WATEEN TELECOM LIMITED hALf yEArLy rEpOrT … TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10 01 ... Bank Alfalah Limited ... WATEEN TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10 03

WATEEN TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10 01

CONTENTs

02 Corporate Information03 Director’s Report

Condensed Financial Information05 Auditors’ Review Report to the Members06 Condensed Interim Balance Sheet08 Condensed Interim Profit and Loss Account09 Condensed Interim Statement of Comprehensive Income10 Condensed Interim Cash Flow Statement12 Condensed Interim Statement of Changes in Equity13 Selected Notes to and Forming Part of the Condensed Interim Financial Information

Condensed Consolidated Financial Information28 Condensed Consolidated Interim Balance Sheet30 Condensed Consolidated Interim Profit and Loss Account31 Condensed Consolidated Interim Statement of Comprehensive Income32 Condensed Consolidated Interim Cash Flow Statement34 Condensed Consolidated Interim Statement of Changes in Equity35 Selected Notes to and Forming Part of the Condensed Consolidated Interim Financial Information


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


The Directors of Wateen Telecom Limited are pleased to present the financial statements for the second quarter and six months ended December 31, 2010. These financial statements have been reviewed by the statutory auditors.

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 reinforce 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 are hence, giving high priority to regularize matters to ensure compliance with the legal and regulatory requirements.

The company has posted consolidated revenues of Rs 1,478 million for the second quarter ended December 31, 2010 and cumulative revenues of Rs 3,409 million for the six months ended December 31, 2010. A 30% decline in the revenue is attributable to the change in market dynamics of long distance international business which remained under severe pressure of grey traffic. Gross profit has been improved to 25% compared to 18% in same period last year. Sponsors’ has injected Rs 2,063 million directly and Rs 600 million through an associated company to improve the liquidity situation of the company compared to Nil for the same period last year.

DIrECTOrs’ rEpOrT


New Management has evaluated the current market dynamics and recommended a focused approach to consolidate the position of the Company and make significant progress in areas with high growth opportunities and discontinue certain operations to ensure best possible return on investments. This has resulted in provisions and write offs of Rs 1,542 million compared to Rs 18 million in the same period last year and brought EBITDA loss to the tune of Rs 1,649 million. We believe these drastic measures were inevitable and overdue to build a profitable business going forward.

Demand for data services in Pakistan and neighboring countries from carriers, businesses and consumers with more innovative value added services like mobile banking and cloud computing will be the key drivers for growth in the 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 Company recognizes the importance of its human resources which play a critical role for a service organization like Wateen Telecom. Conscious efforts are being made to obtain and retain best available human resources as well as to enhance the productivity of the existing ones so as to create a work force suitable to meet today’s challenges.

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

WATEEN TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10

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AUDITOR'S REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIALINFORMATION

We have reviewed the accompanying condensed interim balance sheet of Wateen TelecomLimited as at December 31, 2010 and the related condensed interim profit and loss account,condensed interim statement of comprehensive income, condensed interim cash flowstatement and condensed interim statement of changes in equity and notes to the interimfinancial information for the six months period ended (here-in-after referred to as the "interimfinancial information"). Management is responsible for the preparation and presentation of thisinterim financial information in accordance with approved accounting standards as applicablein Pakistan. Our responsibility is to express a conclusion on this interim financial informationbased on our review. The figures of the condensed interim profit and loss account for quartersended December 31, 2010 and 2009 have not been reviewed, as we are required to reviewonly the cumulative figures for the six months period ended December 31, 2010.

We conducted our review in accordance with International Standard on Review Engagements2410, "Review of Interim Financial Information Performed by the Independent Auditor of theEntity". A review of interim financial information consists of making inquiries, primarily ofpersons responsible for financial and accounting matters, and applying analytical and otherreview procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might beidentified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying interim financial information as of and for the six months period endedDecember 31, 2010 is not prepared, in all material respects, in accordance with approvedaccounting standards as applicable in Pakistan.

H~Chartered AccountantsIslamabad: January 20, 2012

............................................................................................................................................................................................................................................................................:A. F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC networkPIA Building, 3rd FloOr, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000, PakistanTel: +92 (51) 2273457-60/2870045-8; Fax: +92 (51) 2277924; < www.pwc.com/pk>

Karachi: State Life Building No. 1-C, 1.1. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan; Tel: +92 (21) 32426682-5132426711-5; Fax: +92 (21) 32415007Lahore: 23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660, Pakistan; Tel: +92 (42) 35715864-71; Fax: +92 (42) 35715872Kabul: House No. 1916, Street NO.1, Behind Cinema Bariqot, Nahar-e-Darsan, Karte-4, Kabul, Afghanistan; Tel: +93 (779) 315320, +93 (799) 315320

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AUDITOR'S REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIALINFORMATION

We have reviewed the accompanying condensed interim balance sheet of Wateen TelecomLimited as at December 31, 2010 and the related condensed interim profit and loss account,condensed interim statement of comprehensive income, condensed interim cash flowstatement and condensed interim statement of changes in equity and notes to the interimfinancial information for the six months period ended (here-in-after referred to as the "interimfinancial information"). Management is responsible for the preparation and presentation of thisinterim financial information in accordance with approved accounting standards as applicablein Pakistan. Our responsibility is to express a conclusion on this interim financial informationbased on our review. The figures of the condensed interim profit and loss account for quartersended December 31, 2010 and 2009 have not been reviewed, as we are required to reviewonly the cumulative figures for the six months period ended December 31, 2010.

