1. technology and computing
2. consumer electronics
3. telephones
4. mobile phones

‫‪Annual Report 2010‬‬
‫‪Emirates Telecommunications Corporation – Etisalat Annual Report 2010‬‬
‫‪Engaging business‬‬
‫‪and people‬‬
‫تـواصـل األعـمـال‬
‫واألفـراد‬
‫الـتـقـريـر السـنـوي ‪2010‬‬
‫مؤسســــة اإلمــــارات لإلتصاالت ‪ -‬إتصـــاالت التقـــــرير الســنـــوي ‪2010‬‬
Reports and Consolidated Financial Statements
‫التقارير والبيانات المالية الموحدة‬
2010 ‫ ديسمبر‬31 ‫للسنة المنتهية في‬
for the year ended 31 December 2010
Contents
2 Chairman’s Statement
4 Board of Directors and
Executive Committee
6 Group Highlights
8 Chief Executive Officer’s Statement
10 Management Review
12 UAE Highlights
14 Market View
24 Network
28 Etisalat Services Holding
31 Human capital
32 Corporate Social Responsibility
Head Office:
34 Consolidated Financial Statements
35 Independent Auditors’ Report
to the Shareholders
36 Consolidated Income Statement
37 Consolidated Statement of
Comprehensive Income
38 Consolidated Statement of
Financial Position
39 Consolidated Statement of
Changes in Equity
40 Consolidated Statement of Cash Flows
41 Notes to the Consolidated
Financial Statements
74 Notice of Meeting
Etisalat Building
Intersection of Zayed The 1st Street and
Sheikh Rashid Bin Saeed Al Maktoum
Street
P.O. Box 3838
Abu Dhabi, UAE
Telephone: +971 2 6283333
Fax: +971 2 6317000
Telex: 22135 ETCHO EM
etisalat.ae
Regional Offices:
Abu Dhabi, Dubai, Northern Emirates
:‫المكتب الرئيسي‬
‫مبنى اتصاالت‬
‫تقاطع شارع الشيخ زايد األول مع شارع‬
‫الشيخ راشد بن سعيد آل مكتوم‬
3838 :‫صندوق بريد‬
‫ اإلمارات العربية المتحدة‬،‫أبوظبي‬
+9712 6283333 :‫تليفــون‬
+9712 6317000 :‫فاكس‬
ETCHO EM 22135 : ‫تليكس‬
etisalat.ae
:‫مكاتب المناطق‬
‫ دبي واإلمارات الشمالية‬،‫أبوظبي‬
‫المحتويات‬
‫الموحدة‬
‫ البيانات المالية‬34
ّ
‫كلمة رئيس مجلس اإلدارة‬
‫ تقرير مدققي الحسابات المستقلين‬35
‫مجلس اإلدارة واللجنة التنفيذية‬
4
‫ بيان الدخل الموحد‬36
‫المؤشرات الهامة‬
6
‫الموحد‬
‫ بيان الدخل الشامل‬37
ّ
‫كلمة الرئيس التنفيذي‬
8
‫تـقـريـر اإلدارة‬
10
‫الموحد‬
‫ بيان المركز المالي‬38
ّ
2
‫ بيان التغيرات في حقوق‬39
‫الموحد‬
‫الملكية‬
ّ
‫المؤشرات الهامة المحلية‬
12
‫لمحة عن السوق‬
14
‫الموحد‬
‫ بيان التدفقات النقدية‬40
ّ
‫الشبكة‬
24
‫ إيضاحات حول البيانات‬41
‫الموحدة‬
‫المالية‬
ّ
‫اتصاالت للخدمات القابضة‬
28
‫الموارد البشرية‬
31
‫ إعالن انعقاد إجتماع الجمعية‬74
‫العمومية‬
‫المسؤولية المؤسسية‬
‫تجاه المجتمع‬
32
Engaging business and people
135
0.60
million
AED
Aggregate Subscribers
5.8
AED billion
CAPEX
Dividends
0.97
31.9
AED
AED billion
EPS
Revenue
14.6
AED billion
Operating Profit before
Federal Royalty
Enabling Reach
1
Chairman’s Statement
Dear Shareholders,
It is time once again to present the annual
performance of Emirates Telecommunications
Corporation (Etisalat), for the year ended
December 31, 2010.
2
Engaging business and people
This year was a transitional year for the
Corporation, in which we faced several
challenges that have prepared us to operate
in a new environment under diverse
circumstances and a shift in global conditions.
These changes, collectively with a maturing
market and increased competition, have
compelled Etisalat to take strategic measures
to protect its leadership position, diversify its
revenue base, and effectively optimise costs
in order to continue enhancing the returns
to you, our shareholders.
The following is an overview of the main
operational and financial indicators for the
year 2010:
•Aggregate subscribers, including subsidiaries
and associates, grew annually by 24% to
reach 135 million by December 2010
•Revenues increased by 2% to reach
AED 31.9 billion
•Net income decreased 14% to AED 7.6 billion
corresponding to AED 97 fils per share
•Net cash position of AED 3.9 billon composed
of AED 10.3 billion in cash and AED 6.4 billion
in borrowings
•Capital spending for the year was
AED 5.8 billion
Our main success story for the year was
unequivocally the growth achieved by our
international operations. This year Etisalat
has witnessed positive growth in new customer
acquisition, revenues, and earnings. In Egypt,
for example, Etisalat Misr celebrated its
15 million customer milestone, and the
subsidiary reached breakeven point after only
three years of operations. Among consolidated
operations where we exercise management
control, the customer base has increased by
30% while revenues increased 46%. It is notable
that our international operations today make
up 23% of the Group’s top-line results.
Etisalat’s international success story continued
with Mobily, our associate company in
the Kingdom of Saudi Arabia, contributing
healthy earnings following another year
of outstanding performance.
The growth was offset though by the revenue
and earnings decline in our flagship UAE
operation – which is natural and expected
as our home market has entered an advanced
stage of saturation and maturity. As a result,
mobile and fixed services witnessed a modest
decline in operations. Etisalat UAE management
has taken proactive measures to meet this
new challenge.
In line with past years, Etisalat has maintained
its very strong cash position, a strategy that
is especially relevant given the recent state
of financial turmoil worldwide. Our healthy
balance sheet has served as a cushion against
the recent financial shocks, and allowed us
to comfortably finance our operations and
capital investments. As a testament to our
financial health, we maintained our investmentgrade credit rating and positive outlook
from the three major credit rating agencies
(AA- by Standard & Poor’s, Aa3 by Moody’s,
and A+ by Fitch). This will prove vital in
securing financing at favourable rates should
the need arise.
