. Holder and may vary in length over the term of the
Discount Note as long as (i) no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on either the final or first day of an accrual period. The amount of
OID allocable to an accrual period equals the excess of (a) the product of the Discount Note's adjusted issue
price at the beginning of the accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual
period) over (b) the sum of the payments of qualified stated interest on the Discount Note allocable to the
accrual period. The adjusted issue price of a Discount Note at the beginning of any accrual period is the
issue price of the Note increased by (x) the amount of accrued OID for each prior accrual period and
decreased by (y) the amount of any payments previously made on the Note that were not qualified stated
interest payments.
Acquisition Premium
A U.S. Holder that purchases a Discount Note for an amount less than or equal to the sum of all amounts
payable on the Note after the purchase date, other than payments of qualified stated interest, but in excess of
its adjusted issue price (any such excess being acquisition premium) and that does not make the election
described below under "Election to Treat All Interest as Original Issue Discount", is permitted to reduce the
daily portions of OID by a fraction, the numerator of which is the excess of the U.S. Holder's adjusted basis
in the Note immediately after its purchase over the Note's adjusted issue price, and the denominator of which
is the excess of the sum of all amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price.
Further Issuances
The Issuer may, from time to time, without notice to or the consent of the holders of the outstanding Notes,
create and issue additional debt securities with identical terms and ranking pari passu with the Notes in all
respects. The Issuer may consolidate such additional debt securities with the outstanding Notes to form a
single series. The Issuer may offer additional debt securities with OID for U.S. federal income tax purposes
as part of a further issue. Purchasers of debt securities in any further issue may not be able to differentiate
between debt securities sold as part of the further issue and previously issued Notes. If the Issuer were to
issue additional debt securities with OID, purchasers of debt securities after such further issue may be
required to accrue OID (or greater amounts of OID than they would have otherwise accrued) with respect to
their debt securities. This may affect the price of outstanding Notes following a further issuance.
Election to Treat All Interest as Original Issue Discount
A U.S. Holder may elect to include in gross income all interest that accrues on a Note using the constantyield method described above under "Original Issue Discount — General" with certain modifications. For
purposes of this election, interest includes stated interest, OID, de minimis OID, as adjusted by any
acquisition premium. If a U.S. Holder makes this election for the Note, then, when the constant-yield method
is applied, the issue price of the Note will equal its cost, the issue date of the Note will be the date of
acquisition, and no payments on the Note will be treated as payments of qualified stated interest. This
election will generally apply only to the Note with respect to which it is made and may not be revoked
without the consent of the IRS.
199
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
Variable Interest Rate Notes
Notes that provide for interest at variable rates (Variable Interest Rate Notes) will generally bear interest
at a "qualified floating rate" and thus will be treated as "variable rate debt instruments" under U.S. Treasury
regulations governing accrual of OID. A Variable Interest Rate Note will qualify as a "variable rate debt
instrument" if (a) its issue price does not exceed the total non-contingent principal payments due under the
Variable Interest Rate Note by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at (i) one or more qualified floating rates, (ii) a single fixed
rate and one or more qualified floating rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A qualified floating rate is any variable rate where variations in the value of the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in
which the Variable Interest Rate Note is denominated. A fixed multiple of a qualified floating rate will
constitute a qualified floating rate only if the multiple is greater than 0.65 but not more than 1.35. A variable
rate equal to the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more
than 1.35, increased or decreased by a fixed rate, will also constitute a qualified floating rate. In addition,
two or more qualified floating rates that can reasonably be expected to have approximately the same values
throughout the term of the Variable Interest Rate Note (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the Variable Interest Rate Note's issue date) will be
treated as a single qualified floating rate. Notwithstanding the foregoing, a variable rate that would otherwise
constitute a qualified floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate unless the cap or floor is fixed throughout the
term of the Note.
An objective rate is a rate that is not itself a qualified floating rate but which is determined using a single
fixed formula and which is based on objective financial or economic information (e.g., one or more qualified
floating rates or the yield of actively traded personal property). Other variable interest rates may be treated
as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest
on a Variable Interest Rate Note will not constitute an objective rate if it is reasonably expected that the
average value of the rate during the first half of the Variable Interest Rate Note’s term will be either
significantly less than or significantly greater than the average value of the rate during the final half of the
Variable Interest Rate Note’s term. A qualified inverse floating rate is any objective rate where the rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the qualified floating rate. If a Variable Interest
Rate Note provides for stated interest at a fixed rate for an initial period of one year or less followed by a
variable rate that is either a qualified floating rate or an objective rate for a subsequent period and if the
variable rate on the Variable Interest Rate Note's issue date is intended to approximate the fixed rate (e.g.,
the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than
25 basis points), then the fixed rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
A qualified floating rate or objective rate in effect at any time during the term of the instrument must be set
at a “current value” of that rate. A current value of a rate is the value of the rate on any day that is no earlier
than three months prior to the first day on which that value is in effect and no later than one year following
that first day.
If a Variable Interest Rate Note that provides for stated interest at either a single qualified floating rate or a
single objective rate throughout the term thereof qualifies as a “variable rate debt instrument”, then any stated
interest on the Note which is unconditionally payable in cash or property (other than debt instruments of the
Issuer) at least annually will constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Interest Rate Note that provides for stated interest at either a single qualified floating rate or a single
objective rate throughout the term thereof and that qualifies as a “variable rate debt instrument” will
generally not be treated as having been issued with OID unless the Variable Interest Rate Note is issued at a
“true” discount (i.e., at a price below the Note's stated principal amount) in excess of a specified de minimis
200
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
amount. OID on a Variable Interest Rate Note arising from “true” discount is allocated to an accrual period
using the constant yield method described above by assuming that the variable rate is a fixed rate equal to (i)
in the case of a qualified floating rate or qualified inverse floating rate, the value, as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the case of an objective rate (other than a
qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the Variable
Interest Rate Note.
In general, any other Variable Interest Rate Note that qualifies as a “variable rate debt instrument” will be
converted into an “equivalent” fixed rate debt instrument for purposes of determining the amount and accrual
of OID and qualified stated interest on the Variable Interest Rate Note. Such a Variable Interest Rate Note
must be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate
or qualified inverse floating rate provided for under the terms of the Variable Interest Rate Note with a fixed
rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as
of the Variable Interest Rate Note's issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Interest Rate Note is converted into a fixed rate that reflects the
yield that is reasonably expected for the Variable Interest Rate Note. In the case of a Variable Interest Rate
Note that qualifies as a “variable rate debt instrument” and provides for stated interest at a fixed rate in
addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Variable Interest
Rate Note provides for a qualified inverse floating rate). Under these circumstances, the qualified floating
rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of
the Variable Interest Rate Note as of the Variable Interest Rate Note’s issue date is approximately the same
as the fair market value of an otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed
rate into either a qualified floating rate or a qualified inverse floating rate, the Variable Interest Rate Note is
converted into an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Interest Rate Note is converted into an “equivalent” fixed rate debt instrument pursuant to
the foregoing rules, the amount of OID and qualified stated interest, if any, are determined for the
“equivalent” fixed rate debt instrument by applying the general OID rules to the “equivalent” fixed rate debt
instrument and a U.S. Holder of the Variable Interest Rate Note will account for the OID and qualified stated
interest as if the U.S. Holder held the “equivalent” fixed rate debt instrument. In each accrual period,
appropriate adjustments will be made to the amount of qualified stated interest or OID assumed to have been
accrued or paid with respect to the “equivalent” fixed rate debt instrument in the event that these amounts
differ from the actual amount of interest accrued or paid on the Variable Interest Rate Note during the accrual
period.
If a Variable Interest Rate Note, such as a Note the payments on which are determined by reference to an
index, does not qualify as a "variable rate debt instrument", then the Variable Interest Rate Note will be
treated as a contingent payment debt obligation. The proper U.S. federal income tax treatment of Variable
Interest Rate Notes that are treated as contingent payment debt may be more fully described in the applicable
Final Terms.
Short-Term Notes
In general, an individual or other cash basis U.S. Holder of a Short-Term Note is not required to accrue OID
(calculated as set forth below for the purposes of this paragraph) for U.S. federal income tax purposes unless
it elects to do so (but may be required to include any stated interest in income as the interest is received).
Accrual basis U.S. Holders and certain other U.S. Holders are required to accrue OID on Short-Term Notes
on a straight-line basis or, if the U.S. Holder so elects, under the constant-yield method (based on daily
compounding). In the case of a U.S. Holder not required and not electing to include OID in income currently,
any gain realised on the sale or other disposition of the Short-Term Note will be ordinary income to the extent
of the OID accrued on a straight-line basis (unless an election is made to accrue the OID under the constantyield method) through the date of sale or other disposition. U.S. Holders who are not required and do not
elect to accrue OID on Short-Term Notes will be required to defer deductions for interest on borrowings
201
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
allocable to Short-Term Notes in an amount not exceeding the deferred income until the deferred income is
realised.
