Table of contents. Etisalat

Transcription

1 Annual Report 2013

2 Table of contents 02 Key Highlights of Business Snapshot 06 Chairman s Statement 08 Board of Director s 10 Timeline 12 Chief Executive Officer s Statement 14 Management Team 18 Group Strategy 20 Awards 22 Operational Highlights 26 Our International Presence 30 Management Review Middle East 30 Africa 38 Asia 44 Services Holding 48 Human Capital 50 Corporate Social Responsibility Corporate Governance 57 Independent Auditor s Report to the Shareholders 58 Consolidated Income Statement 59 Consolidated Statement of Comprehensive Income 60 Consolidated Statement of Financial Position 61 Consolidated Statement of Changes in Equity 62 Consolidated Statement of Cash Flows 63 Notes to the Consolidated Financial Statements 112 Notice of General Annual Shareholders Meeting 01

3 Key highlights of AED Billion Revenue 148 Million Aggregate Subscribers 18.9 AED Billion EBITDA 7.1 AED Billion Net Profit 6.3 AED Billion CAPEX 70 Fils Dividend per share

4 Aspire To lead Business Snapshot is an international, blue-chip organisation with operations in 15 countries across the Middle East, Africa and Asia. It is one of the leading telecom operator with one of the largest market capitalization among Middle East, African and Asian telcos. It is a highly rated telecom company with ratings from Standard & Poors, Moody s and Fitch (Aa3/AA-/A+); with low leverage and strong UAE Government support. s focus is on delivering innovative solutions to transform the communities in which it operates and fast track social development and economic growth. This is underpinned by its commitment to actively develop and engineer platforms for growth within the local markets in which it operates through the deployment of advanced technologies, quality networks and customer focused services. became one of the world s fastest growing telecom operators; with customer numbers growing from 4 million to over 140 million in less than 10 years. It s international acquisition programme began in earnest in 2004 through the award of the second mobile license, and the first 3G license in Saudi Arabia. Since then the company has witnessed rapid expansion, across the Middle East, Africa and Asia through acquisitions and organic growth. now has access to a population of close to 700 million people, with Thuraya; its satellite network provider covering over two thirds of the planet s surface. The three key pillars of our strategy involve owning and managing an attractive well balanced portfolio of assets consisting of controlling stakes in well positioned operators in target markets. Our second pillar involves providing differentiated, innovative service offerings that leverage our broadband infrastructure and networks. Superior customer experience resulting from s operational excellence is our third pillar. We aim to pro-actively and consistently serve our customers with a common set of brand values based on in-depth customer understanding and building trusted relationships. We will manage this through a strong focus on the efficiency and effectiveness of our operational processes throughout our footprint. For nearly 40 years, has helped the UAE sustain its position as the region s hub for business, trade and foreign investment by providing reliable and high quality services. Earlier in the year, UAE successfully completed the rollout of its fibre-to-the-home (FTTH) network across 1.3m homes in the country. This achievement contributed to UAE being ranked as a global leader in connecting homes in the country on the FTTH network. The advanced infrastructure allows the utilisation of the most advanced technology applications to the UAE market. has launched 4G mobile services in the UAE and Saudi Arabia, and today operates the Middle East s largest LTE network with population coverage exceeding 82 per cent. offers both the Middle East s fastest fixed line broadband service with speeds of up to 500Mbps - the highest mobile broadband connectivity speeds to date. It has also launched several 3G networks in its footprint including Egypt Afghanistan; Ivory Coast and Benin. These advancements have helped capture market share with the introduction of mobile broadband services and affordable internet access. is committed to the principles of corporate social responsibility through strategic partnerships to increase access to education and health care via technology. Under the banner for Good, and its operating companies have been actively working on Mobile for Development initiatives in 2013, in collaboration with its global partners. The efforts have helped bridge the gap between emerging markets and developed nations, while generating impressive digital dividends in the form of jobs, economic growth and stability. 04 Annual Report

5 Growing Through Innovation Last year, witnessed encouraging financial results. Increased revenues and profits and a growing customer base have put in a strong position to embrace the changes that are enveloping the telecoms industry and have enabled it to continue to add value to customers, shareholders and the communities in which we operate. Over the past year we have started to detect a cultural change throughout the corporation, as a new approach encouraged by the leadership cascades to our teams on the ground throughout the Middle East, Asia and Africa. This paradigm shift is the evolution of into a brand that will not just offer its customers products and services, but one that will provide them with a complete experience every time they interact with. By putting customers at the heart of everything we do, we are enabling our current success and planting the seeds of future growth. This is an encouraging step that has put us firmly on the path to reach our aspiration of becoming the leading and most admired telecoms operator in all our operating markets. Being an industry leader is about more than just securing a large market share in each country. It is about driving innovation, satisfying customers and engaging with communities for the benefit of all of society. We want to be a trusted companion to our customers, helping them navigate the digital world. We know the technological advances sweeping through the industry can be daunting for many consumers, it is therefore our job to simplify and explain the changes in terms everyone can embrace. The customer s journey is never over and we must constantly grow to meet their ever increasing demands. As I have already said, proof that we are on the right track is in our financial results and growth. Over the past year, s revenue grew 18 per cent to AED 38.9 billion and the consolidated net profits after Federal Royalty of grew 5% to AED 7.1 billion. Those are impressive indicators by any standard and testament to the strategic direction of the corporation. Given such strong financials the board decided to recommend dividend distribution of 70 fils per share for fiscal year Our aspiration to grow and develop was epitomised last year by the potential deal with Vivendi to buy its shares in Maroc Telecom. We reached an agreement on key terms and signed a Share Purchase Agreement following the completion of a series of successful negotiations. When Maroc Telecom profitable operations are added to our global footprint, we will have a very strong portfolio in West and North Africa. By investing in Maroc Telecom, is investing in the future of Africa. The deal follows a global trend of consolidation in the industry and it is another step toward becoming an admired operator. By admired, I mean that we should actively participate in local growth, give local businesses and communities the means to grow and develop, provide jobs, release Chairman s Statement new innovative products that can be harnessed in education and healthcare, and give directly to good causes through socially responsible initiatives. Innovation is at the heart of everything we do, whether it is pricing, developing networks, diversifying products and services or giving back to society. Another area that was fertile soil for innovation this year was in striking up partnerships that will benefit our organisation and add value to the end user. These include agreements with MasterCard to bring the award-winning mobile commerce solution, Flous, to some of our African operations, and joining the machine-to-machine (M2M) World Alliance, an organisation dedicated to advancing this exciting new technology. Innovation in digital products and services throughout the group has continued to be led by the Digital Services Unit. This talented group of individuals is driving best practices across s operating countries and developing transformational innovative solutions. s growth to become one of the industry s largest companies brings new opportunities, but it also brings new challenges. Large organisations are at risk of becoming too slow to adapt to changes in the marketplace, especially in a dynamic environment such as telecoms. We must therefore always be on our guard and leverage the size of the network and vast expertise amongst employees to the benefit of each operating country. Finally, I would like to thank the Leadership of the UAE and our shareholders for their continued and unwavering support; our employees for their dedication and most of all our customers for their loyalty and faith in our services. On the back of such a successful year, we are looking to the future with confidence that we will continue our emergence as one of the best telecoms operators in the world. Eissa Mohamed Al Suwaidi Chairman 06 Annual Report

6 Board of Directors Eissa Mohamed Al Suwaidi Chairman Investment & Finance Committee Khalaf Bin Ahmed Al Otaiba Vice Chairman Member-Investment & Finance Committee Sheikh Ahmed Mohamed Sultan Bin Suroor Al Dhaheri Member Audit Committee Abdulla Salem Al Dhaheri Member Chairman-Nomination & Remuneration Committee Mohamed Hadi Ahmed Abdulla Al Hussaini Member Investment & Finance Committee Mubarak Rashed Al Mansouri Member Nomination & Remuneration Committee Investment & Finance Committee Abdulfattah Sayed Mansoor Sharaf Member Investment & Finance Committee Mana Mohamed Saeed Al Mulla Member Audit Committee Abdelmonem Bin Eisa Bin Nasser Alserkal Member Nomination & Remuneration Committee Essa Abdulfattah Kazim Member Chairman-Audit Committee Shoaib Mir Hashim Khoory Member Nomination & Remuneration Committee Hasan Al Hosani Corporate Secretary 08 Annual Report

7 Timeline - History of Our Journey 1983 The ownership structure changes: The United Arab Emirates government acquires a 60 per cent share in the company and the remaining 40 per cent is publicly traded The Emirates Telecommunications Corporation launches Middle East s first mobile network The Emirates Telecommunication Corporation is founded Internet services are rolled out across the country, another first in the region. opens its SIM card factory, Ebtikar, in Ajman - now regarded as one of the best industrial organisations in the UAE and a leading provider of smart card solutions Middle East s first GSM service is introduced in the UAE. also launches Emirates Data Clearing House, now one of the world s leading clearing houses - providing complete solutions to GSM operators, who in turn, provide roaming facilities to their customers The Middle East s first broadband Internet service using the latest ADSL technologies is introduced. buys a stake in Tanzanian operator Zantel, its first step towards becoming a major international telecoms group becomes one of the founding investors in satellite telecommunications provider, Thuraya wins the second license to operate in Saudi Arabia thereby introducing Etihad Mobily. It also buys a stake in Canar, a new fixed line operator in Sudan launches Middle East s first 3G network and offers MMS services to its customers Mobile subscribers exceed the 1 million mark as mobile data services is introduced using ewap. introduces the E-Vision brand for its cable TV services wins the third mobile license in Egypt and launched the country s first 3G network networks. It is also awarded a license to provide mobile services in Afghanistan. Services Holding is formed to manage eight business units that offer mission-critical telecoms related services to the industry. This includes EDCH, e-marine, Ebtikar, Academy, E-Facility Management, e-real Estate, Directory Services and Tamdeed acquires a stake and takes management control of PTCL, the incumbent operator in Pakistan. expands into West Africa by taking a stake in Atlantique Telecom whose operations in Benin, Burkina Faso, the Central African Republic Gabon, Ivory Coast, Togo, and Niger completes the rollout of a nationwide fibre optic backbone over which next generation services will be provided in the UAE. is named Largest Carrier in the Middle East in the Financial Times Top 500 list acquires a stake in a green-field operator in Nigeria, the largest and fastest growing market in Africa. introduces mobile TV and officially launches its wholesale business unit as The Smart Hub for the Middle East introduces the first real 4G (LTE) experience to its customers in the UAE acquires Tigo, a Sri Lankan operator, which is later rebranded to Lanka signed SPA with Vivendi to acquire Vivendi s 53% stake in Maroc Telecom Group. Benin obtained a Universal Mobile Service License which covers 2G, 3G, 4G and any other mobile technologies available in future in Benin won 3G license in Afghanistan and Ivory Coast and launched the first 3G services in history of Afghanistan. won three GSMA awards in the Best Mobile Health Innovation and mwomen Best Mobile Product categories for its mobile health innovation Mobile Baby, as well as the Best Mobile Money Innovation award. 10 Annual Report

8 Aspire Forward If I had to summarise this year in one word it would be growth. As we continue our journey from being a provider of fixed and mobile communications to a company that offers and enables the use of a vast number of innovative digital products and services, the relationship with customers is growing deeper too. That is why we speak about adding value. We are providing our customers with the tools to solve problems in their daily lives. Aspiring forward, we have adapted to this evolution admirably so far, even though there is more work to do. And while it is important to recognise the challenges, it is just as important to recognise, and take comfort from our success, and indeed celebrate it. The results this year are a clear indication that we are on the right track. In 2013, aggregate subscribers, grew 7 per cent to reach 148 million and Group revenues grew by 18 per cent to reach AED 38.9 billion. Revenue continues to be boosted by our solid growth in the UAE and international markets, which now account for 36 per cent of the consolidated revenue. Our net profit after Federal Royalty reached AED 7.1 billion, 5 per cent higher than last year. In the UAE, we continued to cement our position as the leading operator in the country despite further competitive pressures. We have continued to be the dominant force in mobiles, driven by our competitive pricing, innovative service offerings and the high quality of our network. Continued improvements in customer service have also engendered a spirit of loyalty among our customers and we will continue to focus on providing a unique customer experience and superior service in the future. We also have strong growth in the data and internet segments, and revenues will continues to grow as we benefit from our investment in infrastructure, including the establishment of the world s most extensive Fiber-To-The-Home (FTTH) network. By utilising best technological and innovative solutions globally available, we are connecting government, businesses and individuals to the services they demand at exceptionally fast speeds. continued to deepen its relationship with other international organisations that will be important to the future of telecoms. Our intention to innovate through global partnerships was clearly demonstrated last year when we joined the Machineto-Machine (M2M) World Alliance, a coalition of eight major operators that are working together to bring the latest M2M technologies to global markets. By being part of the alliance, is positioning itself to become a leader in the global telecom industry. is now the enabler of many innovative services most noticeably in government. A clear example of this is the e-government which we have seen in the UAE for many years and which was reinforced further by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President & Prime Minister of UAE, Ruler of Dubai in his Mobile Government vision. We are delighted with the progress being made in the UAE and we are working with many ministries on different turn-key projects. Some of these are based on our experiences in other markets especially in the fields of Identity, Health, Education and Finance. All this is testament to our visionary government and the healthy growth which has created potential far beyond expectations. has proven that mobile finance technologies can be secure and lifechanging across its footprint in places such as Afghanistan, Tanzania and recently in Sri Lanka, Egypt and Niger. Mobile money technology is now at a very mature level and extremely secure and offers significant benefits for communities, especially those with lower incomes. Another notable innovation was when we became one of the first companies in the world to pass the initial stages of a procedure to obtain our own top-level domain names. The approval paves the way to using an extension such as.etisalat. This will help our work in continuing to build our brand as one of the most innovative companies in the region. Turning to our work in the community, an event that caught the eye of the world Chief Executive Officer s Statement was s involvement in a bicycle tour across five European countries to test the latest mobile technologies that can be used to help manage and cure diabetes. Diabetes, of course, takes a huge toll on many families, especially here in the UAE, and the tour became a symbol for s efforts to help combat the disease. We hope that the technology tested during the tour will make a difference to people s lives. The combination of innovation and giving back is part of our efforts towards the communities we serve. There have also been many other positive developments this year: higher revenues, and successful initiatives. However, we must not allow good news to abate our efforts or distract us from the difficult challenges facing the industry. Whether our voyage is on calm or turbulent waters, we must always focus on the goal of longterm success through innovation, strong performance and progress. We still have a lot of work to do to build our capabilities, be more efficient and launch services in areas such as M2M, e-commerce, video and cloud services. Having said that, I m extremely confident that we will have more good news in the coming years. This is because we invest in people and empower our customers. I am honoured to lead the Group in building upon the success of previous years and into the next stage for generations to come. Ahmed Abdulkarim Julfar Chef Exective Officer 12 Annual Report

9 Management Team Ahmad Abdulkarim Julfar Chief Executive Officer- Group Mr. Julfar was appointed as the CEO of the Group in August Prior to this appointment, he was the Chief Operating Officer of EG. Mr. Julfar has more than 25 years experience in the telecommunication sector and has served in various management positions including General Manager of ecompany, ComTrust and s Dubai region. In addition, Mr. Julfar serves on the boards of Mobily, where he is the Chairman of the Risk Management committee, Misr and Services Holding. Mr. Julfar holds Bachelor s Degrees in Civil Engineering and Computer Science from the USA. Saleh Al Abdooli Chief Executive Officer, UAE Engineer Saleh Al Abdooli was appointed as Chief Executive Officer of UAE in April A strong and charismatic leader, Saleh rose to international fame after his resounding success in Egypt as the CEO of Misr. He built and launched the first 3G operator in Egypt in 7 months. In less than five years, he achieved 27% of revenue share, 28% market share, 36% of EBITDA margin, and 99% 2G/3G coverage. Al Abdooli holds Bachelor s and Master s in Electrical Eng. and Telecom from University of Colorado at Boulder, USA. Serkan Okandan Chief Financial Officer, Group Mr. Okandan joined in January 2012 as Chief Financial Officer of the Group. Prior to his appointment, he was the Group Chief Financial Officer of Turkcell. Mr. Okandan started his professional career at PricewaterhouseCoopers in 1992, and worked for DHL and Frito Lay as a Financial Controller before joining Turkcell. Mr. Okandan is a board member and Chairman of the audit committee of Nigeria, PTCL, Ufone and a board member of Services Holding. Mr. Okandan graduated from Bosphorus University with a degree in Economics. Khalid Al Kaf Managing Director and Chief Executive Officer, Etihad (Mobily) Khalid Al Kaf was appointed as Chief Executive Officer and Managing Director of Etihad (Mobily) in July Prior to this appointment, Mr. Al Kaf worked for over 19 years with in various capacities. He was the General Manager of s Network Services division before being appointed as the start up project manager and later CEO for Mobily. Mr. Al Kaf is the Chairman of the Board of Directors of Sri Lanka and is a board member of Mobily. Mr. Al Kaf holds a Bachelor of Science degree from George Washington University, USA. Essa Al Haddad Chief Regional Officer /Africa, Group Essa Al Haddad was appointed as the Chief Regional Officer, Africa, of the Group in January Prior to this appointment, he was the Chief Commercial Officer of EG. In his 34 years of experience, Mr. Al Haddad has served in various senior leadership positions including Executive Vice President of Engineering of UAE, Chief Marketing Officer UAE and Chief Marketing Officer of EG. Mr. Al Haddad is Chairman of Zantel, Vice Chairman of Nigeria and board member of Atlantique Telecom, Mobily and Canar. He holds a higher diploma in Telecom Engineering and an MBA from the UK. Saeed Al Hamli Chief Executive Officer, Misr Mr. Al Hamli was appointed as Chief Executive Officer of Misr in April Prior to this role, he was the Chief Executive Officer of Afghanistan since Mr. Al Hamli has more than 20 years of experience at and Thuraya where he was the Chief Commercial Officer before moving to Afghanistan. Mr. Al Hamli also serves on the board of Misr. Mr. Saeed holds a Bachelor s of Science degree in Electrical Engineering from USA and Executive Master s of Business Administration degree from the American University of Sharjah. Dr. Daniel Ritz, Ph.D Chief Strategy Officer, Group Daniel Ritz was appointed as Chief Strategy Officer for EG in February Prior to this appointment, he was the CSO at Swisscom Group where he held various positions including Board member of each of the Group s Executive Board, Fastweb, Belgacom and Swisscom IT Services. He also served as Chairman of Swisscom s Hospitality Services and as CEO of Swisscom (Central & Eastern Europe). Prior to joining Swisscom, he was a partner at BCG. Dr. Ritz also serves on the Board of Atlantique Telecom, Thuraya, PTCL and Ufone. Dr. Ritz holds a Ph.D from the Hochschule St. Gallen in Switzerland. Jamal Aljarwan Chief Regional Officer/ Asia, Group Jamal Al Jarwan was appointed as the Chief Regional Officer of the Asian cluster of EG in October Prior to this position, he was the Chief International Investments Officer of EG. Mr. Al Jarwan started his career at in 1988 and held various positions including Chief Commercial Officer at Thuraya. Mr. Al Jarwan is a member of the Board of Afghanistan, Sri Lanka, PTCL and Ufone. He holds a Bachelor s degree in Business from Dayton University in the United States and an MBA in International Management Development from Lausanne University, Switzerland. 14 Annual Report

10 Management Team Abdulaziz Al Sawaleh Chief Human Resources Officer, Group Mr. Al Sawaleh is the Chief Human Resources Officer (CHRO) of the Group. Prior to this position, he was the CHRO of UAE. Mr. Al Sawaleh has more than 25 years experience in various leadership positions. He is responsible for leading the global Human Capital strategies including the areas of talent development, organization effectiveness, compensation & benefits and Performance Management. He is a board member of Atlantique Telecom and Services Holding. Mr. Al Sawaleh holds an MBA degree in Global Leadership Management from UAE University and a BBA degree from the USA. Obaid Bokisha Chief Procurement Officer, Group Obaid Bokisha was appointed as Chief Procurement Officer of the EG in June Since joining, he was assigned various responsibilities contributed to the network implementation of all existing systems covering GSM, UMTS, LTE and WiFi networks. Positions held include Vice President Mobile Networks Planning & Int l Support of UAE and Senior Vice President Mobile Networks Optimization EG.Mr. Bokisha serves on the board of Misr, Zantel and Nigeria. Mr. Bokisha has a degree in Communications Engineering from the College of Engineering. Nasser Bin Obood Chief Government Relations and Corporate Communications Officer, Group Nasser Bin Obood was appointed as Group Chief Government Relations and Corporate Communications Officer at EG in April Prior to this, he was Acting CEO for UAE. Mr. Bin Obood joined in 1986 and held various senior positions including General Manager of Al Ain region, Deputy CEO and Chief Corporate Affairs Officer for UAE and Chief Corporate Affairs Officer of the Group. Mr. Bin Obood serves on the boards of Thuraya and Atlantique Telecom. Mr. Bin Obood holds a Bachelor s degree in Science from the UAE University, Al Ain. Hatem Bamatraf Chief Technology Officer at Group Mr. Hatem Bamatraf was appointed Chief Technology Officer at Group in September Prior to this position he was the Executive Vice President of Enterprise Business at Du. Hatem began his professional career in 1995 at and was seconded to Mobily in 2004 as Director of Mobile Network Development in the Central Region, KSA. He graduated from the College of Engineering and holds a bachelor s degree in Engineering. He has been recognised by Global Telecom Business as one of the 40 under 40 telecom leaders in the world. Rainer Rathgeber Chief Commercial Officer, Group Rainer Rathgeber was appointed as Chief Commercial Officer of EG in January Prior to joining, he was Senior Vice President of Marketing in Europe of the OTE Group. Mr. Rathgeber joined Deutsche Telekom in 2002 as Head of Strategy for T-Mobile Germany, and Executive Vice President of Sales and Service Strategy for T-Mobile International. He then went on to serve in various positions including Executive Vice President of Market Management for T-Mobile International, CEO of T-Mobile Croatia and Member of the Executive Management Committee of T-Mobile International. Mr. Rathgeber holds a Diplom- Kaufmann Degree in Economics. Javier Garcia Chief Internal Auditor, Group Javier Garcia joined in December 2012 as Chief Internal Auditor of the EG. Mr. Garcia was the head of Internal Audit at Telefonica Group before joining. He held various positions with Telefonica including Business Process Audit Director and Vice President of Internal Audit (Chile) before becoming the Group Head of Internal Audit. Mr. Garcia holds a Bachelor s in Economics and a Master s in Financial Markets from the Autonomous University of Madrid Khalifa Al Shamsi Chief Digital Services Officer, Group Khalifa Al Shamsi was appointed as Chief Digital Services Officer of the EG in Prior to this role, Mr. Al Shamsi held the position of Senior Vice President of Technology Strategy of the Group. Since joining in 1993, Mr. Al Shamsi has held various key senior positions including Vice President and Senior Vice President of Marketing of UAE. Mr. Al Shamsi serves on the Boards of Afghanistan and E-vision. Mr. Al Shamsi has a Bachelor s degree in Electrical Engineering from the University of Kentucky, USA John Wilkes Chief Internal Control Officer, Group John Wilkes was appointed as the Chief Internal Control Officer for EG in January Prior to this, Mr. Wilkes was the General Manager of Risk & Supply Chain of the Vodafone Hutchison Company. He has more than 24 years of experience in companies such as KPMG Air in New Zealand where he was the Group Internal Auditor and Stockland in Australia where he held the position of Chief Risk Officer. Mr. Wilkes is a qualified chartered accountant. Dr. Kamal Shehadi, PhD Chief Legal & Regulatory Officer, Group Kamal Shehadi was appointed as Chief Legal & Regulatory Officer of EG in November He Joined in 2010 as Head of the Regulatory Department. Prior to that, Dr. Shehadi was the Chairman and CEO of TRA, Lebanon. He has more than 17 years of experience in consulting and advisory services for telecom regulatory authorities and telecom service providers. Dr. Shehadi serves on the board of Atlantique Telecom. Dr. Shehadi has a B.A. in Economics from Harvard University and a PhD in International Political Economy from Columbia University, USA. 16 Annual Report