In order to establish a well-balanced funding
platform that is aligned with the Corporation’s
funding strategy, Etisalat listed its Global
Medium Term Note (GMTN) and Sukuk
programmes in November 2010. The
establishment of the two programmes will
facilitate Etisalat in accessing a large pool of
global investors to diversify its funding sources
and manage its debt maturity profile effectively.
We carried on our strategy of investing
rationally in our network infrastructure to
capture organic, demand with AED 5.8 billion
in capital expenditure. Notably, we continued
to invest in our country-wide fibre optic
network as part of our commitment to keep
the UAE at the global forefront of state-of-theart telecommunication services. Internationally,
we invested rationally in our telecommunication
networks to enhance customer experience
and affirm our reputation as technology leader.
Our advanced, innovative networks and
products have bolstered Etisalat’s reputation
as a leading global telecom player.
The Corporation maintained its prudent
approach to evaluating acquisition
opportunities that are in line with its strategy
to expand internationally and add value to
its operational portfolio. As well as several
strategic stake increases to our existing
assets, one of the main opportunities in 2010
was our conditional offer to acquire 46%
and effective majority control of Mobile
Telecommunications Company ‘Zain’.
We believe such an acquisition will catapult
Etisalat onto the global stage and cement
our foothold in the Middle East, increasing
our presence to five additional countries. In
addition, the Corporation is in the process
of evaluating and preparing for entry into
new markets such as Syria, when investment
opportunities become available that would
generate returns for shareholders, subscribers,
and the sector.
Further to our efforts to include our
shareholders in the benefits, we have
proposed a final dividend of AED 0.35 per
share, bringing the total dividends for the
year to AED 0.60, in line with our policy in
previous years. This represents a dividend
yield of 6% at the year-end stock price.
We are pleased that total share returns for the
12-month period ended December 31, 2010,
including capital gains and dividends, were
a healthy 13%.
As a model for corporate citizens, Etisalat
believes that social responsibility towards the
community is no less important than our
operational and financial success. Despite
the economic slowdown, the Corporation
continued its full-fledged corporate social
responsibility programme. Etisalat is considered
among the most active socially responsible
corporations in the region.
Before I conclude, I take this opportunity to
reiterate my personal trust in our executive
management and employees, who have
performed exceptionally against the backdrop
of a prevailing challenging environment,
capitalising on these challenges and converting
them to opportunities. Their dedication and
commitment to deliver resulted in the
Corporation meeting its ambitious goals.
Finally, I would like to thank you for your
continued faith and support in our Board
of Directors and Management team. I am
confident that the Corporation is on the
threshold of surmounting the current
challenges and will be a major catalyst for
the economic recovery in all the markets
where we operate.
Sincerely,
Mohammed Hassan Omran
Chairman and Managing Director
22 February 2011
3
Board of Directors and Executive Committee
H.E. Mohammad
Hassan Omran
Chairman and
Managing Director
Chairman
Executive Committee
H.E. Hamad
Mohammad Al Hurr
Al Suweidi
Member
H.E. Saeed
Mohamed
Al Sharid
H.E. Khalaf Bin
Ahmed Al Otaiba
Vice Chairman
Member
H.E. Sheikh Ahmed
Mohammad Sultan
Bin Suroor
Al Dhaheri
H.E. Mubarak
Rashed
Al Mansouri
Member
Member Executive
Committee
4
Member
Member Executive
Committeee
Engaging business and people
H.E. Abdul
Rahman Hassan
Al Rostomani
Member
H.E. Omar Saif
Mohammad
Al Huraiz
H.E. Shoaib Mir
Hashim Khoory
Member
Member Executive
Committee
Member
H.E. Abdulla
Mohammad
Saeed Ghobash
Member
H.E. Ahmad Bin
Eisa Bin Nasser
Alserkal
Member
Member Executive
Committee
Mr. Isam Meccawi
Suliman Akrat
Corporation Secretary
5
Group Highlights
8%
10%
Internet
Telephone
12%
51%
Data Services
10%
Interconnect
Mobile
9%
Others
Breakdown of Revenue – Group (Year Ended December 31, 2010)
6
Africa
Middle East
Asia
Atlantique Telecom, Moov
Etisalat, UAE
Etisalat Afghanistan
Canar
Etihad Etisalat (Mobily)
Etisalat DB
Etisalat Misr
Thuraya
PT XL Axiata Tbk
EMTS – Etisalat Nigeria
Etisalat Services Holding
PTCL
Zantel
- Etisalat Academy
- Tamdeed Project
- Etisalat Directory Services
- Etisalat-Real Estate (E-RE)
- E-Marine
- Etisalat Facilities Management L.L.C (E-FM)
- Emirates Data Clearing House (EDCH)
- Ebtikar Card Systems
Etisalat Lanka
Engaging business and people
31,929
8,836
6,764
31,334
8,511
29,360
7,631
5,760
7,297
21,340
5,860
3,661
3,460
16,290
1,432
06
07
08
09
Revenue (AED millions)
10
06
07
08
09
Net Profit (AED millions)
10
06
07
08
09
10
Capex (AED millions)
7
Chief Executive Officer’s Statement
I am pleased to present Emirates
Telecommunications Corporation’s (Etisalat)
annual performance for the year ended
December 31, 2010.
8
Engaging business and people
Etisalat continued its strong track record
given the challenges during 2010, exhibiting
strong performance in the period under review.
We are confident that Etisalat is poised to
dynamically adapt to the evolving industry
landscape and our business environment.
Some of the highlights for UAE operations
for the year ended in December 31, 2010:
•Mobile subscribers reached a total
of 7.76 million
•Fixed line subscribers stand at 1.24 million
•Internet subscribers totalled 1.32 million
•AED 24.3 billion in revenues
•Capital expenditure totalled AED 2.2 billion
In general, the global telecommunication
industry witnessed a slowdown due to various
conditions that impacted an already highly
saturated UAE market, where penetration
levels are the highest in the region. This
consequently affected overall performance.
In response to this effect Etisalat has been
working on innovating new packages and
services such as value-added and broadband
services, which should lead to balancing
revenues and profits.