For purposes of determining the amount of OID subject to these rules, all interest payments on a Short-Term
Note are included in the Short-Term Note's stated redemption price at maturity. A U.S. Holder may elect to
determine OID on a Short-Term Note as if the Short Term Note had been originally issued to the U.S. Holder
at the U.S. Holder's purchase price for the Short-Term Note. This election shall apply to all obligations with
a maturity of one year or less acquired by the U.S. Holder on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the IRS.
Foreign Currency Notes
OID for any accrual period on a Discount Note that is denominated in, or determined by reference to, a
foreign currency will be determined in the foreign currency and then translated into U.S. Dollars in the same
manner as stated interest accrued by an accrual basis U.S. Holder, as described above under "Payments of
Interest". Upon receipt of an amount attributable to OID (whether in connection with a payment of interest
or the sale or other disposition of a Note), a U.S. Holder will generally recognise exchange gain or loss,
which will be ordinary gain or loss measured by the difference between the amount received (translated into
U.S. Dollars at the exchange rate on the date of receipt) and the amount previously accrued, regardless of
whether the payment is in fact converted into U.S. Dollars.
Substitution of the Issuer
The terms of the Notes provide that, in certain circumstances, the obligations of the Issuer under the Notes
may be assumed by another entity. Any such assumption might be treated for U.S. federal income tax
purposes as a deemed disposition of Notes by a U.S. Holder in exchange for new notes issued by the new
obligor. As a result of this deemed disposition, a U.S. Holder could be required to recognise capital gain or
loss for U.S. federal income tax purposes equal to the difference, if any, between the issue price of the new
notes (as determined for U.S. federal income tax purposes), and the U.S. Holder's tax basis in the Notes.
Sale or Other Disposition of Notes
A U.S. Holder's tax basis in a Note will generally be its cost, increased by the amount of any OID included
in the U.S. Holder's income with respect to the Note and the amount, if any, of income attributable to de
minimis OID included in the U.S. Holder's income with respect to the Note, and reduced by (i) the amount
of any payments that are not qualified stated interest payments. A U.S. Holder’s tax basis in a Foreign
Currency Note will be determined by reference to the U.S. Dollar cost of the Notes. The U.S. Dollar cost of
a Note purchased with a foreign currency will generally be the U.S. Dollar value of the purchase price on
the date of purchase or, in the case of Notes traded on an established securities market, as defined in the
applicable U.S. Treasury regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S.
Holder that so elects), on the settlement date for the purchase.
A U.S. Holder will generally recognise gain or loss on the sale or other disposition of a Note equal to the
difference between the amount realised on the sale or other disposition and the tax basis of the Note. The
amount realised on a sale or other disposition for an amount in foreign currency will be the U.S. Dollar value
of this amount on the date of sale or other disposition or, in the case of Notes traded on an established
securities market, as defined in the applicable U.S. Treasury regulations, sold by a cash basis U.S. Holder (or
an accrual basis U.S. Holder that so elects), on the settlement date for the sale. Such an election by an accrual
basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent
of the IRS. Except to the extent described above under “Original Issue Discount – Short-Term Notes” or
attributable to accrued but unpaid interest or changes in exchange rates, gain or loss recognised on the sale
or other disposition of a Note will be capital gain or loss and will generally be treated as from U.S. sources
for purposes of the U.S. foreign tax credit limitation. In the case of a U.S. Holder that is an individual, estate
or trust, the maximum marginal federal income tax rate applicable to capital gains is currently lower than the
maximum marginal rate applicable to ordinary income if the Notes are held for more than one year. The
deductibility of capital losses is subject to significant limitations.
202
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
Gain or loss recognised by a U.S. Holder on the sale or other disposition of a Note that is attributable to
changes in exchange rates will be treated as U.S. source ordinary income or loss. However, exchange gain
or loss is taken into account only to the extent of total gain or loss realised on the transaction.
Disposition of Foreign Currency
Foreign currency received as interest on a Note or on the sale or other disposition of a Note will have a tax
basis equal to its U.S. Dollar value at the time the interest is received or at the time of the sale or other
disposition. Foreign currency that is purchased will generally have a tax basis equal to the U.S. Dollar value
of the foreign currency on the date of purchase. Any gain or loss recognised on a sale or other disposition
of a foreign currency (including its use to purchase Notes or an exchange for U.S. Dollars) will be U.S.
source ordinary income or loss.
Backup Withholding and Information Reporting
In general, payments of principal, interest and accrued OID on, and the proceeds of a sale, redemption or
other disposition of, the Notes, payable to a U.S. Holder by a U.S. paying agent or other U.S. intermediary
will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup
withholding will apply to these payments if the U.S. Holder fails to provide an accurate taxpayer
identification number or certification of exempt status or otherwise to comply with the applicable backup
withholding requirements. Certain U.S. Holders are not subject to backup withholding.
Recently enacted legislation may require individual U.S. Holders to report to the IRS certain information
with respect to their beneficial ownership of Notes not held through an account with a financial institution.
Investors who fail to report required information could be subject to substantial penalties.
Disclosure Requirements
U.S. Treasury regulations meant to require the reporting of certain tax shelter transactions (Reportable
Transactions) could be interpreted to cover transactions generally not regarded as tax shelters, including
certain foreign currency transactions. Under U.S. Treasury regulations, certain transactions with respect to
the Notes may be characterised as Reportable Transactions including, in certain circumstances, a sale,
exchange, retirement or other taxable disposition of a Foreign Currency Note. Persons considering the
purchase of such Notes should consult with their tax advisers to determine the tax return obligations, if any,
with respect to an investment in such Notes, including any requirement to file IRS Form 8886 (Reportable
Transaction Disclosure Statement).
EU SAVINGS DIRECTIVE
Under the Savings Directive, Member States, including Belgium from 1 January 2010, are required to
provide to the tax authorities of another Member State details of payments of interest (or similar income)
paid by a person within its jurisdiction to an individual resident in that other Member State or to certain
limited types of entities established in that other Member State. However, for a transitional period, Belgium,
Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a
withholding system in relation to such payments (the ending of such transitional period being dependent
upon the conclusion of certain other agreements relating to information exchange with certain other
countries). A number of non-EU countries and territories including Switzerland have adopted similar
measures (a withholding system in the case of Switzerland).
On 15 September 2008 the European Commission issued a report to the Council of the European Union on
the operation of the Savings Directive, which included the Commission’s advice on the need for changes to
the Savings Directive. On 13 November 2008 the European Commission published a more detailed proposal
for amendments to the Savings Directive, which included a number of suggested changes. The European
Parliament approved an amended version of this proposal on 24 April 2009. If any of those proposed changes
are made in relation to the Savings Directive, they may amend or broaden the scope of the requirements
described above.
203
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
SUBSCRIPTION AND SALE AND TRANSFER AND SELLING RESTRICTIONS
The Dealers have, in a programme agreement (the Programme Agreement) dated G 2010, agreed with the
Issuer a basis upon which they or any of them may from time to time agree to purchase Notes. Any such
agreement will extend to those matters stated under “Form of the Notes” and “Terms and Conditions of the
Notes”. In the Programme Agreement, the Issuer has agreed to reimburse the Dealers for certain of their
expenses in connection with the establishment and any future update of the Programme and the issue of
Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in
connection therewith.
In order to facilitate the offering of any Tranche of the Notes, certain persons participating in the offering of
the Tranche may engage in transactions that stabilise, maintain or otherwise affect the market price of the
relevant Notes during and after the offering of the Tranche. Specifically such persons may over-allot or create
a short position in the Notes for their own account by selling more Notes than have been sold to them by the
Issuer. Such persons may also elect to cover any such short position by purchasing Notes in the open market.
In addition, such persons may stabilise or maintain the price of the Notes by bidding for or purchasing Notes
in the open market and may impose penalty bids, under which selling concessions allowed to syndicate
members or other broker-dealers participating in the offering of the Notes are reclaimed if Notes previously
distributed in the offering are repurchased in connection with stabilisation transactions or otherwise. The
effect of these transactions may be to stabilise or maintain the market price of the Notes at a level above that
which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price
of the Notes to the extent that it discourages resales thereof. No representation is made as to the magnitude
or effect of any such stabilising or other transactions. Such transactions, if commenced, may be discontinued
at any time. Under U.K. laws and regulations stabilising activities may only be carried on by the Stabilising
Manager(s) named in the applicable Final Terms (or persons acting on behalf of any Stabilising Manager(s))
and only for a limited period following the Issue Date of the relevant Tranche of Notes.
