contents...zeeshan hasan gm customer care ali khan gm enterprise & carrier sales adnan kareem...

contents

02 Corporate Information03 Director’s Report

Condensed Financial Information04 Condensed Interim Balance Sheet06 Condensed Interim Profit and Loss Account07 Condensed Interim Statement of Comprehensive Income08 Condensed Interim Cash Flow Statement10 Condensed Interim Statement of Changes in Equity11 Selected Notes to and Forming Part of the Condensed Interim Financial Information

Condensed Consolidated Financial Information24 Condensed Consolidated Interim Balance Sheet26 Condensed Consolidated Interim Profit and Loss Account27 Condensed Consolidated Interim Statement of Comprehensive Income28 Condensed Consolidated Interim Cash Flow Statement30 Condensed Consolidated Interim Statement of Changes in Equity31 Selected Notes to and Forming Part of the Condensed Consolidated Interim Financial Information

WAteen teLecoM LIMIteD thIrD QUArter report MAr ‘11 01

corporAte InForMAtIon

Management TeamNaeem ZamindarChief Executive Officer

Sajjeed AslamChief Financial Officer

Sajid Farooq HashmiCompany Secretary & Head of Legal

Syed Jibran AliChief Commercial Officer

Faisal SattarChief Technology Officer

Asad RezzviChief Transformation Officer

Zafar Iqbal Ch.GM HR, Admin & Infrastructure

Zeeshan HasanGM Customer Care

Ali KhanGM Enterprise & Carrier Sales

Adnan KareemHead of Product Development

Brig (R) Mazhar Qayyum ButtGM Corporate Affairs

Saleem AkhtarHead of Project Management Office

Naila BhattiGM Media

AuditorsA.F. Ferguson & Co.Chartered Accountants

PIA Building, 3rd Floor,49 - Blue Area, P.O. Box 3021,Islamabad.

Registered Office4th Floor, New Auriga Complex,Main Boulevard, Gulberg IILahore.

Share RegistrarTHK Associates (Pvt.) LimitedGround Floor,State Life Building No.3,Dr. Zia-ud-Din Ahmed Road,Karachi.

BankersStandard Chartered Bank (Pakistan) LimitedBank Al Habib LimitedHabib Bank LimitedBank Alfalah LimitedNational Bank of Pakistan LimitedPak Libya Holding Company (Pvt.) LimitedSummit Bank Limited (Formerly Arif Habib Bank Limited)Askari Bank LimitedSoneri Bank LimitedPak Brunei Investment Company LimitedThe Bank Of KhyberHSBC Bank Middle East LimitedAllied Bank LimitedUnited Bank LimitedDubai Islamic Bank Limited

WAteen teLecoM LIMIteD thIrD QUArter report MAr ‘1102

03

The Directors of Wateen Telecom Limited are pleased to present the unaudited financial information for the third quarter and nine months ended March 31, 2011.

Wateen reassessed its overall strategy given the current socio-economic situation of Pakistan, evolving consumer needs and the current trends in the telecom sector worldwide. New management and governance structures were introduced during FY’2011 with the major changes in the Board of Directors, establishment of an Executive Management Committee, reconstitution of the Board Audit Committee and appointments of a new Chief Executive Officer, Chief Financial Officer and Company Secretary along with other key positions. These changes were necessary to re-enforce compliance with rigorous requirements of corporate governance and enhancing transparency in the overall operations.

The new Board of Directors appreciate and recognize the significance of sound corporate governance practices and are hence, giving high priority to regularize matters to ensure compliance with legal and regulatory requirements.

The company has posted consolidated revenues of Rs 1,916 million for the third quarter ended March 31, 2011 and cumulative revenues of Rs 5,326 million for the nine months ended March 31, 2011. Revenue has shown a decline by 18% compared to the same period last year due to the

reduction in access promotion charges (APC). The new management remained committed to focusing on high margin areas. Gross margin stands at 21% in this period compared to 18% for the same period last year. Significant efforts are being made to rationalize costs to overcome the impact of prevailing inflationary trends. Sponsors’ have injected Rs 2,779 millions in the current period under review compared to Nil in the same period last year reflecting their confidence in the new management and governance structure and their commitment to Pakistan.

The ever rising demand of data in Pakistan and neighboring countries from carriers, businesses and consumers complimented with value added services like mobile banking and cloud computing will be the key drivers for growth in years to come. Your company is well placed and prepared to claim a fair share in the growth and profitability with the capacity to provide services in the region.

The Board would like to thank our valued customers for their continued support and the regulatory authorities for their guidance and patronage.

On behalf of the Board,

Naeem ZamindarChief Executive Officer &

Member Board of Directors

DIrectors’ report


conDenseD InterIM BALAnce sheet (Un-AUDIteD)AS AT MARCH 31, 2011

(Un-Audited) (Audited) March 31, June 30, 2011 2010 Note (Rupees in thousand)

SHARE CAPITAL AND RESERVESAuthorised capital 1,000,000,000 (June 30, 2010: 1,000,000,000)ordinary shares of Rs 10 each 10,000,000 10,000,000

Issued, subscribed and paid–up capital 6,174,746 6,174,746617,474,620 (June 30, 2010: 617,474,620)ordinary shares of Rs 10 eachGeneral reserve 134,681 134,681Accumulated loss (5,895,309) (2,099,760) 414,118 4,209,667NON – CURRENT LIABILITIESLong term finance – secured 5 – –Medium term finance from an associated company – unsecured 6 – –Long term finance from sponsor – unsecured 7 2,779,615 –Cross currency and interest rate swap – fair value 5.5 – 139,053Obligations under finance leases 7,902 5,429Long term deposits 62,070 110,455 2,849,587 254,937DEFERRED LIABILITIESEmployees’ retirement benefits – 43,690Deferred income tax liability 8 – 74,593Deferred USF grant 9 1,044,240 827,159 1,044,240 945,442CURRENT LIABILITIESCurrent portion of long term finance – secured 5 11,766,711 12,411,659Current portion of medium term finance from anassociated company – unsecured 6 600,000 –Payable to supplier to be settled through long term finance – 433,798Cross currency and interest rate swap liability 5.5 489,998 217,397Current portion of obligations under finance leases 2,035 1,556Finance from supplier – unsecured 77,941 77,668Short term borrowings - secured 10 4,170,871 4,604,346Trade and other payables 11 5,024,794 5,922,431Interest / markup accrued 565,275 631,491 22,697,625 24,300,346 CONTINGENCIES AND COMMITMENTS 12 27,005,570 29,710,392

The annexed notes 1-21 are an integral part of this condensed interim financial information.