11 Vision, Mission and Strategic Pillars Vision Mission Strategic Pillars To be the leading and most admired emerging markets telecom group Provide best in class total customer experience for retail and business Deliver attractive returns to shareholders while investing in the company s long term future Support economic development and job creation through ICT & socially responsible behavior One Company Operational Excellence Customer Experience People & culture Portfolio Service offering The services provided by the communications industry have never been more in demand by both consumers and businesses alike. In today s rapidly evolving digital society, the role of the communications industry has proven to be a key enabler for global socioeconomic growth. From a strategic perspective, the opportunities arising in the industry are coupled with challenges. Major telecommunications players are undergoing significant transformation and change, while boundaries across the value chain are becoming increasingly blurred. More than ever, it is imperative to have a clear understanding of the forces shaping the industry and the optimal position for each player to gain its competitive advantage. The worldwide telecommunications industry with estimated revenues of approximately USD1.7 trillion at the end of 2013 will continue to represent a sizeable and attractive industry, particularly in emerging markets. In s footprint, we envisage significant growth in the telecommunications industry. This growth will be driven primarily by broadband, voice in some markets, and new revenue streams across its footprint. s corporate strategy, outlined last year and reinforced this year, continues to enhance the focus of the organisation across its capabilities in the consumer, business and wholesale segments. The strategy continues to be based on six pillars, which are designed to deliver the objectives of the organisation: Service Offering, Customer Experience, Operational Excellence, Portfolio, One Company and People & Culture. The progress achieved on these fronts during 2013 is highly encouraging and further upsides are expected in the coming years. Service Offering s commitment to enhance its service offering through differentiated and innovative services was evident in the numerous initiatives deployed in Enhancement of customer segmentation and the introduction of new services allowed the organisation to provide incremental value to its customers. For example, continues to leverage its customer-value management capabilities across its footprint to enhance customer retention. In the new digital space, s Flous M-Commerce service was launched in seven new countries in 2013, reaching a total of nine m-commerce enabled operations, with a total registered base of 10.5 million at the end of In the enterprise segment, also witnessed an increase in both market share and value share by deploying solutions that are meeting customer s requirements. The increased loyalty and uptake of services are strong indicators of successful strategy implementation. Customer Experience works continuously on providing customer insight-based and focused propositions, as well as on creating a positive customer experience across all touch points. In 2013, initiated several programmes aimed at improving end-to-end customer experience, with particular emphasis on front-facing elements. An example of these efforts is the increased deployment of s own points of sale in the form of flagship stores across its footprint. Operational Excellence Despite the fact that continues to achieve one of the highest margins in the telecom industry, the organisation is committed to continuously improving its operational excellence. In 2013, numerous strategic initiatives across procurement, network optimisation and capital expenditure became key drivers of s healthy margins. will continue to implement and pursue further improvements by leveraging the international scale of the group over the coming years. Portfolio Based on the established investment guidelines of s corporate strategy, which focuses on the company s operations in the Middle East, Africa and Asia, recent M&A activities have been highly targeted to enhance existing positioning. Activities in 2013 included acquisitions of 3G licences (e.g. Moov Benin) and initiatives to strengthen the company s position through in-market consolidation in some of our core markets. In addition, on 4th November 2013, announced that it had signed a share purchase agreement with Vivendi in relation to the acquisition of Vivendi s 53 Group Strategy per cent stake in Maroc Telecom. The closing of the acquisition is subject to a number of conditions including, among others, the execution of a shareholders agreement with the Kingdom of Morocco regarding Maroc Telecom, securing competition and regulatory approvals in the Kingdom of Morocco and other relevant jurisdictions. The potential acquisition will be EPS accretive and will significantly enhance s positioning in West Africa. From a capital structure optimisation perspective, also continues to monitor its operational requirements to ensure that an optimal structure is in place for its operating companies One Company With a strong footprint across 15 markets, has the scale to deliver exceptional returns. The company is reinforcing a strategy which leverages this scale by enabling a common set of brand values, enhancing integrated systems and processes, and ensuring robust and consistent governance, as well as maximised economies of scale across the Group. As an example, deployed group-wide finance and procurement systems in order to enhance the efficiency of the organisation. People & Culture s people and corporate culture are at the heart of its strategy. Having the right talent and processes in place will continue to enable the Group to deliver on its strategic pillars successfully. In 2013 alone, several strategic programmes were deployed to ensure the organisation attracts, develops and retains the right talent. Initiatives like the High Potential Programme and Top 100 Talent are examples of the organisation s actions to ensure that appropriate resources are in place for any potential business requirement (e.g. succession planning, management reinforcement etc.). In addition, the Group continues to identify ways to streamline its processes to ensure that efficiency is improved. As grows over the next five years, it aims to deliver exceptional customer service and an innovative and dynamic range of services across an optimised and efficient portfolio. With these key principles in place, will be well positioned to achieve its vision of becoming the leading and most admired emerging markets telecom group. 18 Annual Report

12 Awards Corporate Marketing and Customer Care Arab Achievement Awards Leader in Telecoms International Business Awards Corporate Social Responsibility Programme of the Year CommsMEA Best Overall Operator of the Year International Business Awards Best Customer Care GSMA Global Mobile Awards Best Mobile Product and Service for Women in Emerging Markets Mobile Money Global Awards Best Bank Led Mobile Money Programme (Egypt) International Business Awards Most Innovative Company African Investor of the Year Africa Business Awards Arabia CSR Awards First Runner-Up in NGO-partnership Forbes Middle East Most powerful company in the UAE International Business Awards Honourable Mention - Green Programme International Business Awards Honourable Mention - CSR Programme International Business Awards Best New Product or Service of the Year Health Mobile Money Global Best Mobile Money Deployment in the Middle East Asia Brand Employer Awards Training Excellence Asian Brand Employer Awards Asia s Most Preferred Brand SAMENA Awards Technical Leadership Innovation and Engineering Management Global Telecom Business Innovation Awards Video Services GSMA Global Mobile Awards Best Mobile Health Innovation GSMA Mobile World Congress Best NFC/Mobile Money Product or Service International Business Awards Best Chairman International Business Awards Best Executive of the Year in Telecommunications Arabian Business CEO of the Year TMT Finance Middle East Best Broadband Provider COMMS MEA Best Fixed Line Provider GSMA Global Mobile Awards Best Mobile Health Innovation International Business Awards Most Innovative Company in the Middle East and Africa Financial Times Special Commendation - Technology in Sustainable Finance Telecom World ME Best Middle Eastern Wholesale Carrier 20 Annual Report

13 Operational Highlights Substantial Growth with Aspirations to Excel Aggregate Subscribers (m) Subscribers Group aggregate subscriber number grew by 7% on an annual basis to 148 million in 2013 and a 3% growth by December The net addition of 9 million subscribers in the year was mainly a factor of good subscriber growth in the UAE, Saudi Arabia, Egypt, Nigeria, Benin and Togo markets. In the UAE, the active subscriber base grew to 10.4 million subscribers in 2013 representing YoY growth of 16%. Attractive promotional campaigns and new products and services led to the mobile subscriber base growing at 19% to 8.4 million subscribers from 7.0 million. Fixed line subscribers declined to 1.0 million representing a 5% decrease from the previous period. However, this is mainly attributed to the transition of customers to the elife segment (i.e. double play and triple play). The elife segment had a growth rate of 30% for the year to 0.7 million customers. Africa cluster aggregate subscriber base, increased to 28.9 million at the end of December 2013 representing YoY increase of 7%. Asia cluster aggregate subscriber base reached 36.3 million at the end of December 2013, declining by 1% EBITDA (AED b) EBITDA Group Consolidated EBITDA grew to AED 18.9 billion representing a YoY growth of 12%. EBITDA growth was mainly due to increase in revenue and flow through to EBITDA. EBITDA margin declined by 3 points to 49% in This decline is mainly due to higher interconnect & termination costs, higher proportion of low margin handset sales, higher staff costs, network and marketing expenses as well as the diluting impact of consolidation of Pakistan operations. In the UAE, EBITDA in 2013 increased YoY by 4% to AED 14.0 billion leading to an EBITDA margin of 57% in comparison to 59% in the previous year. This decline is attributed to a higher proportion of low margin devices costs and higher interconnection costs. EBITDA of international consolidated operations in 2013 increased YoY by 41% to AED 4.1 billion resulting in 17% contribution to consolidated EBITDA. In Egypt EBITDA for 2013 declined by 19% to AED 1.6 billion due to higher network costs supporting network expansion, higher cost of sales and marketing expenses, and a one-off provision for the interconnection dispute with another mobile operator. This resulted in EBITDA margin declining by 5 points to 34%. Adjusting for the impact of the oneoff, EBITDA margin would have been 36%. In Africa cluster, EBITDA for 2013 declined YoY by 25% to AED 0.5 billion and EBITDA margin fell by 6 points to 19% mainly due to one-off provision in Atlantique operations. Adjusting for these provision, EBITDA Margin in 2013 would have been 22%. In Asia cluster, EBITDA in 2013 increased to AED 1.9 billion and EBITDA margin increased to 31% as a result of the consolidation of operations in Pakistan. Revenues Revenue (AED b) Group s full year consolidated revenue increased YoY by 18% to AED 38.9 billion driven by strong performance of domestic operations and the consolidation of Pakistan operations. In the UAE, revenue grew by 9% to AED 24.8 billion as a result of subscriber growth, increase in demand for data services and higher handsets sales. Revenue from international operations increased by 47% to AED 13.8 billion, representing 36% of consolidated revenues. In Egypt, revenues for 2013 of AED 4.7 billion, were down 7% from prior year mainly impacted by currency devaluation. However, revenue in local currency evidenced single digit growth due to an increase in the post-paid customer base, growth in the data segment and handset sales. Africa Cluster consolidated revenue grew by less than 1% to AED 2.8 billion. Performance was mainly impacted by competitive pressure in Ivory Coast and currency devaluation in Sudan. In 2013 the Asia Cluster benefited from the inclusion of full year results of Pakistan operations with revenue growth for the year increasing three-fold to AED 6.3 billion. Excluding Pakistan operations, full year revenue would have declined by 4% Net Profit (AED b) EPS(Fils) Net Profit and EPS Consolidated net profit after Federal Royalty increased YoY by 5% to AED 7.1 billion in Despite higher depreciation and amortization charges, taxes and lower finance income, net profit improved due to higher share of results of associates, and lower impairment charges and other losses, and lower Federal Royalty. Earnings per share (EPS) increased to 0.90 fils in On 4th of March 2014 the Board of Directors has resolved to propose a final dividend for the second half of 2013 at the rate of 35 fils per share, bringing the full year dividend to 70 fils per share. This proposal is subject to shareholder approval at the Annual General Meeting scheduled for the 26th March Annual Report

14 Operational Highlights CAPEX (AED b) CAPEX Consolidated capital expenditures increased YoY by 52% to AED 6.3 billion resulting in capital intensity ratio of 16% in Capital expenditure during the year focused on network expansion, network capacity and universal mobile license acquisition in Benin. In the UAE, capital expenditures in 2013 increased by 12% to AED 2.0 billion while capital intensity ratio remained stable at 8%. Capital expenditure in the UAE focused on ensuring network leadership by enhancing network quality and coverage. Capital expenditures in consolidated international operations in 2013 increased by 94% to AED 4.3 and represented 67% of total capital expenditures. In Egypt, capital expenditures increased by 5% to AED 1.2 billion as compared to last year resulting in a capital intensity ratio of 26%. In Africa cluster, capital expenditures in 2013 increased significantly by 156% to AED 1.2 billion due to universal mobile license acquisition in Benin and acceleration of network deployment in Benin and Togo. This resulted in a capital intensity ratio of 44%. Adjusting for the licence acquisition in Benin; capital intensity ratio would have been 31%. In Asia cluster, capital expenditure increased more than two-fold to AED 1.8 billion due to the consolidation of operations in Pakistan. Profit and Loss Summary (AED m) FY 12 FY 13 YoY Revenue 32,946 38, % EBITDA 16,855 18, % EBITDA Margin 51% 49% -3pp Federal Royalty 6,451 6,115-5% Net Profit 6,742 7,078 +5% Net Profit Margin 20% 18% -2pp Balance Sheet Summary (AED m) FY 12 FY 13 Cash & Cash Equivalents 13,934 15,450 Total Assets 84,606 85,716 Total Debt 5,806 5,872 Net Cash 8,128 9,579 Total Equity 49,913 49,593 Cash flow Summary (AED m) FY 12 FY 13 Operating 10,486 12,974 Investing (225) (4,854) Financing (6,327) (6,585) Net change in cash 3,934 1,535 Effect of FX rate changes 28 (19) Ending cash balance 13,934 15,450 Reconciliation of Non-IFRS Financial Measurements We believe that EBITDA is a measurement commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our cash generation ability and liquidity position, and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors. Our EBITDA definition includes revenue, staff costs, direct cost of sales, regulatory expenses, operating lease rentals, repairs and maintenance, general financial expenses, and other operating expenses. EBITDA is not a measure of financial performance under IFRS, and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity. The following table provides a reconciliation of EBITDA, which is a non-ifrs financial measurement, to Operating Profit before Federal Royalty, which we believe is the most directly comparable financial measurement calculated and presented in accordance with IFRS. (AED m) FY 12 FY 13 EBITDA 16,855 18,901 Depreciation & Amortization (3,385) (4,607) Exchange gain/(loss) (58) (141) Share of results of associates and Joint ventures 1,263 1,754 Impairment losses (2,825) (1,374) Operating Profit Before Federal Royalty 11,851 14, Annual Report

15 Our International Presence Middle East Asia Operator Country United Arab Emirates Licnese Type: Mobile, Fixed and Internet Ownership 100% Population: (million) 9 Penetration Mobile 191% Fixed: 25% Number of operators 2 Network Coverage, population 100% Operator Etihad (Mobily) Country Saudi Arabia Licnese Type: Mobile & Interent Ownership 28% Population: (million) 29 Penetration 180% Number of operators Mobile 3 Network Coverage, population 99% Operator Country Afghanistan Licnese Type: Mobile Ownership 100% Population: (million) 31 Penetration 72% Number of operators Mobile 4 Network Coverage, population 78% PTCL/Ufone Pakistan Sri Lanka Mobile, Fixed and Internet Mobile 23% 100% Mobile: 73% Fixed: 3% 113% Mobile 5, Fixed 11 Mobile 5 77% 75% Operator Misr Operator Thuraya Country Egypt Country Licnese Type: Mobile & Interent Ownership 66% Population: (million) 83 Penetration 118% Number of operators Mobile 3 Network Coverage, population 99% Licnese Type: Satellite Telecommunication Ownership 28% Population: (million) Penetration Number of operators Satellite 4 Network Coverage, geographical 140 countries Africa Operator Atlantique Telecom, Moov Operator Country West Africa Country Nigeria Licnese Type: Mobile Licnese Type: Mobile Ownership 100% Ownership 40% Population: (million) 62 Population: (million) 174 Penetration 65% Penetration 72% Number of operators Mobile 2-6 per country Number of operators Mobile 5 Network Coverage, population 59% Network Coverage, population 82% Operator Canar Operator Zantel Country Sudan Country Tanzania Licnese Type: Fixed Licnese Type: Mobile and Fixed Ownership 89% Ownership 65% Population: (million) 34 Population: (million) 50 Penetration 1% Penetration 54% Number of operators Fixed 2 Number of operators Mobile 6, Fixed 2 Network Coverage, population 31% Network Coverage, population 45% 26 Annual Report

16 Inspired to transform communities

17 Middle East UAE Management Review maintained Innovation, community and customer focus at the core of its brand values, consistently creating value for its loyal and future customers In 2013, UAE responded to the changes in customer behavior, technology and the country s competitive telecommunications landscape, following a strategy that was in line with Group s strategic pillars of innovation, customer centricity and global family. With the launch of new services, solutions and products, the telecom major s UAE subscriber base and the number of mobile subscribers grew to 10.2million and 8.3m respectively. Furthermore, currently has the widest coverage of its dual network comprising of both 3G and 4G technologies in the UAE, with 99.8 per cent coverage across the country in 3G and over 80 per cent penetration across populated areas in 4G networks. The company successfully upgraded its network of 3G with speeds touching 84 mbps from the previous 42 mbps providing the best quality voice and data transmission in UAE. UAE also completed the successful testing of Voice over LTE (VoLTE) and esrvcc (enhanced Single Radio Call Continuity) providing more services to its subscribers over 4G LTE network, the first in the Middle East and North Africa (MENA) region. offers the widest coverage of its network comprising of 3G and 4G technologies in the country. has upgraded its telecom network in 2013 to provide the best indoor coverage in the country by increasing the number of indoor base stations to 6000 to provide best indoor coverage with high quality service and download speeds, according to the recent report from the TRA. is working to increase the number of base stations over 7500 by the end of the year Earlier in the year, UAE successfully completed the rollout of its fibre-to-the-home (FTTH) network across 1.3m homes in the country. This achievement contributed to UAE being ranked as a global leader in connecting homes in the country on the FTTH network. The advanced infrastructure allows the utilisation of the most advanced technology applications to the UAE market. Its high-speed broadband internet enables users to enjoy multiple high bandwidth applications such as IPTV and online gaming in an integrated single interface for landline, internet and television-based services, providing a truly converged digital home experience to its customers. While UAE already holds the record for the highest internet speed of 300 Mbps in UAE, it decided to go one step further with the announcement that it is introducing a speed of 500Mbps for e-life subscribers. elife is based on Next Generation Fibre Optic Technology which allows customers to combine high-quality voice, supersonic Internet, and highdefinition TV into one experience. UAE recently launched the elife multiscreen service becoming the first provider to allow customers to watch TV on tablets, PCs, laptops and Smartphones from anywhere using WiFi or UAE s high speed 3G and 4G networks. Realising the strategic implications of the cloud, UAE launched its first cloud service for small-and medium-sized businesses (SMBs) and enterprises. Cloud Compute (Infrastructure as a Service) is a pay as you go model, reducing IT costs up to 60 per cent and time to market faster by up to 90 per cent. Hosted at UAE s Jebel Ali data centre, it offers easy access to infrastructure, ability to scale up or down rapidly based on demand and faster time to market than conventional hosting services. UAE brought smarter services into every aspect of its 2013 offering, providing a range of end-to-end managed systems that offer complete solutions to a range of industry verticals. Government was one of the key focus areas for UAE in 2013, and in support of the UAE s goal of creating a smarter environment by promoting digitisation initiatives, UAE set about permanently improving how governments serve and interact with the needs and expectations of the public. In cooperation with the Roads and Transport Authority (RTA), UAE launched the Smart Nol service, which gives Dubai commuters smoother travel via NFC-enabled mobile phones. This service is in line with UAE s longterm strategy to support mgovernment and initiatives raising the profile of the country, as well as impacting the lives of the people of UAE. The company also pioneered several advanced green technologies such as Emirates Energy Star (EES) which have directly impacting the UAE s carbon footprint by reducing C02 emissions. From December 2011 until May 2013, the programme prohibited the emission of more than 11,860 tons of carbon dioxide, which is equivalent to planting as many as 2,546 trees. UAE clients that have benefitted from the programme include Sheikh Khalifa Medical City, Dubai Electricity and Water Authority (DEWA) and Abu Dhabi Commercial Bank (ADCB). Other environmentally friendly practices included substituting traditional paper bills with electronic bills via its ebilling initiative. In addition to billing changes, a new customer technical support centre was established with highly skilled front and back office teams to support field staff. This unit aim is to achieve high levels of customer satisfaction during the cycle of service provisioning and fault management. Employing almost 2000 staff across the country, UAE boasts the biggest call centre network in the UAE. The telecom provider assists more than 150,000 customers every day at the company s three main centres in Ajman, Abu Dhabi and Sharjah. Staff speak a wide variety of languages including Arabic, English and Malayalam and are all trained in soft skills to enable them to communicate effectively with customers. Staying true to its commitment towards meeting the changing requirements of its growing customer base, UAE revamped its packages and introduced new services offering flexibility and value for money. Among the many offerings introduced were the per-second billing service for pre- and post-paid plans, and attractive bundles and packages offering customised solutions and further savings for customers. UAE also came up with customised plans to cater to the increase in data consumption needs of customers a direct result of UAE being ranked as the country with the highest smartphone penetration in the world. Responding to the increased demand for data among UAE consumers, the telecom major streamlined its data package offerings across both prepaid and post-paid services to enhance and simplify the current rates. International calling prices were also slashed and UAE removed international borders for its Wasel pre-paid customers through its call international, pay local campaign. In addition, the company maintained exclusivity in product offerings by introducing the latest smart devices -- Samsung Galaxy S4 Zoom, iphone 5s/5c, BlackBerry Z30 and Nokia Lumia 625 and Huawei s 4G LTE mobile broadband devices to the UAE market at competitive prices. Given the UAE s status as an international tourism and business hub, the telecoms major introduced competitive roaming rates in 190 countries, thus strengthening its leadership in this key area. With an extensive network of 680 international roaming partners, UAE allows prepaid and post-paid customers to use their phones abroad without the need for a subscription or deposit. has also marked a regional first with the launch of its new business roaming data packages aimed at frequent business travellers from the UAE, the country with the highest smartphone penetration in the world UAE s corporate social responsibility activity continued to grow and develop, meanwhile, and the company s commitment towards supporting the community was highlighted through projects such as the YouTube/Google channel, Duroosi, that offers videobased educational tutorials for students. Launched in partnership with the UAE Ministry of Education, UAE developed 600 tutorial videos offering selflearning options complete with visual aids and ease of access. Among the other smart solutions introduced in 2013 was Smart Education, which is the cloud web portal service for K-12 schools designed to provide comprehensive features and functionalities required for school operations as part of UAE managed and cloud service portfolio. In recognition of its outstanding efforts and achievements, UAE won a number of awards in 2013 such as the Best Middle East Product and Service provider at the Capacity Global Carrier Awards Other accolades included being named Best Wholesale Service Provider at the Telecoms Review Summit, Overall Operator of the year at Comms MEA Awards and winning the ICT Development Customer Care Excellence Award at the Middle East Government and Business Customer Care Excellence Awards for the second consecutive year. 30 Annual Report