We conducted our review in accordance with International Standard on Review Engagements2410, "Review of Interim Financial Information Performed by the Independent Auditor of theEntity". A review of interim financial information consists of making inquiries, primarily ofpersons responsible for financial and accounting matters, and applying analytical and otherreview procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might beidentified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying interim financial information as of and for the six months period endedDecember 31, 2010 is not prepared, in all material respects, in accordance with approvedaccounting standards as applicable in Pakistan.

H~Chartered AccountantsIslamabad: January 20, 2012

............................................................................................................................................................................................................................................................................:A. F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC networkPIA Building, 3rd FloOr, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000, PakistanTel: +92 (51) 2273457-60/2870045-8; Fax: +92 (51) 2277924; < www.pwc.com/pk>

Karachi: State Life Building No. 1-C, 1.1. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan; Tel: +92 (21) 32426682-5132426711-5; Fax: +92 (21) 32415007Lahore: 23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660, Pakistan; Tel: +92 (42) 35715864-71; Fax: +92 (42) 35715872Kabul: House No. 1916, Street NO.1, Behind Cinema Bariqot, Nahar-e-Darsan, Karte-4, Kabul, Afghanistan; Tel: +93 (779) 315320, +93 (799) 315320


CONDENsED INTErIM BALANCE shEET (UN-AUDITED)AS AT DECEMBER 31, 2010

December 31, June 30, 2010 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 10,000,000Issued, 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 (4,900,856) (2,099,760) 1,408,571 4,209,667NON–CURRENT LIABILITIESLong term finance – secured 5 – –Medium term finance from an associated company – unsecured 6 – –Long term finance from a shareholder – unsecured 7 2,063,379 –Cross currency and interest rate swap – fair value 5.5 – 139,053Obligations under finance leases 4,638 5,429Long term deposits 64,759 110,455 2,132,776 254,937DEFERRED LIABILITIESEmployees’ retirement benefits – 43,690Deferred income tax liability 8 – 74,593Deferred USF grant 9 1,046,248 827,159 1,046,248 945,442CURRENT LIABILITIESCurrent portion of long term finance – secured 5 11,858,743 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 5.5 517,000 217,397Current portion of obligations under finance leases 2,035 1,556Finance from supplier – unsecured 77,941 77,668Short term borrowings – secured 10 4,092,484 4,604,346Trade and other payables 11 4,898,324 5,922,431Interest / markup accrued 661,615 631,491 22,708,142 24,300,346CONTINGENCIES AND COMMITMENTS 12 27,295,737 29,710,392

The annexed notes 1-26 are an integral part of this condensed interim financial information.



NON-CURRENT ASSETSProperty, plant and equipment Operating assets 13 18,712,000 17,045,929 Capital work in progress 14 2,791,644 3,883,565Intangible assets 197,592 204,726 21,701,236 21,134,220

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

DEFERRED INCOME TAX ASSET 8 773,395 –

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 273,886 238,584Long term prepayments 71,328 79,139 345,214 317,723

CURRENT ASSETSTrade debts 16 1,274,874 3,097,982Contract work in progress 18,805 18,782Stores, spares and loose tools 17 558,096 847,528Advances, deposits, prepayments andother receivables 18 1,923,479 2,001,340Income tax refundable 192,412 238,841Cash and bank balances 19 370,565 1,996,915 4,338,231 8,201,388

27,295,737 29,710,392

______________ _____________Chief Executive Director


CONDENsED INTErIM prOfIT AND LOss ACCOUNT (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

3 months to 6 months to December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Note (Rupees in thousand)

Revenue 20 1,431,663 2,163,409 3,257,190 4,533,435

Cost of sales (excludingdepreciation and amortisation) 21 1,208,553 1,708,023 2,439,071 3,757,814General and administration expenses 567,792 374,426 854,964 730,756Advertisement and marketing expenses 44,664 71,605 75,271 166,196Selling and distribution expenses 1,478 6,901 8,830 14,093Provisions and write off 22 1,516,803 – 1,516,803 18,273Other charges – 28,936 – 28,936Other income 23 128,652 (9,492) (176,790) (33,394) 3,467,942 2,180,399 4,718,149 4,682,674

Loss before interest, taxation,depreciation and amortisation (2,036,279) (16,990) (1,460,959) (149,239)Depreciation and amortisation 518,211 395,312 987,327 757,205Finance cost 24 799,334 561,266 1,282,557 984,956Finance income (78,349) (52,714) (81,759) (60,405)Loss before taxation (3,275,475) (920,854) (3,649,084) (1,830,995)Deferred income tax credit 791,649 290,184 847,988 580,369Loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626)

Loss per share Rs (4.03) Rs (1.51) Rs (4.54) Rs (3.00)




CONDENsED INTErIM sTATEMENT Of COMprEhENsIVE INCOME (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

3 months to 6 months to December 31, December 31, December 31, December 31, 2010 2009 2010 2009 (Rupees in thousand)

Loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626)Other comprehensive income – – – –

Total comprehensive loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626)




CONDENsED INTErIM CAsh fLOW sTATEMENT (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

6 months to December 31, December 31, 2010 2009 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (3,649,084) (1,830,995) Adjustment of non cash items: Depreciation/ Amortisation 987,327 757,205 (Profit)/loss on sale of operating assets 6,798 (22,953)Finance cost 1,282,557 984,956 Deferred grant recognised during the period (25,939) – Dividend income from subsidiary company (156,060) – Provisions and write off (note 22) 1,516,803 18,273 3,611,486 1,737,481 (37,598) (93,514)Changes in working capital: Decrease/ (Increase) in trade debts 1,399,405 (282,265)(Increase) in contract work in progress (23) (3,140)Decrease in stores, spares and loose tools 17,434 223,188 (Increase)/Decrease in advances, deposits,prepayments and other receivables (140,297) 205,756 Increase in cross currency and interest rate swap liability 160,550 43,813 (Decrease)/ Increase in trade and other payables (1,062,810) 708,113 374,259 895,465 Taxes (paid)/refunded 46,429 (20,710)Cash flows from operating activities 383,090 781,241 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,011)Intangible assets additions (4,300) – Sale of property, plant and equipment 10,000 163,024 Long term deposits receivable – (paid)/received (35,302) 213 Long term prepayments 7,811 8,814 Advance against purchase of shares (85,000) – Dividend income received 156,060 – Cash flows from investing activities (1,871,087) (2,636,960)