NON-CURRENT ASSETSProperty, plant and equipment Operating assets 13 18,376,701 17,045,929 Capital work in progress 14 2,814,040 3,883,565 Intangible assets 191,696 204,726 21,382,437 21,134,220

LONG TERM INVESTMENT IN SUBSIDIARY COMPANIES 15 137,661 57,061

DEFERRED INCOME TAX ASSET 8 1,013,136 –

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 272,847 238,584 Long term prepayments 66,823 79,139 339,670 317,723

CURRENT ASSETSTrade debts 16 1,336,022 3,097,982 Contract work in progress 22,526 18,782 Stores, spares and loose tools 17 472,816 847,528 Advances, deposits, prepayments and other receivables 18 1,714,428 2,001,340 Income tax refundable 187,910 238,841 Cash and bank balances 398,964 1,996,915 4,132,666 8,201,388

27,005,570 29,710,392

______________ _____________Chief Executive Director WAteen teLecoM LIMIteD thIrD QUArter report MAr ‘11 05

conDenseD InterIM proFIt AnD Loss AccoUnt (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

3 months to 9 months to March 31, March 31, March 31, March 31, 2011 2010 2011 2010 Note (Rupees in thousand)

Revenue 1,880,139 1,522,506 5,137,329 6,055,941

Cost of sales (excludingdepreciation and amortisation) 1,636,546 1,423,037 4,075,617 5,180,851General and administration expenses 401,278 205,072 1,256,242 935,828Provisions and write off 19 114,493 – 1,631,296 18,273Advertisement and marketing expenses 30,421 51,759 105,692 217,955Selling and distribution expenses 3,757 3,676 12,587 17,769Other charges – – – 28,936Other income (8,122) (3,281) (184,912) (36,675) 2,178,373 1,680,263 6,896,522 6,362,937

Loss before interest, taxation,depreciation and amortisation (298,234) (157,757) (1,759,193) (306,996)Less: Depreciation and amortisation 514,418 427,509 1,501,745 1,184,714 Finance cost 436,127 318,931 1,718,684 1,303,886 Finance income (31,069) (3,363) (112,828) (63,768)Loss before taxation (1,217,711) (900,834) (4,866,795) (2,731,828)Deferred income tax credit 223,257 215,043 1,071,245 795,412Loss for the period (994,453) (685,791) (3,795,549) (1,936,416)

Loss per share Rs (1.61) Rs (1.64) Rs (6.15) Rs (4.64)


______________ _____________Chief Executive Director


conDenseD InterIM stAteMent oF coMprehensIVe IncoMe (Un-AUDIteD) FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

3 months to 9 months to March 31, March 31, March 31, March 31, 2011 2010 2011 2010 (Rupees in thousand)

Loss for the period (994,453) (685,791) (3,795,549) (1,936,416)Other comprehensive income – – – –

Total comprehensive loss for the period (994,453) (685,791) (3,795,549) (1,936,416)




conDenseD InterIM cAsh FLoW stAteMent (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

9 months to March 31, March 31, 2011 2010 Note (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (4,866,795) (2,731,828) Adjustment of non cash items: Depreciation and amortisation 1,501,745 1,184,714 Finance cost 1,718,684 1,303,886 (Profit)/loss on sale of operating assets 11,252 (25,352)Cost associated with IRU of Optic Fiber Cable 27,477 – Deferred grant recognised during the period (118,053) – Dividend income from subsidiary company (156,060) – Provisions and write off 19 1,631,296 18,273 Provision for employees’ accumulated absences 6,096 16,142 4,622,437 2,497,663 (244,358) (234,165)Changes in working capital: Decrease/ (Increase) in trade debts 1,223,763 (21,567)(Increase) in contract work in progress (3,744) (9,355)Decrease in stores, spares and loose tools 102,714 (102,292)(Increase)/Decrease in advances, deposits,prepayments and other receivables (176,276) 191,063 Increase in cross currency and interest rate swap liability 133,548 43,813 (Decrease)/ Increase in trade and other payables (931,054) 2,189,352 348,952 2,291,014 Employees’ accumulated absences paid (16,368) – Taxes (paid)/refunded 34,448 (31,435)Cash flows from operating activities 122,673 2,025,414 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (2,154,561) (3,877,703)Intangible assets additions (4,300) (7,215)Sale of property, plant and equipment 16,655 165,422 Long term deposits receivable – (paid)/received (34,263) (205)Long term prepayments 12,316 8,814 Advance against purchase of shares (85,000) – Dividend income received 156,060 – Cash flows from investing activities (2,093,093) (3,710,887)


9 months to March 31, March 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Share issue cost paid – (5,457)Long term finance received 508,830 5,689,056 Long term finance repaid (1,153,778) (764,929)Medium term finance received from associated company 600,000 – Long term finance received from shareholder 2,779,615 – Payable to supplier to be settled through long term finance – repaid (433,798) (2,872,226)Long term payable to supplier 273 (210,210)Deferred USF grant received 335,134 297,960 Obligations under finance leases repaid 2,952 (1,697)Long term deposits payable – repaid (48,385) – Short term borrowings – repaid (1,545,415) – Finance cost paid (1,784,900) (1,075,383)Cash flows from financing activities (739,472) 1,057,114

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,709,891) (628,358)

Cash and cash equivalents at beginning of the period (927,266) (2,324,688)

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,637,157) (2,953,046)

CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 398,964 437,391 Short term running finance (4,036,121) (3,390,437) (3,637,157) (2,953,046)




conDenseD InterIM stAteMent oF chAnGes In eQUItY (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

Share General Accumulated capital reserve loss Total (Rupees in thousand)

Balance at July 1, 2009 2,087,373 392,908 1,829,146 4,309,427

Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) –Share issue cost – – (5,457) (5,457)Total comprehensive loss for the period – – (1,936,416) (1,936,416)Balance at March 31, 2010 4,174,746 134,681 (1,941,873) 2,367,554

Balance at March 31, 2010 4,174,746 134,681 (1,941,873) 2,367,554Issue of 200,000,000 shares for cash 2,000,000 – – 2,000,000on April 20, 2010Shares issue cost (net of tax benefit) – – (73,790) (73,790)Total comprehensive loss for the period – – (84,097) (84,097)Balance at June 30, 2010 6,174,746 134,681 (2,099,760) 4,209,667

Balance at July 1, 2010 6,174,746 134,681 (2,099,760) 4,209,667Total comprehensive loss for the period – – (3,795,549) (3,795,549)Balance at March 31, 2011 6,174,746 134,681 (5,895,309) 414,118




1. LEGAL STATUS AND OPERATIONS The Company was incorporated in Pakistan as a Private Limited Company under Companies

Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public voice telephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company commenced its commercial operations from May 1, 2005. The legal status of the Company was changed from “Private Limited” to “Public Limited” with effect from October 19, 2009. The Company was listed on Karachi, Lahore and Islamabad Stock Exchanges with effect from May 27, 2010. The registered office of the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, U.A.E.