18 Middle East Mobily Middle East Egypt Management Review Mobily has gained popularity and strength in the region since its inception and has further built on its reputation this year for strong technical capabilities and innovative approach. Innovative and value-driven communications solutions that are geared towards the current and future needs of its consumers have continued to be the mark of Misr in With a clear focus on the consumer and business market segments, 2013 saw the realisation of several new ideas and concepts in the region s telecom sector with Mobily s launch of new products and services. The consumer segment benefited from services like mview a video on demand application that works across device platforms and Kibot a robot for kids that serves as an educational tool. The Arabic Letters App enhanced customer learning experiences by providing a mobile platform that teaches the Arabic alphabet in an intriguing manner, using animal names and their corresponding sounds to recognise them. Keeping in line with the company s focus on customers needs, Mobily introduced the Mushaf App, which proved to be invaluable for customers wishing to read and memorise the Holy Quran. Additionally, while integrating GPS capabilities into a mobile application, the Hajj App was launched to provide customers with a better reality guide when on pilgrimage. The application gave directions to specific destinations by detecting current locations using the phone s camera. Building on this innovative approach to consumer needs, Mobily also launched ibill an interactive bill with the option to view various usage and summary graphs, and the Easy Charge App a unique Optical Character Recognition (OCR) technology that allows users to charge their prepaid cards using their phone s camera. While continuing to maintain its reputation for innovative and customer centric solutions, Mobily introduced the Earn and Burn loyalty points programme, becoming the first in Saudi Arabia to launch a system that works across retail segments. Other ingenious ways it reached its consumers this year were through the Nesma3k App that is dedicated to those with impaired hearing (by providing them with an application that contains information useful to various types of emergencies), and through its M-Health Portfolio, which integrates a user s health records and serves as an on-the-go wellness device. Leveraging on its collaborative partnerships in 2013, Mobily served its business segment by introducing public and hybrid cloud services that employed a multi-tiered cloud based infrastructure and state of the art technology. As a result of its collaboration with IBM, The Kingdom of Saudi Arabia s business sector also benefited from Mobily s world-class Managed Security Services (MSS). The portfolio included a range of integrated management services that detect and protect businesses from virtual security threats. Further building on this partnership with IBM, the Business Continuity and Resiliency Services was also launched to provide Virtual Server Recovery and Smart Cloud Managed Back Up services. In continuing to create value for the business segment, Mobily launched a Managed SAP Service that has proven to be a crucial step in raising a company s operational efficiency and reducing its IT infrastructure costs. Mobily s unique Cloud Advisory Service has also benefited its business clients by helping them create comprehensive resource utilisation reports as a value-added service, giving them the opportunity to transform their IT infrastructure into a Mobily Enterprise Cloud Service. Another key collaboration in 2013 with the market leading Advanced Electronics Company resulted in the launch of the turnkey Fleet Management Service. Finally, in 2013, Mobily introduced a new recruitment scheme that gave customer service team members the flexibility to work from home. The programme aims to create opportunities for women, who could start as part-time agents and then continue to become full-time employees. Egypt has continually shown great potential for growth and expansion in its mobile market. Misr introduced various new products and services in the country s telecom sector over the years and 2013 has seen more innovative and customer tailored services. In recognising the country s developing mobile usage trends, launched a number of value added services during the year including Mokalma 3al Nota that allowed pre-paid users to continue making local calls for up to three minutes even after their credit had been fully utilised. Running out of airtime credit no longer meant being out of touch. Its Sallefni 3al Nota initiative further allowed consumers to borrow credit from the company that could be used for any of its other services, including internet packages, Blackberry bundles and SMS s. In order to maintain its leadership in the mobile data segment, Misr was the first in the market to launch new data schemes, covering the broader spectrum of connectivity, be it for social media usage or daily add-on services, even offering overdraft facilities on data packages. Its Mongez plan offers customers a number of options for Internet usage, allowing them to choose the best speeds, with the widest coverage while employing the latest technology. The company also launched its Max yearly bundle revamp aimed at encouraging customers to purchase s G-tide and Telefunken tablets at competitive prices and data connectivity tariffs. During the year Misr continued to provide value-driven postpaid schemes and introduced the country s first tariff plan that could be personalised to suit individuals. My Line allowed consumers to customise and create a tariff plan that suits their usage and lifestyle. The scheme included four of its main services: My Calls, My Internet Line, My Smartphone and My Extras. Additionally, 2013 was a successful year for the implementation of Customer Value Management Techniques (CVM) in Misr through a new CVM platform that utilised USSDs for various customer offers. Simultaneous targeted offerings have tripled by combining different offers, be it related to recharge, usage development or mobile Internet, based on in-depth understanding of the behavior and needs of customers. Continuing to gain insight on consumer needs and deliver value-driven solutions, the company developed the ecam. The novel video surveillance service allows customers to monitor and secure their family and assets by remotely viewing the IP cameras anytime and on any mobile device or PC. Misr continues to encourage creativity and support innovation in the country s community of mobile developers including universities, startups and professionals through its Yalla Nsyatar Mobile Apps Competition. The open platform submission gathered over 300 ideas from across the nation s brightest tech savvy minds, awarding the top three mobile apps with cash prizes and cobranding them with Misr. 32 Annual Report

19 Middle East Thuraya Management Review Following the previous year s success streak of innovative device launches, Thuraya continues to conceptualise and deliver quality at an affordable price. During 2013 Thuraya unveiled a new Innovation Division that will be focused on spearheading strategic initiatives for the development and implementation of innovation in products, services and business models. This organisational enhancement comes at the back of the successful launch of the company s SatSleeve for the iphone and was driven by Thuraya s ambitions to further pioneer state-of-the-art solutions in the satellite industry. Thuraya also secured a long-term financing facility through Dubai Islamic Bank (DIB) for the upgrade of its network infrastructure and to support further development and expansion of its product portfolio, while enabling business expansion. The SatSleeve is a versatile and userfriendly device that brings satellite connectivity to the Apple iphone. A significant breakthrough in the mobile satellite industry, Thuraya SatSleeve is the world s first product to offer easy and affordable access to mobile satellite communications, which is delivered over Thuraya s extensive satellite network. Only slightly larger than the iphone itself, the compact adaptor provides users with the ability to turn their iphone into a satellite phone that provides reliable connectivity beyond the coverage of traditional terrestrial networks. The device is available in both voice only and data models. Thuraya won the Innovation Award at the Lloyd s List Middle East and Indian Subcontinent 2013 Awards for the SatSleeve product. In March 2013, the Thuraya IP+ was launched, expanding the Company s portfolio of mobile satellite broadband terminals. Thuraya IP+ is the fastest and lightest mobile satellite broadband terminal. Without compromising on portability, it is also designed to achieve the fastest IP speeds, ensuring quick and reliable access to broadband data services over Thuraya s extensive satellite network. Enhanced capabilities facilitate a wide range of applications including live high quality video broadcasting, web browsing, , social media communications, data transfer and VoIP applications, as well as access to corporate networks from remote locations. In September, Thuraya secured a partnership with SMART Communications, a leading provider in the Philippines, to provide low-cost, seamless and reliable crew-calling utilising the Thuraya network. The service, branded Marino PhonePal, is a multi-year deal that will see SMART partner with Thuraya on network services and hardware, and will connect thousands of Filipino seafarers to their loved ones. In addition to the initial agreement, the Companies announced an amendment in November, more than tripling the total contract. Thuraya also partnered with SMART to deploy emergency communications aid following the typhoon that struck the Philippines in November. In November, Thuraya and SRT Wireless, a US-based company, announced the development of the VIPTurbo module. This module can serve as the engine or new broadband terminals for the Thuraya satellite network, enabling manufacturers to integrate the module into new satellite terminals, reducing R&D costs and time to market. Thuraya expanded its roaming coverage across the Americas and now has a strategic partnership with AT&T, the premier communications holding company and one of the world s largest carriers in the United States. Under the agreement, AT&T will provide outbound GSM roaming for voice and data services to Thuraya users across the USA including Puerto Rico and the US Virgin Islands. Thuraya has also signed roaming agreements with Claro and Telefonica, extending similar coverage to 11 countries in Latin and South America. In conjunction with SoftBank Mobile, a telecommunications leader, Thuraya is now bringing MSS services to Japan. Thuraya s services are available to SoftBank users venturing outside of terrestrial networks, or in areas where those networks are either unavailable or are vulnerable to natural disasters. Media, energy, government, and all other types of enterprises, as well as individual consumers are able to avail themselves of Thuraya s services and solutions to enable them to communicate from anywhere in Japan and the maritime areas surrounding it. In a partnership with Chunghwa Telecom, Thuraya now provides mobile satellite service in Taiwan. The significance of this licensing agreement means that for the first time, Taiwanese consumers and enterprise users alike will no longer be required to apply for individual licensing approval from Taiwan s national telecommunications regulator to use mobile satellite services in the country. Previously, only enterprise users were eligible for licensing approval of MSS. 34 Annual Report

20 Leading with Vision & Inspiration 36 Annual Report

21 Africa Atlantique Telecom Africa Nigeria Management Review Atlantique Telecom expanded its operations in 2013 and continues to deliver innovative communication solutions to its customers. In 2013, Nigeria continued to expand its sphere of influence in the country with an augmented subscriber base and with renewed confidence in the market. Geographically represented in six African countries (Benin, Côte d Ivoire, Gabon, Niger, Central African Republic and Togo), Atlantique Telecom continues to position itself as one of the leading telecom operators in West and Central Africa. An initiative to advance this strategy in 2013 was the establishment of direct connectivity between the company s OpCos using existing equipment and infrastructure. This led to significant CAPEX savings of more than USD 1.4 million, while improving international QoS and its management among OpCos. The subsequent elimination of transit costs resulted in further savings during the year. Owing to the acquisition of a Universal License in June 2013, the company introduced Mobile Broadband (3G) Services in the region, while maintaining affordability at the core of its pricing strategy. As one of the biggest revenue generating opportunities after voice, Atlantique Telecom leveraged on the Group s expertise to deliver innovative products using 3G technologies during the year. The availability of mobile broadband drove the provision and adoption of mobile Value Added Services and vice versa. Group further expanded its mobile commerce service Flous through its subsidiary Moov. Also known as Flooz in the region, it enables subscribers to transform their mobile phones into digital wallets. The service allows them to pay for goods and services, transfer money to friends and family, withdraw and deposit cash, top up mobile phones and even manage bank accounts. The game changing initiative has lent a competitive edge to the company in Francophone Africa s dynamic telecom industry. Atlantique Telecom continued to target the youth segment through the revamp of Epiq Nation a mobile package that brings a number of benefits to young subscribers. Improvements to the offer in 2013 included free night calls, free Internet access during fixed time brackets and more value driven SMS packages. Another unique initiative during the year was the Epiq Nation Tour, which allowed the company to go nationwide and meet its young subscribers in universities, colleges and schools. Additionally, roaming tariffs were harmonised in the year and set at par across zones, except for countries in which or Moov were present, where they were lowered. This was an opportunity to leverage on Atlantique Telecom s footprint in the region, while driving revenues upward and providing competitive roaming offers. With a focus on efficiently delivering superior customer experience and innovative services, Global Managed Network Services were introduced during the year. Network operations were outsourced to Ericsson Sweden with a five-year contract in place for the future. With a contract that is structured in accordance with strict SLAs, the focus will be on improving QoS KPIs by 15 per cent year-on-year. Atlantique Telecom has since benefited from the best practices, economies of scale and Ericsson s globally renowned experience in managed services. The company continued to expand its footprint in the region with the opening of eight new Moovstores, bringing customers more proximity to Atlantique Telecom s superior service delivery. Furthering this goal, the Crystal Customer Care Complaint System was launched in the year to gain a 360 degree customer management view. Finally, the year marked Moov Togo s shift to a new headquarter building called Moov. The new central location and modern premises has made it a renowned landmark in the country, further improving the company s overall equity. At the same time, the ability to now house all departments under one roof has improved internal communication and overall working conditions, while impacting positively on Atlantique Telecom s speed to market innovative products and services in the region. In continuing to focus on the customer, Nigeria introduced the Mobile QoE (Quality of Experience) Measurement Solution. The initiative s objective was to deploy a scalable, end-user and devicebased measurement solution that allows Nigeria to measure service quality as experienced by its mobile customers. The system used embedded test apps that integrated into smartphones, tablets, SIMs and PCs, providing end-to-end insight into the performance of services from a customer s point of view. This in turn helped the company to make swift and informed business decisions. Always putting the customer first, this addition has enabled a more efficient business model for Nigeria. Nigeria continued to focus its efforts on widening its customer base and with the implementation of its New Value Extraction Model, it was able to grow its subscriber base by almost one third. In order to increase revenues and improve the spend of subscribers on the network, the company identified the inherent revenue potential of the existing base and leveraged it to drive usage and recharge. Nigeria s strategic partnerships, such as that with the Enterprise Development Centre of the Pan Atlantic University, resulted in continued growth for the company in The partnership was the result of an effort to launch the Small and Medium Enterprises (SME) Toolkit in Nigeria, a project of the International Finance Corporation (part of the World Bank), which provides business tools for small and growing businesses. Internally, Nigeria continued to offer a world-class working environment for its employees, encouraging them to provide the highest level of service to its loyal customers. In 2012, the company had launched a staff recognition scheme, Empact, to celebrate employee success stories over the course of the year. This year, 57 individuals and four teams were recognised and rewarded for their outstanding efforts. Through regular reinforcement of s brand values, an increasing number of employee achievements are surfacing across the business and are being shared this way to inspire the entire workforce. Nigeria further strengthened its CSR initiatives in The company partnered with the Standards Organisation of Nigeria (SON) and leading CSR consulting firm, Thistle Praxis Consulting (TPC), to bring two prominent initiatives to the country for the very first time. The resulting ISO Guidance Standard on Social Responsibility and the Nigeria Adoption Process (ISO26000:NAP) shone positive light on Nigeria, bringing it global recognition as an industry leader and pioneer in promoting social responsibility practices in the country. 38 Annual Report

22 Africa Canar Africa Zantel Management Review Sudan s telecommunications market lent great growth potential to Canar in The company continued to build on its successes of 2012 and introduce new incentives for customers in Zantel finished the year by setting trends with its Epic Nation Youth Offer, and adopted green technologies to drastically reduce operational costs in Capitalising on prior years successful launch of the WiMAX service, Canar commercially launched its broadband services this year using a creative marketing strategy that resulted in doubled sales over a period of just one month. In 2013, the company also positioned itself as an ICT service provider in Sudan, giving customers the opportunity to see the full scope its expertise in the market. The new managed services portfolio included WAN, Internet control, anti-spam and co-location services. As a result, Canar secured new corporate accounts in the country and boosted its revenue streams. The company also provided public Wifi networks with a targeted approach to its retail and corporate clients. Widespread coffee shop and restaurant branding of the service added to the company s renewed efforts in acquiring brand visibility in the country. With a clear focus on delivering customer centric communications solutions, Canar launched the Happy Call Initiative in This customer feedback programme gave users a channel to voice their overall satisfaction with the company s services, resulting in an immediate drop in the number of repeat calls to service centres, with a positive long-term impact on the company s customer satisfaction index. Additionally, Canar launched the KQI Checks, a quality check programme targeted at high value corporate clients, to help position the brand as the top quality telecom provider in the country. A loyalty programme for select corporate clients that was introduced also yielded positive results for the company s revenue streams in Canar introduced the Customer Value Management (CVM) programme to manage customer value by developing a comprehensive view of its customers. As a result, a new unit within the commercial department was established with the aim of providing customers more value added services, while controlling churn. Further building on the strength of its strategic partnerships, Canar s product development team in collaboration with Digital Service Unit has seen its first tangible results this year. The transfer of invaluable industry know-how and synergy with Group s brand values are just some of the milestones achieved thus far. Canar also moved to its newheadquarters in the central business district. The new headquarters have been designed to provide greater ease and accessibility to its customers and business clients alike, while providing a new and improved professional work environment for its employees. As one of its flagship products that has now developed three optional offers within it, the Epic Nation Youth Offer capitalises on the consumption patterns of the country s youth by providing cost-effective options with the maximum possible benefits. This offer contributed to 40 per cent of the company s prepaid voice revenue in 2013 and has set a benchmark in the industry; evident in the way other operators have been inspired to adapt it into their own schemes. While maintaining customer centricity at the core of its operations, Zantel also introduced Product IVR (Interactive Voice Response) mechanisms to enhance the means and effectiveness of their product information dissemination in the country. It allowed subscribers to call a dedicated line where they could immediately opt for various product offers. Building on this, a Unified USSD (Unstructured Supplementary Service Data) Code was introduced to simplify the subscription process, whereby customers could subscribe to Zantel products using a single code. The success of the initiatives was evident in the subsequent drop in customer queries to call centres. With a deep understanding of the importance of the Agriculture sector to the Tanzanian economy, Zantel in partnership with the Ministry of Agriculture, Food, Cooperatives and Sibesonke Limited has launched Z-kilimo ; a special mobile service application for farmers, enabling them to access timely and relevant information regarding modern farming methods from their mobile phones. The service will offer farmers information on soil preparation, fertilizers, weather forecasts, crop varieties and cultivation practices, while providing them with a platform for discussion with other farmers. In 2013, Zantel adapted several new green technologies, simultaneously reducing operational costs. The implementation of the Power Cube System (PCS) across five mainland sites saved the company 78 per cent in monthly generator running hours per site. Additionally, Zantel s inhouse Green Power Solution that utilises solar power instead of fuel resulted in operational cost savings of up to 75 per cent per month. 40 Annual Report

23 Inspiring future generations 42 Annual Report

24 Asia PTCL Pakistan Asia Ufone Pakistan Management Review As Pakistan s only integrated telecommunications company, PTCL continued to expand its operations across the telecom sector with a host of new product and service launches in One of the company s most notable accomplishments has been the launch of its innovative Mobile Financial Service, which won the Global Mobile Money Award s Best bank led mobile money programme of PTCL s exponential growth in the broadband sector has enabled Pakistan to be ranked among the top countries with the highest growth rate in broadband Internet. This is attributed to the significant investment PTCL made in infrastructure and technology development across the country. With a keen eye for innovative communication solutions, PTCL facilitated a number of firsts in the fields of customer service experience, wireless data services, broadband Internet, value-driven bulk offerings and green initiatives. The company s EVO 3G Wingle launch in 2013 was the country s first Wi-Fi enabled USB, powered by PTCL Nitro. This facilitated speeds of up to 9.3Mbps on the go, with instant Internet sharing for up to five users simultaneously. The impeding 3G threat was transformed into an opportunity in June 2013 by initiating innovative improvements in the overall performance of the business, while creating even greater value for its customers. The subsequent introduction of 12 and 16Mbps ultra high-speed broadband data rates benefited users with unlimited downloads at an affordable price. The year also bode well for PTCL s ongoing efforts to conduct CNIC online verification of customers using NADRA, having successfully been implemented in all the targeted regions across the country in The company s customer service experience was further recognised by subscribers for its Web Chat Offerings, which facilitated instant feedback from Customer Care representatives to user queries. Widening its scope of operations, while providing affordable communications solutions to its customers, PCTL negotiated more than 100 bulk deals with other players in the market in 2013 including competitors, real estate developers and builders. In an effort to garner increased revenues by way of volume sales, PTCL s EVO Sales Promo and EVO Tab Discounted Promos gave subscribers the opportunity to avail freebies and discounts on new purchases. The company also launched its first Self Service Portal in October 2013 to enhance customer service experiences. The wholly in-house developed website with real time integration and BSS systems reduced churn and the cost of operations, while increasing sales. Its integration with IPTV and cash machines is due to be completed in In continuing to strive for customer satisfaction, PTCL conducted a consumer segmentation project classifying subscribers into revenue classes as per their billing history whereby the highestranking clients are given preferential treatment for complaint resolution and new service acquisition. Additionally, the company has enhanced customer experiences across the board by swiftly dealing with user queries, both, at stores and at call centres. The company also launched a number of cutting edge telecommunications solutions to the business market to ensure ongoing expansion of its product portfolio and consistent service satisfaction. Its Managed WAN service received a great response from its business clients, providing an ideal end-to-end solution in managing an organisation s communication network infrastructure and security. Additionally, the service included options for premium SLA guarantees, while taking into account support resources such as onsite installation, ground staff support and service, network operation centres and customer portals that deliver alerts, reports and other vital user information. In addition, the company launched Corp Watch; a state of the art online complaints management tool for its corporate customers, which allows them to lodge and monitor complaints with greater ease and faster response times. Subsequently, management has benefited from greater insight into complaints and issues raised by customers, thus increasing service delivery. PTCL has continuously and proactively sought to bring new and innovative power back-up solutions to counter the effects of the power crises in Pakistan. In 2013, PTCL developed Smart Switch a low cost solution that simultaneously monitors battery voltages and the main power grid to alternate energy sources, ensuring a round the clock functioning power system for its operations. About 1,000 remote sites had been targeted for its implementation and more than 80 per cent have been successfully completed this year. Additionally, PTCL introduced solar power solutions to numerous sites in Broadening the scope of its ongoing green initiatives, the company launched its Wind Mill Project, the Fast Charge Battery Solution for BTS and MSAG sites, deployed battery backup solutions, installed free cooling units to optimise OPEX and replaced battery banks at MSAG/ONU locations. The achievement has created a distinct advantage for the product that is now viewed as a mobile wallet rather than a simple tool for money transfers, while reflecting the industry s recognition of the company s efforts in developing innovative products that empower the local community. Ufone also signed a strategic deal with the National Bank of Pakistan to provide its customers with Ubank s mobile banking services. This has given Ufone access to a new potential market, with the Government of Pakistan s pensioners and the more than one million account holders of the National Bank itself. Ufone also launched Uthpack ; the country s first youth centric product that redefines traditional cellular service offerings. It is designed to target the urban youth who are looking for more than just voice, SMS and data services. Ufone partnered with a host of almost 300 brand outlets to provide Uthpack users with discounts and free movie tickets, making the product a success across the country. It also won the best social media campaign award at the PASHA Awards. In an effort to improve customer experience, Ufone launched the country s first Self Service Smartphone Application in August 2013 for Apple and Android operating systems. Customers can now view their weekly call, SMS and Internet usage summaries, while managing their Ufone subscriptions through the application s new and improved userfriendly interface. Through its Customer Management Platform, the company rolled out Inbound Campaign Automation to boost its prior successful launch of Outbound Campaign Operations. The inbound marketing platform has been successfully running across Ufone s call centres since May The platform has empowered call centre agents to make real-time decisions based on personalised subscriber information now available to them. The initiative has also increased marketing opportunities to reach customers in a focused and personalised context, providing significantly higher acceptance probabilities of the tailored offers being pitched to subscribers. With continued drive for maintaining customer centricity and quality service experiences, Ufone initiated a Service Excellence Drive to achieve the ISO 9001:2008 Certification for its customer operations department. Through the implementation of the Quality Management System that is at the core of the certification process, business processes have been standardised, document and record controls enabled, while staff are working towards better problem solving processes. Through the programme, the company endeavors to continually review and improve the quality of service delivered, while remaining conscious to the needs of its subscribers and enhance overall user experience. The company s commitment to the environment has remained strong. In 2013, Ufone launched several alternative energy systems that included solar hybrid and smart power solutions as part of its efforts towards better power management and green initiatives. To reduce its carbon footprint in 2013 and beyond, Ufone installed long life batteries with a pay as you go model. The year 2014 is expected to reap the benefits of this project, with a potential saving of USD 10 million over its life cycle. Additionally, the company converted 150 BTS indoor sites to outdoor sites, resulting in a per cent reduction in power consumption in the year. 44 Annual Report