6 months to December 31, December 31, 2010 2009 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Long term finance received 579,241 5,691,156 Long term finance repaid (1,132,158) (470,929)Long term finance received from associated company 600,000 – Long term finance received from sponsor 2,063,379 – Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226)Long term payable to supplier received/(repaid) 273 (210,212)Employees’ accumulated absences paid (4,987) 4,228 Deferred USF grant received – 297,960 Obligations under finance leases repaid (312) (1,683)Long term deposits payable – (repaid)/received (45,696) 13,594 Short term borrowings repaid (1,545,415) – Finance cost paid (1,252,433) (769,511)Cash flows from financing activities (1,171,906) 1,682,377

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,659,903) (173,341)Cash and cash equivalents at beginning of the period (927,266) (2,324,688)

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,587,169) (2,498,029)

CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 370,565 337,838 Short term running finance (3,957,734) (2,835,867) (3,587,169) (2,498,029)




CONDENsED INTErIM sTATEMENT Of ChANGEs IN EQUITy (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

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

Balance at July 1, 2009 2,087,373 392,908 1,829,146 4,309,427Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) –Total comprehensive loss for the period – – (1,250,626) (1,250,626)Balance at December 31, 2009 4,174,746 134,681 (1,250,626) 3,058,801

Balance at January 1, 2010 4,174,746 134,681 (1,250,626) 3,058,801Issue of 200,000,000 shares for cashon April 20, 2010 2,000,000 – – 2,000,000Shares issue cost (net of tax benefit) – – (79,247) (79,247)Total comprehensive loss for the period – – (769,887) (769,887)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 – – (2,801,096) (2,801,096)Balance at December 31, 2010 6,174,746 134,681 (4,900,856) 1,408,571




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 is listed on Karachi, Lahore and Islamabad Stock Exchanges. 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 six months period ended

December 31, 2010 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 December 31, 2010 were Rs 18.370 billion of which Rs 10.613 billion

relate to loan installments due for repayment after December 31, 2011 and Rs 4.660 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 2.063 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 1.795 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 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 i.e. 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 SIX MONTHS PERIOD ENDED DECEMBER 31, 2010




5. LONG TERM FINANCE - SECURED Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,199,048 2,450,304 Standard Chartered Bank (SCB) 5.3 40,500 54,000 Dubai Islamic Bank (DIB) 5.4 477,000 477,000 Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 Standard Chartered Bank (SCB) 5.6 508,830 – Total 12,113,605 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 (44,602) (101,398) (254,862) (299,464) 11,858,743 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,845,763) (1,991,174) Amount due after Dec 31, 2011 5.7 (10,012,980) (10,420,485) (11,858,743) (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 December 31, 2010. The tenure of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped -up- semi annual installments. The first such installment 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 December 31, 2010. Amount outstanding at December 31, 2010 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 December 31, 2010 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 December 31, 2010. 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 installments due as per loan agreements after December 31, 2011 amounting to Rs 10,012,980 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 December 31, 2011 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 24 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) Taxable temporary differences between accounting and tax depreciation (3,745,267) (3,423,807) Unused tax losses 8.1 3,973,860 3,268,671 Unused tax benefit related to share issue cost 39,462 34,138 Deductible temporary differences on account of provisions 505,340 46,405 773,395 (74,593)

8.1 Unused tax losses for which no deferred tax asset has been recognised amounts to Rs 478,585 thousand 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.

December 31, June 30, 2010 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 245,028 616,477 Amount recognised as income during the period/year (25,939) (1,746) Closing balance 1,046,248 827,159

10. SHORT TERM BORROWINGS - SECURED Short term borrowings 134,750 1,680,165 Short term running finance 3,957,734 2,924,181 4,092,484 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 106,366 86,656 Advances from Warid Telecom (Pvt) Limited 34,316 151,004 Bank Alfalah Limited 3,950 – Warid Telecom Uganda Limited – 47,474 Payable to gratuity fund 109,841 104,041 Payable to provident fund 22,637 11,569 598,706 712,231

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 1,412,233 1,476,816(iii) Outstanding commitments for capital expenditure 1,208,145 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 Extra Ordinary General Meeting dated December 31, 2011.


Six months to Year ended December 31, 2010 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 against purchase of shares 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

All the companies are incorporated in Pakistan.

Six months to Year ended December 31, June 30, 2010 2010 Note (Rupees in thousand)

13. OPERATING ASSETS Opening net book value 17,045,929 14,050,553 Additions – owned 2,658,762 4,803,102 – leased – 9,293 Disposals at net book value (16,798) (191,184) Depreciation charge (975,893) (1,625,835) 18,712,000 17,045,929

14. CAPITAL WORK IN PROGRESS Leasehold improvements 21,219 23,334 Line and wire 1,240,781 1,319,762 Network equipment 14.1 1,529,644 2,540,469 2,791,644 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 six months period ended December 31,

2010 (Year ended June 30, 2010: Rs 550 million).