2. STATEMENT OF COMPLIANCE This condensed interim financial information of the Company for the nine months period ended March

31, 2011 has been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed.

3. ACCOUNTING POLICIES The accounting policies and methods of computation adopted for the preparation of this condensed

interim financial information are the same as those applied in preparation of the financial statements for the year ended June 30, 2010.

4. NET CURRENT LIABILITIES Net current liabilities as at March 31, 2011 were Rs 18.565 billion of which Rs 10.599 billion relate to

loan installments due for repayment after March 31, 2012 and Rs 3.683 billion relates to current portion of long term finance and short term finance. A shareholder of the Company has provided financial support in the form of long term finance amounting to Rs 2.779 billion to meet the requirements of the Company and this arrangement is expected to continue. Subsequent to the period end, the Company has negotiated with the lenders to restructure long term finance and convert short term finance, except for short term running finance from Bank Alfalah Limited amounting to Rs 1.837 billion, into long term finance facilities. The tenure of the restructured facilities is eight years w.e.f January 1, 2011 (inclusive of grace period of three years). The principal amount of restructured facilities will be repayable in 10 semiannual installments commencing July 1, 2014. Compliance with financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio of 80:20, which should not be breached during the grace period. The Company is in the phase of finalizing addendum agreements to restructure term finance facilities with lenders.

The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its medium term finance facility. The associated company has agreed to reschedule its facility. Principal will be repayable in semi-annual equal installments within two years after the expiry of grace period (from January 01, 2011 to December 31, 2019). The rate of markup will be 6 months KIBOR, subject to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum agreement to restructure the term finance facility with lender.

seLecteD notes to AnD ForMInG pArt oF theconDenseD InterIM FInAncIAL InForMAtIon (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011



March 31, June 30, 2011 2010 Note (Rupees in thousand)

5. LONG TERM FINANCE - SECURED Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department - (ECGD) 5.2 2,182,407 2,450,304 Standard Chartered Bank (SCB) 5.3 27,000 54,000 Dubai Islamic Bank (DIB) 5.4 424,000 477,000 Motorola Credit Corporation (MCC) 5.5 4,091,035 4,963,819 Standard Chartered Bank (SCB) 5.6 508,830 – Total 11,999,272 12,711,123 Unamortized transaction and other ancillary cost Opening balance 299,464 – Additions during the period/year – 400,862 Amortisation for the period/year (66,903) (101,398) (232,561) (299,464) 11,766,711 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,768,181) (1,991,174) Amount due after March 31, 2011 5.7 (9,998,530) (10,420,485) (11,766,711) (12,411,659) – –

5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till March 31, 2011. The tenure of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years.

The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/fixed assets (excluding assets under specific charge of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in respect of immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and a corporate guarantee from Warid Telecom International LLC.

5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till March 31, 2011. Amount outstanding at March 31, 2011 was USD 25.600 million. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the


period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company.

5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million.

5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, 2010. The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries).

During the period the bank has rescheduled the second installment due on August 01, 2010 to January 31, 2011. Remaining repayments are due on their respective dates.

5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million (June 30, 2010: USD 64 million) has been availed till December 31, 2010. Amount outstanding at March 31, 2011 was USD 47.989 million. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola.

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged through cross currency swap contract with SCB. In consideration, the Company paid the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account.

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account.

Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the original facility agreement to the Deutsche Bank AG as lender, effective August 19, 2011.

5.6 During the period, the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer.


During the period the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 217 million. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer.

5.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company paid ECGD loan installment of USD 3.025 million on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 thousand on January 31, 2011 which was due on October 25, 2010. Further, certain ratios specified in the loan agreements have not been maintained at March 31, 2011. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments due as per loan agreements after March 31, 2012 amounting to Rs 10,598,530 thousand have been shown as current liability.

Subsequent to period end, the Company has negotiated with the lenders to restructure its existing long term finance facilities as explained in note 4.

6. MEDIUM TERM FINANCE FROM AN ASSOCIATED COMPANY - UNSECURED During the period, the Company has obtained an aggregate medium term finance facility of Rs 600

million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e September 30, 2010. The rate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan installments due as per loan agreement after March 31, 2012 amounting to Rs 600 million have been shown as current liability.

Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility as explained in note 4.

7. LONG TERM FINANCE FROM A SHAREHOLDER - UNSECURED During the period, the Company has obtained loan from a shareholder amounting to USD 33 million.

This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loan, which shall be on or about January 29, 2015. The rate of mark-up is LIBOR + 1.5%. Alternatively the loan may be converted into equity by way of issuance of the Company’s ordinary shares at the option of the lender at any time after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the repayment date, provided that such conversion is permissible under the applicable laws of Pakistan.




8. DEFERRED INCOME TAX ASSET/ (LIABILITY) Temporary differences between accounting and tax depreciation (3,885,156) (3,423,807) Unused tax losses 8.1 4,297,167 3,268,671 Unused tax benefit related to share issue cost 39,462 34,138 Deductible temporary differences on account of provisions 561,663 46,405 1,013,136 (74,593)

8.1 Potential tax benefit of Rs 478,585 thousand has not been recognised representing business losses of Rs 1,367,386 thousand which will expire in tax year 2016.

8.2 The existence of future taxable profits sufficient to absorb these losses is based on a business plan prepared by management of the Company which involves making judgments regarding key assumptions underlying the estimation of future taxable profits estimated in the plan. These assumptions if not met have a significant risk of causing a material adjustment to the carrying amount of the deferred tax asset. In the management’s view it is probable that the company will be able to achieve the profits projected in the plan.