25 Asia Lanka Asia Afghanistan Management Review Building on the launch of its flagship store in 2012, Lanka continued to surprise the country with the introduction of innovative products and services in In what has seemed like a challenging task, Afghanistan strived to maintain and develop a strong foothold in the country s telecom industry in The country s first online book store, Bookhub, was launched this year in line with the onset of the global e-books trend. The company s strategic partnership with MD Gunasena and Micro Image is expected to launch a number of much anticipated local authors onto the literary scene in Sri Lanka. In maintaining this hype, the Bookhub application will soon be available as a free download for any PC, Andriod and Apple mobile phone, hosting locally published works in English, Sinhala and Tamil. In continuing its focus on the customer and building on this brand value, Lanka also introduced the country s first unlimited music, video and image download service, called Music Unlimited. In partnership with global music giant Sony Music, the daily data subscription service gives customers the opportunity to own their favourite music and videos from Sony s vast catalog of more than two million songs in Sinhalese, English, Tamil and of the Bollywood repertoire. Lanka also focused its attention on the country s intensely competitive postpaid market segment in In a strategic move to tackle the challenge of managing the payment cycle and retention of postpaid customers, the company initiated a segmentation programme to identify and classify users based on the number of years of their patronage and payment patterns. The subsequent classifications allowed Lanka to provide customised solutions, benefits and services to its consumers. This led to a more efficient collections management system, while working towards a pull collection strategy. Highvalue customers and enterprises benefited from the greatly improved delivery service. Additionally, the company focused on its call centre hotline service, which is the key customer communication point and where more than 27 million interactions were recorded over of the course of The Interactive & Intelligent Voice (IVR) and SMS automated information system is offered to all subscribers, where they can obtain information related to the company s products, services and promotions. It also provides a channel for the activation and deactivation of services, and agent assistance. The base system provided by ASPECT UIP was upgraded to its latest version (V7.01) in 2013 with full IP integration, further enhancing customer service delivery. The IVR response platform was also upgraded to an intelligent multi-media interactive solution with SMS push abilities. As a result, customer behaviour and usage patterns can now be used to promptly guide subscribers to information most relevant to them. As the first operator to acquire a 3G license and launch 3G services in the country in 2012, Afghanistan had already established itself as a forerunner in the country s telecom industry. The boost to the market and the customer has built some positive momentum and the company capitalised on this upward trend by continuing to roll out technological upgrades and innovative products in It further introduced an array of attractive bundle offers to the growing customer base, including the Itekhaab and Ramadan Kareem bundles. Through these bundle offers, the company launched segmented offerings during the holy month of Ramadan, targeting different customer segments, while offering Hajj Pilgrims a range of different roaming packages. In line with growing global trends towards optimising the use of mobile marketing to boost revenues, increase audience-brand proximity, and extend brand communication into the personal sphere, Afghanistan launched its Flytxt Campaign & SAS (CRM) Management System in May The programme is aimed at increasing the monthly take-up among target subscribers, improving revenue and reducing churn. Additionally, Afghanistan continued to enhance its loyalty programme in 2013, with new reward schemes and events to heighten customer experiences, increase product awareness, engage users and retain their business. The company also focused on boosting customer relations by identifying and resolving root causes for customer grievances, which led to a reduction in call centre complaints by 69 per cent. Customer call waiting times at the centres was also reduced by 81 per cent by adopting an outsourcing strategy. 46 Annual Report

26 Management Review Services Holding (ESH) The key for the future of any country and any institution lies in the talent, skills and capabilities of its people. As part of the Group, ESH brings strategic direction and corporate support to eight independent business units that work in a wide spectrum of industries, providing state-of-the-art processes, technologies, products and services to the telecom sector as well as other industries, governmental and private, in the UAE, the Middle East and globally. ETISALAT FACILITIES MANAGEMENT (EFM) EFM provides a single point of contact to its valued customers in offering Integrated Facilities Management Solutions tailored to the customer s needs. Maintaining a keen focus on delivering customer centric communications solutions, EFM further improved the quality of its services in State of the art maintenance tools and technologies were introduced to provide customers with a host of access tools that helped track their work progress and status. This was possible through the Maximo System, which plans and controls work flow patterns in EFM. By maintaining its ISO Certifications, the company has further improved the implementation of its customer centric processes and procedures, resulting in a two-fold increment in the customer satisfaction index. EFM continued to pioneer several advanced green initiatives in 2013, with Mabanina being one of the most attractive and profitable to the company and customers alike. The new, green, sustainable and responsible facilities management service product is tailored to the needs of its customers and is aimed at reducing the client s bills by 20 per cent. It also facilitates an upgrade of the client s airconditioning units and lighting systems for free, while enhancing asset lifecycles and reducing their carbon footprint. ETISALAT REAL ESTATE (ere) In 2013, ere introduced property management services to external clients that included financial institutions, local government and large fund entities. UAE s strong economic growth has led to an increasing supply of new real estate commercial properties, and by focusing on a specialised set of clients, ere hopes to capture 10 per cent of the market in the next three years. ere implemented increased flexibility in leasing terms that reflected market rental rates and other financial conditions prevalent during the year. Furthermore, the expansion of additional leasing opportunities was organised to maintain a competitive edge in the market. Finally, ere introduced an asset optimisation initiative in 2013 to increase the level of interaction and understanding among the group of companies, with an aim to preserve, protect and optimise property assets in the UAE. This entailed a number of new undertakings, which included the optimisation of office space, proactive leasing of retail spaces within business centres and HQ buildings to enhance customer experiences (coffee shops, telecom equipment and accessories). The initiative also had a positive impact internally by enhancing employees corporate spirit, encouraging them to focus on reducing costs and increasing revenues. TAMDEED PROJECTS Tamdeed Projects received distinguished business excellence and international recognition in 2013.The evaluation committee of The World Confederation of Businesses rewarded Tamdeed Projects with The Bizz trophy under the category of Inspirational Company. Through consistent managerial excellence, Tamdeed Projects have become a leader in their domain, continually demonstrating market superiority with progressive business models and constant brand recognition. The company is now recognised as a gold member of the FTTH Council, a corporate member of BICSI, an elite member of the World Confederation of Businesses, and ISO , OHSAS and ISO certified. The company has also maintained its efforts to achieve group synergy with by continually aligning its service delivery portfolio to comply with s outsourcing roadmap for the provisioning of video, data and voice services. E-MARINE In 2013, the region s offshore energy sector has shown significant growth potential and in acknowledging the expansion opportunity for its assets capacity, E-marine adopted a targeted approach to extend its operations in to the energy sector. As part of its ongoing strategy to enhance assets and provide customer centric service, the company began constructing its first vessel, CS MARAM, which is expected to be operational by mid In an effort to enhance its customer base, E-marine is gearing towards establishing a new operational base on the East Coast of Africa, which will result in an increased number of cable projects in the upcoming years. The initiative will also significantly shorten transit and down time, overall repair costs to damaged cables, and have a positive impact on the lives of people who depend upon its products and services. Amidst highly competitive market dynamics with both, local and international players, E-marine s continued focus on understanding customer needs has helped position the company favourably in This was marked by a significant accomplishment of securing more than 95,000 km of cable maintenance works that span the Red Sea, East Africa, Central and Western Indian Oceans. This has further strengthened E-marine s credibility, trustworthiness and unmatched service record in the region and internationally. ETISALAT INFORMATION SERVICES (eis) With a vision to be recognised as the number one reference for commercial and residential directories in the UAE and beyond, eis has been the leading directory services provider in the country since the publication of its first directory in The company maintains UAE consumers directory listing database, which is used by Directory Enquiries (181) and also publishes annual telephone directories through print, online and mobile mediums. In keeping with its ethos for innovation and customer centricity, eis launched a number of new services in This included Daleel al seha ; a mobile application that serves as a health guide by providing smart search functionalities in Arabic and English on the country s health, wellness and beauty sectors. It was showcased at the 2013 GITEX show where it received a great response from the market. The App also hosts interactive maps, option to call listings directly from the application and save business details into the favourites panel for easy future access. Its integrated GPS even allows users to find the closest business listings relevant to their search criteria and route their movements accordingly. Additionally, eis launched Daleel al seyaha to its online portfolio of services, which is a comprehensive bilingual guide to travel, leisure and tourism service providers in the UAE. It provides tourists, business travellers and residents with an easy reference and contact tool to connect with relevant businesses across the country. At the same time, it connects industry vendors and suppliers to help them find new business opportunities. EBTIKAR CARD SYSTEMS Ebtikar Card Systems is a major provider of smart card solutions in the UAE and was established in 1996 to fulfill the growing card and application demands of the market. In its continued effort to provide customer centric and value driven telecom products and services, Ebtikar introduced new SIM based solutions in 2013 to address the growing needs of its dynamic consumer base. These included the Trusted SIM Management (TSM) solution, Device Management System and a new STK development. With a drive for innovation, Ebtikar constantly develops new products and services, such as the new SIM and scratch cards that it introduced in the year, which included the M2M and NFC SIM cards, and new multi-pin scratch cards. In 2013, the company has continued to provide customer oriented products and services enabling telecom operators to deliver airtime and value-added services globally. EMIRATES DATA CLEARING HOUSE (EDCH) EDCH is one of the leading clearing houses in the world, offering complete solutions to GSM operators. As the first data-clearing house in the Middle East, EDCH has expanded its sphere of influence over the years to include Asia, Africa and Europe. In striving to enhance its products and apply state-of-the-art solutions to support the fast changing mobile industry, EDCH launched a number of new products in Two such new initiatives included SIM Watch and Online Reporting that targeted current and potential new clients. The products are aimed at helping mobile operators enhance their roaming businesses and assist them in generating increased roaming revenues. While SIM Watch is designed to prevent misuse and fraudulent activity in roaming test SIM cards, Online Reporting provides users with a powerful business analytics tool that monitors and analyses roaming service usage patterns. Further strengthening its presence in the market, EDCH acquired a new partnership with global mobile services cloud provider Infobip. The move was in anticipation of the company s new SMS service launch for its current and future clients. ETISALAT ACADEMY (ETAC) The Academy Centre of Excellence in Quality was launched as a joint effort between ESH Quality Services and ETAC to help develop the level of quality and business excellence delivered by government bodies, the corporate sector and individuals. This was followed by a number of partnerships with internationally renowned certification bodies, including the Dubai Quality Group, Bureau Veritas and EFQM. Over the course of the year, ETAC trained 700 employees in crisis management and business continuity principles. The initiative shed light on the key stages of performing best practices in the immediate response to a major incident. It defined the roles and responsibilities of corporate employees and what entails the implementation and maintenance of effective crisis management processes. In line with its geographic expansion strategy, ETAC also completed a training project of 150 employees in the Ivory Coast and continued to support succession planning and the organisational development of Afghanistan. Finally, in November 2013, the academy launched the first Smart Government Conference to help public entities transition from an electronic to a smart era, demonstrating innovative applications and case studies to provide a platform for intellectual exchange globally. 48 Annual Report

27 Management Review Human Capital Passion to excel drives s people to deliver outstanding business results. Our human resources strategy enables employees to live this passion; unleash their talent, skills and capabilities. Our strategy is built on three pillars: the culture and values, talent pool and operational excellence. Our culture and values are essential to engage employees to contribute to our success. Being an Citizen is synonymous to being open, collaborative, innovative and accountable. The Global Values Framework was created through the combined efforts of over 200 employees across s operating companies. They developed the statement is a global family; putting customers at the centre of its actions; is innovative and focused on its people that represents who staff are and how they behave as employees of Group. An illustration of this open and collaborative culture is the high participation rate in The Global Employee Engagement Survey. With more than 20,000 responses, the survey shows employees believe that management take action based on their feedback. And indeed, several suggestions were implemented, including a more efficient communication model between the various levels of employees, and an improved performance management system. The second pillar of the human resource strategy involves the continuous investment in enhancing the capabilities of our talent pool. In 2013, senior executives joined the Group and the new recruits boosted strategically significant operational areas, such as digital services. The year saw new additions to the C-Suite of Mobily, Afghanistan, Misr, Atlantique Telecom and UAE. Our first Group-wide HiPo programme targeting High Potentials employees to develop their leadership skills was an outstanding success with the graduation of 75 employees. A new intake of 100 trainees will join the program in The encouraging track record combined with low graduation attrition rates has highlighted the programme as a promising source of talent throughout the organisation. Additionally, new international assignment policies were introduced to fully optimise the spread of this new talent pool. Our third pillar, operational excellence, aims at ensuring an effective and efficient business management model. Two measures help monitor our operational excellence; the productivity index and the performance indicator. The productivity index measures operational efficiency such as customers per employee, revenue per employee and staff cost ratios. The performance indicator reflects prompt and efficient managerial action in instances of staff level reductions, HR policy changes and the outsourcing of non-core activities. The reviewed Performance Management System strongly contributed to align senior executives and employee objectives with the goals and aspirations of the Group s corporate strategy. It bridged performance and associated rewards in a consistent and coherent approach in all the operations. Finally, the HR Excellence Scheme ran for the third year in 2013, and helped align our HR Excellence score for the group and some of its Operating Companies with best practice. During the year Group Human Resources also introduced a number of initiatives to increase staff engagement including sponsoring and participating in a unique and challenging cycling marathon that spanned 2,100km. The 13-day Grand Tour from Brussels to Barcelona provided a platform for the demonstration of our innovative mobile health solutions to the challenges of diabetes. The initiative successfully presented our brand as a unified entity to global competitors, senior GSMA officials, potential ICT partners and European government officials. This will further help us in developing new technologies and conducting research that will encourage regulators to open markets for our mhealth applications in the near future. We believe the Group HR strategy is well balanced as it integrates the complexity of being a strategic international player while delivering efficient local business partnerships in all of its operations. In 2014 we will continue our journey toward world class HR excellence through engaging passionate employees across the group. 50 Annual Report

28 for Good Corporate Social Responsibility 52 Annual Report 2013 Under the banner for Good, and its operating companies have been actively working on Mobile for Development initiatives in 2013, in collaboration with its global partners. The efforts have helped bridge the gap between emerging markets and developed nations, while generating impressive digital dividends in the form of jobs, economic growth and stability. In Sri Lanka, is providing access to education using tablets and special software to a number of rural communities. During the first phase of the project, two rural villages were chosen and 10 android tablets were distributed among 48 families. Several Apps and locally relevant information was pre-installed on the tablets, and distributed to adults and youth alike. The programme has since been rolled out into schools and has earned the attention of global stakeholders, and was also featured in the Dubai Expo 2020 bid video. Android Village hub is now earmarked for replication in Egypt and other markets, further highlighting the success of the initiative. has continually helped empower women and people with special needs, especially in communities lacking social or economic development. As a reflection of these efforts, GSMA awarded one of the only two financial grants for projects that will provide sustainable benefit to women in three of the company s West African markets through its recently launched Weena initiative. s Mobile Baby, a complete suite of services powered by mobile technologies that allow healthcare workers to provide critical medical care in rural areas, has seen continued success during the year. More than 1500 mothers and expectant mothers were registered to the programme, while 261 traditional birth attendants were trained on how to use the programme s tools. Subsequently, related maternal care technologies were launched in Tanzania, Nigeria and Sri Lanka, with future projects lined up for Niger. Each of these initiatives have contributed tangibly and form the core of s UNGC efforts to help reduce child mortality rates, while simultaneously improving maternal health in the regions. supports the growing demand for Mobile Commerce, to provide secure and accessible financial services to unbanked citizens in emerging countries. Whether it s remittance between individuals or the ability to purchase power or other utilities, demand and usage is growing rapidly across the company s footprint. In 2013, a number of its mobile commerce solutions assisted in improving the living conditions of refugees in many parts of Niger, Egypt, Afghanistan and Pakistan through its Social Cash platform. The UAE, Egypt, Saudi Arabia and other countries within s footprint rank among the worst effected nations suffering from diabetes. In an effort to help these countries fight diabetes, a team of 12 volunteers from its operations in UAE, Afghanistan, Egypt, Saudi Arabia, Pakistan, Sudan and Tanzania were recruited over a threemonth campaign to represent Team in the GSMA organised mhealth Grand Tour. This culminated in a 13-day cycle ride from Brussels to Barcelona testing new technologies, supporting research and raising awareness of technologies to help manage diabetes. As a result, initiatives are being undertaken in collaboration with the UAE Ministry of Health to spearhead discussions across the region on the importance of mhealth and the necessary regulation to facilitate its effective use. As environmental pressures grow globally, there is an increasing pressure on the Management Review need for smart buildings and cities to help reduce waste and pollution. In the UAE, s Emirates Energy Star programme has the ambitious target of reducing the country s carbon footprint by 20 per cent within an optimum period. It targets old buildings equipped with s fiber network, and connects them to a centrally managed control centre. The solution reduces power consumption, especially from air conditioning, and has already been installed in 80 buildings across the country. Thus far, has saved the equivalent of 5,588 trees by helping enterprises eliminate more than 26,025 tonnes of unnecessary CO2 emissions, through 24/7 monitoring, streamlining and reducing energy usage of heating, ventilation and air conditioning (HVAC) equipment in the facilities. In 2013, completed its first solar project in Sri Lanka and became the first operator on the island to deploy Net Metering. The 6KW solar powered solution is expected to reduce power costs by half. s engineering teams across Sri Lanka are working on further optimising solar power generation at a number of its sites. The company is committed to ensuring its networks and systems deliver the highest quality of service in a responsible and efficient manner, with a plan to convert at least 300 sites in the future to Net Metering. s strategy continues to be inspired by international benchmarks set by the International Standards Organisation (ISO 26000) and the Global Reporting Initiative (GRI). The company reiterated its support and commitment to the 10 Principles of the United Nations Global Compact in 2013, focusing on labour, human rights, the environment and anti-corruption, while continuing to engage proactively and transparently with its stakeholders. Additionally, s Chief Executive Officer, Ahmad Julfar has been providing leadership since 2012 as the signatory for the Group s United Nations Global Compact commitments. Mr. Julfar also provided the vision for these initiatives as a board member of GSMA s Mobile for Development Foundation. 53

29 Corporate Governance The General Assembly The General Assembly is composed of all the shareholders of the Corporation, and it exercises all its powers in accordance with the law and the Articles of Association. The General Assembly is entrusted with approving the Board s Annual Report on the Corporation s activities and financial position during the preceding financial year. The General Assembly is also entrusted with appointing external auditors and approving their report, discussing and approving the balance sheet and the profit and loss account for the previous year, as well as the Board of Director s recommendation with regards to the distribution of dividends Board of Directors The Board of Directors carries out the Corporation s business and for that purpose, exercises all powers of the Corporation, except those reserved by Law or the Articles of Association for the General Assembly of the Corporation. The Board of Directors of consists of eleven members, seven of whom were appointed, including the Chairman of the Board pursuant to the Federal Decree No.74 of 2012, Appointing the Government s Representatives in the Board of Emirates Telecommunications Corporation. The other four members of the Board of Directors were elected by National (nongovernment) shareholders who hold 40 per cent of the Corporation shares. The Corporation is committed to apply best practices and corporate governance standards, taking into account best international standards in this regard and the applicable laws in the UAE. Therefore, the Corporation took into account when composing its Board of Directors the requirements of Ministerial Resolution No.518 of 2009 Concerning Governance Rules and Corporate Discipline Standards with respect to the capacity of Board members, whereas all current Board members are non-executives and Independent members. Committees of the Board of Directors: There are currently three Board Committees that have been established to assist the Board with its responsibilities, those Committees are 1) Audit Committee. 2) Nomination and Remuneration Committee. 3) Investment and Finance Committee. Audit Committee As the Corporation is committed to implementing governance best international practice standards, which are also compatible with applicable Laws and Regulation in the UAE, The Board of Directors has composed the Audit Committee to support it in discharging its duties. The Audit Committee undertakes its duties in accordance with its Charter, which comply with Ministerial Resolution No.518 of 2009 concerning Governance Rules and Corporate Discipline Standards. This Charter is considered to be a delegation from Board to the Audit Committee to undertake the tasks mentioned therein, which include the following: Ensuring the safety and integrity of the Corporation s financial statements Reviewing and implementing systems and internal control policies, and supervising the Internal Control Department to ensure that it is undertaking its duties accurately Monitoring the Corporation s commitment to the laws and regulations Developing and implementing a policy contract with the external auditor and ensuring its independence Reviewing financial control systems and risk management The Committee s Charter has clarified its duties in detail, and how it shall be comprised and the conditions to convene its meetings and the quorum for same, in addition to the way it shall take its decisions. The Committee is comprised of three (3) non-executive and independent members of the Board of Directors, in addition to an external member experienced in accounting and finance, The Committee convene quarterly or whenever necessary. Nomination and Remuneration Committee: To implement governance best practices and in compliance with applicable Laws in this regard, the Board of Directors has composed the Nomination and Remuneration Committee to undertake its duties according to its Charter, which comply with Ministerial Resolution No.518 of 2009 Concerning Governance Rules and Corporate Discipline Standards. This Charter is considered to be a delegation from the Board of Directors to the Committee to discharge its duties mentioned therein. The main objective of the Nomination and Remuneration Committee is to ensure that the Board of Directors is undertaking its duties diligently and is complying with Governance Rules and Discipline Standards. The Committee is also responsible for organising the procedures regarding the Nomination to the Board of Directors and to constantly ensure the independence of independent Board of Directors Members and to report to the Board of Directors in the event that an independent Board member loses his independency. The Committee is further entrusted with developing policies with respect to determining the Corporation s needs for talents at the level of executive management and employees as well as developing policies with respect to granting awards, incentives, Board Members Remunerations and Salaries of the Executive Management and employees in a manner that achieves the Corporation s objectives and suits its performance. The Committee s Charter provided for the detailed powers of the committee and how to be constituted and formed, the terms of convention of its meetings, the required quorum for convention of its meetings and how to make its decision. In the course of exercising its functions, the Committee shall take into consideration the competitive nature of the Corporate Strategy and the fair compensations commensurate with the same to attract and retain talented employees for achievement of best results. Nomination and Remuneration Committee comprise four (4) nonexecutive independent members from the Board of Directors. Investment and Finance Committee In addition to the Audit Committee and the Nominations and Remunerations Committee provided for in the Ministerial Resolution No.518 of 2009 Concerning Governance Rules and Corporate Discipline Standards, the Board of Directors of constituted the Investment and Finance Committee to assist the Board to carry out his functions related to Corporations internal and external investments. The Charter of the Committee defined the functions and duties assigned to the Committee and specified the cases where the Committee is entitled to make decisions as it deems appropriate. On the other hand, it defined the cases where the Committee s role is exclusive to issuance of recommendations for the Board to pass appropriate resolution thereon. This Charter is deemed an authorisation by the Board for the Committee to carry out the functions and responsibilities stipulated therein. The Investment and Finance Committee comprises five (5) independent non-executive members from the Board Members. Operating Structure of the Corporation During 2013, Group continued to implement its revised group structure, which was commenced in The purpose was to manage its international expansion strategy, protect value resulting from the Corporation s United Arab Emirates operations, secure value creation from its fifteen international operations, and to gain the trust of its stakeholders by putting in place a solid structure based on corporate punctuality and governance in line with best practices. At the level of the United Arab Emirates, the Group organisation structure features two autonomous Operating Units: UAE Unit (which is entrusted with provisioning Licensed Telecom Services in the United Arab Emirates); and the Services Unit (a wholly owned holding company entrusted with providing certain non-core, non-telecom services to the Corporation, as well as to third parties). The Group exercises and sets its various activities and responsibilities and sets its key corporate policies, prepares plans, and monitors the operational and financial performance of its operating companies, and reports the same to the Board of Directors on a regular basis. 54 Annual Report