16. TRADE DEBTS Trade debts – related parties 16.1 224,956 1,807,657 – other parties 1,399,981 1,422,911 1,624,937 3,230,568 Less: Provision for doubtful debts – other parties 16.2 (350,063) (132,586) 1,274,874 3,097,982

16.1 Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 124,864 457,957 Warid International LLC, UAE – Parent company 85,700 85,400 Bank Alfalah Limited 14,392 12,125 Warid Telecom Congo S.A – 1,060,716 Warid Telecom Uganda Limited – 85,816 Wateen Telecom UK Limited – 105,643 224,956 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

16.2 Provision for doubtful debts – other parties Opening balance 132,586 85,131 Provision during the period 217,477 47,455 Closing balance 350,063 132,586

Provision during the period includes Rs 197,213 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 830,094 847,528 Less: Provision for obsolete stores 271,998 – 558,096 847,528

18. ADVANCES, DEPOSITS, PREPAyMENTS AND OTHER RECEIVABLES18.1 These include receivable from related parties as follows: Wateen Solutions (Pvt) Limited 370,376 488,943 Wateen Telecom UK Limited 18.2 293,367 108,720 Wateen Multimedia (Pvt) Limited 149,106 137,160 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 – 5,384 993,728 909,954 Less: Provision for doubtful receivables from related parties 18.3 447,587 – 546,141 909,954

18.2 This includes investment in 51 % shares of Wateen Telecom UK Limited of par value GBP 5,099 (2010: 51 % shares of par value of GBP 5,099). Subsequent to December 31, 2010 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 for 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 terms of dividend, repatriation of investment, advance or receive any loan or interest thereon. Hence despite the 51% ownership Wateen Telecom UK Limited is not treated as subsidiary of the Company.




18.3 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 other than Netsonline Services (Pvt) Limited have been approved by shareholders of the Company in Extraordinary General Meeting held on December 31, 2011.

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

19. CASH AND BANK BALANCES Bank balances amounting to Rs 31 million were under lien with banks (June 30, 2010: Rs 31 million).


20. REVENUE Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) (232,045) – – – Operation and Maintenance 155,147 169,317 298,690 295,709 Managed capacity 21,991 23,669 34,734 52,582 Broadband and voice 455,723 354,198 903,267 644,357 Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 Very Small Aperture Terminal services (VSAT) 218,387 467,346 470,895 861,073 ADM sites rentals 43,174 – 74,172 – Others 84,941 55,641 220,360 170,035 1,431,663 2,163,409 3,257,190 4,533,435



21. COST OF SALES LDI Interconnect cost 616,022 735,525 1,069,463 1,531,653 Leased circuit charges 84,230 80,330 181,471 163,327 Contribution to PTA Funds 49,006 234,296 123,384 627,848 PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 Operational cost 247,880 329,407 588,260 732,966 Bandwidth cost of VSAT services 196,248 297,816 398,726 624,642 Others 9,241 21,641 64,629 65,118 1,208,553 1,708,023 2,439,071 3,757,814

22. PROVISIONS AND WRITE OFF Trade debts written off – related parties 206,227 – 206,227 8,451 Provision for doubtful trade debts – other parties 217,477 – 217,477 9,822 Provision for doubtful advances and other receivables – related parties 447,587 – 447,587 – – other parties 15,599 – 15,599 – Provision for impairment of capital work in progress 353,515 – 353,515 – Provision for impairment of long term investment in subsidiary company 4,400 – 4,400 – Provision for obsolete stores and spares 271,998 – 271,998 – 1,516,803 – 1,516,803 18,273

23. OTHER INCOME/ (LOSS) Dividend income from subsidiary company – – 156,060 – USF grant recognised as income (121,608) – 25,939 – Profit/ (loss) on sale of fixed assets (6,709) – (6,798) 22,953 Rental income – 3,892 – 3,892 Other income/ (loss) (335) 5,600 1,589 6,549 (128,652) 9,492 176,790 33,394

24. FINANCE COST Interest/markup 500,971 163,886 1,012,486 676,875 Cross currency and interest rate swap contracts cost 377,947 171,155 377,947 171,155 Amortization of ancillary cost of long term finance 22,301 – 44,602 – Finance cost of leased assets 596 190 852 595 Bank charges, commission and fees 26,615 43,682 39,638 95,916 Exchange (gain)/ loss (11,900) 328,542 41,424 332,792 916,530 707,455 1,516,949 1,277,333 Interest/mark up capitalised under property, plant and equipment (117,196) (146,189) (234,392) (292,377) 799,334 561,266 1,282,557 984,956




25. RELATED PARTy TRANSACTIONS Aggregate transactions with related parties during the period were as follows: Parent Company Warid Telecom International LLC, UAE (WTI) Markup charged to WTI 1,549 – 3,045 – Provision for doubtful advances 35,911 – 35,911 – Payments made by the Company on behalf of WTI – – 56 –

Shareholder Long term finance received from shareholder 856,579 – 2,063,379 – Markup on long term finance from shareholder 8,693 – 8,693 –

Subsidiary Companies Wateen Solutions (Private) Limited (WSPL) Cost and expenses charged by WSPL 30,191 – 30,630 – Markup charged to WSPL 25,951 57,225 – Purchase of intangible assets 4,300 – 4,300 – Dividend income – – 156,060 – Payments made by WSPL on behalf of the Company 65,357 – 176,952 35,588 Payments made on behalf of WSPL – 21,797 – 21,797 Netsonline Services (Pvt) Limited Provision for doubtful advances 7,728 – 7,728 – Provision for impairment in investment 4,400 – 4,400 –

Associated Companies Warid Telecom (Private) Limited (WTL) Sale of services to WTL 500,478 546,934 891,537 1,097,493 Cost and expenses charged by WTL 86,601 69,049 231,804 145,775 Trade debts written off 76,834 – 76,834 – Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by WMM 13,674 – 22,791 – Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 Wateen Telecom Limited - UK (Wateen UK) Sale of services 33,635 – 67,313 – Markup charged to Wateen UK 7,480 – 11,820 – Cost and expenses charged by Wateen UK 153,561 – 218,766 – Provision for doubtful advances 266,708 – 266,708 – Payments made by the Company on behalf of Wateen UK – – 173,458 –