That being said, Etisalat faced local competition
under scrupulous regulations, including
increasing pressure on international tariffs
from competition and Voice over Internet
Protocol (VoIP) usage. The market also
witnessed competition in mobile data,
with a focus on smart phones, which led to
voice revenue disruption in favour of data
revenues – a natural phenomenon in light
of the technological advancement and
introduction of a new generation of services
and handset equipment. Etisalat has proactively
introduced selected value propositions that
responded to relevant, current and future
market needs, focusing its efforts on stabilising
our market share – as the major service
provider – after the entrance of the new
competitor in the country.
To recapitulate on the major offerings
launched during the year, Etisalat introduced
‘My Plan’ and ‘Business Edge’, two new postpaid
plans targeting individual and corporate
consumers respectively. The plans offer
international and national minutes and data
with a variety of bundles and add-ons.
We also delivered ‘eLife’, offering customers
the option of connecting through optical
fibres to broadband, fixed voice and TV services,
with higher speeds and bundled voice minutes
all at competitive rates. Furthermore, Etisalat
launched 3-D TV to its customers, making
the UAE amongst the first five countries in
the world to do so.
With ‘BusinessOne Super’, Etisalat has made
high-speed broadband easily accessible to the
entire SME landscape. ‘BusinessOne Super’
broadband service offers speeds ranging
from 4 Mbps up to 100 Mbps, which is a
landmark development in the evolution of
broadband in the UAE and across the region.
We believe high-speed broadband is integral
to the overall economic development of the
UAE, which concentrates on developing the
infrastructure that in turn will spur increased
online business activity.
Etisalat will offer business customers VoIP
solutions, following the legalisation of the
service by the UAE Telecommunications
Regulatory Authority. With the growth in IP
networks, there is a significant opportunity
for business enterprises to leverage the
advantages of an integrated network and
the convergence of voice and data through
a VoIP solution.
We welcomed the positive step towards
telecom infrastructure-sharing that has
been authorised by the Telecommunications
Regulatory Authority. Etisalat has one of the
best networks in the world and has invested
a lot in developing the network in order to
fulfil the various service requirements for
the present and the future. Etisalat will now
extend the benefits of its fixed-line and
broadband services to both individual and
business customers who currently do not
have access to Etisalat’s wide array of services.
Etisalat will expand its reach within Dubai’s
Free Zones, such as Dubai Internet City,
TECOM and the new residential areas, through
innovative products and services that provide
a strong differentiation and superior value.
To that end, Etisalat launched a strategic
partnership with Jebel Ali Free Zone (JAFZA)
to deliver enhanced telecom and ICT services
to JAFZA tenants in the Free Zone, with direct
access to Etisalat services on a priority basis.
As a main player, Etisalat is investing prudently
to achieve excellence in customer experience
for the UAE. This commitment was highlighted
by the further development and roll-out
of the Fibre-To-The-Home network. Etisalat
is on track to reach its goal of covering all
of the UAE with its fibre network by 2012.
We have also begun a commercial trial of
Long Term Evolution (LTE), an important step
towards 4G technology. Etisalat has successfully
combined the protection of the environment
and advanced technology by investing in
optical fibre networks that enhance the energy
efficiency of our networks and reduce
our carbon footprint and operating cost.
Accordingly we have also begun an initiative
to implement environmentally-friendly
‘green building’ policies.
Facing a mature market that is highly
saturated and characterised by revenue
erosion and pressure on profit margins, the
top management team embarked on an
ambitious cost optimisation programme
to reinforce Etisalat’s competitive position.
Etisalat underwent a thorough cost analysis
exercise to scrutinise current expenditures
and review areas for improving efficiency.
As a result, business priorities have shifted
towards value creation and profitability,
infrastructure-sharing, outsourcing, and
shared services. Etisalat has already begun
implementing these steps during the last
quarter of 2010 and we expect to capture
the full benefit of the programme over the
coming two years.
We are lucky to be part of the new digital
era that enables us to deliver state-of-theart communication services. We believe that
wise leadership and vision yield positive
returns. Under Etisalat top management’s
guidance, the right choices and world-class
execution should generate lucrative returns.
We will continue determinedly to differentiate
ourselves and excel through our advanced
networks and innovative product offerings
and value propositions in our quest to align
our performance with the expectations of
our shareholders, customers, and employees.
Finally, I take this opportunity to extend my
deep appreciation to the Board of Directors,
who gave us all the resources and support
needed to make our tasks easier and more
efficient. I also extend my appreciation to our
employees at every level across all departments
and regions for their dedication and contribution
to our success.
Respectfully yours,
Nasser Bin Obood
Acting Chief Executive Officer
22 February 2011
9
Management Review
Financial Results
Etisalat continues to maintain a strong
financial position supported by sustainable
cash flows, a conservative balance
sheet, and ample liquidity that enabled
it to fund core strategic investments,
despite the challenging market conditions.
The following table shows selected historical data for the year ended December 31, 2009 and 2010.
Selected Financial Data
As of December 31 or for the year ended
2009
2010
Income Statement Data
Revenue
Operating Profit before federal royalty
Net Profit
31,334
17,651
8,836
31,929
14,627
7,631
Balance Sheet Data
Total assets
Total liabilities
Total equity
Net debt (1)
71,379
30,989
40,389
(6,808)
75,607
33,042
42,565
(3,877)
10,125
(6,771)
(3,407)
Notes: 1. Net debt represents Borrowings less Cash and cash equivalents
10
1.12
0.60
7,187
6%
7%
5%
-43%
7,807
(4,853)
(4,372)
Earnings per share and dividends per share data EPS (AED)
DPS (AED)
Number of issued shares (million)
2%
-17%
-14%
Cash Flow Data
Net cash flow from operating activities
Net cash flow used for investing activities
Net cash flow used for financing activities
Change %
-23%
-28%
28%
0.97 0.60
7,906
-13%
0%
10%
Engaging business and people
For the fiscal year ended December 31, 2010,
Etisalat revenues totalled AED 31,929 million,
representing growth of 2% compared to 2009.
Operating profit before federal royalty stood
at AED 14,627 million, an impressive operating
margin of 46%. Net profit for the year
(attributable to equity holders of the
Corporation) was AED 7,631 million after
federal royalty, taxes and net finance income.
Group revenues increased slightly in spite
of the challenges faced by the UAE operation
owing to Etisalat’s diversified portfolio.
However, earnings margins have decreased
due to a sizeable increase in operational costs,
the effect of an increase in contribution to
Group results from international operations
that operate in lower-margin industries
compared to the UAE. A number of these
international operations are still at an early
stage of operation and are expected to
improve their contribution as they mature.