March 31, June 30, 2011 2010 (Rupees in thousand)

9. DEFERRED UNIVERSAL SERVICE FUND (USF) GRANT Balance at beginning of the period/year 827,159 212,428 Amount received/receivable during the period/year 255,988 616,477 Amount recognised as income during the period/year (118,053) (1,746) Closing balance 965,094 827,159

10. SHORT TERM BORROWINGS - SECURED Short term borrowings 134,750 1,680,165 Short term running finance 4,036,121 2,924,181 4,170,871 4,604,346




11. TRADE AND OTHER PAYABLES These include payable to related parties as follows: Wateen Solutions (Pvt) Limited 175,392 165,283 Wateen Satellite Services (Pvt) Limited 146,204 146,204 Warid Telecom (Pvt) Limited 295,252 86,656 Advances from Warid Telecom (Pvt) Limited 34,316 151,004 Bank Alfalah Limited 3,950 1,206 Warid Telecom Uganda Limited – 47,474 Payable to gratuity fund 115,684 104,041 Payable to provident fund 24,739 11,569 795,537 713,437

12. CONTINGENCIES AND COMMITMENTS(i) Claims against the Company not acknowledged as debt 260,267 264,038 (ii) Performance guarantees issued by banks in favour of the Company 1,416,629 1,476,816 (iii) Outstanding commitments for capital expenditure 1,259,352 1,799,824 (iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of

Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions.

However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, 2010.

Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as partial payment of the purchase price and the balance of Rs 255,000 thousand is payable by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen Solutions and the resultant devaluation of its share price, the new management entered into negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 thousand, however the finalization of renegotiated agreement is in process.

Same have been approved by shareholders in EOGM dated December 31, 2011.


Nine months to Year ended March 31, June 30, 2011 2010 Note (Rupees in thousand)

13. OPERATING ASSETS Opening net book value 17,045,929 14,050,553 Additions – owned 2,867,067 4,803,102 – leased 3,504 9,293 Disposals at net book value (55,383) (191,184) Depreciation charge (1,484,415) (1,625,835) 18,376,701 17,045,929

14. CAPITAL WORK IN PROGRESS Leasehold improvements 21,138 23,334 Line and wire 1,194,626 1,319,762 Network equipment 14.1 1,598,276 2,540,469 2,814,040 3,883,565

14.1 Network equipment is net of provision for impairment of Rs 354 million (June 30, 2010: Nil).

14.2 Finance cost of Rs 234 million was capitalised during the nine months period ended March 31, 2011 (Year ended June 30, 2010: Rs 550 million).

March 31, 2011 June 30, 2010 %age (Rupees in %age (Rupees in Holding thousand) Holding thousand)

15. LONG TERM INVESTMENT IN SUBSIDIARY COMPANIES

Unquoted Wateen Solutions (Pvt) Limited 413,212 fully paid ordinary shares of Rs 100 each 51 52,656 51 52,656 Advance paid against purchase of shares Wateen Solutions (Pvt) Limited (note 12 (iv) 85,000 – 137,656 52,656 Wateen Satellite Services (Pvt) Limited 500 fully paid ordinary shares of Rs 10 each 100 5 100 5 Netsonline Services (Pvt) Limited 4,000 fully paid ordinary shares of Rs 100 each 100 4,400 100 4,400 142,061 57,061 Provision for impairment of investment in Netsonline Services (Pvt) Limited (4,400) – 137,661 57,061

15.1 All the companies are incorporated in Pakistan.




16. TRADE DEBTS Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 530,345 457,957 Warid International LLC, UAE - Parent company 85,700 85,400 Bank Alfalah Limited 16,093 12,125 Warid Telecom Congo S.A – 1,060,716 Warid Telecom Uganda Limited – 85,816 Wateen Telecom UK Limited – 105,643 632,138 1,807,657

These balances are net of trade debts written off during the period related to following associated companies, which have been approved by the shareholders in Extra Ordinary General Meeting held on December 31, 2011.


Warid Telecom (Private) Limited 76,834 – Warid Telecom Congo Limited 125,127 – Warid Telecom Uganda Limited 4,266 – Bank Alfalah Limited – 8,451 206,227 8,451

16.1 Provision for doubtful debts - other parties Opening balance 132,586 85,131 Provision made during the period 331,970 47,455 Closing balance 464,556 132,586

Provision during the period includes Rs 311,706 thousand based on age analysis of debts as follows:

– Balances 181 - 360 days past due - 50 % – Balances over 360 days past due - 100 %



17. STORES, SPARES AND LOOSE TOOLS Cost 744,814 847,528 Less: Provision for obsolete stores 271,998 – 472,816 847,528

18. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

18.1 These include receivable from related parties as follows: Wateen Solutions (Pvt) Limited 380,465 488,943 Wateen Telecom UK Limited 18.3 312,349 108,089 Wateen Multimedia (Pvt) Limited 152,891 137,160 Advance for construction of Warid Tower 68,916 65,716 Warid International LLC, UAE – Parent company 38,956 35,855 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 16,329 – Warid Telecom Georgia Limited 15,403 15,403 Netsonline Services (Pvt) Limited 7,728 6,847 Warid Telecom International – Bangladesh 5,587 5,587 Bank Alfalah Limited – 12,379 Warid Telecom Congo S.A – 5,384 1,026,584 909,323 Less: Provision for doubtful receivables from related parties 18.2 447,587 – 578,997 909,323

18.2 Provision for doubtful receivables from related parties Wateen Telecom UK Limited 266,708 – Advance for construction of Warid Tower 68,916 – Warid International LLC, UAE 38,956 – Amoon Media Group (Pvt) Limited 27,960 – Raseen Technology (Pvt) Limited 16,329 – Warid Telecom Georgia Limited 15,403 – Netsonline Services (Pvt) Limited 7,728 – Warid Telecom International – Bangladesh 5,587 – 447,587 –

Provision for doubtful receivables have been approved by shareholders of the Company in Extraordinary General Meeting held on December 31, 2011.