Bank Alfalah Limited (BAL) Sale of services to BAL 1,652 – 35,312 33,818 Markup charged by BAL on short term borrowings 68,399 67,666 132,571 135,581 Trade debts written off – 8,451 – 8,451

Taavun (Pvt) Limited Long term finance received 50,000 – 600,000 – Markup on long term finance 23,789 – 23,789 –

Warid Congo S.A (Warid Congo) Cost and expenses charged by Warid Congo – – – 3,675 Trade debts written off 125,127 – 125,127 – Payments made on behalf of Warid Congo – – 5,384 –

Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda – 26,537 47,474 39,933 Trade debts written off 4,266 – 4,266 –

Warid Telecom Georgia Limited Provision for doubtful advances 15,403 – 15,403 –

Warid Telecom International – Bangladesh Provision for doubtful advances 5,587 – 5,587 –

Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen – – 1,159 – Provision for doubtful advances 16,329 – 16,329 –

Amoon Media Group (Private) Limited Provision for doubtful advances 27,960 – 27,960 –

Advance for construction of Warid Tower Advance paid during the period – – 3,200 – Provision for doubtful advances 68,916 – 68,916 –

Gratuity Fund Employer contribution to fund 8,905 17,963 27,686 32,963

Provident Fund Trust Employer contribution to trust 4,649 8,267 14,052 14,865 Surcharge payable to trust on late payments 1,142 – 1,142 –

Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 110,926 97,664 228,600 190,483

26


26. 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.


WATEEN TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10

2727

CONDENsEDCONsOLIDATEDfINANCIALINfOrMATION


CONDENsED CONsOLIDATED INTErIM BALANCE shEET (UN-AUDITED)AS AT DECEMBER 31, 2010


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 (4,799,761) (1,794,123) 1,509,666 4,515,304Non controlling interest in equity of Subsidiary CompanyWateen Solutions (Pvt) Ltd 5,007 206,999 1,514,673 4,722,303NON–CURRENT LIABILITIESLong term finance – secured 5 – –Medium term finance from an associated company – unsecured 6 – –Long term finance from a shareholder – unsecured 7 2,063,379 –Cross currency and interest rate swap – fair value 5.5 – 139,053Obligations under finance leases 4,638 5,429Long term deposits 64,759 110,455 2,132,776 254,937DEFERRED LIABILITIESEmployees’ retirement benefits 18,748 60,059 Deferred income tax liability 8 – 76,807 Deferred USF grant 9 1,046,248 827,159 1,064,996 964,025 CURRENT LIABILITIESCurrent portion of long term finance – secured 5 11,858,743 12,411,659 Current portion of medium term finance from an associated company – unsecured 6 600,000 – Payable to supplier to be settled through long term finance – 433,798 Cross currency and interest rate swap liability 5.5 517,000 217,397 Current portion of obligations under finance leases 2,035 1,556 Finance from supplier – unsecured 77,941 77,668 Short term borrowings – secured 10 4,092,484 4,604,346 Trade and other payables 11 4,909,744 6,030,371 Interest / markup accrued 661,615 631,491 22,719,562 24,408,286 CONTINGENCIES AND COMMITMENTS 12 27,432,007 30,349,551

The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information.



NON-CURRENT ASSETSProperty, plant and equipment Operating assets 13 18,718,039 17,053,114 Capital work in progress 14 2,791,644 3,883,565 Intangible assets 295,943 310,843 21,805,627 21,247,522

ADVANCE AGAINST PURCHASE OF SHARES 15 85,000 –

DEFERRED INCOME TAX ASSET 8 772,299 –

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 273,886 239,474 Long term prepayments 71,328 79,139 345,214 318,613

CURRENT ASSETSTrade debts 16 1,602,279 4,060,687Contract work in progress 39,390 47,394Stores, spares and loose tools 17 564,418 855,619Advances, deposits, prepayments andother receivables 18 1,634,177 1,558,692Income tax refundable 202,168 246,298Cash and bank balances 19 381,435 2,014,726 4,423,867 8,783,416

27,432,007 30,349,551



CONDENsED CONsOLIDATED INTErIM prOfIT AND LOss ACCOUNT (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

3 months to 6 months to December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Note (Rupees in thousand)

Revenue 20 1,478,374 2,417,220 3,409,340 4,915,648

Cost of sales (excludingdepreciation and amortisation) 21 1,231,428 1,901,223 2,563,887 4,049,688General and administration expenses 595,323 379,899 891,505 762,691Provisions and write off 22 1,542,537 – 1,542,537 18,273Advertisement and marketing expenses 44,664 71,605 75,271 166,196Selling and distribution expenses 1,478 6,901 8,830 14,093Other charges – 28,936 – 28,936Other income 23 95,135 (10,163) (23,388) (34,695) 3,510,565 2,378,401 5,058,642 5,005,182

Loss before interest, taxation,depreciation and amortisation (2,032,191) 38,819 (1,649,302) (89,534)Depreciation and amortisation 519,782 400,533 990,472 762,748Finance cost 24 808,172 556,208 1,284,594 963,734Finance income (20,503) (52,460) (23,917) (60,405)Loss before taxation (3,339,642) (865,462) (3,900,450) (1,755,611)Deferred Income tax credit 25 785,965 287,635 842,760 575,268Loss for the period (2,553,676) (577,827) (3,057,690) (1,180,343)Non controlling interest in (profit)/loss ofconsolidated subsidiary company 34,506 (17,455) 52,052 (34,956)Loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299)