Transfer Restrictions
As a result of the following restrictions, purchasers of Notes in the United States are advised to consult
legal counsel prior to making any purchase, offer, sale, resale or other transfer of such Notes
Each purchaser of definitive Registered Notes or a person wishing to transfer an interest from one Registered
Global Note to another or from global to definitive form or vice versa, will be required to acknowledge,
represent and agree, and each person purchasing an interest in a Registered Global Note will be deemed to
have acknowledged, represented and agreed, as follows (terms used in this paragraph that are defined in Rule
144A or in Regulation S are used herein as defined therein):
(a)
that either: (i) it is a QIB, purchasing (or holding) the Notes for its own account or for the account of
one or more QIBs and it is aware that any sale to it is being made in reliance on Rule 144A or (ii) it
is outside the United States and is not a U.S. person;
(b)
that it, and each account for which it is purchasing, will hold and transfer at least the minimum
denomination of the Notes;
(c)
that the Notes are being offered and sold in a transaction not involving a public offering in the United
States within the meaning of the Securities Act, and that the Notes have not been and will not be
registered under the Securities Act or any other applicable U.S. State securities laws may not be
offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as
set forth below;
(d)
that, except to the extent it holds an interest in a Regulation S Global Note and is a person located
outside the United States that is not a U.S. person, if in the future it decides to resell, pledge or
otherwise transfer the Notes or any beneficial interests in the Notes, it will do so, prior to the
expiration of the applicable required holding period determined pursuant to Rule 144 of the Securities
Act from the later of the most recent Issue Date for the Series of Notes of which such Notes form a
part and the last date on which the Issuer or an affiliate of the Issuer was the owner of such Notes,
204
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
only (i) to the Issuer or any affiliate thereof, (ii) inside the United States to a person whom the seller
reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a
transaction meeting the requirements of Rule 144A, (iii) outside the United States in compliance with
Rule 903 or Rule 904 under the Securities Act, (iv) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available) or (v) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with all applicable U.S. State securities
laws;
(e)
it will, and will require each subsequent holder to, notify any purchaser or transferee, as applicable,
of the Notes from it of the resale and transfer restrictions referred to in paragraph (d) above, if then
applicable;
(f)
that Notes initially offered in the United States to QIBs will be represented by one or more Rule 144A
Global Notes, and that Notes offered outside the United States in reliance on Regulation S will be
represented by one or more Regulation S Global Notes;
(g)
that the Notes in registered form, other than the Regulation S Global Notes, will bear a legend to the
following effect unless otherwise agreed to by the Issuer:
“THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE U.S. STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (A) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL
BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING THE
SECURITIES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE
QUALIFIED INSTITUTIONAL BUYERS; (B) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE SECURITIES EXCEPT IN ACCORDANCE WITH THE AGENCY
AGREEMENT AND, PRIOR TO THE EXPIRATION OF THE APPLICABLE REQUIRED
HOLDING PERIOD DETERMINED PURSUANT TO RULE 144 OF THE SECURITIES ACT
FROM THE LATER OF THE MOST RECENT ISSUE DATE FOR THE SERIES OF NOTES OF
WHICH SUCH NOTES FORM A PART AND THE LAST DATE ON WHICH THE ISSUER OR AN
AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH SECURITIES OTHER THAN (1) TO
THE ISSUER OR ANY AFFILIATE THEREOF, (2) INSIDE THE UNITED STATES TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904
UNDER THE SECURITIES ACT, (4) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER JURISDICTION; AND
(C) IT AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. NO
REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALES OF THE SECURITY.
THIS SECURITY AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION,
THE AGENCY AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, WITHOUT THE CONSENT OF, BUT UPON NOTICE
TO, THE HOLDERS OF SUCH SECURITIES SENT TO THEIR REGISTERED ADDRESSES, TO
MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER
TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR
205
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
RESALES OR OTHER TRANSFERS OF RESTRICTED SECURITIES GENERALLY. THE
HOLDER OF THIS SECURITY SHALL BE DEEMED, BY ITS ACCEPTANCE OR PURCHASE
HEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF
WHICH SHALL BE CONCLUSIVE AND BINDING ON THE HOLDER HEREOF AND ALL
FUTURE HOLDERS OF THIS SECURITY AND ANY SECURITIES ISSUED IN EXCHANGE
OR SUBSTITUTION THEREFOR, WHETHER OR NOT ANY NOTATION THEREOF IS MADE
HEREON).”;
(h)
that the Notes in registered form which are registered in the name of a nominee of DTC will bear an
additional legend to the following effect unless otherwise agreed to by the Issuer:
“UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORISED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, (“DTC”), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY REGISTERED NOTE ISSUED IN EXCHANGE FOR THIS SECURITY OR ANY
PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUIRED BY AN AUTHORISED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORISED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN DTC OR A
NOMINEE THEREOF IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY
REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE
THEREOF EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THIS SECURITY,
AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE
WITH THE RESTRICTIONS SET FORTH IN THIS LEGEND. BENEFICIAL INTERESTS IN
THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THIS
LEGEND.”;
(i)
if it holds an interest in a Regulation S Global Note and is outside the United States and is not a U.S.
person, that if it should resell or otherwise transfer the Notes prior to the expiration of the distribution
compliance period (defined as 40 days after the completion of the distribution, as determined and
certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant
lead manager, of all Notes of the Tranche of which such Notes are a part), it will do so only (i)(A)
outside the United States in compliance with Rule 903 or 904 under the Securities Act or (B) to a QIB
in compliance with Rule 144A and (ii) in accordance with all applicable U.S. State securities laws;
and it acknowledges that the Regulation S Global Notes will bear a legend to the following effect
unless otherwise agreed to by the Issuer:
“THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE U.S. STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT IN ACCORDANCE WITH THE AGENCY AGREEMENT AND PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT. THIS
LEGEND SHALL CEASE TO APPLY UPON THE EXPIRY OF THE PERIOD OF 40 DAYS
AFTER THE COMPLETION OF THE DISTRIBUTION OF ALL THE NOTES OF THE TRANCHE
OF WHICH THIS NOTE FORMS PART.”; and
(j)
that the Issuer and others will rely upon the truth and accuracy of the foregoing acknowledgements,
representations and agreements and agrees that if any of such acknowledgements, representations or
agreements made by it are no longer accurate, it shall promptly notify the Issuer; and if it is acquiring
any Notes as a fiduciary or agent for one or more accounts it represents that it has sole investment
206
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
discretion with respect to each such account and that it has full power to make the foregoing
acknowledgements, representations and agreements on behalf of each such account.
No sale of Legended Notes in the United States to any one purchaser will be for less than U.S.$100,000 (or
its foreign currency equivalent) principal amount and no Legended Note will be issued in connection with
such a sale in a smaller principal amount. If the purchaser is a non-bank fiduciary acting on behalf of others,
each person for whom it is acting must purchase at least U.S.$100,000 (or its foreign currency equivalent)
of Registered Notes.
Selling Restrictions
United States
The Notes have not been and will not be registered under the Securities Act or the securities laws of any state
or other jurisdiction of the United States and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in certain transactions exempt from, or not subject to the
registration requirements of the Securities Act.
In connection with any Notes which are offered or sold outside the United States in reliance on an exemption
from the registration requirements of the Securities Act provided under Regulation S (Regulation S Notes),
each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that it will not offer or sell such Regulation S Notes (a) as part of their
distribution at any time or (b) otherwise until 40 days after the completion of the distribution, as determined
and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant
lead manager, of all Notes of the Tranche of which such Regulation S Notes are a part, within the United
States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further
Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it
sells any Regulation S Notes during the distribution compliance period a confirmation or other notice setting
forth the restrictions on offers and sales of the Regulation S Notes within the United States or to, or for the
account or benefit of, U.S. persons. Terms used in the two preceding paragraphs have the meanings given to
them by Regulation S under the Securities Act.
The Bearer Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within
the United States or its possessions or to United States persons, except in certain transactions permitted by
U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal
Revenue Code of 1986 and the regulations promulgated thereunder.
Until 40 days after the commencement of the offering of any Tranche of Notes, an offer or sale of such Notes
within the United States by any dealer (whether or not participating in the offering) may violate the
registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with
Rule 144A.