In terms of cash flows, Etisalat generated
AED 7,807 million in net cash from operating
activities in 2010. Uses of cash included
AED 5,760 million to fund capital expenditure,
representing a capital intensity ratio of 18%,
primarily related to international network
expansion and fibre network roll-out in the
UAE. Compared to 2009, capital spending
fell by AED 1,004 million.
Borrowings and financing obligations
increased by AED 1,899 million to reach
AED 6,400 million, while cash and equivalents
remained sturdy at AED 10,277 million.
This represents a healthy net cash position
of AED 3,877 million. In addition, Etisalat
successfully extended the Corporation’s
average debt maturity through a recent
refinancing of Etisalat Misr’s loan facility.
During the last quarter of 2010, the
Corporation listed its Global Medium Term
Note (GMTN) and Sukuk programmes on
the London Stock Exchange for USD 7 billion
and USD 1 billion, respectively. This listing
will give Etisalat more flexibility when
accessing capital markets to fund potential
investments at more preferential rates.
Etisalat managed to maintain its investmentgrade credit rating and positive outlook from
the three major credit rating agencies, despite
the downturn of the local economy. In May
2010, S&P upgraded Etisalat’s long-term credit
rating to AA- due to strong liquidity and
financial flexibility, while Fitch and Moody’s
reaffirmed their credit rating post annual
credit review. Moody’s had downgraded
Etisalat’s rating to Aa3 earlier in the year due
to its revised view of the UAE sovereign ratings
and Government support. The Corporation
paid AED 4,492 million in total dividends,
an increase of 15% from the same period
last year. This figure is composed of 2009
final dividends of AED 0.35 per share and
2010 interim dividends of AED 0.25 per share.
The Board of Directors has proposed final
dividends of AED 0.35 per share, bringing the
total dividends for the year to AED 0.60 per
share, in line with previous years. The proposed
dividend will be submitted for approval at
the Annual General Meeting of Shareholders
on March 22, 2011.
11
UAE Highlights
7,741 7,764
1,358
1,325
1,331 1,323
1,309
3,989
1,285
7,285
4,158
19,410
18,252
17,770
1,237
3,847
3,769
1,153
15,996
6,372
3,369
15,650
5,520
875
660
06
07
08
09
10
Mobile Subscribers
(thousand subscribers)
12
06
07
08
09
10
Fixed Line Subscribers
(thousand subscribers)
06
07
08
09
10
Internet Subscribers
(thousand subscribers)
06
07
08
09
National Calls
(million minutes)
10
06
07
08
09
International Calls
(million minutes)
10
Engaging business and people
12%
10%
Internet
Telephone
7%
Interconnect
48%
15%
Data Services
Mobile
8%
Others
Breakdown of Revenue – UAE (Year Ended December 31, 2010)
13
Management Review continued
Market View
Innovation has been key to Etisalat’s
2010 roadmap for customers and
business alike, providing great new
offerings and value-added services
to match the growing demand for
mobile and fixed line broadband.
14
Engaging business and people
The year also saw the introduction of several
on-net offerings in the form of preferred rates,
as well as many other commercial offers
meeting each customer segment’s needs.
Africa
Canar
Atlantique Telecom (AT)
In Egypt, Etisalat successfully re-launched the
prepaid plan ‘Kol al Nas’ and ‘Kol al Nas +’,
which enables customers to call any national
number at a competitive flat rate. Also launched
were regional plans ‘Mohafazat’ and ‘Alexandria’
for customers calling from local areas and
the ‘Green Line’ package for high users,
giving unlimited calls and data. In Nigeria,
Etisalat revamped its flagship product ‘Easy
Starter’ package, giving customers bonuses
on incoming calls and preferred numbers at
competitive rates, while the new proposition
‘EasyLife’ focused on competitive call prices
to any network. Etisalat Nigeria customers
also had their share of the latest innovations
with the Samsung Galaxy tab, the first tablet
computer introduced by a mobile operator
in the country.
Teledensity continues to be very low in Sudan
in comparison with surrounding markets in
this highly populated region. Canar continued
its focus on International Services, Wholesale
capacity, Enterprise Solutions and Data Services.
Two major data campaigns were launched,
giving a stable revenue stream, whereas voice
revenue remained at similar levels as 2009.
The year 2010 saw the launch of a major
network expansion to be completed by the
end of the first quarter 2011. This will resolve
radio capacity bottlenecks (mainly Cote d’Ivoire
and Benin) and expand the core network
in Cote d’Ivoire, Togo and Niger to improve
geographical and population coverage.
More broadly, Etisalat continued to leverage
on its footprint to offer products and services
across several operations. For example,
competitive international call offers were
introduced within the West African footprint
and between Pakistan and Afghanistan.
A new offer targeting Middle Eastern customers
roaming across Arab countries was also
launched, as was the opportunity for roaming
UAE customers to recharge their prepaid
account from Egypt, KSA and vice versa.
Etisalat India launched commercial operations
under the brand of ‘Cheers’ in New Delhi and
has further expanded into more telecom circles.
The successful rebrand of Etisalat’s Sri Lankan
operation occurred in February 2010, launching
new prepaid packages that have been well
received in that market. It was also the first time
the market was offered a whole new concept of
buckets for postpaid packages in Sri Lanka.
AT maintained its role as the challenger in all
countries where it operates. While initiatives
aimed at reducing competitive disadvantage
are still to be realised, market share rose, with
Cote d’Ivoire in particular performing well owing
to aggressive and timely commercial offers.
By the year end, population coverage had
improved to 54% on average, with the
number of sites on air increasing by 40%
during the year.
‘Moov’ continued to excite consumers with
another successful launch of the ‘Moov’in’
offer targeting the youth segment, ‘per second
billing’ in three countries (Benin, Gabon and
CAR), and the launch of BlackBerry services
in all Moov markets.
For the first time in the West African market,
the Moov passport was introduced for all
prepaid outbound roaming customers, where
calls are charged at a local rate wherever they
are within the AT territory.
The main contributors to market-share gains
were Cote d’Ivoire (CDI) and Togo. In CDI,
in-depth market segmentation studies and
tailored commercial offers paid off. Togo
had been adversely affected in 2009 by a
network closure (from August 2009 to early
January 2010) due to a legal dispute with the
government on the licence renewal terms,
but it recovered well in 2010 thanks to
aggressive offers. These resulted in a 20%
turnover growth for the year, and a 2% rise
in the EBITDA margin.