Loss per share Rs (4.08) Rs (1.47) Rs (4.87) Rs (2.91)




CONDENsED CONsOLIDATED INTErIMsTATEMENT Of COMprEhENsIVE INCOME (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010


Loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299)Other comprehensive income – – – –

Total comprehensive loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299)




CONDENsED CONsOLIDATED INTErIM CAsh fLOW sTATEMENT (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

6 months to December 31, June 30, 2010 2009 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (3,900,450) (1,755,611) Adjustment of non cash items: Depreciation and amortisation 990,472 762,748 Finance cost 1,284,594 963,734 (Profit)/loss on sale of operating assets 6,798 (23,328)Deferred grant recognised during the period (25,939) – Provisions and write off (note 22) 1,542,537 18,273 Provision for employees’ retirement benefits 4,052 6,655 3,801,858 1,728,082 (98,593) (27,529)Changes in working capital: Decrease/(Increase) in trade debts 2,002,607 (384,933)Decrease/(Increase) in contract work in progress 8,004 (9,527)Decrease in stores, spares and loose tools 19,203 336,191 (Increase)/Decrease in advances, deposits,prepayments and other receivables (285,259) 561,588 Increase in cross currency and interest rate swap liability 160,550 43,813 (Decrease)/Increase in trade and other payables (1,159,330) 235,153 745,776 782,285Employees’ retirement benefits paid (6,661) – Taxes refund/(paid) 37,786 (28,958) Cash flows from operating activities 678,308 725,798 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,024)Intangible assets additions (4,300) – Sale of property, plant and equipment 10,000 163,656 Long term deposits receivable – (paid)/received (34,412) 213 Long term prepayments 7,811 8,815 Advance against purchase of shares (85,000) – Cash flows from investing activities (2,026,257) (2,636,340)


6 months to December 31, June 30, 2010 2009 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Long term finance received 579,241 5,691,156Long term finance repaid (1,132,158) (470,929)Long term finance received from associated company 600,000 –Long term finance received from a shareholder 2,063,379 –Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226)Long term payable to supplier 273 (210,212)Deferred USF grant received – 297,960Obligations under finance leases repaid (311) (1,683)Long term deposits payable – (repaid)/received (45,696) 13,594Dividend paid to non controlling shareholders (149,940) –Short term borrowings repaid (1,545,415) –Finance cost paid (1,254,470) (748,289)Cash flows from financing activities (1,318,895) 1,699,371

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,666,844) (211,171)Cash and cash equivalents at beginning of the period (909,455) (2,261,349)

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,576,299) (2,472,520)

CASH AND CASH EQUIVALENTS COMPRISE:Cash and bank balances 381,435 363,347Short term running finance (3,957,734) (2,835,867) (3,576,299) (2,472,520)




CONDENsED CONsOLIDATED INTErIM sTATEMENT Of ChANGEs IN EQUITy (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010

Non controlling Share General Accumulated interest in equity capital reserve 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 4,767,411Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) – – –Total comprehensive loss for the period – – (1,215,298) (1,215,298) 34,956 (1,180,342)Balance at December 31, 2009 4,174,746 134,681 (936,814) 3,372,613 214,456 3,587,069

Balance at January 1, 2010 4,174,746 134,681 (936,814) 3,372,613 214,456 3,587,069Issue of 200,000,000 shares for cash 2,000,000 – – 2,000,000 – 2,000,000on April 20, 2010Shares issue cost (net of tax benefit) – – (79,247) (79,247) – (79,247)Total comprehensive loss for the period – – (778,062) (778,062) (7,457) (785,519)Balance at June 30, 2010 6,174,746 134,681 (1,794,123) 4,515,304 206,999 4,722,303

Balance at July 1, 2010 6,174,746 134,681 (1,794,123) 4,515,304 206,999 4,722,303Dividend paid to non–controlling shareholders – – – – (149,940) (149,940)Total comprehensive loss for the period – – (3,005,638) (3,005,638) (52,052) (3,057,690)Balance at December 31, 2010 6,174,746 134,681 (4,799,761) 1,509,666 5,007 1,514,673




1. LEGAL STATUS AND OPERATIONS The condensed consolidated interim financial information includes the financial information of Wateen

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

Wateen Telecom Limited 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.

The subsidiary company Wateen Solutions (Pvt) Limited , is incorporated under Companies Ordinance, 1984 as a private Limited company on May 17, 2004. The principal activities of the company are to sell and deploy telecom equipment and provide related services. The registered office of the company is situated at Lahore. Wateen acquired 100 % interest in Wateen Solutions (Pvt) Limited on August 2, 2006. Wateen sold 49% shares (397,027 fully paid ordinary shares of Rs 100 each) of Wateen Solutions (Pvt) Limited on July 1, 2008.

The subsidiary company Wateen Satellite Services (Pvt) Limited (WSS) ,is incorporated as a private limited company under the Companies Ordinance, 1984 and is engaged in providing back haul and satellite data connectivity services in Pakistan. On March 1, 2009, the Company transferred all contracts for providing back haul and satellite data connectivity services to Wateen Telecom Limited. Wateen acquired 100% shares of Wateen Satellite Services (Pvt) Limited on July 1, 2008.

WSS has transferred all of its assets to parent company on March 31, 2009. Further, subsequent to year end the Board of Directors of the parent company in their meeting held on November 22, 2011 has decided to voluntary winding up the Company. Accordingly, the financial statements of the WSS has not been prepared on a going concern basis.

The subsidiary company Netsonline Services (Pvt) Limited, is incorporated as a private limited company under the Companies Ordinance, 1984 and is engaged in providing internet and other technology related services in Pakistan. Wateen acquired 100% shares of Netsonline Services (Pvt) Limited on July 1, 2008.