18.3 This includes investment in 51% shares of Wateen Telecom UK Limited of par value GBP 5,099 (June 30, 2010: 51% shares of par value of GBP 5,099). Subsequent to March 31, 2011 the Company acquired remaining 49% shares of Wateen Telecom UK Limited of par value GBP 4,901. This company was incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank Of Pakistan as per investment in foreign equity abroad is in process and shares of Wateen Telecom UK Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of this specific approval holding company cannot control the financial and operating policies of Wateen Telecom UK Limited to obtain the benefit in term of dividend, repatriation of investment, advance or receive any loan or interest thereon. Hence despite of the 100% ownership Wateen Telecom UK Limited is not treated as subsidiary of the Company.

18.4 Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 30, 2010: Rs Nil).


19. PROVISIONS AND WRITE OFF Trade debts written off – related parties – – 206,227 8,451 Provision for doubtful trade debts – other parties 114,493 – 331,970 9,822 Provision for doubtful advances and other receivables – related parties – – 447,587 – – other parties – – 15,599 – Provision for impairment of capital work in progress – – 353,515 – Provision for impairment of long term investment in Subsidiary company – – 4,400 – Provision for obsolete stores and spares – – 271,998 – 114,493 – 1,631,296 18,273



20. RELATED PARTY TRANSACTIONS Aggregate transactions with related parties during the period were as follows: Subsidiary Companies Cost and expenses charged by subsidiary companies – 60,337 439 92,716 Purchase of intangibles assets 4,300 – 4,300 – Dividend income – – 156,060 – Markup charged to subsidiary companies 12,565 – 69,787 – Payments made by subsidiary companies 12,218 36,206 275,365 80,568 Associated Companies/shareholder Revenue from associated companies 488,924 463,943 1,483,086 1,595,254 Cost and expenses charged by associated companies 229,609 49,382 653,427 205,032 Trade debts written off from – associated companies (note 16) – – 206,227 – Provisions for doubtful advances – associated companies (note 18.2) – – 447,587 – Provision for impairment of long term investment in Subsidiary company – – 4,400 – Markup charged to associated companies 16,606 – 30,232 – Markup on short term running finance from an associated company 70,992 65,266 203,563 201,418 Markup on medium term finance from an associated company 23,789 – 47,667 – Markup on long term finance from a shareholder 20,314 – 29,007 – Interest on late payment to provident fund 1,142 – 535 – Medium term finance received from an associated company – – 600,000 – Long term finance received from sponsor 716,236 – 2,779,615 – Payments made on behalf of associated companies 9,338 65,216 194,798 – Payments made by associated companies on behalf of the Company – – – 50,875 Other related parties Contribution to employees’ retirement funds 20,796 21,021 62,534 68,347


21. DATE OF AUTHORISATION FOR ISSUE This condensed interim financial information has been authorised for circulation to the shareholders by the

Board Of Directors of the Company on January 20, 2012.




232323

conDenseDconsoLIDAteDFInAncIALInForMAtIon

23

conDenseD consoLIDAteD InterIM BALAnce sheet (Un-AUDIteD)AS AT MARCH 31, 2011


SHARE CAPITAL AND RESERVESAuthorised capital 1,000,000,000 (June 30, 2010: 1,000,000,000)ordinary shares of Rs 10 each 10,000,000 10,000,000Issued, subscribed and paid-up capital 6,174,746 6,174,746617,474,620 (June 30, 2010: 617,474,620)ordinary shares of Rs 10 eachGeneral reserve 134,681 134,681Accumulated loss (5,803,867) (1,794,123) 505,560 4,515,304 Non controlling interest in equity of Subsidiary Company Wateen Solutions (Pvt) Ltd (4,266) 206,999 501,294 4,722,303 NON – CURRENT LIABILITIES Long term finance – secured 5 – –Medium term finance from an associated company – unsecured 6 – –Long term finance from sponsor – unsecured 7 2,779,615 –Cross currency and interest rate swap – fair value 5.5 – 139,053 Obligations under finance leases 7,902 5,429Long term deposits 62,070 110,455 2,849,587 254,937DEFERRED LIABILITIESEmployees’ retirement benefits 18,748 60,059 Deferred income tax liability 8 – 76,807 Deferred USF grant 9 1,044,240 827,159 1,062,988 964,025 CURRENT LIABILITIESCurrent portion of long term finance – secured 5 11,766,711 12,411,659Current portion of medium term finance from anassociated company – unsecured 6 600,000 –Payable to supplier to be settled through long term finance – 433,798Cross currency and interest rate swap liability 5.5 489,997 217,397Current portion of obligations under finance leases 2,035 1,556Finance from supplier – unsecured 77,941 77,668Short term borrowings – secured 10 4,170,871 4,604,346Trade and other payables 11 5,058,895 6,030,371 Interest / markup accrued 565,419 631,491 22,731,868 24,408,286 CONTINGENCIES AND COMMITMENTS 12 27,145,737 30,349,551




NON-CURRENT ASSETSProperty, plant and equipment Operating assets 13 18,382,240 17,053,114 Capital work in progress 14 2,814,040 3,883,565 Intangible assets 289,047 310,843 21,485,327 21,247,522

ADVANCE AGAINST PURCHASE OF SHARES 15 85,000 –

DEFERRED INCOME TAX ASSET 8 1,012,041 –

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 272,847 239,474 Long term prepayments 66,823 79,139 339,670 318,613

CURRENT ASSETSTrade debts 16 1,709,422 4,060,687 Contract work in progress 45,542 47,394 Stores, spares and loose tools 17 480,155 855,619 Advances, deposits, prepayments and other receivables 18 1,390,964 1,558,692 Income tax refundable 198,783 246,298 Cash and bank balances 398,833 2,014,726 4,223,699 8,783,416

27,145,737 30,349,551



conDenseD consoLIDAteD InterIMproFIt AnD Loss AccoUnt (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

3 months to 9 months to March 31, March 31, March 31, March 31, 2011 2010 2011 2010 Note (Rupees in thousand)