By expanding the fibre optic network inside
Khartoum and introducing a new internet
gateway, Canar attracted new corporate
customers in the oil, banking and education
sectors. Further enhancements should ensure
continued growth as new technologies
are introduced such as Wi-Max and Wi-Fi,
catering for the SME segment and other
high ARPU customers.
In August, Canar took the decision to introduce
per second billing on international calls,
and to enhance the Canar Go bundling. This
is Evolution Data Optimised based wireless
access technology (EVDO) for broadband,
with maximum throughput of 3.1 Mbps
providing mobile wireless broadband facility
through data card and USB modems. It is
offered to the postpaid and prepaid market
segments at various entry levels.
The ‘Tayman Plus’ offering, targeting residential
and SME customers, also saw a revamp
introducing new monthly rental charges,
favourite numbers at preferential rates, and
on-net rates.
Etisalat increased its ownership in AT from
88% to 100% in February, demonstrating its
strong belief in AT and continuing growth in
this continent of high potential.
Moov
Etisalat continued to leverage on
its footprint to offer products and
services across several operations.
‘Moov’ continued to excite
consumers with another successful
launch of the ‘Moov’in’ offer
targeting the youth segment,
Canar, Sudan
‘per second billing’ in three
countries (Benin, Gabon and CAR)
and the launch of BlackBerry
services in all Moov markets.
By expanding the fibre optic
network inside Khartoum and
introducing a new internet
gateway, Canar attracted new
corporate customers in the oil,
banking and education sectors.
15
Management Review continued
Etisalat Misr
Etisalat Misr’s 2010 strategy focused on driving
subscriber numbers in the youth segment and
expanding regionally. Sustaining a strong
technological platform and roll-out, the 2G
network now covers 99% of the population and
the 3G network covers 87%, placing the 2011
target of 100% firmly in reach. Further
deployment of High Speed Packet Access (HSPA)
was undertaken across more than 160 sites.
Etisalat Misr is the innovation leader in the
country, achieving rapid network roll-outs
through turnkey projects. Attention to timely
implementation and quality control with its
commercial launches has enabled the operation
to be first-to-market in many instances.
By leveraging key strengths in mobile
broadband, innovation, and the Group
footprint, Etisalat Misr has consistently been
associated with attributes of innovation,
straightforwardness, best value and
transparency. This has resulted in stronger
customer loyalty through brand association,
consideration and awareness. The company
is now perceived as the mobile broadband
leader and market driver, while its competitors
are in reactive mode.
The operation was able to reinforce Etisalat’s
brand positioning as the ‘Smart Choice’,
adopting an aggressive leadership strategy in
market movers across all segments. Preferential
rates, such as on-net, per second billing at given
times on international and local calls, as well as
unlimited usage packages for mobile data and
broadband were all introduced during 2010.
Postpaid customers saw additional value in
tariff schemes with monthly rewards consisting
of bonus minutes. Setting up value-added
services for key users (such as HSPA, mobile
VPNs and data card) Etisalat Misr was among
the first to offer bundled services for both
mobile and fixed broadband, improving
point-of-sale service and bill payment
processes. Increasing training for all sales and
customer support staff set a new standard for
customer service and care for Etisalat Misr.
Etisalat Misr, Egypt
Etisalat Misr is the innovation
leader in the country, achieving rapid network roll-outs
through turnkey projects.
16
With a strong technological platform and the
continued strategy of being first-to-market,
Etisalat Misr is gearing to further expand
its presence in the Egyptian market through
innovative ICT services such as m-commerce,
mobile advertisement, mobile applications
and mobile payments. The operation plans
to become the brand of choice by further
associating itself with those attributes that
deliver the highest return to customers and
the company.
Etisalat Nigeria (EMTS)
Etisalat Nigeria’s strategy has always been to
offer the best quality network and innovative
products and services to attract subscribers.
The company has successfully asserted itself
in the Nigerian marketplace as an innovator
in commercial products and services, and is
on track to expand its customer base. The
company is already seeing a positive trend
in its ARPU expansion, and expects more rapid
growth in ARPU in 2011 as its focus turns
to innovative data-centric products. This
focus on innovation is Etisalat’s key point
of differentiation in the predominantly voice
revenue market. Etisalat Nigeria retains its
position as market leader in terms of Brand
Awareness as reported by the Nigerian
Telecommunications Commission.
The ‘Easy Starter’ proposition was enhanced
and several other on-net propositions were
launched to the market. ‘Easy Starter’ added
two more features, one being the ‘Bonus On
Incoming Calls’, which gives the customer
one minute free for every three minutes
on incoming calls, whereas the ‘You & Me’
element gives customers free talk time on
on-net selected numbers. Similar trade-offs
were launched to increase the subscriber base
and support ARPU levels.
Network expansion continued in Lagos and
other major cities, in addition to a pilot of
3G services in preparation for commercial
launch in Q2 2011.
As the 3G network becomes operational in
2011 there will be greater commercial focus
on higher-value, data-centric offerings
to attract consumers and drive up ARPU.
Etisalat Nigeria will continue to establish
the Nigerian operation by addressing key
strategic areas such as network expansion,
EMTS - Etisalat Nigeria
Etisalat Nigeria’s strategy has
always been to offer the best
quality network and innovative
products and services to attract
subscribers.
network quality of service (QoS)
management, network infrastructure
expansion, and the management and
capabilities needed to drive commercial
propositions and enterprise efficiency.
Zantel
With eight competitors in Tanzania, operators
have been involved in a price war to acquire
market share from one another. To avoid
competing on price and further damaging
the market, Zantel instead switched its strategy
to focus on value.
Adopting a segmented approach, Zantel has
focused on customer retention and loyalty
in Zanzibar, growing high-value segments in
Dar es Salaam and acquiring new customers
in the remainder of the country.
Through clear value propositions and brand
focus, the operation offered packages with
dedicated bandwidth for the SME segment
and for students, which resulted in Zantel
gaining broadband leadership and solid
financial returns.
Further, by driving propositions firmly based
on strategy, Zantel acquired and retained
customers with offerings such as ‘Twanga’
and ‘Mzuka’, which are directed to a greater
mass market and lower-end customers.
In partnership with Zain and TIGO, a joint
project was started in deploying a national
backbone, cross-border and metropolitan
network to be co-run and co-shared.
Cost-savings were made by optimising the
network, outsourcing maintenance work in
telecom and non-telecom parts, and further
site OPEX reductions.