Dealers may arrange for the resale of Notes to persons reasonably believed to be QIBs pursuant to Rule 144A
and each such purchaser of Notes is hereby notified that the Dealers may be relying on the exemption from
the registration requirements of the Securities Act provided by Rule 144A. The minimum aggregate principal
amount of Notes which may be purchased by a QIB pursuant to Rule 144A is U.S.$100,000 (or the
approximate equivalent thereof in any other currency).
Each issuance of Index Linked Notes or Dual Currency Notes shall be subject to such additional U.S. selling
restrictions as the Issuer and the relevant Dealer may agree as a term of the issuance and purchase of such
Notes, which additional selling restrictions shall be set out in the applicable Final Terms.
Public offer selling restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a Relevant Member State), each Dealer has represented and agreed, and each further
Dealer appointed under the Programme will be required to represent and agree, that with effect from and
including the date on which the Prospectus Directive is implemented in that Relevant Member State (the
207
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
Relevant Implementation Date) it has not made and will not make an offer of Notes which are the subject
of the offering contemplated by this Base Prospectus as completed by the final terms in relation thereto to
the public in that Relevant Member State, except that it may, with effect from and including the Relevant
Implementation Date, make an offer of such Notes to the public in that Relevant Member State:
(a)
at any time to legal entities which are authorised or regulated to operate in the financial markets or, if
not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(b)
at any time to any legal entity which has two or more of (1) an average of at least 250 employees
during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual
net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
(c)
at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers
nominated by the Issuer for any such offer; or
(d)
at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes referred to above shall require the Issuer or any Dealer to publish a
prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article
16 of the Prospectus Directive.
For the purposes of this provision, the expression an offer of Notes to the public in relation to any Notes in
any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to
purchase or subscribe the Notes, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
United Kingdom
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that:
(a)
in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary
activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes
other than to persons whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or as agent) for the purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for
the purposes of their businesses where the issue of the Notes would otherwise constitute a
contravention of Section 19 of the Financial Services and Markets Act 2000 (the FSMA) by the
Issuer;
(b)
it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in
circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
(c)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of
Japan (Law No. 25 of 1948, as amended; the FIEA). Accordingly, each Dealer has represented and agreed,
and each further Dealer appointed under the Programme will be required to represent and agree, that it will
not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan
208
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
(as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control Law
(Law No. 228 of 1949, as amended), or to others for re-offering or resale, directly or indirectly, in Japan or
to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration
requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and
ministerial guidelines of Japan.
United Arab Emirates (excluding the Dubai International Financial Centre)
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that the Notes to be issued under the Programme have not been and will not
be offered, sold or publicly promoted or advertised by it in the United Arab Emirates other than in
compliance with any laws applicable in the United Arab Emirates governing the issue, offering and sale of
securities.
Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to
acknowledge, that the information contained in this Base Prospectus does not constitute a public offer of
securities in the United Arab Emirates in accordance with the Commercial Companies Law (Federal Law 8
of 1984 (as amended)) or otherwise and is not intended to be a public offer and the information contained in
this Base Prospectus is not intended to lead to the conclusion of any contract of whatsoever nature within the
territory of the United Arab Emirates.
Dubai International Financial Centre
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that it has not offered and will not offer the Notes to be issued under the
Programme to any person in the Dubai International Financial Centre unless such offer is:
(a)
deemed to be an “Exempt Offer” in accordance with the Offered Securities Rules of the Dubai
Financial Services Authority (the DFSA); and
(b)
made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSA
Conduct of Business Module.
Kingdom of Saudi Arabia
Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a Saudi Investor) who acquires
Notes pursuant to an offering should note that the offer of Notes is a limited offer under Article 11 of the
“Offer of Securities Regulations” as issued by the Board of the Capital Market Authority resolution number
2-11-2004 dated 4 October 2004 and amended by the Board of the Capital Market Authority resolution
number 1-28-2008 dated 18 August 2008 (the KSA Regulations). Each Dealer has represented and agreed,
and each further Dealer appointed under the Programme will be required to represent and agree, that any
offer of Notes to a Saudi Investor will comply with the KSA Regulations.
The offer of Notes shall not therefore constitute a “public offer” pursuant to the KSA Regulations, but is
subject to the restrictions on secondary market activity under Article 17 of the KSA Regulations. Any Saudi
Investor who has acquired Notes pursuant to a limited offer may not offer or sell those Notes to any person
unless the offer or sale is made through an authorised person appropriately licensed by the Saudi Arabian
Capital Market Authority and: (a) the Notes are offered or sold to a Sophisticated Investor (as defined in
Article 10 of the KSA Regulations); (b) the price to be paid for the Notes in any one transaction is equal to
or exceeds Saudi Riyal 1 million or an equivalent amount; or (c) the offer or sale is otherwise in compliance
with Article 17 of the KSA Regulations.
Kingdom of Bahrain
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that it has not offered and will not offer any Notes to the Public (as defined
in Articles 142-146 of the Commercial Companies Law (Decree Law No. 21/2001) of Bahrain, in Bahrain.
209
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
State of Qatar
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that it has not offered or sold, and will not offer or sell, directly or indirectly,
any Notes in the State of Qatar, except: (a) in compliance with all applicable laws and regulations of the State
of Qatar; and (b) through persons or corporate entities authorised and licensed to provide investment advice
and/or engage in brokerage activity and/or trade in respect of foreign securities in the State of Qatar.
Singapore
This Base Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore
under the Securities and Futures Act, Chapter 289 of Singapore (SFA). Accordingly, each Dealer has
represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that it has not offered or sold and that it will not offer or sell any Notes or cause such Notes to be
made the subject of an invitation for subscription or purchase, nor will it circulate or distribute this Base
Prospectus or any other document or material in connection with the offer or sale or invitation for
subscription or purchase of the Notes, whether directly or indirectly, to any person in Singapore other than
(a) to an institutional investor pursuant to Section 274 of the SFA, or (b) to a relevant person, or any person
pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of
the SFA, or (c) pursuant to, and in accordance with the conditions of, any other applicable provisions of the
SFA.
Hong Kong
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that:
(a)
it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, the Notes
other than (i) to persons whose ordinary business is to buy or sell shares or debentures (whether as
principal or agent); or (ii) to “professional investors” within the meaning of the Securities and Futures
Ordinance (Cap. 571) of Hong Kong (the SFO) and any rules made under the SFO; or (iii) in other
circumstances which do not result in the document being a “prospectus” as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the
meaning of that Ordinance; and
(b)
it has not issued or had in its possession for the purposes of issue, and will not issue or have in its
possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,
invitation or document relating to the Notes, which is directed at, or the contents of which are likely
to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of
Hong Kong) other than with respect to the Notes which are or are intended to be disposed of only to
persons outside Hong Kong or only to professional investors as defined in the SFO and any rules
made under the SFO.
General
Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be
required to represent and agree that it will (to the best of its knowledge and belief) comply with all applicable
securities laws, regulations and directives in force in any jurisdiction in which it purchases, offers, sells or
delivers Notes or possesses or distributes this Base Prospectus and will obtain any consent, approval or
permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations
in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or
deliveries and neither the Issuer, the Trustee nor any of the other Dealers shall have any responsibility
therefor.
None of the Issuer, the Trustee and the Dealers represents that Notes may at any time lawfully be sold in
compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any
exemption available thereunder, or assumes any responsibility for facilitating such sale.
210
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
With regard to each Tranche, the relevant Dealer will be required to comply with such other restrictions as
the Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Final Terms.
211
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
GENERAL INFORMATION
Authorisation
The establishment of the Programme has been duly authorised by a resolution of the Board of Directors of
the Issuer dated 19 October 2009.
Listing of Notes
It is expected that each Tranche of Notes which is to be admitted to the Official List and to trading on the
London Stock Exchange’s regulated market will be admitted separately as and when issued, subject only to
the issue of one or more Global Notes initially representing the Notes of such Tranche. Application has been
made to the UK Listing Authority for Notes issued under the Programme to be admitted to the Official List
and to the London Stock Exchange for such Notes to be admitted to trading on the London Stock Exchange’s
regulated market. The listing of the Programme in respect of Notes is expected to be granted on or before
12 November 2010.
Documents Available
For the period of 12 months following the date of this Base Prospectus, copies of the following documents
will, when published, be available for inspection from the registered office of the Issuer and from the
specified office of the Paying Agent for the time being in London:
(a)
the Articles of Association (with an English translation thereof) of the Issuer;
(b)
the consolidated audited financial statements of the Issuer in respect of the financial years ended
31 December 2008 and 31 December 2009 together with the audit reports prepared in connection
therewith. The Issuer currently prepares audited consolidated accounts on an annual basis;
(c)
the most recently published audited consolidated annual financial statements of the Issuer and the
most recently published unaudited consolidated interim financial statements (if any) of the Issuer
together with any audit or review reports prepared in connection therewith. The Issuer currently
prepares unaudited consolidated interim accounts on a quarterly basis;
(d)
the Trust Deed, the Agency Agreement and the forms of the Global Notes, the Notes in definitive
form, the Receipts, the Coupons and the Talons;
(e)
a copy of this Base Prospectus; and
(f)
any future Base Prospectuses, prospectuses, information memoranda and supplements including Final
Terms (save that the Final Terms relating to a Note which is neither admitted to trading on a regulated
market in the European Economic Area nor offered in the European Economic Area in circumstances
where a prospectus is required to be published under the Prospectus Directive will only be available
for inspection by a holder of such Note and such holder must produce evidence satisfactory to the
Issuer and the Paying Agent as to its holding of Notes and identity) to this Base Prospectus and any
other documents incorporated herein or therein by reference.