Revenue 1,916,723 1,611,972 5,326,063 6,527,620

Cost of sales (excludingdepreciation and amortisation) 1,670,749 1,518,510 4,234,636 5,568,198 General and administration expenses 407,277 203,827 1,298,782 966,518 Provisions and write off 19 114,493 – 1,657,030 18,273 Advertisement and marketing expenses 30,421 51,759 105,692 217,955 Selling and distribution expenses 3,757 3,676 12,587 17,769 Other charges – – – 28,936 Other income (8,757) (2,366) (32,145) (37,061) 2,217,939 1,775,406 7,276,581 6,780,588 Loss before interest, taxation, depreciation and amortisation (301,217) (163,434) (1,950,519) (252,968)Less: Depreciation and amortisation 515,920 426,814 1,506,392 1,189,563 Finance cost 436,471 316,338 1,721,064 1,280,073 Finance income (17,339) (4,281) (41,255) (64,686)Loss before taxation (1,236,269) (902,305) (5,136,720) (2,657,918)Income tax credit 222,891 206,003 1,065,651 781,271 Loss before Non controlling interest (1,013,377) (696,302) (4,071,068) (1,876,646)Non controlling interest in (profit)/loss of consolidated subsidiary company 9,272 151 61,325 (34,805)Loss for the period (1,004,105) (696,151) (4,009,744) (1,911,451)

Loss per share Rs (1.63) Rs (1.67) Rs (6.49) Rs (4.58)




conDenseD consoLIDAteD InterIMstAteMent oF coMprehensIVe IncoMe (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011


Loss for the period (1,004,105) (696,151) (4,009,744) (1,911,451)Other comprehensive income – – – –

Total comprehensive loss for the period (1,004,105) (696,151) (4,009,744) (1,911,451)




conDenseD consoLIDAteD InterIM cAsh FLoW stAteMent (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

9 months to March 31, March 31, 2011 2010 Note (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (5,136,720) (2,657,918) Adjustment of non cash items: Depreciation and amortisation 1,506,392 1,189,563 Finance cost 1,721,064 1,280,073 (Profit)/loss on sale of operating assets 11,252 (23,328)Cost associated with IRU of Optic Fiber Cable 27,477 – Deferred grant recognised during the period (38,907) – Provisions and write off 19 1,657,030 18,273 Provision for employees’ accumulated absences 10,955 18,374 4,895,262 2,482,955 (241,458) (174,964)Changes in working capital: (Increase)/Decrease in trade debts 1,780,971 (128,494)(Increase) in contract work in progress 1,852 (18,763)Decrease in stores, spares and loose tools 103,466 10,862 (Increase)/Decrease in advances, deposits, prepayments and other receivables (287,729) 1,222,575 Increase in cross currency and interest rate swap liability 133,547 43,813 Increase/(Decrease) in trade and other payables (1,004,894) 1,046,237 727,212 2,176,231 Employees’ accumulated absences paid (18,849) – Taxes (paid)/refunded 24,318 (43,979)Cash flows from operating activities 491,224 1,957,289 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (2,154,561) (3,878,021)Intangible assets additions (4,300) (7,215)Sale of property, plant and equipment 16,655 165,423 Long term deposits receivable – (paid)/received (33,373) (203)Long term prepayments 12,316 8,814 Advance against purchase of shares (85,000) – Dividend paid to minority shareholders (149,940) – Cash flows from investing activities (2,398,203) (3,711,202)


9 months to March 31, March 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Share issue cost paid – (5,457)Long term finance received 508,830 5,689,056 Long term finance repaid (1,153,778) (764,929)Long term finance received from associated company 600,000 – Long term finance received from sponsor 2,779,615 – Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226)Long term payable to supplier received/(repaid) 273 (210,210)Deferred USF grant received 255,988 297,960 Obligations under finance leases repaid 2,952 (1,697)Long term deposits payable repaid (48,385) – Short term borrowings repaid (1,545,415) – Finance cost paid (1,787,136) (1,051,570)Cash flows from financing activities (820,854) 1,080,927

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,727,833) (672,986)Cash and cash equivalents at beginning of the period (909,455) (2,261,349)CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,637,288) (2,934,335) CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 398,833 510,791 Short term running finance (4,036,121) (3,445,126) (3,637,288) (2,934,335)




conDenseD consoLIDAteD InterIM stAteMent oF chAnGes In eQUItY (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011

Non controlling Share General Accumulated interest in equity capital reserve profit/(loss) Total of subsidiary Total (Rupees in thousand)

Balance at July 1, 2009 2,087,373 392,908 2,107,630 4,587,911 179,500 4,767,411

Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) – – – Share issue cost – – (5,457) (5,457) – (5,457)Total comprehensive loss for the period – – (1,911,451) (1,911,451) 34,805 (1,876,646)Balance at March 31, 2010 4,174,746 134,681 (1,638,425) 2,671,003 214,305 2,885,307

Balance at March 31, 2010 4,174,746 134,681 (1,638,425) 2,671,003 214,305 2,885,307 Issue of 200,000,000 shares for cash 2,000,000 – – 2,000,000 – 2,000,000 on April 20, 2010 Shares issue cost (net of tax benefit) – – (73,790) (73,790) – (73,790)Total comprehensive loss for the period – – (81,909) (81,909) (7,306) (89,215)Balance at June 30, 2010 6,174,746 134,681 (1,794,124) 4,515,304 206,999 4,722,303

Balance at July 1, 2010 6,174,746 134,681 (1,794,124) 4,515,304 206,999 4,722,303 Dividend paid tonon–controlling shareholders – – – – (149,940) (149,940)Total comprehensive loss for the period – – (4,009,744) (4,009,744) (61,325) (4,071,068)Balance at March 31, 2011 6,174,746 134,681 (5,803,867) 505,560 (4,266) 501,294




1. LEGAL STATUS AND OPERATIONS These condensed consolidated interim financial information include the financial information of

Wateen Telecom Limited and its subsidiary companies Wateen Solutions (Pvt) Limited (WSPL) (51% owned), Wateen Satellite Services (Pvt) Limited (WSSPL) (100% owned) and Netsonline Services (Pvt) Limited (NOSPL) (100% owned). For the purpose of these condensed consolidated interim financial information, Wateen and consolidated subsidiaries are referred to as the Company.

Further, subsequent to the period end the Board of Directors of the Parent Company in their meeting held on November 22, 2011 has decided to voluntary winding up the WSSPL and NOSPL. Accordingly, the financial statements of WSSPL and NOLSPL has not been prepared on going concern basis.

2. STATEMENT OF COMPLIANCE These condensed consolidated interim financial information of the Company for the nine months period

ended March 31, 2011 has been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. These condensed consolidated interim financial information do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the published financial statements of the Company for the year ended June 30, 2010.

3. ACCOUNTING POLICIES The accounting policies and methods of computation adopted for the preparation of this condensed

consolidated interim financial information are the same as those applied in preparation of the annual financial statements for the year ended June 30, 2010.