30 Financials Independent Auditor's Report to the Shareholders Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of ( the Corporation ) and its subsidiaries (together the Group ) which comprise the consolidated statement of financial position as at 31 December 2013 and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements We have obtained all the information and explanations considered necessary for the purposes of our audit. The Corporation has maintained proper books of account and has carried out physical verification of inventories in accordance with properly established procedures and the financial information included in the Chairman s statement is consistent with the books of account of the Corporation. Nothing has come to our attention which causes us to believe that the Corporation has breached any of the applicable provisions of the UAE Federal Act No. (1) of 1991, as amended by Decretal Federal Code No. 3 of 2003, or of its Articles of Association, which would materially affect its activities or its financial position as at 31 December Deloitte & Touche (M.E.) Abu Dhabi, United Arab Emirates Mutasem M. Dajani (Reg. No. 726) 4 March Annual Report

31 Financials Consolidated statement of profit or loss for the year ended 31 December 2013 Consolidated statement of comprehensive income for the year ended 31 December Notes Revenue 38,853,238 32,946, Notes Profit for the year 7,750,948 6,571,746 Operating expenses 5 (24,700,384) (19,533,493) Impairment and other losses 9 (1,374,176) (2,825,365) Share of results of associates and joint ventures 13 1,754,341 1,263,155 Operating profit before federal royalty 14,533,019 11,850,597 Other comprehensive income / (loss) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligations - net of tax (126,618) - Federal royalty 5 (6,115,016) (6,451,252) Operating profit 8,418,003 5,399,345 Gain on partial disposal of investment in an associate ,138 Finance income 6 440, ,111 Finance costs 7 (458,607) (322,938) Profit before tax 8,399,595 6,657,656 Taxation 8 (648,647) (85,910) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations (1,969,056) (889,879) Loss on revaluation of available-for-sale financial assets 15 (138,909) (2,305) Reclassification adjustment relating to available-for-sale financial asset impaired during the year ,310 - Total other comprehensive loss (1,970,273) (892,184) Profit for the year 7,750,948 6,571,746 Profit attributable to: The equity holders of the Corporation 7,078,388 6,741,819 Non-controlling interests 672,560 (170,073) 7,750,948 6,571,746 Earnings per share Total comprehensive income for the year 5,780,675 5,679,562 Attributable to: The equity holders of the Corporation 6,063,592 5,979,318 Non-controlling interests (282,917) (299,756) 5,780,675 5,679,562 Basic and diluted 34 AED 0.90 AED 0.85 Chairman Board Member The accompanying notes on pages 7 to 55 form an integral part of these consolidated financial statements. The Independent Auditor's report is set out on page 1. The accompanying notes on pages 63 to111 form an integral part of these consolidated financial statements. The independent Auditor s report is set out on page Annual Report 2013 The accompanying notes on pages 63 to111 form an integral part of these consolidated financial statements. The independent accompanying Auditor s notes report on pages is set out 7 to on 55 page form 57. an integral part of these consolidated financial statements. The Independent Auditor's report is set out on page 1. 59

32 Financials Consolidated statement of financial position as at 31 December Notes (Restated) Non-current assets Goodwill 9 5,552,266 5,929,087 Other intangible assets 9 9,447,281 10,226,108 Property, plant and equipment 10 31,319,161 31,040,677 Investment property 11 41,211 41,681 Investments in associates and joint ventures 9,14 7,062,009 6,325,335 Other investments ,984 1,451,495 Trade and other receivables , ,051 Loans to related party 16 2,390,194 2,906,069 Deferred tax assets 8 243, ,607 57,518,129 58,362,110 Current assets Inventories , ,756 Trade and other receivables 18 10,613,248 10,824,624 Current income tax assets 8 503, ,139 Due from associates and joint ventures , ,441 Other investments held for sale 15,29 448,448 - Cash and cash equivalents 19 15,450,248 13,934,076 28,197,405 26,244,036 Total assets 85,715,534 84,606,146 Non-current liabilities Trade and other payables , ,149 Borrowings 21 4,467,122 4,482,841 Payables related to investments and licenses 22 68,751 67,369 Deferred tax liabilities 8 1,749,839 1,818,053 Finance lease obligations 23 2,460 3,508 Provisions , ,971 Provision for end of service benefits 26 1,911,773 1,986,663 9,229,599 9,126,554 Current liabilities Trade and other payables 20 21,164,411 20,358,010 Borrowings 21 1,404,543 1,323,597 Payables related to investments and licenses 22 2,963,623 3,005,899 Current income tax liabilities 8 185, ,965 Finance lease obligations 23 2,564 5,980 Provisions 24 1,172, ,569 26,893,239 25,567,020 Total liabilities 36,122,838 34,693,574 Net assets 49,592,696 49,912,572 Equity Share capital 27 7,906,140 7,906,140 Reserves 28 28,266,980 29,115,839 Retained earnings 4,359,024 3,492,333 Equity attributable to the equity holders of the Corporation 40,532,144 40,514,312 Non-controlling interests 12 9,060,552 9,398,260 Total equity 49,592,696 49,912,572 Consolidated statement of changes in equity for the year ended 31 December 2013 Attributable to equity holders of the Corporation Share capital Reserves Retained earnings Owners' equity Noncontrolling interests Total equity Notes Balance at 1 January ,906,140 28,686,726 2,786,813 39,379,679 2,324,172 41,703,851 Total comprehensive income for the year - (762,501) 6,741,819 5,979,318 (299,756) 5,679,562 Other movements in equity 12 - (4,330) (9,955) (14,285) 332, ,532 Transfer to reserves - 1,195,944 (1,211,295) (15,351) 15,351 - Consolidation of Pakistan Telecommunication Company Limited ,259,290 7,259,290 Transaction with owners: Dividends (4,743,684) (4,743,684) - (4,743,684) Effect of changes in accouting policy for remeasurement of defined benefit obligation (71,365) (71,365) (233,614) (304,979) Balance at 31 December 2012 (as restated) 7,906,140 29,115,839 3,492,333 40,514,312 9,398,260 49,912,572 Total comprehensive income for the year - (985,167) 7,048,759 6,063,592 (282,917) 5,780,675 Transfer to reserves ,308 (136,308) Transaction with owners: Disposal of partial interest in subsidiaries , ,220 87, ,453 Acquisition of non-controlling interests 12 - (7,804) (7,804) (5,782) (13,586) Additional equity from noncontrolling interests ,835 16,835 Dividends 33 - (6,322,176) (6,322,176) (153,077) (6,475,253) Balance at 31 December ,906,140 28,266,980 4,359,024 40,532,144 9,060,552 49,592,696 Chairman Board Member The accompanying notes on pages 63 to111 form an integral part of these consolidated financial statements. The independent Auditor s report is set out on page Annual Report 2013 The accompanying notes on pages 7 to 55 form an integral part of these consolidated financial statements. The Independent Auditor's report is set out on page 1. The accompanying notes on pages 63 to111 form an integral part of these consolidated financial statements. The independent Auditor s report is set out on page 57. The accompanying notes on pages 7 to 55 form an integral part of these consolidated financial statements. The Independent Auditor's report is set out on page

33 Financials Consolidated statement of cash flows for the year ended 31 December Notes Operating profit 8,418,003 5,399,345 Adjustments for: Depreciation 10, 11 3,798,455 2,670,013 Amortisation 9 809, ,725 Impairment and other losses 9 1,374,176 2,825,365 Share of results of associates and joint ventures 13 (1,754,341) (1,263,155) Provisions and allowances 300,806 (15,873) Other non-cash movements - 4,449 Operating profit before changes in working capital 12,946,192 10,334,869 Changes in working capital: Inventories (75,475) 46,035 Due from associates and joint ventures (175,392) (198,345) Trade and other receivables 210,436 (1,516,093) Trade and other payables 995,923 2,188,102 Cash generated from operations 13,901,684 10,854,568 Income taxes paid (490,317) (188,627) Payment of end of service benefits 26 (437,806) (179,985) Net cash generated from operating activities 12,973,561 10,485,956 Cash flows from investing activities Net acquisition of other investments (71,038) (124,164) Proceeds from capital reduction of a joint venture 14 40,000 - Proceeds from disposal of investment in an associate 14-1,856,268 Loans to associates - (335,996) Purchase of property, plant and equipment (5,567,248) (3,881,356) Proceeds from disposal of property, plant and equipment 73,586 12,337 Purchase of other intangible assets (766,638) (282,992) Proceeds from disposal of intangible assets - 11,392 Dividend income received from associates and other investments 1,010,169 1,006,038 Cash acquired on consolidation of PTCL 29-1,452,608 Cash derecognised upon deconsolidation of DB Telecom Pvt Ltd (EDB) 12 - (654,926) Finance income received 427, ,784 Net cash used in investing activities (4,853,487) (225,007) Cash flows from financing activities Proceeds from borrowings and finance lease obligations 3,491,716 1,404,134 Repayments of borrowings and finance lease obligations (3,142,979) (2,547,119) Dividends paid (6,475,253) (4,743,684) Finance costs paid (458,607) (440,056) Net cash used in financing activities (6,585,123) (6,326,725) Notes to the consolidated financial statements for year ended 31 December General information The Group ( the Group ) comprises the holding company Emirates Telecommunications Corporation ( the Corporation ) and its subsidiaries. The Corporation was incorporated in the United Arab Emirates ( UAE ), with limited liability, in 1976 by UAE Federal Government decree No. 78, which was revised by the UAE Federal Act No. (1) of 1991 and further amended by Decretal Federal Code No. 3 of 2003 concerning the regulation of the telecommunications sector in the UAE. In accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The address of the registered office is P.O. Box 3838, Abu Dhabi, United Arab Emirates. The Corporation s shares are listed on the Abu Dhabi Securities Exchange. The principal activities of the Group are to provide telecommunications services, media and related equipment including the provision of related contracting and consultancy services to international telecommunications companies and consortia. These activities are carried out through the Corporation (which holds a full service license from the UAE Telecommunications Regulatory Authority valid until 2025), its subsidiaries, associates and joint ventures. These consolidated financial statements were approved by the Board of Directors and authorised for issue on 4 Mar ch Significant accounting policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ( IFRS ) applicable to companies reporting under IFRS. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3. The consolidated financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments and in accordance with the accounting policies set out herein. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether the price is directly observable or estimated using another valuation technique. The consolidated financial statements are presented in UAE Dirhams (AED) which is the Corporation's functional and presentational currency, rounded to the nearest thousand except where otherwise indicated. Net increase in cash and cash equivalents 1,534,951 3,934,224 Cash and cash equivalents at the beginning of the year 13,934,076 9,971,647 Effect of foreign exchange rate changes (18,779) 28,205 Cash and cash equivalents at the end of the year 19 15,450,248 13,934,076 The accompanying notes on pages 7 to 55 form an integral part of these consolidated financial statements. The Independent Auditor's report is set out on page 1. The accompanying notes on pages 63 to111 form an integral part of these consolidated financial statements. The independent Auditor s report is set out on page Annual Report

34 Financials Notes to the consolidated financial statements for year ended 31 December 2013 Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) 2. Significant accounting policies (continued) New and amended standards adopted by the Group The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2013 and have a material impact on the Group: Amendments to IAS 1 Presentation of Financial Statements The amendments require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to IAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income. Changes in accounting policies due to revision in IAS 19 The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant changes relate to the accounting changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the corridor approach permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the condensed consolidated statement of financial position to reflect the full value of the deficit or surplus. Accordingly, a retrospective adjustment in provision for end of service benefits amounting to AED 469 million and deferred tax amounting to AED 164 million has been made in the consolidated financial statements. The following revised IFRSs have been adopted in these consolidated financial statements. The application of these revised IFRSs has not had any material impact on the amounts reported for the current and prior periods but may affect the accounting for future transactions or arrangements. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards relating to accounting for government loans at below market interest rate IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement Amendments to IFRS 7 Financial Instruments: Disclosures relating to offsetting of Financial Assets and Financial Liabilities Amendments to IAS 16 Property, Plant and Equipment - servicing equipment IAS 27 (as revised in 2011) Separate Financial Statements IAS 28 (as revised in 2011) Investment in Associates and Joint Ventures Improvements to IFRSs issued in 2011 and 2012 Cycle covering amendments to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34 New and amended standards in issue but not yet effective At the date of the consolidated financial statements, the following Standards, Amendments and Interpretations have not been effective but have not been early adopted: IFRS 9 Financial Instruments (as amended in 2010) Amendments to IAS 32 Financial Instruments: Presentation relating to offsetting financial assets and liabilities Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements relating to investment entities and exemption of consolidation of particular subsidiaries Amendment to IFRS 7 Financial Instruments: Disclosures relating to transition to IFRS 9 (or otherwise when IFRS 9 is first applied) Effective date Not earlier than 1 January January January 2014 When IFRS 9 is first applied IFRS 14 Regulatory deferral accounts 1 January 2016 Amendments to IAS 36 Impairment of Assets relating to recoverable amount disclosures for 1 January 2014 non-financial assets Amendments to IAS 39 Financial instruments Recognition and Measurement amendments for 1 January 2014 novations of derivatives and continuation of hedge accounting IFRIC 21 Levies Guidance on when to recognize a levy imposed by a government 1 January 2014 Annual Improvements Cycle, IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16 and 38 and IAS 24 1 January 2014 Annual Improvements Cycle, IFRS 1, IFRS 3, IFRS 13 and IAS 40 1 January 2014 Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1 January 2014 Management anticipates that the application of the above Standards and Interpretations in future periods will have no material impact on the consolidated financial statements of the Group in the period of initial application. Basis of consolidation These consolidated financial statements incorporate the financial statements of the Corporation and entities controlled by the Corporation. Control is achieved when the Group has: has power over the investee; is exposed, or has rights, to variable returns from its involvement; has the ability to use its power to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has the power to control another entity. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests share of changes in equity since the date of the business combination. Total comprehensive income within subsidiaries is attributed to the Group and to the non-controlling interest even if this results in non-controlling interests having a deficit balance. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are excluded from consolidation from the date that control ceases. Intercompany transactions, balances and any unrealised gains/losses between Group entities have been eliminated in the consolidated financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. 64 Annual Report

35 Financials Notes to the consolidated financial statements for year ended 31 December 2013 Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) Business combinations The acquisition of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the aggregate of the fair value, at the date of exchange, of the assets given, equity instruments issued and liabilities incurred or assumed. The acquiree s identifiable assets and liabilities that meet the conditions for recognition under IFRS 3 Business Combinations, are recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in the consolidated statement of profit or loss as incurred. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group s interest in the net fair value of the acquiree s identifiable assets and liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated statement of profit or loss. The non-controlling interest in the acquiree is initially measured at the minority s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Step acquisition If the business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in the consolidated statement of profit or loss. Associates and joint ventures A joint venture is a joint arrangement whereby the Group has joint control of the arrangement and has corresponding rights to the net assets of the arrangement. Associates are those companies over which Group exercises significant influence but it does not control those companies. Investments in associates and joint ventures are accounted for using the equity method of accounting. Investments in associates and joint ventures are carried in the consolidated statement of financial position at cost as adjusted by post-acquisition changes in the Group s share of the net assets of the associates and joint ventures less any impairment in the value of individual investments. Losses of the associates and joint ventures in excess of the Group s interest are not recognised unless the Group has incurred legal or constructive obligations. The carrying values of investments in associates and joint ventures are reviewed on a regular basis and if an impairment in the value has occurred, it is written off in the period in which those circumstances are identified. Any excess of the cost of acquisition over the Group s share of the fair values of the identifiable net assets of the associates at the date of acquisition is recognised as goodwill and included as part of the cost of investment. Any deficiency of the cost of acquisition below the Group s share of the fair values of the identifiable net assets of the associates at the date of acquisition is credited to the consolidated statement of profit or loss in the year of acquisition. The Group s share of associates and joint ventures results is based on the most recent financial statements or interim financial statements drawn up to the Group s reporting date. Accounting policies of associates and joint ventures have been adjusted, where necessary, to ensure consistency with the policies adopted by the Group. 2. Significant accounting policies (continued) Revenue Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for telecommunication products and services provided in the normal course of business. Revenue is recognised, net of sales taxes, discounts and rebates, when it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue and associated cost can be measured reliably. Revenue from telecommunication services comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision and fees for connecting users of other fixed line and mobile networks to the Group s network. Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as revenue over the related access period, with unbilled revenue resulting from services already provided from the billing cycle date to the end of each period accrued and unearned revenue from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid credit is recognised on the actual utilisation of the prepaid credit and is deferred as deferred income until such time as the customer uses the airtime, or the credit expires. Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service. Incentives are provided to customers in various forms and are usually offered on signing a new contract or as part of a promotional offering. Where such incentives are provided on connection of a new customer or the upgrade of an existing customer, revenue representing the fair value of the incentive, relative to other deliverables provided to the customer as part of the same arrangement, is deferred and recognised in line with the Group s performance of its obligations relating to the incentive. In revenue arrangements including more than one deliverable that have value to a customer on stand alone basis, the arrangement consideration is allocated to each deliverable based on the relative fair value of the individual elements. The Group generally determines the fair value of individual elements based on prices at which the deliverable is regularly sold on a standalone basis. Contract revenue is recognised under the percentage of completion method. Profit on contracts is recognised only when the outcome of the contracts can be reliably estimated. Provision is made for foreseeable losses estimated to complete contracts. Revenue from interconnection of voice and data traffic with other telecommunications operators is recognised at the time the services are performed based on the actual recorded traffic. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that asset s net carrying amount. Profits and losses resulting from upstream and downstream transactions between the Group (including its consolidated subsidiaries) and its associate or joint ventures are recognised in the Group s financial statements only to the extent of unrelated group s interests in the associates or joint ventures. Losses may provide evidence of an impairment of the asset transferred, in which case appropriate provision is made for impairment. Dilution gains and losses arising on deemed disposal of investments in associates and joint ventures are recognised in the consolidated statement of profit or loss. 66 Annual Report

36 Financials Notes to the consolidated financial statements for year ended 31 December 2013 Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. i) The Group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group s net investment outstanding in respect of the leases. Revenues from the sale of transmission capacity on terrestrial and submarine cables are recognised on a straight-line basis over the life of the contract. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. ii) The Group as lessee Rentals payable under operating leases are charged to the consolidated statement of profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Foreign currencies 2. Significant accounting policies (continued) iii) Foreign exchange differences Exchange differences are recognised in the consolidated statement of profit or loss in the period in which they arise except for exchange differences that relate to assets under construction for future productive use. These are included in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency borrowings. Exchange differences on transactions entered into to hedge certain foreign currency risks; and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation are recognised in the foreign currency translation reserve and recognised in the consolidated statement of profit or loss on disposal of the net investment. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the consolidated statement of profit or loss in the period in which they are incurred. Government grants i) Functional currencies The individual financial statements of each of the Group s subsidiaries, associates and joint ventures are presented in the currency of the primary economic environment in which they operate (its functional currency). For the purpose of the consolidated financial statements, the results, financial position and cash flows of each Group company are expressed in UAE Dirhams, which is the functional currency of the Corporation, and the presentation currency of the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity s functional currency are recorded at exchange rates prevailing at the dates of the transactions. At each year end, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the entity s functional currency at rates prevailing at the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated except that the recoverable amount is translated at the date of revaluation if a non- monetory item is impaired. ii) Consolidation On consolidation, the assets and liabilities of the Group s foreign operations are translated into UAE Dirhams at exchange rates prevailing on the date of the consolidated statement of financial position. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are also translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences are recognised in other comprehensive income and are presented in the translation reserve in equity. On disposal of overseas subsidiaries or when significant influence is lost, the cumulative translation differences are recognised as income or expense in the period in which they are disposed of. Government grants relating to non-monetary assets are recognised at nominal value. Grants that compensate the Group for expenses are recognised in the consolidated statement of profit or loss on a systematic basis in the same period in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in the consolidated statement of profit or loss on a systematic basis over the expected useful life of the related asset upon capitalisation. End of service benefits Payments to defined contribution schemes are charged as an expense as they fall due. Payments made to state -managed pension schemes are dealt with as payments to defined contribution schemes where the Group s obligations under the schemes are equivalent to those arising in a defined contribution scheme. Provision for employees end of service benefits for non-uae nationals is made in accordance with the Projected Unit Cost method as per IAS 19 Employee Benefits taking into consideration the UAE Labour Laws. The provision is recognised based on the present value of the defined benefit obligations. The present value of the defined benefit obligations is calculated using assumptions on the average annual rate of increase in salaries, average period of employment of non-uae nationals and an appropriate discount rate. The assumptions used are calculated on a consistent basis for each period and reflect management s best estimate. The discount rates are set in line with the best available estimate of market yields currently available at the reporting date with reference to high quality corporate bonds or other basis, if applicable. 68 Annual Report

37 Financials Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of profit or loss because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax is calculated using relevant tax rates and laws that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is charged or credited in the consolidated statement of profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognise d to the extent that it is probable that sufficient taxable profits will be available in the future against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor the accounting profit. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Property, plant and equipment Property, plant and equipment are only measured at cost, less accumulated depreciation and any impairment. Cost comprises the cost of equipment and materials, including freight and insurance, charges from contractors for installation and building works, direct labour costs, capitalised borrowing costs and an estimate of the costs of dismantling and removing the equipment and restoring the site on which it is located. Assets in the course of construction are carried at cost, less any impairment. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group s accounting policy. Depreciation of these assets commences when the assets are ready for their intended use. Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) Other than land (which is not depreciated), the cost of property, plant and equipment is depreciated on a straight line basis over the estimated useful lives of the assets as follows: Buildings: Permanent the lesser of years and the period of the land lease. Temporary the lesser of 4 10 years and the period of the land lease. Plant and equipment: Years Submarine fibre optic cables 20 coaxial cables 10 Cable ships 15 Coaxial and fibre optic cables Line plant Exchanges 5 10 Switches 15 Radios/towers Earth stations/vsat 5 10 Multiplex equipment 10 Power plant 5 7 Subscribers apparatus 3 5 General plant 2 7 Other assets: Motor vehicles 5 Computers 5 Furniture and fittings 4-6 The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the consolidated statement of profit or loss. Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is carried at cost less accumulated depreciation and impairment loss. Investment properties are depreciated on a straight-line basis over the lesser of 20 years and the period of the lease. Intangible assets (i) Goodwill Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the Group s share of net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to consolidated statement of profit or loss during the period in which they are incurred. 70 Annual Report

38 Financials Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units (CGUs) expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other non-financial assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of an associate, joint venture, or a subsidiary or where Group ceases to exercise control, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. (II) Licenses Acquired telecommunication licenses are initially recorded at cost or, if part of a business combination, at fair value. Licenses are amortised on a straight line basis over their estimated useful lives from when the related networks are available for use. The estimated useful lives range between 10 and 25 years and are determined primarily by reference to the unexpired license period, the conditions for license renewal and whether licenses are dependent on specific technologies. (III) Internally-generated intangible assets An internally-generated intangible asset arising from the Group s IT development is recognised at cost only if all of the following conditions are met: an asset is created that can be identified (such as software and new processes); it is probable that the asset created will generate future economic benefits; and the development cost of the asset can be measured reliably. Internally-generated intangible assets are amortised on a straight-line basis over their useful lives of 3-10 years. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. (IV) Indefeasible Rights of Use ( IRU ) IRUs correspond to the right to use a portion of the capacity of a terrestrial or submarine transmission cable granted for a fixed period. IRUs are recognised at cost as an asset when the Group has the specific indefeasible right to use an identifie d portion of the underlying asset, generally optical fibres or dedicated wavelength bandwidth, and the duration of the right is for the major part of the underlying asset s economic life. They are amortised on a straight line basis over the shorter of the expected period of use and the life of the contract which ranges between 10 to 20 years. Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Inventory Inventory is measured at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Allowance is made, where appropriate, for deterioration and obsolescence. Cost is determined in accordance with the weighted average cost method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Financial instruments Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. i) Fair value The fair values of financial assets and financial liabilities are determined as follows: the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions. (V) Other intangible assets Customer relationships and trade names are recognised on acquisition at fair values. They are amortised on a straight line basis over their estimated useful lives. The useful lives of customer relationships range from 5-13 years and trade names have a useful life of 15 years. Impairment of tangible and intangible assets excluding goodwill The Group reviews the carrying amounts of its tangible and intangible assets whenever there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life (including goodwill) is tested for impairment annually. Recoverable amount is the higher of an asset s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. 72 Annual Report