Clearing Systems
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg which are the
entities in charge of keeping the records. The appropriate Common Code and ISIN for each Tranche of Notes
allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. In
addition, the Issuer may make an application for any Notes in registered form to be accepted for trading in
book-entry form by DTC. The CUSIP and/or CINS numbers for each Tranche of such Registered Notes,
together with the relevant ISIN and (if applicable) common code, will be specified in the applicable Final
Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate
information will be specified in the applicable Final Terms.
212
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:08 – eprint6 – 4224 Section 09
The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels. The
address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
The address of DTC is 55 Water Street, New York, New York 10041, United States of America.
Conditions for Determining Price
The price and amount of Notes to be issued under the Programme will be determined by the Issuer and the
relevant Dealer at the time of issue in accordance with prevailing market conditions.
Significant or Material Change
There has been no significant change in the financial or trading position of the Group since 30 September
2010 and, other than as disclosed in “— Significant Factors Affecting Financial Condition and Results of
Operations”, “— Results of Operations — Nine Months Ended 30 September 2009 and 2010 — IFRS” and
“Liquidity and Capital Resources” in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations of the Group” on pages 107 to 116, 120 to 123 and 130 to 140, respectively, of this
Base Prospectus and in “Description of the Group” on pages 143 to 182 of this Base Prospectus, there has
been no material adverse change in the prospects of the Group since 31 December 2009.
Litigation
Neither the Issuer nor any other member of the Group is or has been involved in any governmental, legal or
arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer
is aware) in the 12 months preceding the date of this document which may have or have in such period had
a significant effect on the financial position or profitability of the Issuer or the Group.
Auditors
The Annual Financial Statements of the Group have been audited by Deloitte & Touche and
PricewaterhouseCoopers, independent auditors, as stated in their reports included herein.
Post-issuance Information
Save as set out in the Final Terms, the Issuer does not intend to provide any post-issuance information in
relation to any issues of Notes.
Dealers Transacting with the Issuer
Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking
and/or commercial banking transactions with, and may perform services to the Issuer and its affiliates in the
ordinary course of business.
213
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
DEFINITIONS AND GLOSSARY
The following technical terms and abbreviations when used in this Base Prospectus have the definitions
ascribed to them below:
2030 Economic Vision ................................
refers to the Abu Dhabi Government’s long-term plan to
diversify its economy and to grow the contribution of the
non-oil sector.
accessories ..................................................
means the additional pieces of equipment designed to
enhance mobile phones, including covers, batteries, chargers,
headsets, car kits and carrying cases.
advanced High-Speed Packet Access or
HSPA+ ........................................................
refers to a wireless broadband standard based on Universal
Mobile Telecommunications System (UMTS), which has
higher data transfer speeds and capacity providing download
speeds of up to 42 Mbps. Etisalat’s next-generation network
in the UAE utilises this technology.
AED or dirham ..........................................
refer to the UAE dirham being the legal currency of the UAE
for the time being.
airtime ........................................................
refers to the time that has elapsed between the start of a call
achieved by connecting to the service provider’s network and
the termination of a call achieved by pressing the end button.
Network connection time includes signals received prior to
voice transmission, such as busy signals and ringing.
Al-Warid......................................................
refers to Al-Warid Telecom.
analogue ......................................................
means the first generation of mobile telecommunications
technology in which radio signals are modulated
proportionally by the strength and frequency of audio
sounds.
Annual Financial Statements ....................
refers to the Etisalat GAAP Financial Statements and the
IFRS Financial Statements.
associates ....................................................
refers to investments in companies where the Group
exercises a significant influence.
asymmetric digital subscriber line or
ADSL ..........................................................
refers to a data communications technology that enables
faster data transmission over copper telephone lines than a
conventional modem can provide by utilising frequencies
that are not used by voice telephone calls.
Atlantique Telecom ....................................
refers to Atlantique Telecom S.A., the holding company of
the Group’s operations in Sub-Saharan Africa.
Average Revenue Per User or ARPU ......
refers to the measure of total service revenues for a given
period, divided by the number of months in that period and
divided again by that period’s average total customers
(calculated by dividing the aggregate number of customers at
the beginning and end of the relevant period by two). The
Group’s calculation of mobile ARPU includes outgoing
voice revenue, subscription fees and net customer roaming
revenue. Interconnect revenue is not included in mobile
ARPU. Fixed-line ARPU includes outgoing voice revenue
214
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
and line rental charges. Both ARPU measures include
residential as well as business customers.
band ............................................................
in wireless communication, band refers to a frequency or
contiguous range of frequencies.
base station controller, base station or
BSC ..............................................................
refers to equipment in a mobile telecommunications network
for controlling call set-up, signalling and maintenance
functions and the use of radio channels or one or more base
stations.
base transceiver station, BTS or sites ......
means the fixed transmitter/receiver equipment in each cell
of a mobile telecommunications network that communicates
by radio signal with mobile telephones in the cell.
Bharti Airtel................................................
refers to Bharti Airtel Limited.
bit ................................................................
refers to the smallest unit of binary information.
Board ..........................................................
refers to the board of directors of the Company.
broadband ..................................................
refers to a connection to exchange data at higher speeds than
through analogue lines. The most common broadband
technologies are cable modems (up to 3 Mbps), DSL (up to
8 Mbps), satellite (up to 10 Mbps), wireless (up to 1.54
Mbps) and optical fibre (up to 155 Mbps).
Canar ..........................................................
refers to Canar Telecommunications Co. Limited, the
Group’s operating company in Sudan.
Capital Market Authority..........................
refers to the Capital Market Authority of the Kingdom of
Saudi Arabia.
carrier..........................................................
refers to a generic term for a network operator.
cell ................................................................
means the geographic area covered by a single base station in
a mobile communications network.
cellular ........................................................
refers most basically to the structure of the wireless
transmission networks that are comprised of cells or
transmission sites.
churn............................................................
refers to the rate at which mobile customers are disconnected
from a network or are removed from an operating company’s
customer count due to inactivity. The Group calculates churn
by dividing the number of voluntary and involuntary
deactivations in a given period by the average number of
customers for the same period.
Code Division Multiple Access or
CDMA ........................................................
also known as spread spectrum, CDMA cellular systems
utilise a single frequency band for all traffic, differentiating
the individual transmissions by assigning them unique codes
before transmission. There are a number of variants of
CDMA (for example, W-CDMA, B-CDMA and TDSCDMA).
CITC............................................................
refers to the Communications and Information Technology
Commission of Saudi Arabia, the regulator of Mobily.
215
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
Company, Etisalat or Issuer......................
refers to Emirates Telecommunications Corporation and not
any of its subsidiaries, associates or joint ventures, unless the
context requires otherwise.
coverage ......................................................
means the geographical area encompassing a wireless
network. This is the area in which a network service provider
offers cellular service for a customer’s phone.
CRA ............................................................
means the Communications Regulatory Authority of Iran.
DFSA ..........................................................
refers to the Dubai Financial Services Authority.
digital ..........................................................
refers to a signalling technology in which a signal is encoded
into digits for transmission.
Digital Subscriber Line or DSL................
refers to a technology enabling a local loop copper pair to
transport high-speed data between a central office and the
subscriber’s premises.
Directors......................................................
refers to the members of the Board.
EgyNet ........................................................
refers to the Egyptian Company for Networks S.A.E.
Egyptian Pound or EGP............................
refer to the lawful currency of Egypt.
Egyptian Telecommunications Law..........
refers to Law 10, issued in February 2003, which regulates
the telecommunications sector in Egypt.
EIAL ............................................................
refers to Etisalat International Atlantique Limited, the entity
through which the Group holds its investment in Atlantique
Telecom.
EIEL ............................................................
refers to Etisalat International Egypt Limited, the entity
through which the Group holds its interest in Etisalat Misr.