4. NET CURRENT LIABILITIES Net current liabilities as at March 31, 2011 were Rs 18.508 billion of which Rs 10.599 billion relate to

loan installments due for repayment after March 31, 2012 and Rs 3.683 billion relates to current portion of long term finance and short term finance. A shareholder of the Company has provided financial support in the form of long term finance amounting to Rs 2.779 billion to meet the requirements of the Company and this arrangement is expected to continue. Subsequent to the period end, the Company has negotiated with the lenders to restructure long term finance and convert short term finance, except for short term running finance from Bank Alfalah Limited amounting to Rs 1.837 billion, into long term finance facilities. The tenure of the restructured facilities is eight years w.e.f January 1, 2011 (inclusive of grace period of three years). The principal amount of restructured facilities will be repayable in 10 semiannual installments commencing July 1, 2014. Compliance with financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio of 80:20, which should not be breached during the grace period. The Company is in the phase of finalizing addendum agreements to restructure term finance facilities with lenders.

The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its medium term finance facility. The associated company has agreed to reschedule its facility. Principal will be repayable in semi-annual equal installments within two years after the expiry of grace period (from January 01, 2011 to December 31, 2019). The rate of markup will be 6 months KIBOR, subject to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum agreement to restructure the term finance facility with lender.

seLecteD notes to AnD ForMInG pArt oF theconDenseD consoLIDAteD InterIM FInAncIAL InForMAtIon (Un-AUDIteD)FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2011




5. LONG TERM FINANCE - SECURED Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,182,407 2,450,304 Standard Chartered Bank (SCB) 5.3 27,000 54,000 Dubai Islamic Bank (DIB) 5.4 424,000 477,000 Motorola Credit Corporation (MCC) 5.5 4,091,035 4,963,819 Standard Chartered Bank (SCB) 5.6 508,830 – Total 11,999,272 12,711,123 Unamortized transaction and other ancillary cost Opening balance 299,464 – Additions during the period/year – 400,862 Amortisation for the period/year (66,903) (101,398) (232,561) (299,464) 11,766,711 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,768,181) (1,991,174) Amount due after March 31, 2011 5.7 (9,998,530) (10,420,485) (11,766,711) (12,411,659) – –

5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till March 31, 2011. The tenure of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years.

The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/fixed assets (excluding assets under specific charge of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in respect of immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and a corporate guarantee from Warid Telecom International LLC.

5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till March 31, 2011. Amount outstanding at March 31, 2011 was USD 25.600 million. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the


period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company.

5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million.

5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, 2010. The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries).

During the period the bank has rescheduled the second installment due on August 01, 2010 to January 31, 2011. Remaining repayments are due on their respective dates.

5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million (June 30, 2010: USD 64 million) has been availed till December 31, 2010. Amount outstanding at March 31, 2011 was USD 47.989 million. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola.

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged through cross currency swap contract with SCB. In consideration, the Company paid the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account.

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account.

Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the original facility agreement to the Deutsche Bank AG as lender, effective August 19, 2011.

5.6 During the period, the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer.



During the period the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 217 million. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer.

5.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company paid ECGD loan installment of USD 3.025 million on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 thousand on January 31, 2011 which was due on October 25, 2010. Further, certain ratios specified in the loan agreements have not been maintained at March 31, 2011. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments due as per loan agreements after March 31, 2012 amounting to Rs 10,598,530 thousand have been shown as current liability.

Subsequent to period end, the Company has negotiated with the lenders to restructure its existing long term finance facilities as explained in note 4.

6. MEDIUM TERM FINANCE FROM AN ASSOCIATED COMPANY - UNSECURED During the period, the Company has obtained an aggregate medium term finance facility of Rs 600

million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e September 30, 2010. The rate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan installments due as per loan agreement after March 31, 2012 amounting to Rs 600 million have been shown as current liability.

Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility as explained in note 4.

7. LONG TERM FINANCE FROM A SHAREHOLDER - UNSECURED During the period, the Company has obtained loan from a shareholder amounting to USD 33 million.

This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loan, which shall be on or about January 29, 2015. The rate of mark-up is LIBOR + 1.5%. Alternatively the loan may be converted into equity by way of issuance of the Company’s ordinary shares at the option of the lender at any time after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the repayment date, provided that such conversion is permissible under the applicable laws of Pakistan.



8. DEFERRED INCOME TAX ASSET/ (LIABILITY) Temporary differences between accounting and tax depreciation (3,885,156) (3,423,722) Unused tax losses 8.1 4,297,167 3,268,671 Unused tax benefit related to share issue cost 39,463 34,138 Deductible temporary differences on account of provisions 562,466 47,102 Deferred cost 36 (72) Trade debts - exchange gain (1,935) 3,068 1,012,041 (76,807)

8.1 Potential tax benefit of Rs 478,585 thousand has not been recognised representing business losses of Rs 1,367,386 thousand which will expire in tax year 2016.

8.2 The existence of future taxable profits sufficient to absorb these losses is based on a business plan prepared by management of the Company which involves making judgments regarding key assumptions underlying the estimation of future taxable profits estimated in the plan. These assumptions if not met have a significant risk of causing a material adjustment to the carrying amount of the deferred tax asset. In the management’s view it is probable that the company will be able to achieve the profits projected in the plan.


9. DEFERRED UNIVERSAL SERVICE FUND (USF) GRANT Balance at beginning of the period/year 827,159 212,428 Amount received/receivable during the period/year 255,988 616,477 Amount recognised as income during the period/year (118,053) (1,746) Closing balance 965,094 827,159

10. SHORT TERM BORROWINGS - SECURED Short term borrowings 134,750 1,680,165 Short term running finance 4,036,121 2,924,181 4,170,871 4,604,346




11. TRADE AND OTHER PAYABLES These include payable to related parties as follows: Warid Telecom (Pvt) Limited 295,252 86,656 Advances from Warid Telecom (Pvt) Limited 34,316 151,004 Warid Telecom Uganda Limited – 47,474 Payable to gratuity fund 115,684 104,041 Payable to provident fund 24,739 11,569 469,991 400,744

12. CONTINGENCIES AND COMMITMENTS(i) Claims against the Company not acknowledged as debt 260,267 264,038 (ii) Performance guarantees issued by banks in favour of the Company 1,416,629 1,476,816 (iii) Outstanding commitments for capital expenditure 1,259,352 1,799,824 (iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of

Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions.