Further, subsequent to year end the Board of Directors of the parent company in their meeting held on November 22, 2011 has decided to voluntary winding up the Company. Accordingly, the financial statements of the NetsOnline Services (Pvt) Limited has not been prepared on a going concern basis.

Subsidiaries are all entities over which the parent has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a

sELECTED NOTEs TO AND fOrMING pArT Of ThECONDENsED CONsOLIDATED INTErIM fINANCIAL INfOrMATION (UN-AUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010


business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the parent share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

All significant intercompany transactions and balances between group entities are eliminated on consolidation.

The group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the group. Disposals to non-controlling interests result in gain and losses for the company and are recorded in the income statement if the parent losses control of the subsidiary and in the statement of changes in equity if the change in ownership of subsidiary does not result in loss of control. Purchases from minority interests results in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of the assets of the subsidiary.

2. STATEMENT OF COMPLIANCE The presentation of this condensed consolidated interim financial information of the Company

for the six months period ended December 31, 2010 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

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

4. NET CURRENT LIABILITIES Net current liabilities as at December 31, 2010 were Rs 18.272 billion of which Rs 10.613 billion

relate to loan installments due for repayment after December 31, 2011 and Rs 4.660 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 2.063 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 1.795 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.




5. LONG TERM FINANCE - SECURED Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,199,048 2,450,304 Standard Chartered Bank (SCB) 5.3 40,500 54,000 Dubai Islamic Bank (DIB) 5.4 477,000 477,000 Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 Standard Chartered Bank (SCB) 5.6 508,830 – Total 12,113,605 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 (44,602) (101,398) (254,862) (299,464) 11,858,743 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,845,763) (1,991,174) Amount due after Dec 31, 2011 5.7 (10,012,980) (10,420,485) (11,858,743) (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 December 31, 2010. 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 December 31, 2010. Amount outstanding at December 31, 2010 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 December 31, 2010 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 December 31, 2010. 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 installments due as per loan agreements after December 31, 2011 amounting to Rs 10,012,980 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 December 31, 2011 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 24 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 (3,745,161) 3,423,722 Unused tax losses 8.1 3,973,860 (3,268,671) Unused tax benefit related to share issue cost 39,462 (34,138) Deductible temporary differences on account of provisions 506,037 (47,102) Deferred cost 36 (72) Trade debts - exchange gain (1,935) 3,068 772,299 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 245,028 616,477 Amount recognised as income during the period/year (25,939) (1,746) Closing balance 1,046,248 827,159

10. SHORT TERM BORROWINGS - SECURED Short term borrowings 134,750 1,680,165 Short term running finance 3,957,734 2,924,181 4,092,484 4,604,346



11. TRADE AND OTHER PAyABLES These include payable to related parties as follows: Warid Telecom (Pvt) Limited 140,682 86,656 Advances from Warid Telecom (Pvt) Limited 34,316 151,004 Bank Alfalah Limited 3,950 – Warid Telecom Uganda Limited – 47,474 Payable to gratuity fund 109,841 104,041 Payable to provident fund 22,637 11,569 311,426 400,744

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 1,412,233 1,476,816(iii) Outstanding commitments for capital expenditure 1,208,145 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.



Six months to Year ended December 31, June 30, 2010 2010 Note (Rupees in thousand)

13. OPERATING ASSETS Opening net book value 17,053,114 14,062,017 Additions – owned 2,658,762 4,804,160 – leased – 9,293 Disposals at net book value (16,798) (191,532) Depreciation charge (977,039) (1,630,824) Closing net book value 18,718,039 17,053,114

14. CAPITAL WORK IN PROGRESS Leasehold improvements 21,219 23,334 Line and wire 1,240,781 1,319,762 Network equipment 14.1 1,529,644 2,540,469 2,791,644 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 six months period ended December 31, 2010 (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 – related parties 16.1 328,258 1,807,657 – other parties 1,680,630 1,422,911 Less: Provision for doubtful debts – other parties 16.2 (406,609) (157,035) 1,602,279 4,060,687



16.1 Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 145,927 560,627 Warid International LLC, UAE - Parent company 85,700 85,400 Bank Alfalah Limited 96,631 22,095 Warid Telecom Congo S.A – 1,191,305 Warid Telecom Uganda Limited – 201,540 Wateen Telecom UK Limited – 105,643 328,258 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

16.2 Provision for doubtful debts – other parties Opening balance 157,035 110,875 Provision during the period 249,574 47,203 Recovery during the year – (1,043) Closing balance 406,609 157,035

Provision during the period includes Rs 197,213 thousand based on age analysis of debts as follows: Balances 181 - 360 days past due - 50 % Balances over 360 days past due - 100 % December 31, June 30, 2010 2010 (Rupees in thousand)

17. STORES, SPARES AND LOOSE TOOLS Cost 836,416 855,619 Less: Provision for obsolete stores 271,998 – 564,418 855,619




18. ADVANCES, DEPOSITS, PREPAyMENTS AND OTHER RECEIVABLES18.1 These include receivable from related parties as follows: Wateen Telecom UK Limited 293,998 108,720 Wateen Multimedia (Pvt) Limited 149,106 137,160 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 – 5,384 616,255 414,164 Less: Provision for doubtful receivables from related parties 18.2 439,859 – 176,396 414,164

18.2 Provision for doubtful receivables from related parties Wateen Telecom UK Limited 18.3 266,708 – 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 December 31, 2010 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. CASH AND BANK BALANCES Bank balances amounting to Rs 34 million were under lien with banks (June 30, 2010: Rs 42.2

million).