Zantel is the first mobile operator to partner
with EASSy landings and operations and
is poised to land an additional submarine
cable, acting as host for the Government
of Seychelles. The operation can then offer
submarine capacity for both national and
international operators.
Zantel became a game changer for the
operators in terms of the number of points
of sale, which now exceeds 1500. Increasing
the coverage of the availability of UMTS,
Zantel captured a larger share of the mobile
broadband subscribers, both impacting
the financial results and a strong financial
performer in the Tanzanian market.
Zantel, Tanzania
By driving propositions firmly
based on strategy, Zantel
acquired and retained customers
with offerings such as ‘Twanga’
and ‘Mzuka’, which are directed
to a greater mass market and
lower-end customers.
Engaging business and people
Etisalat competes on the quality of
its service by maintaining the highest
network standards for sound quality,
signal strength, coverage and fewest
dropped calls.
17
Management Review continued
The continuous roll-out of the FibreTo-The-Home (FTTH) network across
the UAE enabled launches of e-Life
services to new areas in the country,
offering customers higher broadband
speeds and TV services bundled with
attractive voice rate plans.
18
Engaging business and people
Middle East
Etisalat
Etisalat UAE has maintained its position as
market leader as the demand for broadband
and value-added services continues to grow
and competes on the quality of its service by
maintaining the highest network standards
for sound quality, signal strength, coverage
and fewest dropped calls.
A clear focus on customer loyalty has seen
the expansion and enhancement of the full
range of product and service offerings and
marketing and promotional strategies.
Etisalat has also continued to develop its
distribution channels, particularly in the
highest customer-value segments of the
retail and corporate markets.
The continuous roll-out of the Fibre-To-TheHome (FTTH) network across the UAE
enabled launches of e-Life services to new
areas in the country, offering customers
higher broadband speeds and TV services
bundled with attractive voice rate plans.
In addition, High Definition TV and 3D
television were launched through e-Vision
in another first-to-market. With near full
roll-out of the FTTH network, greater
efficiencies and network cost effectiveness
will help contain operating costs and capital
expenditure. This will be an important factor
in an increasingly competitive market with
challenging macro-economic conditions.
Several offers have been launched with
good response from the market, such as ‘My
Plan’ for the postpaid segment. ‘My Plan’
offers free international and national
minutes, data at various levels, and a wide
choice of optional add-ons. The ‘Homeland
Plan’ for prepaid, offering attractive rates
for customers to India and Pakistan among
others, had a similar impact in this segment.
Offers to the UAE market are designed not
only to stem increasing competition on the
international tariffs but also to combat the
loss of Voice over IP traffic.
Etisalat
A clear focus on customer
loyalty has seen the expansion
and enhancement of the full
range of product and service
offerings and marketing and
promotional strategies.
The dedicated business solutions unit
continued to work closely with enterprise
customers to provide complete end-to-end
telecommunications and ICT services
involving a combination of network,
hardware, software and service solutions.
New products such as ‘Business Edge’, ‘My
Business Plan’ and ‘Business Super One’
were launched to these groups to further
meet their needs.
Etisalat’s strategy in 2010 involved building
best-in-class customer experience with a
strong focus on streamlining and simplifying
processes and enhancing the skills of
customer-facing employees. In addition,
large groups of employees participated in
the Regulatory Compliance Programme to
ensure adherence to regulatory policies at
all times. The customer distribution network
was also expanded, adding to the number of
Etisalat contact points.
Etisalat Etihad (Mobily)
Mobile penetration continues to rise in the
Kingdom of Saudi Arabia along with Mobily’s
growth in market share year on year. This is
largely fuelled by the consistent launch of
new innovative products and faster and
wide-reaching networks built across the
country. Today Mobily has the largest active
HSPA+ base in the world with 2,000,000
active subscribers and total usage exceeding
90 Terabytes a day. This is in line with the
strategy of pursuing broadband opportunities,
which are growing at a fast rate in all customer
segments. The network has thus become one of
the busiest mobile data networks in the region.
As an operator and a well-known brand name
in the Kingdom, Mobily’s strategy centres on
three key pillars of growth: Efficiency;
Differentiation in providing best-in-class
customer experiences; Continuously
introducing the latest technology and services.
Whilst offering a number of new services to
consumer and enterprise segments, the key
first-to-market launches included the new
application store for customers to buy
locally developed applications, the Hajj
iPhone application enabling pilgrims to
access all the information and steps needed
to complete their pilgrimage, and the
full-fledged gaming portal to create an
online gaming community. Mobily prides
itself in being first-to-market in many
device launches such as the iPhone, the
Nokia N8, and Ferrari-branded products.
Mobily ended the year with growth in
subscribers and revenues across all of its
operating segments. The year-on-year growth
percentage is a landmark among all mobile
network operators, not only in the GCC but
in the world.
Thuraya
A provider of both aerial and nautical
satellite solutions for remote areas, Thuraya
is today the undisputed leader in the
handheld satellite voice market with about
65% market share in its coverage area. One
of the key contributors to its success has
been the Thuraya XT, which has so far
exceeded market expectations.
Mobile broadband solutions continue to
grow in the satellite market as increased
bandwidth becomes available for broadband
usage. Thuraya has enhanced and stabilised
IP services and improved the overall
performance of its systems on the ground.
At the end of 2009 and into 2010, Thuraya
re-launched the brand and proposition of
‘Stay Close’. Focusing only on carefully
selected trade publications and online and
mobile advertising, the re-launch was a
great success, with the online segment of
the campaign alone creating over 95 million
impressions and over 100,000 click-throughs.
Thuraya is now being recognised in its
targeted circles, and its products can meet
exacting requirements.
Etihad Etisalat
(Mobily), KSA
Today Mobily has the largest
active HSPA+ base in the
world with 2,000,000 active
subscribers and total usage
exceeding 90 Terabytes a day.
Thuraya, UAE
A provider of both aerial and
nautical satellite solutions for
remote areas, Thuraya is today
the undisputed leader in the
handheld satellite voice market
with about 65% market share
in its coverage area.
19
Management Review continued
Asia
Etisalat DB Telecom Pvt. Ltd
Etisalat Lanka
Etisalat Afghanistan
Improved network infrastructure in India
has seen a sharp rise in teledensity,
exceeding 51% in the past year. The launch
of advanced telecom services like 3G and
IPTV will continue to drive subscriber
growth, and Etisalat DB is well poised to
take a sizeable portion of the market in this
country of over 1,150 million people.