EIIL ............................................................
refers to Etisalat International India Limited, the entity
through which the Group holds its interest in Etisalat DB
India.
EINL ............................................................
refers to Etisalat International Nigeria Limited, one of two
entities through which the Group holds its interest in Etisalat
Nigeria.
EIPL ............................................................
refers to Etisalat International Pakistan LLC, the entity
through which the Group holds its interest in PTCL.
EISLL ..........................................................
refers to Etisalat International Sri Lanka Limited.
EIZL ............................................................
refers to Etisalat International Zantel Limited, the entity
through which the Group holds its interest in Zantel.
e-marine ......................................................
refers to Emirates Telecommunications and Marine Services
FZE, which operates the Group’s submarine cable
installation, maintenance and repair business.
Enhanced Data rates for GSM Evolution
or EDGE ....................................................
means the final stage in the evolution of the GSM standard;
EDGE uses a new modulation schema to enable theoretical
data speeds of up to 384kbit/s within the existing GSM
spectrum.
216
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
Etisalat Afghanistan ..................................
refers to Etisalat Afghanistan, the Group’s operating
subsidiary in Afghanistan.
Etisalat DB India........................................
refers to Etisalat DB Telecom Private Limited, the Group’s
operating subsidiary in India.
Etisalat GAAP ............................................
refers to the Group’s internal accounting policies used in its
audited consolidated financial statements prior to those for
the year ended 31 December 2009.
Etisalat GAAP Financial Statements ......
refers to the Group’s audited consolidated financial
statements as of and for the financial years ended
31 December 2007 and 31 December 2008, prepared in
accordance with Etisalat GAAP.
Etisalat Lanka ............................................
refers to Tigo Private Ltd, the Group’s operating subsidiary
in Sri Lanka.
Etisalat Law ................................................
refers to Article 7 of the UAE Federal Law No. 1 of 1991.
Etisalat Misr ..............................................
refers to the Group’s operating company in Egypt.
Etisalat Nigeria ..........................................
refers to Emerging Market Telecommunications Services
Limited, the Group’s operating company in Nigeria.
Etisalat Services..........................................
refers to Etisalat Services Holdings LLC, the holding
company of the Group’s non-core service providers in the
UAE.
EU ................................................................
refers to the European Union.
euro and € ..................................................
refers to the lawful currency of the Member States of the
European Union participating in the European Union’s
Economic and Monetary Union.
Exchange Act ..............................................
refers to the U.S. Securities Exchange Act of 1934, as
amended.
Executive Order ........................................
refers to the current executive order made pursuant to the
Telecom Law and is largely concerned with specific matters
relating to the operations of the TRA.
fibre optic cable ..........................................
refers to a transmission medium made from pure and
consistent glass. Digital signals are transmitted across fibre
optic cable as pulses of light. While signals transmitted over
fibre optic cable travel at the same speed as those transmitted
over traditional copper cable, fibre optic cable benefits from
greater transmission capacity and lower distortion of signals
transmitted.
Fibre to the home or FTTH ......................
refers to a broadband network that uses fibre optic cable to
replace all or part of the usual metal local loop by extending
the fibre optic cable network to the subscriber’s living or
working space.
FIEL ............................................................
refers to the Financial Instruments and Exchange Law, as
amended.
Fitch ............................................................
refers to Fitch Ratings Ltd.
217
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
fixed-line......................................................
refers to a physical line connecting the subscriber to the
telephone exchange. In addition, fixed-line includes fixed
wireless systems, in which the users are in fixed locations
using a wireless connection to the telephone exchange.
fixed-to-mobile substitution ......................
refers to the use of a mobile telephone instead of a fixed-line
telephone as the result of a customer (most often a young or
new customer) either eliminating or never entering into a
subscription for fixed-line services in favour of relying solely
on mobile services.
fixed wireless ..............................................
refers to a network of wireless devices or systems that
connects two fixed locations (e.g., buildings) through a radio
or other wireless link. Typically, fixed wireless networks are
part of a wireless LAN infrastructure and utilise large
directional radio antennae designed for outdoor use.
Foreign Currency ......................................
refers to cash distributions denominated in a currency other
than AED or U.S. dollars, including Egyptian pounds and
West African CFA franc.
frequency ....................................................
means the rate at which an electrical current alternates,
usually measured in Hertz (Hz). Also the way to note a
general location on the radio frequency spectrum such as 800
MHz, 900 MHz or 1900 MHz.
FSMA ..........................................................
refers to the Financial Services and Markets Act 2000 (as
amended).
gateway........................................................
refers to a facility which adapts signals and the messages of
one network to the protocols and conventions of other
networks or services.
GCC ............................................................
refers to the Gulf Cooperation Council.
GDP ............................................................
refers to gross domestic product.
General Packet Radio Service or
GPRS ..........................................................
refers to a packet based telecommunications service designed
to send and receive data at rates from 56 Kbps to 114 Kbps
that allows continuous connection to the internet for mobile
phone and computer users. GPRS is a specification for data
transfer over GSM networks.
Gigabit passive optical network or
GPON ..........................................................
refers to a point-to-multipoint, fibre to the premises network
architecture in which unpowered optical splitters are used to
enable a single optical fibre to serve multiple premises.
GPON supports higher data rates and enhanced security
compared to earlier passive optical network structures.
Global System for Mobile
Communications or GSM..........................
refers to a comprehensive digital network for the operation of
all aspects of a cellular telephone system.
Group ..........................................................
refers to Etisalat and its consolidated subsidiaries and its
associated companies, unless otherwise specified or the
context otherwise requires.
High-Speed Downlink Packet Access or
HSDPA ........................................................
refers to a system which allows networks based on the
Universal Mobile Telecommunications System (UMTS) to
have higher data transfer speeds and capacity. Current
218
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
HSDPA systems support download speeds of 1.8, 3.6, 7.2
and 14.0 Mbps.
High-Speed Uplink Packet Access or
HSUPA ........................................................
refers to a system which allows networks based on the
Universal Mobile Telecommunications System (UMTS) to
improve the performance of uplink dedicated transport
channels. Current HSUPA systems support up-link speeds of
up to 5.76 Mbps.
Home location registers ............................
refers to a database used by a cellular operator to keep track
of a network’s users. When switched on, a cell phone
automatically informs the network which cell it is in at
intervals of a second or so. This information is stored on the
home location register, so that when one user dials another
user’s number, the call can be routed through the network
accordingly.
IASB ............................................................
refers to the International Accounting Standards Board.
ICT ..............................................................
refers to information and communication technology.
IFRIC ..........................................................
refers to the International Financial Reporting Interpretations
Committee.
IFRS Financial Statements........................
refers to the Group’s audited consolidated financial
statements as of and for the financial year ended 31
December 2009 (and the unaudited consolidated
comparatives as of and for the financial year ended 31
December 2008), prepared in accordance with IFRS.
Instaphone ..................................................
refers to Pakcom (Pvt.) Limited, a mobile services provider
in Pakistan.
Investor’s Currency ..................................
refers to the currency in which an investor’s financial
activities are principally denominated.
Integrated Services Digital Network or
ISDN ............................................................
refers to a way to move more data over existing regular
phone lines. It can provide speeds of about two 64 Kbpschannels, thereby providing integrated digital transmission
of data and voice at a higher speed and broader band over
regular phone lines. An ISDN-modem is necessary to
connect to the network.
Interim Financial Statements....................
refers to the Group’s unaudited condensed consolidated
financial statements as of and for the nine months ended 30
September 2010, prepared in accordance with IFRS.
interconnection ..........................................
means the way in which networks are connected to each
other and the charges payable for accepting traffic from or
delivering traffic to another.
International Direct Dial or IDD ..............
refers to calls made directly from one mobile or fixed-line
customer located in a particular country to another mobile or
fixed-line number located in a different country.
internet and communication technology
or ICT..........................................................
refers to all technologies used to facilitate and enhance
internet and telecommunications services.
Internet Protocol or IP ..............................
refers to a standard procedure whereby internet-user data is
divided into packets to be sent onto the correct network
219
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
pathway. In addition, IP gives each packet an assigned
number so that the message completion can be verified.
Before packets are delivered to their destination, the protocol
carries out unifying procedures so that they are delivered in
their original form.
Internet Protocol Television or IPTV ......
refers to the provision of television programming and
services through the architecture and networking methods of
the Internet and broadband Internet access networks, instead
of being delivered through traditional radio frequency
broadcast, satellite signal, and cable television formats.
Internet Service Provider or ISP ..............
refers to a service provider who provides access to internet
services.
leased line ....................................................
refers to a voice or data circuit leased to connect two or more
locations for the exclusive use of the subscriber.