20. REVENUE Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) (232,045) – – – Operation and Maintenance 155,147 169,317 298,690 295,709 Managed capacity 21,991 23,669 34,734 52,582 Broadband and voice 455,723 354,198 903,267 777,854 Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 Very Small Aperture Terminal services (VSAT) 218,387 467,346 470,895 861,073 ADM sites rentals 43,174 – 74,172 – Sale of product and services 33,282 105,634 149,090 377,576 Margin/commission 13,429 148,177 3,060 4,637 Others 84,941 55,641 220,360 36,538 1,478,374 2,417,220 3,409,340 4,915,648

21. COST OF SALES LDI Interconnect cost 616,022 735,525 1,069,463 1,531,653 Leased circuit charges 84,230 80,330 181,471 163,327 Contribution to PTA Funds 49,006 234,296 123,384 627,848 PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 Cost associated with IRU of Optic Fiber Cable – – – – Operational cost 247,880 443,369 630,116 849,017 Bandwidth cost of VSAT services 196,248 297,816 398,726 624,642 Equipment and material consumed 22,875 79,238 82,960 159,320 Others 9,241 21,641 64,629 81,621 1,231,428 1,901,223 2,563,887 4,049,688




22. PROVISIONS AND WRITE OFF Trade debts written off - related parties 206,227 – 206,227 8,451 Provision for doubtful trade debts – other parties 249,574 – 249,574 9,822 Provision for doubtful advances and other receivables – related parties 439,859 – 439,859 – – other parties 15,599 – 15,599 – Provision for impairment of capital work in progress 353,515 – 353,515 – Provision for impairment of goodwill on acquisition of subsidiary company 5,765 – 5,765 – Provision for obsolete stores and spares 271,998 – 271,998 – 1,542,537 – 1,542,537 18,273

23. OTHER INCOME/ (LOSS) Profit/(loss) on sale of fixed assets (6,709) – (6,798) 23,326 Rental income – 3,892 – 3,892 USF grant recognised as income (84,816) – 25,939 – Other income/ (loss) (3,610) 6,271 4,247 7,477 (95,135) 10,163 23,388 34,695

24. FINANCE COST Interest/markup 507,699 163,886 1,012,486 669,926 Cross currency and interest rate swap contracts cost 377,947 171,155 377,947 171,155 Amortization of ancillary cost of long term finance 22,301 – 44,602 – Finance cost of leased assets 596 190 852 595 Bank charges, commission and fees 28,762 44,006 41,849 103,785 Exchange loss/(gain) (11,937) 323,160 41,250 310,650 925,368 702,397 1,518,986 1,256,111 Mark up on long term finance capitalised under property, plant and equipment (117,196) (146,189) (234,392) (292,377) 808,172 556,208 1,284,594 963,734

25. INCOME TAx CHARGE/(CREDIT) Current (12,894) 4,310 3,747 8,621 Prior Period – – 2,601 – Deferred (773,071) (291,944) (849,108) (583,889) (785,965) (287,634) (842,760) (575,268)



26. RELATED PARTy TRANSACTIONS Aggregate transactions with related parties during the period were as follows: Parent Company Warid Telecom International LLC, UAE (WTI) Markup charged to WTI 3,045 – 6,090 – Payments made by the Company on behalf of WTI – – 56 – Provision for doubtful advances 35,911 – 35,911 –

Shareholder Long term finance received from shareholder 856,579 – 2,063,379 – Markup on long term finance from shareholder 8,693 – 8,693 –

Associated Companies Warid Telecom (Private) Limited (WTL) Sale of services 500,478 546,934 891,537 1,097,493 Cost and expenses charged by company 86,601 69,049 423,818 145,775 Trade debts written off 76,834 – 76,834 – Unearned revenue reversed 147,315 – 147,315 – Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by (WMM) 13,674 – 22,791 – Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 Bank Alfalah Limited (BAL) Sale of services 1,652 – 35,312 33,818 Markup charged by company on running finance facility 68,399 67,666 132,571 135,581 Trade debts written off – 8,451 – – Taavun (Pvt) Limited Long term finance received 50,000 – 600,000 – Markup charged by company on long term finance 23,789 – 23,789 – Wateen Telecom Limited – UK (Wateen UK) Sale of services 33,635 – 67,313 – Markup charged to Wateen UK 7,480 – 11,820 – Cost and expenses charged by Wateen UK 153,561 – 218,766 – Provision for advance against purchase of shares 266,708 – 266,708 – Payments made by the Company on behalf of Wateen UK 86,729 – 173,458 –




Warid Congo S.A (Warid Congo) Cost and expenses charged by Warid Congo – – – 3,675 Trade Debts written off 125,127 – 125,127 – Payments made on behalf of Warid Congo – – 5,384 – Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda – 26,537 47,474 39,933 Trade Debts written off 4,266 – 4,266 – Warid Telecom Georgia Limited Provision for doubtful advances 15,402 – 15,402 – Warid Telecom International – Bangladesh Provision for doubtful advances 5,586 – 5,586 – Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen – – 1,159 – Provision for doubtful advances 16,329 – 16,329 – Amoon Media Group (Private) Limited Provision for doubtful advances 27,960 – 27,960 – Advance for construction of Warid Tower Advance paid during the period – – 3,200 – Provision for doubtful advances 68,916 – 68,916 – Gratuity Fund Employer contribution to fund 8,905 17,963 27,686 32,963 Provident Fund Trust Employer contribution to trust 4,649 8,267 14,052 14,865 Surcharge charged by trust on late payments 1,142 – 1,142 – Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 110,926 97,664 228,600 190,483

27. 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.


Documents

WATEEN TELECOM LIMITED hALf yEArLy rEpOrT … TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10 01 ... Bank Alfalah Limited ... WATEEN TELECOM LIMITED hALf yEArLy rEpOrT DEC ‘10 03