With a full rebranding exercise, Etisalat
Lanka staged its energetic launch in the
local marketplace and the media in March.
With the promise of being the first to offer
exciting new products and solutions, the
operation introduced two new prepaid price
propositions for consumers. By keeping the
communication bold and upfront, customers
were quick to accept the new player and it
being part of a much larger global company.
This helped ensure the smooth transition
from Tigo to Etisalat Lanka.
Moderate stabilisation of the country and
some economic growth have contributed to
telecommunication penetration rates in
Afghanistan continuing to rise to just over
45% in 2010.
Continued unrest is expected in parts, and
reforms provisioned in the Afghanistan
National Development Strategy (ANDS)
will be challenging to implement. However,
investment from the government and
coalition forces is expected to increase,
bringing more stability to the people and
businesses of Afghanistan.
Etisalat Afghanistan undertook a major
branding exercise to position the operation
as a beacon of the future. This confirmed the
Corporation’s long-term commitment to the
country both as an investor and an enabler.
This is further demonstrated in the continuous
technological upgrades and roll-outs
undertaken to meet the changing and growing
needs and requirements of the market.
New pricing plans were introduced to
differentiate the offerings for the general,
youth, and other segments. The organisation
also streamlined processes in its marketing
and sales organisations to further drive
activation and increase revenue.
At year end, the results can be seen in a
sizeable lift in market share and healthy
revenue growth, with ARPU increasing by
more than 15%.
Etisalat Afghanistan is best positioned by the
end of the year in being the operator of choice
for on-net as well as off-net propositions.
2010 paved the way for the company to be
the market leader in value-for-money in 2011
and one of the top mobile network operators
in Afghanistan by end of 2011.
To ensure the roll-out goes as planned, in
line with regulatory compliance, Etisalat DB
has optimised initial investments through
a strategy of sharing passive network
infrastructure with the leading service and
telecom infrastructure providers. The
operation has also entered into Intra Circle
Roaming agreements in circles with large
geographic areas to speed up market
coverage in the initial stages.
A 100% Core (Circuit Switched) Network
has been commissioned for both Access
Network and for the National Long Distance
(NLD)/International Long Distance (ILD)
business. With Mobile Number Portability
(MNP) mandated by the government,
Etisalat DB has implemented the solution in
its Access Network from all three vendors
and successfully passed the tests conducted
by DoT (the Indian licensor), thus bettering
the performance of large incumbent service
providers like Vodafone and Bharti-Airtel.
Among the most notable product launches
were the 2-for-1 offer on prepaid; new
prepaid per minute price plan with floor prices
introduced; a no-monthly rental on postpaid
package; 100 Dial IDD plan; and 2 Friends
service. The strategy is to build the postpaid
market as well as building considerable market
share for products such as BlackBerry.
On the network front, work has started
on the migration to the Next Generation
Network (NGN) and changing from Time
Division Multiplexing (TDM) transmission
to IP technology.
Etisalat Lanka plans to continue on the positive
wave created with the launch as a preferred
operator, offering better alternatives and
strong network capabilities to this growing
market with a healthy growth potential.
Etisalat DB launched the brand name ‘Cheers’
in March. The first promotional pack offered
customers a combination of discounted on-net
and off-net voice call and SMS for a period
of six months. The alternative offer has
50 minutes of free voice calls and 50 free SMS
for the first 60 days, after which a normal
rate is charged. To date the subscriber base
is close to 265,000.
Etisalat Afghanistan
Etisalat Afghanistan undertook
a major branding exercise to
position the operation as a beacon
of the future.
20
Etisalat, Lanka
This confirmed the Corporation’s
long-term commitment to the
country both as an investor and
an enabler.
Etisalat India launched commercial
operations under the brand of
‘Cheers’ in New Delhi and has
further expanded into more
telecom circles.
Etisalat Lanka plans to
continue on the positive
wave created with the launch
as a preferred operator.
Engaging business and people
With a full rebranding exercise, Etisalat
Lanka staged its energetic launch in
the local marketplace and the media in
March... by keeping the communication
bold and upfront, customers were quick
to accept the new player and it being
part of a much larger global company.
21
Management Review continued
Pakistan Telecommunications Company
Limited (PTCL)
PTCL maintains its commitment to the
people of Pakistan, providing voice and
broadband services as well as some exciting
new technology in 2010.
The operation gained a cutting-edge advantage
in the market by launching the first-ever
commercial Evolution-Data Optimised Network
(EVDO), which allows for data transmission
through radio signals.
The proposition, EVO Nitro 9.3, brought a new
era of broadband speed in Pakistan, generating
many upgrades of existing customers as well
as new subscribers.
In addition, PTCL offered other new services
at various speeds suitable for a wide range of
consumers, and introduced a zero rent package
on fixed line services. PTCL has also established
itself as the first 3G wireless service provider in
Pakistan by upgrading the existing fixed-line
wireless platforms in major cities with
CDMA-based 3G technology. Other
enhancements and upgrades of the network
continued in cities and remote areas.
Together, these initiatives have firmly placed
PTCL as the preferred broadband service
provider in the country and the market leader
in voice, both in subscription and ARPU.
For Ufone - the mobile arm of PTCL - the
network improvements further strengthened
its Value Added Services portfolio, with a higher
degree of flexibility in the service offerings and
an increase of 13% in network coverage.
The youth segment was offered several
attractive offers during 2010 with fixed and
mobile broadband, including unlimited internet
access and free minutes as well as free
e-learning cards and an open competition
for all scholarship students. Ufone launched
its third youth-oriented service, ‘Uth – Soch
Hai Aap Ki’, with attractive voice and SMS
rates. The Uth portfolio has taken the segment
by storm and the portfolio carries 4.5 million
subscribers after just over seven months.
Ufone launched the first m-commerce
service using Unstructured Supplementary
Service Data (USSD), which is supported by
all GSM handsets. The service was launched
in partnership with the largest commercial
bank in Pakistan and offers an efficient
low-cost mobile payment system for people
without access to banks or credit cards. This,
coupled with other value-added services
such as Double Number Service, where
subscribers can get two numbers on a single
SIM card, adds healthy new revenue streams
to the company.
In terms of future synergies between the
PTCL and Ufone businesses, the 2010
network and technology advancements have
paved the way for combined GSM, data and
voice products. Partnering also with Etisalat
Afghanistan and offering attractive rates
between the two countries has quadrupled
traffic since the launch, contributing to the
Pakistan success story.