39 Financials Notes to the consolidated financial statements for year ended 31 December 2013 Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) 2. Significant accounting policies (continued) ii) Financial assets All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: held-to-maturity investments, available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. iii) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments that are held-to-maturity, are available-forsale, or are loans and receivables. iv) Held-to-maturity investments Bonds and Sukuk bonds with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. The Group considers the credit risk of counterparties in its assessment of whether such financial instruments are impaired. v) Available-for-sale financial assets ( AFS ) Listed securities held by the Group that are quoted in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investment revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in the consolidated statement of profit or loss. Dividends on AFS equity instruments are recognised in the consolidated statement of profit or loss when the Group s right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate prevailing at the reporting date. The foreign exchange gains/losses that are recognised in the consolidated statement of profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains/losses are recognised in the consolidated statement of changes in equity. The Group assesses at each reporting date whether there is objective evidence that AFS assets are impaired. In the case of equity securities, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. Impairment losses recognised in the consolidated statemet of profit or loss on equity instruments are not reversed through the consolidated statement of profit or loss. vi) Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated statement of profit or loss where there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The allowance for doubtful debts reflects estimates of losses arising from the failure or inability of the Group s customers to make required payments. The estimates are based on the ageing of customer s accounts and the Group s historical write-off experience. vii) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. viii) Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss ( FVTPL ) or other financial liabilities. ix) Financial guarantee contract liabilities Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of: the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies set out above. x) Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as such. A financial liability is classified as held for trading if it has been incurred principally for the purpose of disposal in the near future or it is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the consolidated statement of profit or loss. xi) Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. 74 Annual Report

40 Financials Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) xii) Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group s obligations are discharged, cancelled or they expire. xiii) Derivative financial instruments The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including forward foreign exchange contracts, interest rate swaps and cross currency swaps. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The Group does not currently designate any financial instruments as hedging instruments, and accordingly all resulting gains or losses arising from the remeasurement of derivatives are recognised in the consolidated statement of profit or loss immediately. xiv) Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in the consolidated statement of profit or loss. xv) Hedge accounting The Group may designate certain hedging instruments, which include derivatives, embedded derivatives and nonderivatives in respect of foreign exchange risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges where appropriate criteria are met. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item. xvi) Put option arrangements The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary. The amount that may become payable under the option on exercise is initially recognised at fair value within borrowings with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries. For options that involve a fixed amount of cash for a fixed number of shares in the subsidiary, the Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration received, as a financing cost. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity. Notes to the consolidated financial statements for year ended 31 December Significant accounting policies (continued) xvii) Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset or substantially all the risk and rewards of ownership to another entity. If the Group neither transfer nor retains substantially all the risks and reward of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Transactions with non-controlling interests The Group applies a policy of treating transactions with non-controlling interest holders as transactions with parties external to the Group. Disposals to non-controlling interest holders result in gains and losses for the Group and are recorded in the consolidated statement of profit or loss. Purchases from non-controlling interest holders result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. Dividends Dividend distributions to the Group s shareholders are recognised as a liability in the consolidated financial statements in the period in which the dividends are approved. 3. Critical accounting judgements and key sources of estimation uncertainty In the application of the Group s accounting policies, which are described in Note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed below. i) Fair value of other intangible assets On the acquisition of mobile network operators, the identifiable intangible assets may include licenses, customer bases and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset, where no active market for the assets exist. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. 76 Annual Report

41 Financials Notes to the consolidated financial statements for year ended 31 December 2013 Notes to the consolidated financial statements for year ended 31 December Critical accounting judgements and key sources of estimation uncertainty (continued) 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 lives used to amortise intangible assets relate 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. ii) Business combinations The recognition of business combinations requires the purchase price of acquisitions to be allocated to the identifiable assets acquired and the liabilities assumed measured at their acquisition-date fair values. The Group makes judgments and estimates in relation to the fair value determination of the assets acquired and liabilities assumed and allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill and if negative, it is recognised in the statement of profit or loss. iii) Impairment of goodwill and associates Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating unit to which the goodwill has been allocated. The value-in-use calculation for goodwill and associates requires the Group to calculate the net present value of the future cash flows for which certain assumptions are required, including management s expectations of: long term growth rates in cash flows; timing and quantum of future capital expenditure; and the selection of discount rates to reflect the risks involved. The key assumptions used and sensitivities are detailed on Note 9 of the consolidated financial statements. A change in the key assumptions or forecasts might result in an impairment of goodwill and investment in associates. iv) Impairment of intangibles 3. Critical accounting judgements and key sources of estimation uncertainty (continued) vii) Classification of associates, joint ventures and subsidiaries The appropriate classification of certain investments as subsidiaries, associates and joint ventures requires significant analysis and management judgement as to whether the Group exercises control, significant influence or joint control over these investments. This may involve consideration of a number of factors, including ownership and voting rights, the extent of Board representation, contractual arrangements and indicators of de fact control. Changes to these indicators and management s assessment of the power to control or influence may have a material impact on the classification of such investments and the Group s consolidated financial position, revenue and results. viii) Federal royalty The computation of Federal Royalty in accordance with the Cabinet of Ministers of UAE decision No. 320/15/23 of 2012 and guidelines issued by the UAE Ministry of Finance ( the MoF ) dated 21 January 2013 and subsequent clarification letters dated 24 April 2013, 30 October 2013 and 29 January 2014 requires a number of calculations. In performing these calculations, management have made certain critical judgements, interpretations and assumptions. These mainly relate to the segregation of items between regulated and other activities and items which the Corporation judges as not subject to Federal royalty or which may be set off against profits which are subject to Federal royalty. The calculation basis and methodology to be applied for future periods is still subject to ongoing discussion and may change. ix) Regulatory expenses The Corporation is required to pay the UAE Telecommunication Regulatory Authority (TRA) 1% of its revenues annually as regulatory expenses towards ICT contributions. In the computation of the regulatory expenses, the Corporation has made certain critical judgements and assumptions relating mainly to the interpretation of revenues, which the Corporation contends to include UAE regulated revenues only and not revenues in other UAE entities as well as overseas subsidiaries. Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the 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 quantum of future capital expenditure; and the selection of discount rates to reflect the risks involved. v) 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/decreasing an asset s expected life or its residual value would result in a reduced/increased depreciation charge in the consolidated statement of profit or loss. vi) Impairment of trade receivables The Group determines the impairment of trade receivables based on their ageing when objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the trade receivables. Management exercises significant judgments in assessing the impact of adverse indicators and events on recoverability of trade receivables. 78 Annual Report

42 Financials Notes to the consolidated financial statements for year ended 31 December Segmental information Information regarding the Group s operating segments is set out below in accordance with IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Group s chief operating decision maker and used to allocate resources to the segments and to assess their performance. a) Products and services from which reportable segments derive their revenues The Group is engaged in a single line of business, being the supply of telecommunications services and related products. The majority of the Group s revenues, profits and assets relate to its operations in the UAE. Outside of the UAE, the Group operates through its subsidiaries and associates in sixteen countries which are divided in to the following operating segments: Pakistan Egypt International - others Revenue is attributed to an operating segment based on the location of the Group company reporting the revenue. Intersegment sales are charged at arms length prices. b) Segment revenues and results Segment results represent operating profit earned by each segment without allocation of finance income, finance costs and federal royalty. This is the measure reported to the Group s Board of Directors ( Board of Directors ) for the purposes of resource allocation and assessment of segment performance. The Group s share of results from associates and joint ventures has been allocated to the segments based on the geographical location of the operations of the associate and joint venture investments. The allocation is in line with how results from investments in associates and joint ventures are reported to the Board of Directors. c) Segment assets For the purposes of monitoring segment performance and allocating resources between segments, the Board of Directors monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments. The segment information has been provided in the following page. 4. Segmental information International UAE Egypt Pakistan Others Eliminations Consolidated 31 December 2013 Revenue External sales 25,448,349 4,715,665 4,425,863 4,263,361-38,853,238 Inter-segment sales 507,120 25, , ,581 (978,621) - Total revenue 25,955,469 4,741,520 4,760,928 4,373,942 (978,621) 38,853,238 Segment result 11,543, , ,448 1,709,804 14,533,019 Federal royalty (6,115,016) Finance income 440,199 Finance costs (458,607) Profit before tax 8,399,595 Taxation (648,647) Profit for the year 7,750,948 Total assets 58,557,080 13,766,144 18,117,964 15,352,603 (20,078,257) 85,715,534 Depreciation and amortisation 1,889, , , ,010-4,607,548 Additions to non-current assets 2,063,453 1,228,969 1,391,760 1,649,704-6,333, December 2012 Revenue External sales 23,598,041 5,050,125-4,298,134-32,946,300 Inter-segment sales 240,271 25,060-96,116 (361,447) - Total revenue 23,838,312 5,075,185-4,394,250 (361,447) 32,946,300 Segment result 9,385,496 1,026,484 8,441 1,430,176-11,850,597 Federal royalty (6,451,252) Gain on partial disposal of associate 860,138 Finance income 721,111 Finance costs (322,938) Profit before tax 6,657,656 Taxation (85,910) Profit for the year 6,571,746 Total assets 57,848,198 14,323,902 19,497,968 13,773,276 (20,837,198) 84,606,146 Depreciation and amortisation 1,723, , ,925-3,384,739 Additions to non-current assets 1,939,353 1,174,053-1,050,942-4,164,348 UAE Segment revenue breakup: AED million AED million UAE Revenue - TRA regulated 22,758 22,010 UAE Revenue - Non-regulated 3,197 1,828 25,955 23, Annual Report

43 Financials 5. Operating expenses and federal royalty a) Operating expenses (before federal royalty) Direct cost of sales 8,730,519 7,165,626 Staff costs 5,149,391 4,475,420 Depreciation (Notes 10,11) 3,798,455 2,670,013 Network and other related costs 2,187,302 1,329,038 General and administrative expenses 1,346,749 1,224,535 Marketing expenses 906, ,077 Amortisation (Note 9) 809, ,726 Regulatory expenses 674, ,879 Operating lease rentals 258, ,165 Foreign exchange losses 140,873 57,669 Other operating expenses 698, ,345 Operating expenses (before federal royalty) 24,700,384 19,533,493 The comparative figures for 2012 have been reclassified to conform with the current year's presentation of operating expenses (before federal royalty), so that they appropriately reflect the nature of transactions. This reclassification does not have an impact on the profit or the statement of financial position in the current or prior year. b) Federal Royalty In accordance with the Cabinet decision No. 558/1 for the year 1991, the Corporation was required to pay a federal royalty, equivalent to 40% of its annual net profit before such federal royalty, to the UAE Government for use of federal facilities. With effect from 1 June 1998, Cabinet decision No. 325/28M for 1998 increased the federal royalty payable to 50%. On 9 December 2012 the Cabinet of Ministers of UAE issued decision no. 320/15/23 of 2012 in respect of a new royalty mechanism applicable to. Under the new mechanism a distinction is made between revenue earned from services regulated by Telecommunications Regulatory Authority ( TRA ) and non-regulated services as well as between foreign and local profits. is required to pay 15% royalty fee on the UAE regulated revenues and 35% of net profit after deduction of the 15% royalty fee on the UAE regulated revenues. In respect of foreign profit, the 35% royalty is reduced by the amount that the foreign profit has already been subject to foreign taxes. Ministry of Finance have confirmed via their letter dated 29 January 2014 that the mechanism of calculating the royalty fee for the year ended 31 December 2013 will follow the same principles that were applicable for the calculation of royalty fees for the year ended 31 December The federal royalty has been treated as an operating expense in the consolidated statement of profit or loss on the basis that the expenses the Corporation would otherwise have had to incur for the use of the federal facilities would have been classified as operating expenses. 6. Finance income Interest on bank deposits and held-to-maturity investment 315, ,966 Interest on loans to associates - 342,278 Other finance income 124,783 60, , , Finance costs Interest on bank overdrafts, loans and other financial liabilities 312, ,706 Interest on other borrowings 97,790 4,905 Unwinding of discount 47,912 2, , ,938 Total borrowing costs 482, ,590 Less: amounts included in the cost of qualifying assets (Note 10) (24,326) (25,652) 458, ,938 All interest charges are generated on the Group s financial liabilities measured at amortised cost. Borrowing costs included in the cost of qualifying assets during the year arose on specific and general borrowing pools. Borrowing costs attributable to general borrowing pools are calculated by applying a capitalisation rate of 10.0% (2012: 9.4%) to expenditure on such assets. Borrowing costs have been capitalised in relation to loans by certain of the Group s subsidiaries. 8. Taxation Current tax expense 496, ,554 Deferred tax expense / (credit) 151,740 (33,644) 648,647 85,910 a) Current tax Corporate income tax is not levied in the UAE for telecommunication companies and accordingly the effective tax rate for the Corporation is 0% (2012: 0%). The table below reconciles the difference between the expected tax expense of nil (2012: nil) (based on the UAE effective tax rate) and the Group s tax charge for the year Profit before tax 8,399,595 6,657,656 Tax at the UAE corporation tax rate of 0% (2012: 0%) - - Effect of different tax rates of subsidiaries operating in other jurisdictions 496, ,554 Current tax expense for the year 496, ,554 b) Current income tax assets and liabilities The current income tax assets represent refunds receivable from tax authorities and current income tax liabilities represent income tax payable. c) Deferred tax Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when these relate to the same income tax authority. The amounts recognised in the consolidated statement of financial position after such offset are as follows: Deferred tax assets 243, ,607 Deferred tax liabilities (1,749,839) (1,818,053) (1,506,797) (1,531,446) 82 Annual Report

44 Financials 8. Taxation (continued) 9. Goodwill, other intangible assets, impairment and other losses The following represent the major deferred tax liabilities and deferred tax assets recognised by the Group and movements thereon without taking into consideration the offsetting of balances within the same tax jurisdiction. Deferred tax liabilities Accelerated tax Deferred tax on depreciation overseas earnings Others Total At 1 January , , ,602 (Credit)/charge to the consolidated statement of profit or loss (111,799) 48,369 8,215 (55,215) Payment during the year - (52,952) - (52,952) Consolidation of PTCL (Note 29) 879,313-32, ,935 Exchange differences (11,589) - (169) (11,758) At 31 December 2012 (as previously reported) Effect of change in accounting policy (Note 2) Consolidation of PTCL (Note 29) - additional recognition on fair valuation At 31 December 2012 (as restated) (Credit)/charge to the consolidated statement of profit or loss (Credit)/charge to other comprehensive income 1,264, ,582 40,668 1,464, , ,621 1,976, ,582 41,194 2,177,759 6,121 21,661 (6,223) 21, (53) (53) Exchange differences (173,723) - 14,838 (158,885) At 31 December 2013 Deferred tax assets 1,809, ,243 49,756 2,040,380 Retirement benefit obligations Tax losses Others Total At 1 January , ,908 17, ,094 Charge/(Credit) to the consolidated statement of profit or loss Consolidation of PTCL (Note 29) 884 (15,773) (6,682) (21,571) - 59, , ,532 Exchange differences ,084 At 31 December 2012 (as previously reported) 3, , , ,139 Effect of change in accounting policy (Note 2) 164, ,174 At 31 December 2012 (as restated) 167, , , ,313 (Credit)/charge to the consolidated statement of profit or loss (Credit)/charge to other comprehensive income (44,107) (73,906) (12,168) (130,181) 62,913 2, ,485 Exchange differences (13,160) (25,566) (9,308) (48,034) At 31 December , , , ,583 Unused tax losses AED million AED million Total unused tax losses 1,642 1,706 of which deferred tax assets recognised for 1,153 1,104 of which no deferred tax asset recognised, due to unpredictability of future taxable profit streams of the unrecognised tax losses, losses that will expire in the next three years are Cost At 1 January 2012 Additions Consolidation of PTCL (Note 29) Other intangible Goodwill assets Total AED 000 3,113,583 15,401,323 18,514, , ,992 4,546,698 1,041,494 5,588,192 Disposals - (12,543) (12,543) Exchange differences (151,684) (596,598) (748,282) Deconsolidation of a subsidiary (Note 12) (1,192) (92,611) (93,803) At 31 December ,507,405 16,024,057 23,531,462 Amortisation and impairment At 1 January 2012 Charge for the year 1,240,690 5,123,699 6,364, , ,726 Impairment losses 337, ,130 Consolidation of PTCL (Note 29) - 130, ,830 Disposals - (1,152) (1,152) Exchange differences 498 (150,272) (149,774) Deconsolidation of a subsidiary (Note 12) At 31 December (19,882) (19,882) 1,578,318 5,797,949 7,376,267 Carrying amount At 31 December ,929,087 10,226,108 16,155,195 Cost At 1 January ,507,405 16,024,057 23,531,462 Additions - 766, ,638 Exchange differences (332,498) (944,227) (1,276,725) At 31 December ,174,907 15,846,468 23,021,375 Amortisation and impairment At 1 January ,578,318 5,797,949 7,376,267 Charge for the year - 809, ,093 Impairment losses 43,063-43,063 Exchange differences 1,260 (207,855) (206,595) At 31 December ,622,641 6,399,187 8,021,828 Carrying amount At 31 December ,552,266 9,447,281 14,999,547 Other intangible assets - net book values Licenses 8,046,956 8,686,381 IRU 387, ,238 Computer software 231, ,613 Customer relationships 405, ,905 Trade names 221, ,700 Others 154, ,270 9,447,281 10,226, Annual Report

45 Financials 9. Goodwill, other intangible assets, impairment and other losses (continued) 9. Goodwill, other intangible assets, impairment and other losses (continued) Impairment and other losses The net impairment losses recognised in the consolidated statement of profit or loss in respect of the carrying amounts of investments, goodwill, licenses and property, plant and equipment are as follows: AED 000 AED 000 Pakistan Telecommunication Company Limited (PTCL) 16,293 2,365,953 of which relating to carrying amount of investment in associate (Note 14b) - 2,365,953 of which relating to property, plant and equipment (Note 10) 16,293 - Canar Telecommunications Co. Limited (Canar) - 459,412 of which relating to goodwill - 337,130 of which relating to property, plant and equipment - 122,282 Atlantique Telecom S.A (AT) 71,715 - of which relating to goodwill 43,063 - of which relating to property, plant and equipment (Note 10) 24,327 - of which relating to other financial assets 4,325 - Others 1,286,168 - of which relating to loans to related party 515,875 - of which relating to available-for-sale financial assets (quoted equity instruments) (Note 15) 264,309 - of which other losses 505,984 - Total impairment and other losses for the year 1,374,176 2,825,365 b) Cash generating units Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The carrying amount of goodwill (all relating to operations within the Group s International reportable segment) is allocated to the following CGUs: Cash generating units (CGU) to which goodwill is allocated Atlantique Telecom, S.A. (AT) 1,218,897 1,256,345 Misr () S.A.E. 27,111 29,518 Zanzibar Telecom Limited (Zantel) 44,896 44,896 Lanka (Pvt) Limited ( Lanka) 206, ,123 Pakistan Telecommunication Company Limited (PTCL) 4,055,239 4,392,205 5,552,266 5,929,087 c) Key assumptions for the value in use calculations The key assumptions for the value in use calculations are those regarding the long term forecast cash flows, discount rates and capital expenditure. Long term cash flows The Group prepares cash flow forecasts derived from the most recent annual business plan approved by management for each location for the next five years. The business plans take into account local market considerations such as the revenues and costs associated with future customer growth, the impact of local market competition and consideration of the local macro-economic and political trading environment. This rate does not exceed the average long-term growth rate for the relevant markets and it ranges between 2.6% to 6.3% (2012:0.8% to 6.8%). Impairment losses were primarily driven by increased discount rates as a result of increases in inflation in the operating countries and challenging economic and political conditions, as well as negative local currency fluctuation. Impairment losses of Group's investment in available-for-sale financial assets is triggered by a significant decline in the fair value of the quoted investment. The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an (increase)/decrease to the aggregate impairment loss recognised in the year ended 31 December Discount rates The discount rates applied to the cash flows of each of the Group s operations are based on an internal study conducted by the management. The study utilised market data and information from comparable listed mobile telecommunications companies and where available and appropriate, across a specific territory. The pre-tax discount rates use a forward looking equity market risk premium and ranges between 13.9% to 19.3% (2012: 11.7% to 17.6%). Pre-tax adjusted discount rate Growth rate Sensitivity to changes in assumptions AED million AED million Atlantique Telecom S.A (AT) increase by 2% - 6 Decrease by 2% 18 - Capital expenditure The cash flow forecasts for capital expenditure are based on past experience and include the ongoing capital expenditure required to continue rolling out networks in emerging markets, providing enhanced voice and data products and services, and meeting the population coverage requirements of certain licenses of the Group. Capital expenditure includes cash outflows for the purchase of property, plant and equipment and other intangible assets. 86 Annual Report

46 Financials 10. Property, plant and equipment 10. Property, plant and equipment (continued) Land and buildings Plant and equipment Motor vehicles, computer, furniture Assets under construction Total AED 000 Cost At 1 January ,735,029 27,065,353 2,808,811 7,146,752 40,755,945 Additions 44, , ,840 2,800,706 3,879,315 Consolidation of PTCL (Note 29) 4,761,744 14,890, , ,654 20,676,803 Transfers 61,013 2,907, ,611 (3,338,856) - Disposals (1,268) (415,386) (82,743) - (499,397) Exchange differences (34,240) (430,476) (52,615) 26,894 (490,437) Deconsolidation of Subsidiary (Note 12) - (108,294) - (1,318,756) (1,427,050) At 31 December ,566,580 44,833,427 3,421,778 6,073,394 62,895,179 Depreciation and impairment At 1 January ,206,722 15,888,329 1,987,066 59,833 20,141,950 Charge for the year 209,268 2,027, ,942-2,666,878 Impairment losses - 122, ,282 Consolidation of PTCL (Note 29) 191,147 9,262, ,813-9,589,129 Disposals (42) (407,854) (79,165) - (487,061) Exchange differences (9,202) (130,997) (38,411) (66) (178,676) At 31 December ,597,893 26,761,597 2,435,245 59,767 31,854,502 Carrying amount At 31 December ,968,687 18,071, ,533 6,013,627 31,040,677 Cost At 1 January ,566,580 44,833,427 3,421,778 6,073,394 62,895,179 Additions 17,576 1,178, ,735 4,263,687 5,564,687 Transfers 187,069 4,007,140 1,052,034 (5,246,243) - Disposals (239) (158,289) (29,351) (44,430) (232,309) Exchange differences (393,731) (1,609,659) (180,586) (111,091) (2,295,067) At 31 December ,377,255 48,251,308 4,368,610 4,935,317 65,932,490 The carrying amount of the Group s land and buildings includes a nominal amount of AED 1 (2012: AED 1) in relation to land granted to the Group by the Government. There are no contingencies attached to this grant and as such no additional amounts have been included in the consolidated statement of profit or loss or the consolidated statement of financial position in relation to this. An amount of AED 24.3 million (2012: AED 25.7 million) is included in property, plant and equipment on account of capitalisation of borrowing costs for the year. Borrowings are secured against property, plant and equipment with a net book value of AED 2,781 million (2012: AED 3,060 million). Assets under construction include multiplex equipment, line plant, exchange and network equipment. 11. Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at depreciated cost and included separately under non-current assets in the consolidated statement of financial position Cost At 1 January 54,210 52,169 Additions 2,561 2,041 At 31 December 56,771 54,210 Depreciation At 1 January 12,529 9,394 Additions 3,031 3,135 At 31 December 15,560 12,529 Carrying amount at 31 December 41,211 41,681 Fair value at 31 December 65,842 62,706 Investment property rental income and direct operating expenses AED million AED million Property rental income Direct operating expenses Depreciation and impairment At 1 January ,597,893 26,761,597 2,435,245 59,767 31,854,502 Charge for the year 109,735 2,962, ,912-3,795,424 Impairment losses - 40, ,620 Disposals (27) (134,902) (23,791) - (158,720) Exchange differences (20,264) (799,800) (98,433) - (918,497) At 31 December ,687,337 28,830,292 3,035,933 59,767 34,613,329 The fair values of the Group s investment property has been arrived at on the basis of a valuation carried out by internal valuers. Carrying amount At 31 December ,689,918 19,421,016 1,332,677 4,875,550 31,319, Annual Report