Legended Notes ..........................................
refers to Notes represented by a Rule 144A Global Note or
any Notes issued in registered form in exchange or
substitution therefor.
Licence ........................................................
refers to Etisalat’s licence dated 9 March 2006 issued under
the Telecom Law.
Local Area Network or LAN ....................
refers to a telecommunications network covering a small
physical area, like a home, office, or small group of
buildings, such as a school, or an airport.
London Stock Exchange ............................
refers to the London Stock Exchange plc.
Long Term Evolution or LTE ..................
refers to the trademarked project name of a high performance
air interface for cellular mobile telephony designed to
increase the capacity and speed of mobile telephone
networks.
Mbps ............................................................
refers to the data transfer rate equalling 1,000,000 bits (or
one megabit) per second.
MCIT ..........................................................
refers to the Egyptian Ministry of Communications and
Information Technology.
Megahertz or MHz ....................................
refers to a unit of frequency of one million Hertz.
Mobile Switching Centre or MSC ............
refers to an exchange used in a cellular network to switch
incoming traffic to the required base station nearest to the
user. Whereas the local exchange in a fixed network will
always deliver calls to an assigned circuit denoted by the
telephone number, mobile switching centres route calls for a
particular number according to location information received
from a network of base stations. Since a user’s location may
change during a call, MSCs also perform the switching
function required to transfer a call from one base station to
the next.
Mobile virtual network operator or
MNOV ........................................................
refers to a mobile operator that does not own its own
spectrum and usually does not have its own network
infrastructure. Instead, MVNOs have business arrangements
220
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
with traditional mobile operators to buy minutes of use for
sale to their own subscribers.
Mobilink ......................................................
refers to the brand name of PMCL’s GSM operation.
Mobinil ........................................................
refers to the Egyptian Company for Mobile Services S.A.E.,
a mobile services provider in Egypt.
Mobily ........................................................
refers to Etihad Etisalat Company, the Group’s associate in
Saudi Arabia.
Mobily Management Agreement ..............
refers to the management agreement between Etisalat and
Mobily entered into pursuant to CITC licensing requirements
and effective from 14 August 2004.
Moody’s ......................................................
refers to Moody’s Investors Service Limited.
MTN ............................................................
refers to Mobile Telephone Networks,
telecommunications operator in Africa.
Mubadala ....................................................
refers to Mubadala Holdings Cyprus Limited.
Multimedia Messaging Service or
MMS ............................................................
a text messaging service offering various kinds of
multimedia content, including images, audio and video clips.
Nedaa ..........................................................
refers to the Professional Communication Corporation in the
UAE.
New York Convention ................................
refers to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 1958, which entered
into force in the UAE on 19 November 2006.
network........................................................
refers to an interconnected collection of components which
would, in a telecommunications network, consist of switches
connected to each other and to customer equipment by real
or virtual links. Transmission links may be based on fibre
optic or metallic cable or point-to-point radio connections.
NGN ............................................................
refers to Next Generation Network, in which one network
transports all information and services in packets.
Nile Online ..................................................
refers to the Egyptian Company for Internet and Digital
Infrastructure S.A.E., an ISP in Egypt.
NTRA ..........................................................
refers to the Egyptian National Telecommunications
Regulatory Authority.
number portability ....................................
refers to a facility provided by telecommunications operators
which enables customers to keep their full telephone
numbers when they change operators.
OFAC ..........................................................
refers to the Office of Foreign Assets Control of the U.S.
Department of Treasury.
Official List ................................................
refers to the official list of the UK Listing Authority.
on-network ..................................................
means telephone calls that stay on a private network,
travelling by private line from beginning to end without the
need to interconnect with another network.
OPEC ..........................................................
refers to the Organisation of Petroleum Exporting Countries.
221
a
mobile
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
operator ......................................................
means any company building and running its own network
facilities.
Orange ........................................................
refers to France Telecom.
PAMR ..........................................................
refers to the Public Access Mobile Radio network, a field
radio communications system which uses portable, mobile,
base station, and dispatch console radios to allow users to
communicate with each other. A PAMR network provides for
both voice and data services, as well as national and multinational networks and national and international roaming.
Pakistani Ministry......................................
refers to the Government of Pakistan Ministry of
Communications.
Paktel ..........................................................
refers to Paktel (Pvt.) Limited.
penetration ..................................................
refers to a measurement of access to telecommunications,
normally calculated by dividing the number of subscribers to
a particular service by the population and multiplying by
100. Also referred to as teledensity (for fixed-line networks)
or mobile density (for cellular networks).
postpaid ......................................................
refers to a type of service plan which is billed after the
service has been provided, usually monthly.
prepaid ........................................................
refers to a service plan requiring subscribers to pay for
wireless services in advance.
Prospectus Directive ..................................
refers to the Directive of the European Parliament and of the
Council 2003/71/EC.
PTA ..............................................................
refers to the Pakistan Telecommunications Authority.
PTCL and Ufone ........................................
refers to Pakistan Telecommunications Company Limited,
the Group’s associate in Pakistan, and its mobile
telecommunications provider in Pakistan, respectively.
PTCL Service Agreement..........................
refers to the service agreement between Etisalat and PTCL
made pursuant to the PTCL Shareholders’ Agreement and
effective from 10 October 2006.
PTCL Shareholders’ Agreement ..............
refers to the agreement between EIPL and the Government of
Pakistan dated 12 April 2006.
QIBs ............................................................
refers to Qualified Institutional Buyers as defined in Rule
144A under the U.S. Securities Act.
radio network controllers or RNCs..........
refers to the devices that connect and control base stations
within each cell site in a 3G network.
recharge ......................................................
means adding credit onto a prepaid account that is depleted
as airtime is used.
Reference Interconnection Offer ..............
refers to certain interconnection related services to an
operator supplied by another operator.
Regulated Activities....................................
refers to the activities that are regulated under the Telecom
Law, and therefore require a licence issued under the Telecom
Law.
222
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
Regulation S................................................
refers to Regulation S under the U.S. Securities Act.
Relevant Factor ..........................................
refers to the factors, including a reference to an index or
formula, to changes in the prices of securities or
commodities, or movements in currency exchange rates or
other factors, that may be used by the Issuer to determine the
principal or the interest due under the Notes.
Relevant Member State ............................
refers to any Member State of the European Economic Area
which has implemented the Prospectus Directive
(2003/71/EC).
roaming ......................................................
means the ability to make and receive calls on the same
mobile phone when travelling outside the area of the home
network operator.
Rule 144A....................................................
refers to Rule 144A under the U.S. Securities Act.
Sanction Targets ........................................
refers to certain countries, including Iran and Sudan, and
specifically designated nationals that are subject to
restrictions pursuant to OFAC.
Sark ............................................................
refers to Sark Corporation N.V., the entity through which the
Company holds its interest in Etisalat Lanka.
Savings Directive ........................................
refers to the EC Council Directive 2003/48/EC on the
taxation of savings income.
scratch cards ..............................................
refers to cards with a special opaque strip on the surface of
the card and covered password, code or other type of
information. It is necessary to scratch the strip to retrieve the
information underneath it. Widely used in the activation of
prepaid services.
SEC ..............................................................
refers to the United States Securities and Exchange
Commission.
Securities Act ..............................................
refers to the U.S. Securities Act of 1933, as amended.
service provider ..........................................
refers to a term usually employed to distinguish a company
which offers telecommunications services over another
company’s infrastructure from one which owns and operates
its own network.
Short Message Service or SMS ................
refers to a text message service which enables users to send
short messages (160 characters) to other users.
Significant Market Power or SMP ..........
refers to a term used to describe a high degree of influence in
the market. It is not an economic measurement, but rather it
requires a consideration of the factors specific to a given
market.
SIM card ....................................................
refers to subscriber identity module cards that contain a
smart chip with memory that allows for data storage and
software applications.
SMB ............................................................
refers to small and medium-sized businesses. For customers
of Etisalat, it specifically refers to those customers
contributing AED 25,000 to AED 250,000 to Etisalat’s
annual revenue.
223
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
SOCPA ........................................................
means the Saudi Organization for Certified Public
Accountants.
software ......................................................
means the detailed instructions to operate a computer,
differentiating instructions (i.e., the program) from the
hardware.
Specified Currency ....................................
refers to the currency in which the Issuer will pay principal
and interest on the Notes.
spectrum......................................................
refers to a continuous range of frequencies, usually wide in
extent within which waves have some specific common
characteristics.
S&P..............................................................
refers to Standard & Poor’s Rating Services.
Star Satellite................................................
refers to Star Satellite Communications Company, a satellite
services provider licenced in the UAE.