However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, 2010.

Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as partial payment of the purchase price and the balance of Rs 255,000 thousand is payable by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen Solutions and the resultant devaluation of its share price, the new management entered into negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 thousand, however the finalization of renegotiated agreement is in process.

Same have been approved by shareholders in EOGM dated December 31, 2011.


Nine months to Year ended March 31, June 30, 2011 2010 Note (Rupees in thousand)

13. OPERATING ASSETS Opening net book value 17,053,114 14,062,017 Additions – owned 2,867,067 4,804,160 – leased 3,504 9,293 Disposals at net book value (55,383) (191,532) Depreciation charge (1,486,062) (1,630,824) Closing net book value 18,382,240 17,053,114

14. CAPITAL WORK IN PROGRESS Leasehold improvements 21,138 23,334 Line and wire 1,194,626 1,319,762 Network equipment 14.1 1,598,276 2,540,469 2,814,040 3,883,565

14.1 Network equipment is net of provision for impairment of Rs 354 million (June 30, 2010: Nil).

14.2 Finance cost of Rs 234 million was capitalised during the nine months period ended March 31, 2011 (Year ended June 30, 2010: Rs 550 million).


15. ADVANCE AGAINST PURCHASE OF SHARES Advance paid against purchase of shares Wateen Solutions (Pvt) Limited 12 (iv) 85,000 – 16. TRADE DEBTS Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 551,408 560,627 Warid International LLC, UAE – Parent company 85,700 85,400 Bank Alfalah Limited 16,093 22,095 Warid Telecom Congo S.A – 1,191,305 Warid Telecom Uganda Limited – 201,540 Wateen Telecom UK Limited – 105,643 653,201 2,166,610

These balances are net of trade debts written off during the period related to following associated companies, which have been approved by the shareholders in Extra Ordinary General Meeting held on December 31, 2011.




Warid Telecom (Private) Limited 76,834 – Warid Telecom Congo Limited 125,127 – Warid Telecom Uganda Limited 4,266 – Bank Alfalah Limited – 8,451 206,227 8,451

16.1 Provision for doubtful debts - other parties Opening balance 157,035 110,875 Provision during the period 364,067 47,203 Recovery during the period/year – (1,043) Closing balance 521,102 157,035

Provision during the period includes Rs 342,803 thousand based on age analysis of debts as follows: – Balances 181 – 360 days past due – 50 % – Balances over 360 days past due – 100 % March 31, June 30, 2011 2010 Note (Rupees in thousand)

17. STORES, SPARES AND LOOSE TOOLS Cost 752,153 855,619 Less: Provision for obsolete stores 271,998 – 480,155 855,619

18. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

18.1 These include receivable from related parties as follows: Wateen Telecom UK Limited 18.3 312,349 107,433 Wateen Multimedia (Pvt) Limited 152,891 137,160 Advance for construction of Warid Tower 68,916 65,716 Warid International LLC, UAE – Parent company 38,956 35,855 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 16,329 – Warid Telecom Georgia Limited 15,403 15,403 Warid Telecom International – Bangladesh 5,587 5,587 Bank Alfalah Limited – 12,379 Warid Telecom Congo S.A – 5,384 638,391 412,877 Less: Provision for doubtful receivables from related parties 18.2 439,859 – 198,532 412,877



18.2 Provision for doubtful receivables from related parties Wateen Telecom UK Limited 266,708 – Advance for construction of Warid Tower 68,916 – Warid International LLC, UAE 38,956 – Amoon Media Group (Pvt) Limited 27,960 – Raseen Technology (Pvt) Limited 16,329 – Warid Telecom Georgia Limited 15,403 – Warid Telecom International – Bangladesh 5,587 – 439,859 –

Provision for doubtful receivables have been approved by shareholders of the Company in Extraordinary General Meeting held on December 31, 2011.

18.3 This includes investment in 51% shares of Wateen Telecom UK Limited of par value GBP 5,099 (June 30, 2010: 51% shares of par value of GBP 5,099). Subsequent to March 31, 2011 the Company acquired remaining 49% shares of Wateen Telecom UK Limited of par value GBP 4,901. This company was incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank Of Pakistan as per investment in foreign equity abroad is in process and shares of Wateen Telecom UK Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of this specific approval holding company cannot control the financial and operating policies of Wateen Telecom UK Limited to obtain the benefit in term of dividend, repatriation of investment, advance or receive any loan or interest thereon. Hence despite of the 100% ownership Wateen Telecom UK Limited is not treated as subsidiary of the Company.

18.4 Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 30, 2010: Rs Nil).


19. PROVISIONS AND WRITE OFF Trade debts written off - related parties – – 206,227 8,451 Provision for doubtful trade debts – other parties 114,493 – 364,067 9,822 Provision for doubtful advances and other receivables – related parties – – 439,859 – – other parties – – 15,599 – Provision for impairment of capital work in progress – – 353,515 – Provision for impairment of goodwill on acquisition of subsidiary company – – 5,765 – Provision for obsolete stores and spares – – 271,998 – 114,493 – 1,657,030 18,273




20. RELATED PARTY TRANSACTIONS Aggregate transactions with related parties during the period were as follows:

Associated Companies/shareholder Revenue from associated companies 488,924 463,943 1,483,086 1,595,254 Cost and expenses charged by associated companies 229,609 49,382 653,427 205,032 Trade debts written off from – associated companies (note 16) – – 206,227 – Provisions for doubtful advances – associated companies (note 18.2) – – 439,859 – Markup charged to associated companies 16,606 – 30,232 – Markup on short term running finance from an associated company 70,992 65,266 203,563 201,418 Markup on medium term finance from an associated company 23,789 – 47,667 – Markup on long term finance from a shareholder 20,314 – 29,007 – Interest on late payment to provident fund 1,142 – 535 – Medium term finance received from an associated company – – 600,000 – Long term finance received from sponsor 716,236 2,779,615 – Payments made on behalf of associated companies 9,338 65,216 194,798 – Payments made by associated companies on behalf of the Company – – – 50,875

Other related parties Contribution to employees’ retirement funds 20,796 21,021 62,534 68,347

21. DATE OF AUTHORISATION FOR ISSUE This condensed interim financial information has been authorised for circulation to the shareholders by the

Board Of Directors of the Company on January 20, 2012.



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