47 Financials 12. Subsidiaries 12. Subsidiaries (continued) a) The Group s principal subsidiaries are as follows: Name Emirates Telecommunications and Marine Services FZE Country of incorporation Percentage shareholding UAE Telecommunications services 100% Emirates Cable TV and Multimedia LLC UAE Cable television services 100% International Pakistan LLC UAE Holds investment in Pakistan Telecommunication Co. Ltd 90% E-Marine PJSC UAE Submarine cable activities 100% Services Holding LLC UAE Infrastructure services 100% Software Solutions (Private) Limited India Technology solutions 100% Zanzibar Telecom Limited Tanzania Telecommunications services 65% Canar Telecommunications Co. Limited Republic of Sudan Telecommunications services 90% Holds investment in Emerging Market International Nigeria Limited UAE Telecommunications Services B.V. 100% (Netherlands) International Indonesia Limited UAE Holds investment in PT XL Axiata TBK 100% Afghanistan Afghanistan Telecommunications services 100% Misr S.A.E. Egypt Telecommunications services 66% Atlantique Telecom S.A. Cote d Ivoire Telecommunications services 100% Benin Benin Telecommunications services 100% Lanka (Pvt.) Limited Sri Lanka Telecommunications services 100% Pakistan Telecommunication Company Limited Pakistan Telecommunications services 23% Mauritius Private Limited Mauritius Holds investment in DB Telecom Private Limited 100% The assets and liabilities derecognised as a result of the deconsolidation of EDB in 2012 were as follows: Principal activity At 31 December 2012 as a result of a reassessment by management of the Corporation s ability to control, reflecting changes to the Board of PTCL and falling away of certain prevailing existing control impediments, the Group has commenced treating its investment in Pakistan Telecommunications Company Limited (PTCL) as a subsidiary as disclosed in Note 29. In March 2012, the Group reviewed the degree of control it has over DB Telecom Pvt Ltd (EDB) in respect of the Group s ability to influence EDB's response to events in India and the agreements relating to the investment and concluded it is no longer appropriate to treat EDB as a subsidiary. AED 000 Assets Property, plant and equipment 1,427,049 Cash and cash equivalents 654,926 Other Assets 419,373 Total assets 2,501,348 Liabilities Trade and other payables 1,223,915 Borrowings 1,083,475 Other Liabilities 214,687 Total liabilities 2,522,077 The above deconsolidation did not have a material impact on the consolidated statement of profit or loss for the year ended 31 December During the year ended 31 December 2013, Atlantique Telecom S.A. (AT), a 100% subsidiary of the Group, disposed 15% shares of its subsidiary (Moov CDI) in Ivory Coast for a consideration of AED 371 million. AT transferred 3.98% of its shareholding in another subsidiary (Moov Gabon) to comply with the local regulations to increase the shareholding of local shareholder to 10%. The Group also acquired additional shareholding in Canar Telecommunications Co. Limited and consequently Group s shareholding increased from 89% to 90%. b) Disclosures relating to subsdiaries Information relating to subsidiaries that have non-controlling interests that are material to the group are provided below: PTCL Misr Information relating to non-controlling interest: Non-controlling interest (shareholding %) 76.6% 76.6% 34% 34% Profit 618,382 n/a* 95, ,179 Total comprehensive income/(loss) (265,036) n/a* (134,873) (160,506) Dividends (141,106) n/a* - - Non-controlling interests as at 31 December 4,820,564 5,226,706 2,635,964 2,770,837 Summarised information relating to subsidiary: Current assets 2,546,468 3,102,920 1,093,194 1,055,754 Non-current assets 8,578,638 5,753,169 12,672,950 13,268,148 Current liabilities 2,051,623 1,990,121 3,675,356 3,561,445 Non-current liabilities 2,780,319 2,592,855 2,169,319 2,627,139 * PTCL became a subsidiary effective 31 December 2012 c) Movement in non-controlling interests The movement in non-controlling interests is provided below: As at 1 January 9,398,260 2,324,172 Total comprehensive income: Profit for the year 672,560 (170,073) Remeasurement of defined benefit obligations - net of tax (96,989) - Exchange differences on translation of foreign operations (859,520) (129,728) Loss on revaluation of available-for-sale financial assets 1, Deconsolidation of a subsidiary (Note 12) - 332,817 Consolidation of PTCL - 7,259,290 Effect of changes in accouting policy for remeasurement of defined benefit obligation - (233,614) Transfer to reserves - 15,351 Transaction with owners: Disposal of partial interest in subsidiaries 87,233 - Acquisition of non-controlling interests (5,782) - Additional equity from non-controlling interests 16,835 - Dividends (153,077) - As at 31 December 9,060,552 9,398, Annual Report

48 Financials 13. Share of results of associates and joint ventures Associates excluding EMTS (Note 14 b) 1,743,379 1,641,278 Joint ventures (Note 14 g) 10,962 5,276 EMTS (Note 14 b) - (383,399) Total 1,754,341 1,263, Investment in associates and joint ventures (continued) d) Market value of an associate The shares of one of the Group s associates are quoted on public stock markets. The market value of the Group s shareholding based on the quoted prices is as follows: Etihad Company ("Mobily") 17,654,107 14,307, Investment in associates and joint ventures a) Associates Name Country of incorporation Percentage shareholding Etihad Company ("Mobily") Saudi Arabia Telecommunications services 27% Thuraya Telecommunications Company PJSC ("Thuraya") Emerging Markets Telecommunications Services Limited ("EMTS Nigeria") b) Movement in investments in associates UAE Satellite communication services 28% Nigeria Telecommunications services 40% Carrying amount at 1 January 5,961,612 5,273,517 6,231,988 16,911,377 Share of results (Note 13) 1,807,648 1,629,348 1,743,379 1,641,278 Reclasifications to Other investments (see below) (1,858,736) Impairment of an associate (Note 9) (2,365,953) Consolidation of PTCL (Note 29) (7,097,260) Other movements - - (355) 1,425 Dividends (973,311) (941,253) (973,311) (1,000,143) Carrying amount at 31 December 6,795,949 5,961,612 7,001,701 6,231,988 c) Aggregated amounts relating to associates Current assets 15,017,960 10,280,545 15,839,241 11,248,556 Non-current assets 30,539,065 27,801,830 38,202,534 37,948,613 Current liabilities (12,167,821) (9,933,604) (14,520,802) (12,632,881) Non-current liabilities (9,919,520) (7,535,676) (24,581,489) (19,202,448) Net assets 23,469,684 20,613,095 14,939,484 17,361,840 Revenue 24,838,181 21,609,483 28,686,109 26,704,391 Profit or loss 6,583,081 5,933,748 1,935,090 4,058,795 Dividends received 973, , ,311 1,000,143 Mobily Mobily Principal activity All Associates During the year, the Group has reassessed its accounting treatment for share of results of one of its associates. Consequently, the Group has discontinued the recognition of the share of results of that associate with effect from 1 January Accordingly, no share of losses (2012: AED 383 million) have been offset against loans due from associate as the investment in associate has already been fully written down by prior year losses. The amount receivable towards interest on loan to the associate of AED 633 million has been impaired during the year. The net cumulative unrecognised share of losses in the associate as at 31 December 2013 amounts to AED 630 million. All Associates e) Disposal of investment in an associate On 13 September 2012, the Group sold 775 million shares in PT XL Axiata Tbk ( XL ), previously classified as an associate, representing 9.1% of XL's issued share capital, at a price of IDR 6,300 per share, retaining a 4.2% stake. The Group received proceeds of IDR 4.85 trillion (AED 1.86 billion) net of commission and expenses. The partial disposal of the investment in XL resulted in the recognition of gain amounting to AED 860 million before Federal royalty. As part of the disposal, the Group gave up significant influence over XL and, consequently, classified the remaining stake in XL amounting to AED 860 million on the date of disposal as available-for-sale financial assets under other investments in the consolidated statement of financial position. f) Joint ventures Name Ubiquitous Telecommunications Technology LLC Smart Technology Services DWC LLC Country of incorporation Principal activity Percentage shareholding UAE Installation and management of network systems 50% UAE ICT Services 50% g) Movement in investment in joint ventures Carrying amount at 1 January 93,347 88,071 Share of results 10,962 5,276 Capital reduction (40,000) - Dividends (4,000) - Carrying amount at 31 December 60,309 93,347 h) Aggregated amounts relating to joint ventures Current assets 93,176 89,402 Non-current assets 77, ,782 Current liabilities (50,107) (57,490) Net assets 120, ,694 Revenue 99,282 77,506 Profit or loss 21,924 10,552 The Group has not identified any contingent liabilities or capital commitments in relation to its interest in joint ventures. 92 Annual Report

49 Financials 15. Other investments Other investments comprise of the following, all of which are classified as available-for-sale, with the exception of the Sukuk, which are classified as held-to-maturity investments. Quoted equity Un-quoted equity investments investments Sukuks Total At 1 January ,776 78,030 91, ,656 Additions 69,251 10, , ,192 Consolidation of PTCL - 3,171-3,171 Investment revaluation (2,305) - - (2,305) Reclassification from associate (Note 14) 859, ,542 Sukuk redemption - - (91,850) (91,850) Exchange differences - 1,089-1,089 At 31 December ,213,264 92, ,524 1,451,495 Additions - 19,117 53,495 72,612 Transfer to other receivables - (65,286) - (65,286) Investment revaluation (138,909) - - (138,909) Sukuk redemption - - (1,856) (1,856) Unwinding of discount - - (1,578) (1,578) Exchange differences - (1,046) - (1,046) At 31 December ,074,355 45, ,585 1,315,432 Quoted equity investments represent investments in listed equity securities that present the Group with opportunity for return through dividend income and capital growth. These shares are not held for trading. The fair values of these equity securities are derived from quoted prices in active markets for identical assets, which, in accordance with the fair value hierarchy within IFRS 7 Financial Instruments: Disclosure, represent Level 1 fair values. Quoted investments include AED 448 million relating to investments held for sale which the Group intends to sell in the market to maximize its return on investment and to release funds for other strategic investments. Non-quoted equity investments are carried at cost as they are unquoted equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. The Sukuk is a bond structured to conform with the principles of Islamic Sharia law. At 31 December 2013, the market value of the investment in Sukuk was AED million (2012: AED million). in accordance with the fair value hierarchy within IFRS 7 Financial Instruments: Disclosure, represents Level 1 fair values. 16. Related party transactions Transactions between the Corporation and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below. a) Federal Government and state controlled entities 16. Related party transactions (continued) b) Joint ventures and associates Associates Joint Ventures AED millions AED millions AED millions AED millions Trading transactions Telecommunication services sales Telecommunication services purchases Management and other services Net amount due from related parties as at 31 December Loans to related party Loans due from related party as at 31 December 2, , Sales to related parties comprise management fees and the provision of telecommunication products and services (primarily voice traffic and leased circuits) by the Group. Purchases relate exclusively to the provision of telecommunication products and services by associates to the Group. The loans due from related party is subordinated to external borrowings. The principal management and other services provided to the Group s associates are set out below: i. Etihad Company Pursuant to the Communications and Information Technology Commission s (CITC) licensing requirements, EEC (then under incorporation) entered into a management agreement ( the Agreement ) with the Corporation as its operator from 23 December Amounts invoiced by the Corporation relate to annual management fees, fees for staff secondments and other services provided under the Agreement. The term of the Agreement is for a period of seven years and can be automatically renewed for successive periods of five years unless the Corporation serves a 12 month notice of termination or EEC serves a 6 month notice of termination prior to the expiry of the applicable period. ii. Thuraya Telecommmunications Company PJSC The Corporation provides a primary gateway facility to Thuraya including maintenance and support services. The Corporation receives annual income from Thuraya in respect of these services. iii. Emerging Markets Telecommunications Services B.V. Amounts invoiced by the Corporation relate to annual management fees, fees for staff secondments, interest on loan and other services. c) Remuneration of key management personnel The remuneration of the Board of Directors, who are the key management personnel of the Group, is set out below in aggregate for the category specified in IAS 24 Related Party Disclosures Short-term benefits 35,141 34,660 As stated in Note 1, in accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The Group provides telecommunication services to the Federal Government (including Ministries and local bodies). These transactions are at normal commercial terms. The credit period allowed to Government customers ranges from 90 to 120 days. Trade receivables include an amount of AED 1,123 million (2012: AED 1,232 million), which are net of allowance for doubtful debts of AED 58 million (2012: 68 million), receivable from Federal Ministries and local bodies. See Note 5 for disclosure of the royalty payable to the Federal Government of the UAE. In accordance with IAS 24 (revised 2009) Related Party Disclosures the Group has elected not to disclose transactions with the UAE Federal Government and other entities over which the Federal Government exerts control, joint control or significant influence. The nature of the transactions that the Group has with such related parties is the provision of telecommunication services. 94 Annual Report

50 Financials 17. Inventories AED 000 AED 000 Subscriber equipment 263, ,597 Maintenance and consumables 234,696 38, Trade and other receivables 498, , Amount receivable for services rendered 6,623,754 6,882,721 Allowance for doubtful debts (1,550,560) (1,555,738) Net trade receivables 5,073,194 5,326,983 Amounts due from other telecommunication operators/carriers 2,984,878 3,246,681 Prepayments 506, ,754 Accrued income 499, ,879 Other receivables 2,145,220 1,621,378 At 31 December 11,209,229 10,979,675 Total trade and other receivables 11,209,229 10,979,675 of which current 10,613,248 10,824,624 of which non-current 595, ,051 The Group s normal credit terms ranges between 30 and 120 days (2012: 30 and 180 days). Ageing of net trade receivables, including amounts due from other telecommunication operators/carriers Upto 60 days 4,640,536 4,868, days 538, , days 1,400,590 2,093,294 Over one year 1,478,727 1,094,253 Net trade receivables 8,058,072 8,573,664 Movement in allowance for doubtful debts At 1 January 1,555,738 1,257,814 Net increase/ (decrease) in allowance for doubtful debts (5,178) 297,924 At 31 December 1,550,560 1,555, Trade and other payables Current Federal royalty 6,129,150 6,466,873 Trade payables 4,955,221 3,639,830 Amounts due to other telecommunication administrations 2,472,950 2,762,283 Deferred revenue 1,487,470 1,392,846 Other payables and accruals 6,119,620 6,096,178 At 31 December 21,164,411 20,358,010 Non-current Trade payables 593, ,645 Other payables and accruals 234, ,504 At 31 December 828, ,149 Amounts due to other telecommunication administrations include interconnect balances with related parties. Federal royalty for the year ended 31 December 2013 is to be paid as soon as the consolidated financial statements have been approved but not later than 4 months from the year ended 31 December Borrowings The carrying value and estimated fair value of the Group s bank and other borrowings are as follows: Bank borrowings Bank overdrafts 105,895 51, ,895 51,298 Bank loans 4,579,854 4,230,862 4,576,106 4,203,791 Other borrowings Fair Value Carrying Value Loans from non controlling interest 60,382 62,340 60,382 62,340 Vendor financing 541, , , ,362 Others 8,420 34,336 8,420 34,336 5,296,227 5,250,198 5,292,479 5,223,127 Advances from non controlling interest 579, ,311 At 31 December ,871,665 5,806,438 of which due within 12 months 1,404,543 1,323,597 of which due after 12 months 4,467,122 4,482,841 No interest is charged on the trade receivable balances. With respect to the amounts receivable from the services rendered the Group holds AED 266 million (2012: AED 260 million) of collateral in the form of cash deposits from customers. Amounts due from other telecommunication administrations include interconnect balances with related parties. 19. Cash and cash equivalents Cash and cash equivalents 15,450,248 13,968,521 of which maintained locally 13,834,412 11,371,676 of which maintained overseas, unrestricted in use 1,448,825 2,562,400 of which maintained overseas, restricted in use 167,011 34,445 The fair values of the Group s bank and other borrowings are calculated based on discounted cash flows using an appropriate discount factor for similar financial instruments that includes credit risk. The discount rates range from 8 to 10%. Fair values have been derived based on observable inputs which qualify as Level 2 inputs within IFRS 7 Financial Instruments: Disclosure. Advances from non-controlling interests represent advances paid by the minority shareholder of International Pakistan LLC (EIP) towards the Group's acquisition of its 26% stake in PTCL, net of repayments. The amount is interest free and is not repayable within 12 months of the statement of financial position date and accordingly the full amount is carried in non-current liabilties. The fair value of advances is not equivalent to its carrying value as it is interest-free. However, as the repayment dates are variable, a fair value cannot be reasonably dertermined. External borrowings of AED 4,563 million (2012: AED 4,292 million) are secured by property, plant and equipment. One of the Group's subsidiary had a principal repayment due on a bank loan amounting to AED 27 million which was unpaid as at 31 December Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. These are denominated primarily in UAE Dirham, with financial institutions and banks. Interest is earned on these deposits at prevailing market rates. The carrying amount of these assets approximates to their fair value. 96 Annual Report

51 Financials 21. Borrowings (continued) The terms and conditions of the Group s bank and other borrowings are as follows: Variable interest borrowings Year of maturity Currency Nominal interest rate 2013 AED AED 000 Secured bank loan EGP Mid Corridor +1.4% 1,345,355 1,263,184 Secured bank loan EURO EURIBOR +0.8% 504, ,725 Secured bank loan USD LIBOR +2.9% 367, ,860 Secured bank loan USD LIBOR +4.8% 351, ,691 Secured bank loan 2014-onwards PKR KIBOR+1.2% - 226,800 Unsecured bank loan USD LIBOR +1.3% 33, ,128 Secured bank loan PKR KIBOR+1.8% - 189,000 Secured bank loan EURO EURIBOR +4.9% 137, ,498 Secured bank loan PKR KIBOR+1.4% - 151,200 Secured bank loan PKR KIBOR+1.7% - 151,200 Secured bank loan USD LIBOR +6.2% - 111,883 Secured bank loan 2013 PKR KIBOR+0.2% - 83,525 Secured bank loan EUR KIBOR+0.2% 685,669 - Secured bank loan USD KIBOR+0.2% 661,232 - Secured bank loan USD KIBOR+0.2% 271,273 - Fixed interest borrowings Secured vendor financing USD 5.0% 74, ,220 Secured bank loan CFA 8.0% 65,803 63,224 Unsecured loans from non-controlling interests EGP 10.0% 60,382 62,340 Other borrowings Advances from non-controlling interests N/A USD Interest free 579, ,311 Unsecured vendor financing PKR Interest free 296, ,794 Others Various Various Various 437, ,855 At 31 December 5,871,665 5,806,438 a) Interest rates The weighted average interest rate paid during the year on bank and other borrowings is set out below: Bank borrowings 5.4% 7.4% Other borrowings 4.9% 3.9% b) Available facilities Carrying Value At 31 December 2013, the Group had AED 1,966 million (2012: AED 2,675 million) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. 22. Payables related to investments and licenses At 31 December 2013 Investments Current Non-current Total AED 000 International Pakistan LLC 2,936,653-2,936,653 Atlantique Telecom S.A. 11,022-11,022 Licenses Republic of Benin 14,179 65,476 79,655 Pakistan Telecommunication Company Limited 1,769 3,275 5,044 At 31 December 2012 Investments 2,963,623 68,751 3,032,374 International Pakistan LLC 2,936,653-2,936,653 Atlantique Telecom S.A. 11,022-11,022 Licenses Republic of Benin 56,513 62, ,306 Pakistan Telecommunication Company Limited 1,711 4,576 6,287 3,005,899 67,369 3,073,268 According to the terms of the share purchase agreement between International Pakistan LLC and the Government of Pakistan ( GOP ) payments of AED 6,612 million (2012: AED 6,612 million) have been made to GOP with the balance of AED 2,937 million (2012: AED 2,937 million) to be paid. The amounts payable are being withheld pending completion of certain conditions in the share purchase agreement relatedto the transfer of certain assets to PTCL. All amounts payable on acquisitions are financial liabilities measured at amortised cost and are mostly denominated in either USD or AED and thus do not result in significant exchange rate risk. 23. Finance lease obligations Present value of minimum lease Minimum lease payments payments Amounts payable under finance lease Within one year 2,724 6,341 2,564 5,980 Between 2 and 5 years 4,012 6,173 2,460 3,508 After 5 years ,736 12,571 5,024 9,488 Less: future finance charges (1,711) (3,083) - - Present value of lease obligations 5,025 9,488 5,024 9,488 of which due within 12 months 2,564 5,980 2,564 5,980 of which due after 12 months 2,460 3,508 2,460 3,508 It is the Group policy to lease certain of its plant and machinery under finance leases. For the year ended 31 December 2013, the average effective borrowing rate was 20.8% (2012: 14.9%). The fair value of the Group s lease obligations is approximately equal to Minimum lease payments Present value of minimum lease payments their carrying value. 98 Annual Report