STC ..............................................................
refers to Saudi Telecom Company, the incumbent
telecommunications operator in Saudi Arabia.
Sterling or £ ................................................
refer to pounds sterling being the legal currency for the time
being of the United Kingdom.
Sudatel ........................................................
refers to Sudan Telecommunications Company Limited.
switch ..........................................................
means communications equipment which enables calls made
by one user to another user to be routed, either directly or
through other switches, through a network for delivery to the
intended recipient.
switching centre..........................................
refers to a system which directs radio signals (telephone
calls) to telephone users or other networks. If the intended
recipient is another mobile customer on the same network,
the signal is directed by the message switching centre to the
base transceiver station serving the cell in which the recipient
is located. Otherwise the signal is passed by the message
switching centre to another telecommunications network
through an interconnection point to that network.
Telecom Law ..............................................
refers to UAE Decree No. 3 regarding the Regulation of the
Telecommunication Sector, as amended by the Federal Law
by Decree No. 1 of 2005 and the Federal Law by Decree
No. 5 of 2008.
Telephone Direct Exchange Line or Tel
DEL ............................................................
refers to the traditional system for providing fixed-line
telecommunications services.
Third Generation Mobile System or 3G ....
means the generic term for the next generation of wireless
mobile communications networks. 3G networks will transmit
data at 144 kilobits per second or up to 2 Mbps from fixed
locations.
Thuraya ......................................................
refers to Thuraya Telecommunications Company PJSC, the
Group’s associate providing satellite services in the UAE and
abroad.
TRA ............................................................
refers to the General Authority for Regulating the
Telecommunications Sector in the UAE.
224
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 10
TRAI............................................................
refers to the Telecom Regulatory Authority of India.
UAE ............................................................
refers to the United Arab Emirates.
UAE Government ......................................
refers to the Federal Government of the UAE.
UK Listing Authority or UKLA................
refers to the UK Financial Services Authority in its capacity
as competent authority under the FSMA.
Universal Mobile Telecommunications
System or UMTS ........................................
refers to a third generation (3G) network designed to provide
a wide range of voice, high-speed data and multimedia
services.
U.S. dollars, dollars and U.S.$ ..................
refer to the lawful currency of the United States of America.
Value-added services or VAS ....................
refers to a service which provides a higher level of
functionality than the basic transmission services offered by
a telecommunications network for the transfer of information
among its terminals, as well as enhanced media content
offerings.
Virtual Private Network or VPN ..............
refers to a network that is layered on top of an underlying
network. The private nature of a VPN means that the data
travelling over the VPN is not generally visible to, or is
encapsulated from, the underlying network traffic.
Vodafone......................................................
refers to the Vodafone Group plc.
Voice over Internet Protocol or VoIP ......
refers to a telephone service via internet, or via TCP/IP
protocol, which can be accessed using a computer, a sound
card, adequate software and a modem.
web ..............................................................
is an abbreviation for the internet’s World Wide Web.
WiMAX ......................................................
refers to Worldwide Interoperability for Microwave Access,
a telecommunications technology that provides fixed and
fully mobile internet access.
Wireless Application Protocol or WAP ....
refers to a de facto standard for enabling mobile phones to
access the Internet and advanced services.
Wireless Fidelity or WiFi ..........................
is a technology for wireless networking that employs the
IEEE 802.11 family of standards; WiFi is a common
enabling technology for wireless local area networks
(WLANS).
XL ................................................................
refers to PT XL Axiata TBK (formerly PT Excelcomindo
Pratama Tbk), the Group’s associate in Indonesia.
Yahsat ..........................................................
refers to Al Yah Satellite Communications Company, a
specialised operator of satellite-based communications
services in the UAE.
Zain..............................................................
refers to Mobile Telecommunications Company K.S.C.
Zantel ..........................................................
refers to Zanzibar Telecom Ltd, the Group’s operating
company in Tanzania.
Zong ............................................................
refers to China Mobile Pakistan.
225
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 11
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited condensed consolidated interim financial statements of the Issuer as of and
for the nine month period ended 30 September 2010 ..............................................................
F-2
Auditor’s audit report in respect of the consolidated financial statements of the Issuer as of
and for the year ended 31 December 2009 ..............................................................................
F-20
Consolidated financial statements of the Issuer as of and for the year ended
31 December 2009 ....................................................................................................................
F-22
Auditors’ audit report in respect of the consolidated financial statements of the Issuer as of
and for the year ended 31 December 2008 ..............................................................................
F-101
Consolidated financial statements of the Issuer as of and for the year ended
31 December 2008 ....................................................................................................................
F-103
Auditors’ audit report in respect of the consolidated financial statements of the Issuer as of
and for the year ended 31 December 2007 ..............................................................................
F-131
Consolidated financial statements of the Issuer as of and for the year ended
31 December 2007 ...................................................................................................................
F-133
F-1
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-2
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-3
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-4
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-5
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-6
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-7
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-8
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-9
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-10
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-11
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-12
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-13
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-14
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-15
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-16
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-17
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-18
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:55 – Mac6 – 4224 Section 11a
F-19
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-20
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-21
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-22
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-23
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-24
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-25
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-26
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-27
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-28
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-29
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-30
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-31
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-32
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-33
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-34
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-35
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-36
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-37
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-38
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-39
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-40
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-41
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-42
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-43
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-44
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-45
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-46
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-47
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-48
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-49
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-50
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-51
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-52
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-53
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-54
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-55
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-56
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-57
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-58
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-59
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-60
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-61
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-62
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-63
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-64
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-65
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-66
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-67
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-68
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-69
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-70
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-71
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-72
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-73
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-74
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-75
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-76
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-77
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-78
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-79
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-80
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-81
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-82
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-83
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-84
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-85
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-86
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-87
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-88
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-89
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-90
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-91
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-92
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-93
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-94
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-95
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-96
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-97
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-98
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-99
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:56 – Mac6 – 4224 Section 11b
F-100
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-101
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-102
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-103
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-104
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-105
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-106
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-107
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-108
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-109
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-110
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-111
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-112
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-113
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-114
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-115
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-116
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-117
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-118
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-119
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-120
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-121
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-122
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-123
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-124
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-125
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-126
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-127
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-128
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-129
Level: 0 – From: 0 – Thursday, October 21, 2010 – 23:59 – Mac6 – 4224 Section 11c
F-130
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-131
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-132
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-133
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-134
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-135
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-136
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-137
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-138
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-139
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-140
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-141
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-142
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-143
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-144
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-145
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-146
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-147
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-148
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-149
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-150
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-151
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-152
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-153
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-154
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-155
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-156
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-157
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-158
Level: 0 – From: 0 – Friday, October 22, 2010 – 00:01 – Mac6 – 4224 Section 11d
F-159
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 12
ISSUER
Emirates Telecommunications Corporation
P.O. Box 3838
Abu Dhabi
United Arab Emirates
PRINCIPAL PAYING AGENT, TRANSFER AGENT, PAYING AGENT AND EXCHANGE AGENT
Citibank, N.A.
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB
United Kingdom
REGISTRAR AND TRANSFER AGENT
Citigroup Global Markets Deutschland AG
Reuterweg 16
60323 Frankfurt
Germany
TRUSTEE
Citicorp Trustee Company Limited
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB
United Kingdom
LEGAL ADVISERS
To the Issuer as to
English law
UAE law
United States law
Allen & Overy LLP
One Bishops Square
London E1 6AD
United Kingdom
Allen & Overy LLP
Suite 101/202, Level 1 & 2
The Gate Village Building GV08
Dubai International Financial Centre
P.O. Box 506678
Dubai
United Arab Emirates
Allen & Overy LLP
Edouard VII
26 Boulevard des Capucines
75009 Paris
France
To the Dealers as to English law and UAE law
To the Dealers as to United States law
Clifford Chance LLP
13th and 14th Floors, Al Niyadi Building
Airport Road, Sector W-14/02
P.O. Box 26492
Abu Dhabi
United Arab Emirates
Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ
United Kingdom
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 12
AUDITORS
To the Issuer
Deloitte & Touche
P.O. Box 990
Abu Dhabi
United Arab Emirates
PricewaterhouseCoopers
P.O. Box 45263
Abu Dhabi
United Arab Emirates
DEALERS
Citigroup Global Markets Limited
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB
United Kingdom
The Royal Bank of Scotland plc
135 Bishopsgate
London EC2M 3UR
United Kingdom
Level: 10 – From: 10 – Thursday, November 11, 2010 – 13:09 – eprint6 – 4224 Section 12
printed by eprintfinancial.com
tel: + 44 (0) 20 7613 1800 document number 4224