52 Financials 24. Provisions Asset retirement obligations Other Total AED 000 At 1 January , , ,400 Additional provision during the year 3, , ,542 Utilisation of provision - (296,104) (296,104) Release of provision - (113,844) (113,844) Reclassification (34,370) (118,461) (152,831) Unwinding of discount Deconsolidation of a subsidiary (Note 12) (9,311) - (9,311) Exchange differences (610) (27,044) (27,654) At 31 December , , ,540 Additional provision during the year 2,719 1,001,252 1,003,971 Utilisation of provision - (208,067) (208,067) Release of provision (16,167) (184,150) (200,317) Reclassification - (5,890) (5,890) Unwinding of discount (162) - (162) Exchange differences (346) (29,354) (29,700) At 31 December ,721 1,353,654 1,373,375 Disclosed as: Included in current liabilities 1,172, ,569 Included in non-current liabilities 201, ,971 At 31 December 1,373, ,540 Asset retirement obligations relate to certain assets held by certain Group s overseas subsidiaries that will require restoration at a future date that has been approximated to be equal to the end of the useful economic life of the assets. There are no expected reimbursements for these amounts. Other includes provisions relating to certain indirect tax liabilities and other regulatory related items, including provisions relating to certain Group s overseas subsidiaries. 25. Financial instruments Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the bases of recognition of income and expenses) for each class of financial asset and financial liability are disclosed in Note 2. Capital management The Group s capital structure is as follows: Bank borrowings (4,682,001) (4,255,089) Other borrowings (1,189,664) (1,551,349) Finance lease obligations (5,024) (9,488) Cash and cash equivalents 15,450,248 13,934,076 Net funds 9,573,559 8,118,150 Total equity 49,592,696 49,912,572 Net equity 40,019,137 41,794,422 The capital structure of the Group consists of bank and other borrowings, finance lease obligations, cash and cash equivalents and total equity comprising share capital, reserves and retained earnings. The Group monitors the balance between equity and debt financing and establishes internal limits on the maximum amount of debt relative to earnings. The limits are assessed, and revised as deemed appropriate, based on various considerations including the anticipated funding requirements of the Group and the weighted average cost of capital. The overall objective is to maximise returns to its shareholders through the optimisation of the net debt and equity balance. The Group is not subject to any externally imposed capital requirements. Categories of financial instruments The Group s financial assets and liabilities consist of the following: Financial assets Loans and receivables, held at amortised cost: Loans to/due from associates and joint ventures 3,074,027 3,414,510 Trade and other receivables, excluding prepayments 10,703,026 10,493,921 13,777,053 13,908,431 Available-for-sale financial assets (including other investments held for sale) 1,119,847 1,305,971 Held-to-maturity investments 195, ,524 Cash and cash equivalents 15,450,248 13,934,076 30,542,733 29,294,002 Financial liabilities Other financial liabilities held at amortised cost: Trade and other payables, excluding deferred revenue 20,505,506 19,563,313 Borrowings 5,871,665 5,806,438 Payables related to investments and licenses 3,032,374 3,073,268 Finance lease obligations 5,024 9,488 29,414,569 28,452, Annual Report

53 Financials 25. Financial instruments (continued) Financial risk management objectives The Group s corporate finance function monitors the domestic and international financial markets relevant to managing the financial risks relating to the operations of the Group. Any significant decisions about whether to invest, borrow funds or purchase derivative financial instruments are approved by either the Board of Directors or the relevant authority of either the Corporation or of the individual subsidiary. The Group s risk includes market risk, credit risk and liquidity risk. The Group takes into consideration several factors when determining its capital structure, with the aim of ensuring sustainability of the business and maximising the value to shareholders. The Group monitors its cost of capital with a goal of optimizing its capital structure. In order to do this, the Group monitors the financial markets and updates to standard industry approaches for calculating weighted average cost of capital, or WACC. The Group also monitors a net financial debt ratio to obtain and maintain the desired credit rating over the medium term, and with which the Group can match the potential cash flow generation with the alternative uses that could arise at all times. These general principles are refined by other considerations and the application of specific variables, such as country risk in the broadest sense, or the volatility in cash flow generation, or the applicable tax rules, when determining the Group s financial structure. a) 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. From time to time, the Group will use derivative financial instruments to hedge its exposure to currency risk. There has been no material change to the Group s exposure to market risks or the manner in which it manages and measures the risk during the year. Foregin 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 Nigerian Naira, Egyptian Pounds, Euros, Pakistani Rupee, Indonesian Rupiah, Tanzanian Shilling and CFA Francs. The Group also enters into contracts in USD and Euros as a proxy for its exposures in AED and CFA due to their respective pegs. At 31 December 2013, the Group has financial assets and liabilities in its Egyptian and West African subsidiaries that were in USD 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, hedging solutions are explored and executed to avoid volatilities in the committment. 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 equity. Foreign currency sensitivity The following table presents the Group s sensitivity to a 10 per cent change in the Dirham against the Egyptian Pound, the Euro and the Pakistani Rupees. These three currencies account for a significant portion of the impact of net profit, which is considered to materially occur through cash and borrowings within the Group s financial statements in respect of subsidiaries and associates whose functional currency is not the Dirham. The impact has been determined by assuming a weakening in the foreign currency exchange of 10% upon closing foreign exchange rates. A positive number indicates an increase in the net cash and borrowings balance if the AED/USD were to strengthen against the foreign currency Increase in profit/(loss) and increase/(decrease) in equity Egyptian pounds 108, ,085 Euros 52,808 34,867 Pakistani rupees 7,569 (8,299) 25. Financial instruments (continued) 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. The Group monitors the 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, the projected future interest rates, the cost and availability of derivate 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 2013, if interest rates had been 2% 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 91 million (2012: AED 86 million).this impact is primarily attributable to the Group s exposure to interest rates on its variable rate borrowings. The Group s sensitivity to interest rate has not changed significantly during the year. 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 15 for further details on the carrying value of these investments. The Group s sensitivity to other prices has not changed significantly during the year. b) Credit risk management Credit risk refers to the risk that the 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 creditworthy counterparties and obtaining sufficient collateral, where 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 its bank balance, 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. The assessment of the banks and the amount to be invested in each bank is assessed annually or when there are significant changes in the marketplace. At 31 December 2013, the Group s bank balances were invested 99% (2012: 82%) in the UAE and 1% (2012: 18 %) outside of the UAE. Of the amount in the UAE, an aggregate of AED 5.9 billion (2012: AED 3.8 billion) was with a bank rated A+, AED 1.6 billion (2012: AED 0.6 billion) was with a bank rated A by Fitch, AED Nil (2012: AED 1.4 billion) was with a bank rated A1 and AED 1.5 billion (2012: AED 1 billion) was with a bank 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 appropriate, collateral is received from customers usually in the form of a cash deposit. The carrying amount of financial assets recorded in the consolidated financial statements, net of any allowances for losses, represents the Group s maximum exposure to credit risk without taking account of the value of any collateral obtained. c) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate 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 maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The details of the available undrawn facilities that the Group has at its disposal at 31 December 2013 to further reduce liquidity risk is included in Note 21. The majority of the Group s financial liabilities as detailed in the consolidated statement of financial position are due within one year. 102 Annual Report

54 Financials 25. Financial instruments (continued) Financial liabilities are repayable as follows: On demand or within one year 24,034,485 22,307,443 In the second year 2,195,976 3,577,394 In the third to fifth years inclusive 3,014,922 2,522,549 After the fifth year 389, , Provision for end of service benefits 29,634,568 28,680,382 The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Fair value of financial instruments Borrowings are measured and recorded in the consolidated statement of financial position at amortised cost and their fair values are disclosedin Note 21. The carrying amounts of the other financial assets and liabilities recorded in the consolidated financial statements approximate their fair values. The liabilities recognised in the consolidated statement of financial position are: Funded Plans Present value of defined benefit obligations 3,025,327 2,936,658 Less: Fair value of plan assets (2,555,736) (2,390,283) 469, ,375 Unfunded Plans Present value of defined benefit obligations and other employee benefits 1,442,182 1,440,288 Total 1,911,773 1,986,663 The movement in defined benefit obligations for funded and unfunded plans is as follows: As at 1 January 4,376, ,011 Additional provision from consolidation of PTCL - 3,155,143 Effect of change in accounting policy (Note 2) - 468,627 Service cost 132, ,929 Interest cost 382,308 - Actuarial loss/(gain) 4,712 - Remeasurements 208,290 - Benefits paid (344,296) (179,985) Others - (4,591) Exchange difference (292,992) (188) As at 31 December 4,467,509 4,376, Provision for end of service benefits (continued) The amount recognised in statement of profit or loss is as follows: Service cost 132, ,929 Interest cost 130,075 - Others 3, , ,929 Following are the significant assumptions used relating to the major plans Discount rate UAE 3.07% 3.07% Pakistan 11% % N/A Average annual rate of salary UAE 4.0% 3.5% Pakistan 7% % N/A 27. Share capital Authorised: 8,000 million (2012: 8,000 million) ordinary shares of AED 1 each 8,000,000 8,000,000 Issued and fully paid up: 7,906.1 million (2012: 7,906.1 million) ordinary shares of AED 1 each 7,906,140 7,906, Reserves The movement in the Reserves is provided below: As at 1 January 29,115,839 28,686,726 Total comprehensive income for the year (985,167) (762,502) Other movements in equity - (4,329) Transfer from retained earnings 136,308 1,195,944 As at 31 December 28,266,980 29,115,839 The movement in the fair value of plan assets is as follows: As at 1 January 2,390,283 - Additional provision from consolidation of PTCL - 2,390,283 Return on plan assets 268,676 - Contributions received 308,449 - Benefits paid (214,939) - Exchange difference (196,734) - As at 31 December 2,555,735 2,390, Annual Report

55 Financials 28. Reserves (continued) 29. Consolidation of PTCL The movement for each type of reserves is provided below: Translation reserve As at 1 January (1,100,345) (335,865) Total comprehensive income for the year (1,109,536) (760,151) Other movements in equity - (4,329) As at 31 December (2,209,881) (1,100,345) Investment revaluation reserve As at 1 January 80,108 82,459 Loss on revaluation (139,941) (2,351) Reclassification adjustment relating to available-for-sale financial assets impaired during the year 264,310 - As at 31 December 204,477 80,108 Development reserve As at 1 January and 31 December 7,850,000 7,850,000 Asset replacement reserve As at 1 January 8,108,000 8,070,000 Transfer from retained earnings 58,000 38,000 As at 31 December 8,166,000 8,108,000 Statutory reserve As at 1 January 97,561 56,641 Transfer from retained earnings 67,516 40,920 As at 31 December 165,077 97,561 General reserve As at 1 January 14,080,515 12,963,491 Transfer from retained earnings 10,792 1,117,024 As at 31 December 14,091,307 14,080,515 a) Development reserve, asset replacement reserve and general reserve These reserves are all distributable reserves and comprise amounts transferred from unappropriated profit at the discretion of the Group to hold reserve amounts for future activities including the issuance of bonus shares. b) Statutory reserve In accordance with the UAE Federal Law No. 8 of 1984, as amended, and the respective Memoranda of Association of some of the Group s subsidiaries, 10% of their respective annual profits should be transferred to a non-distributable statutory reserve. The Corporation s share of the reserve has accordingly been disclosed in the consolidated statement of changes in equity. c) Translation reserve Cumulative foreign exchange differences arising on the translation of overseas operations are taken to the translation reserve. d) Investment revaluation reserve The cumulative difference between the cost and carrying value of available-for-sale financial assets is recorded in the Investment revaluation reserve. The balance at 31 December 2013 includes AED 259 million being the cumulative gain recognised in other comprehensive income relating to quoted investment which is classified as held for sale. The Corporation, through its majority owned subsidiary International Pakistan LLC ( EIP ), owns the entire billion Class B shares of PTCL. These Class B shares represent 26% of PTCL s issued capital and, in accordance with PTCL s Articles of Association, provide the Corporation with 53% of the voting rights. Under the terms of the Shareholders Agreement between EIP and the Government of Pakistan ( GOP ), EIP has the right to appoint five of the nine members of the Board of Directors of PTCL in addition to the appointment of certain key management personnel. In previous periods, management assessed that there were certain significant control impediments, including but not limited to restrictions on the Corporation s financial and operating decision making ability, and because of these, PTCL was previously accounted for as an associate using the equity method. During the fourth quarter of 2012, management reassessed their position, judging based on a number of recent developments and their experience in practice that the majority of these former control impediments had either been alleviated or no longer have a significant impact on control. As a result, it was concluded by management that the Corporation can be demonstrated to have control over the PTCL, which should therefore be accounted for as a subsidiary. Accordingly, the Corporation has derecognised its existing investment in PTCL as an associate and has consolidated PTCL as at 31 December The consolidation has been accounted for as a step acquisition as per IFRS 3, with no additional consideration beyond that paid and payable for the original acquisition in 2006, adjusted for impairment recognised during the year ended 31 December 2012, as referred to in note 9. After taking into account this impairment, there was no gain or further loss on derecognition of the investment in PTCL as an associate. As at the 31 December 2012, management had not completed the fair valuation of the separately identifiable assets and liabilities of the PTCL or the purchase price allocation exercise. Therefore, the balances consolidated as at 31 December 2012 were mainly the existing PTCL book values with the excess consideration being accounted for as provisional goodwill. The application of acquisition accounting under IFRS 3 requires that the total purchase price to be allocated to the fair value of the assets acquired and liabilities assumed based on their fair values at the acquisition date, with amount exceeding the fair values being recorded as goodwill. Accordingly, during the year ended 31 December 2013, the assets and liabilities of PTCL have been appraised, based on third party valuations, for inclusion in the consolidated statement of financial position. The purchase price allocation process (PPA) requires an analysis of acquired fixed assets, licenses, customer relationships, brands, contractual commitments and contingencies to identify and record the fair values of all assets acquired and liabilities assumed. In valuing acquired assets and liabilities assumed, fair values were based on but not limited to: future expected discounted cash flows for customer relationships, current replacement cost for similar capacity and obsclensence for certain fixed assets, comparable market rates for real estate and appropriate discount rates and growth rates. The following table summarises the fair values of the assets acquired, liabilities assumed, related deferred taxes and goodwill as of the acquisition date futher to the purchase price allocation process (PPA). Fair values based on purchase price allocation AED 000 Provisional values reported in 2012 AED 000 Intangible assets 910, ,339 Property, plant and equipment 11,087,674 5,619,640 Investments 4,190 4,190 Inventory 125, ,305 Trade and other receivables 1,525,008 1,525,008 Cash and cash equivalents 1,452,608 1,452,608 Trade and other payables (1,728,531) (1,728,531) Provision for end of service benefits (764,860) (764,860) Obligations under finance leases (3,901) (3,901) Bank loans (1,369,283) (1,369,283) Deferred tax liabilities (1,429,023) (716,402) Net identifiable assets acquired 9,809,852 4,273,113 Share of net identifiable assets acquired (26%) 2,550,562 1,111,009 Goodwill 4,546,698 5,986,251 Fair value of investment in PTCL as at 31 December ,097,260 7,097,260 Net cash inflow arising on acquisition: Cash and cash equivalents acquired 1,452,608 1,452, Annual Report

56 Financials 29. Consolidation of PTCL (continued) Goodwill resulting from the acquisition has been assigned to PTCL Group as a CGU. Acquisition accounting allows for recognition of deferred tax liabilities on acquired intangibles (other than goodwill) which is expected to be reflected as a tax benefit on Group s future consolidated statement of profit or loss in proportion to and and over the amortization period of the related intangible asset. There is no deferred tax liability recorded for fair value adjustment relating to land as this is not depreciated. 30. Significant events a) On 22 July 2013, the Group made a binding offer that valued Vivendi s 53% stake in Itisalat Al Maghrib ( Maroc Telecom ) share at MAD 92.6, amounting to a consideration of EURO 3.9 billion (equivalent to AED 19.3 billion) for Vivendi s 53% stake. The above consideration does not include the dividend received by Vivendi from Maroc Telecom in respect of the 2012 financial year, equivalent to MAD 7.40 per share, which will also be for the benefit of. At closing, will pay Vivendi the cash value of such 2012 dividend of Euro 0.3 billion (equivalent to AED 1.5 billion). On 4 November 2013, the Group signed a Share Purchase Agreement for the acquisition of Vivendi s 53% stake in Maroc Telecom. Closing of the transaction would be subject to a number of conditions which are expected to be fulfilled in These conditions include, among others, the execution of a shareholders agreement with the Kingdom of Morocco regarding Maroc Telecom and securing competition and regulatory approvals in the Kingdom of Morocco and certain other jurisdictions in Maroc Telecom s footprint. is planning to finance the transaction through external borrowings and has already secured a commitment to provide the requisite funds from a syndicate of local and international banks. s Extraordinary General Assembly Meeting that was held on 28 May 2013 approved the Board s recommendation to raise external funding in excess of the Corporation s capital, as per s Articles of Association. b) Following the Supreme Court of India s cancellation of all of DB Telecom Private Limited s ( the Company ) licenses removing the Company s ability to operate its current mobile telecommunications business, on 22 February 2012 the Board of the Company unanimously decided to shut down its network and gave the appropriate notices to the Indian authorities. Furthermore, the resignation of the directors of the Company appointed by the majority shareholders without replacement adversely affected the ability of the Company s Board of Directors to take decisions. Subsequent to this, Mauritius Limited (owned by Corporation) filed proceedings on 12 March 2012 for the just and equitable winding up of the Company, which are ongoing. On 3 July 2012, the Bombay High Court appointed an Indian law firm, as the Authorised Person to manage the Company pending the Bombay High Court's decision on the admission of the just and equitable winding up Petition submitted by Mauritius Limited. In November 2013, the High Court in Bombay admitted the petition and confirmed the Authorized Person shall remain in place until further orders. This decision was appealed by one of the Company s shareholders and the appeal is still pending. 31. Commitments a) Capital commitments The Group has approved future capital projects and investments commitments to the extent of AED 5,448 million (2012: AED 5,005 million). a) Lease commitments i) The Group as lessee Minimum lease payments under operating leases recognised as an expense in the year (Note 5) , ,165 At the end of the reporting period, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: Within one year 275, ,133 Between 2 to 5 years 1,330,078 1,202,491 After 5 years 722, ,586 2,328,557 2,195,210 Operating lease payments represent rentals payable by the Group for certain of its office and retail properties. Leases are negotiated for an average term of two years. ii) The Group as lessor Property rental income earned during the year was AED 12 million (2012: AED 15 million). All of the properties held have committed tenants for the next 3-15 years. At the reporting date, the Group had contracted with tenants for the following future minimum lease payments: Within one year 10,207 11,955 Between 2 to 5 years 29,673 33,696 After 5 years - 5,289 39,880 50, Contingent liabilities a) Bank guarantees At 31 December 2013, the Group s bankers had issued: i) performance bonds and guarantees for AED 527 million (2012: AED 431 million) in relation to contracts, of which AED 393 million (2012: AED 308 million) relates to the Corporation's overseas investments and ii) promissory notes and letters of credit amounting to AED 228 million (2012: AED 293 million). b) Derivative financial instruments Derivative financial instruments representing the fair value of a written put option over the equity of an overseas subsidiary amounting to AED 355 million were derecognised during the three months ended 31 March 2012 and are treated as a contingent liability. c) Foreign exchange regulations On 23 July 2011, DB Telecom Pvt Limited ( the Company ) received a show cause notice from the Directorate of Enforcement (ED) of India alleging certain breaches of the Foreign Exchange Management Act, 1999 (FEMA), by the Company and its Directors. The Company and its Directors have filed their response(s) to the notice and the cases of each of the notices have been part heard by the ED. d) Other contingent liabilities The Group is disputing certain charges from the regulatory agencies in the UAE and certain other jurisdictions but does not expect any material adverse effect on the Group's financial position and results from resolution of these. 108 Annual Report

57 Financials 33. Dividends Amounts recognised as distribution to equity holders: AED December 2012 Final dividend for the year ended 31 December 2011 of AED 0.35 per share 2,767,149 Interim dividend for the year ended 31 December 2012 of AED 0.25 per share 1,976,535 4,743, December 2013 Final dividend for the year ended 31 December 2012 of AED 0.45 per share 3,556,224 Interim dividend for the year ended 31 December 2013 of AED 0.35 per share 2,765, Earnings per share Earnings (AED'000) Earnings for the purposes of basic earnings per share being the profit attributable to the equity holders of the Corporation Number of shares ('000) Weighted average number of ordinary shares for the purposes of basic earnings per share 6,322,176 A final dividend of AED 0.45 per share was declared by the Board of Directors on 19 February 2013, bringing the total dividend to AED 0.70 per share for the year ended 31 December An interim dividend of AED 0.35 per share was declared by the Board of Directors on 22 July 2013 for the year ended 31 December A final dividend of AED 0.35 per share was declared by the Board of Directors on 4 March 2014, bringing the total dividend to AED 0.70 per share for the year ended 31 December ,078,388 6,741,818 7,906,140 7,906,140 The Group does not have potentially dilutive shares and accordingly, diluted earnings per share equals to basic earnings per share. 35. Restatement and reclassification of comparative figures The comparative figures for 2012 have been restated mainly due to: a. changes in accounting policy relating to provision for end of service benefits (IAS 19 Employee benefits). The restatements are in line with IAS 1 Presentation of Financial Statements and IAS 8 Accounting policies, changes in accounting estimates and errors; b. purchase price allocation of PTCL resulting in fair value adjustments to assets, related deferred tax liabilities and revision of goodwill; c. current tax assets and current tax liabilities have been reclassified from trade and other receivables and trade and other payables respectively and presented separately in the consolidated statement of financial position. As previously reported Restatement relating to IAS19 Fair value adjustments relating to PTCL Other reclassifications As restated AED 000 Consolidated statement of financial position as at 31 December 2012 Goodwill 7,523,132 - (1,439,553) (154,492) 5,929,087 Other intangible assets 9,444, ,327-10,226,108 Property, plant and equipment 25,572,642-5,468,035-31,040,677 Deferred tax assets 482, (195,531) 286,607 Trade and other receivables - non-current , ,051 Trade and other receivables - current 11,533, (709,193) 10,824,624 Current income tax assets , ,139 Trade and other payables - current 20,487, (129,573) 20,358,010 Current income tax liabilities , ,965 Trade and other payables - non-current 698, (100,392) 598,149 Deferred tax liabilities 1,464,611 (163,648) 712,621 (195,531) 1,818,053 Provision for end of service benefits 1,518, , ,986,663 Reserves 29,257, (141,402) 29,115,839 Retained earnings 3,563,698 (71,365) - - 3,492,333 Non-controlling interests 5,547,778 (233,614) 4,097,186 (13,090) 9,398,260 Consolidated statement of comprehensive income for the year ended 31 December 2012 Exchange differences on translation of foreign operations (735,387) - - (154,492) (889,879) 110 Annual Report

58 Notice of General Annual Shareholders Meeting The s Board of Directors is pleased to invite their esteemed shareholders to attend the General Annual Shareholders Meeting to be held at 4:30pm on Wednesday 26th March 2014 at Head Office in Abu Dhabi for the purpose of discussing the following meeting agenda: 1 To hear and approve the report of the Board of Directors on the Corporation s activities and its financial position for the fiscal year ended 31 December To hear and approve the External Auditors report for the fiscal year ended 31 December To discuss and approve the Corporation s Consolidated statements of financial position and proft or loss for the year ended 31 December To consider the Board of Director s recommendation on the distribution of dividends in the amount of 35 fils per share to be distributed for the second half of the year 2013, bringing the full dividend for the fiscal year ended 31 December 2013 to 70 fils per share. 5 To look into the compensations of the Members of the Board of Directors. 6 To absolve the Members of the Board of Directors and the External Auditors of liability in respect of the fiscal year ended 31 December To appoint External Auditors for the year 2014 and to determine their remunerations. Based on Board of Director s directives Corporate Secretary Notes: 1 Each shareholder is entitled to delegate a proxy to attend the Annual General Meeting on his/her behalf as per the delegation form attached with the meeting invitation (minors and those who have no legal capacity shall be represented by their legal representative). All delegations forms shall be submitted to the securities department of the National Bank of Abu Dhabi PO Box 6865-Abu Dhabi, at least two days before the meeting date in order to register the same in the respective records. Only original delegations are accepted. 2 Only the owners of the shares as on Tuesday, 25 March, 2014 shall be entitled to vote in the Annual General Meeting. 3 The owners of the shares as on Sunday, 6 April, 2014 shall be entitled to shares dividends. 4 The shareholders can review the Corporation s financial Statement on Abu Dhabi Exchange website. 5 To ensure good organization of the Annual General Meeting, any shareholder who attends after the beginning of the meeting shall not be entitled to vote. 6 If the quorum of the first Annual General Meeting has not been met, the second meeting shall be held on the 1 April 2014 at the same place and time. 112 Annual Report 2013

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