22
XL delivered higher value to shareholders
and outpaced industry growth by targeting
a higher share in the stabilising core
business of voice and SMS, while also
seizing opportunities from the rise of the
data service industry and other markets
with high growth potential.
The operation maintained a balanced focus
on top-line growth, operating profitability
and asset productivity, and was ranked 8th
amongst the top 50 fastest-growing companies
in Indonesia by Fortune magazine.
PT XL Axiata Tbk
With cost leadership and customer intimacy
at the core of its 2010 strategy, XL has
achieved a more in-depth understanding of
its customers, at almost ‘street-level’.
With such insights, and a concentrated
focus on dealing with customer complaints,
the operation has enhanced the customer
experience and improved customer
advocacy with positive results and feedback.
XL firmly understands its customers’
preferences and meets their needs by
offering relevant choices routed through a
single portal with streamlined and simplified
registration. The portal offers a mix of voice,
SMS and data to suit customer preferences.
PTCL
For Ufone - the mobile arm of
PTCL - the network improvements
further strengthened its Value
Added Services portfolio,
This success has helped to position XL as
‘best-in-class’ in execution and the market
leader of industry vision, strategy, and
execution. It is known to be always one step
ahead of competitors on network roll-out,
pricing, and distribution strategies. As a
result XL has seen a healthy and steady
growth in revenue streams and earnings.
PT XL Axiata Tbk
with a higher degree of flexibility
in the service offerings and an
increase of 13% in network
coverage.
XL delivered higher value to
shareholders and outpaced
industry growth by targeting
a higher share in the stabilising
core business of voice and SMS,
while also seizing opportunities
from the rise of the data service
industry and other markets with
high growth potential.
Engaging business and people
The proposition, EVO Nitro 9.3, brought
a new era of broadband speed in Pakistan,
generating many upgrades of existing
customers as well as new subscribers.
23
Network
Africa
Atlantique Telecom, Moov, West Africa
moov.com
Operational in 6 countries
Licence type
Mobile
Etisalat ownership
100%
Population
57 million
Penetration rate 58% average across all countries
Number of operators
Mobile 2-5 per country
Network coverage, population
56%
EMTS – Etisalat Nigeria
etisalat.com.ng
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile
40%
155 million
57%
Mobile 5
59%
Etisalat Misr, Egypt
etisalat.com.eg
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile and Internet
66%
80 million
92%
Mobile 3
99%
Canar, Sudan
canar.sd
Licence type
Etisalat ownership
Population
Penetration rate Number of operators
Network coverage, population
Fixed
89%
44 million
Fixed 1%
Fixed 2
31%
Zantel, Tanzania
zantel.com
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile and Fixed
65%
41 million
Mobile 43%
Fixed Line 0.4%
Mobile 6 Fixed 2
42%
Middle East
Etisalat, UAE
etisalat.ae
Licence type
Etisalat ownership
Population
Penetration rate
Mobile, Fixed and Internet
100%
5 million
Mobile 241%
Fixed 26%
Internet 27%
Number of operators
2
Network coverage, population
100%
Thuraya, UAE
thuraya.com
Licence type
Satellite telecommunication
Etisalat ownership
28%
Population
Number of operators
Satellite 4
Network coverage, population
Network coverage, geographical
140 countries
24
Engaging business and people
Etihad Etisalat (Mobily), KSA
mobily.com.sa
Licence type
Etisalat ownership
Population
Penetration rate Number of operators
Network coverage, population
Mobile and Internet
28%
26 million
194%
Mobile 3
99% Asia
Etisalat Afghanistan
etisalat.af
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile
100%
30 million
52%
Mobile 4
73%
Etisalat DB
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile
45%
1,200 million
52%
Mobile 15
-
PTCL
ptcl.com.pk
Licence type
Etisalat ownership
Population
Penetration rate Mobile, Fixed and Internet
23%
183 million
Fixed 3%
Mobile 60%
Number of operators
Mobile 5
Fixed11
Network coverage, population
76%
Etisalat, Lanka
etisalat.lk
Licence type
Etisalat ownership
Population
Penetration rate
Number of operators
Network coverage, population
Mobile
100%
22 million
67%
Mobile 5
67%
PT XL Axiata Tbk
xl.co.id
Licence type
Etisalat ownership
Population
Penetration rate Number of operators
Network coverage, population
Mobile
13%
237 million 76%
Mobile 11
92%
25
Management Review continued
Etisalat can offer preferential tariffs
between international operations that
have substantial cross-country calling
and large expatriate populations. These
exist in Pakistan and Afghanistan and
are being planned for Sri Lanka and India.
26
Engaging business and people
Synergies and economies of scale
The great advantage of having such a diverse
spread of operations is economy of scale and
benefiting from the many synergies of
operating and standardising numerous
mobile networks.
Etisalat has been able to centralise its
contracts, marketing and planning functions
along with equipment and handset
procurement. This enables the Corporation
to effectively plan, build and manage new
mobile networks, develop strong branding
strategies, and introduce new product and
service offerings. Significant cost savings
are the result, as compared to stand-alone
operators, and Etisalat gains more favourable
terms from suppliers, in particular with popular
handsets that are instrumental in the many
market-leading offers and services.
The benefits of centralisation also extend to
the procurement of network equipment and
the creation of value-added services through
content licensing, joint ventures with media
providers and similar initiatives. Such efforts
have allowed for leverage in negotiating
power, sharing market intelligence, and
researching and coordinating technology
sourcing, investment and management.
Etisalat has been able to
centralise its contracts,
marketing and planning
functions along with equipment
and handset procurement.
One such example is in negotiating roaming
agreements for some of its smaller
operations with global companies, such as
between Atlantique Telecom and Vodafone.
Etisalat can offer preferential tariffs between
international operations that have substantial
cross-country calling and large expatriate
populations. These exist in Pakistan and
Afghanistan and are being planned for
Sri Lanka and India. Further, Etisalat can
obtain more favourable rates for roaming in
countries where it does not have operations,
and can negotiate the interconnection and
termination rates.
Another prime example of consolidation is
the Etisalat Brand Globalisation programme,
which looks to strengthen the company’s
name and reputation on the global stage.
Now a clear direction has been set for
growing the Etisalat Brand Value, improving
employees’ belief in the company values and
increasing the effectiveness of multinational marketing communications efforts.
Execution will start in 2011.
All operations are bound by stringent
guidelines involving radiation emissions,
zoning, employee health and safety, noise,
historic and artistic preservation, etc.
Additional obligations surround the granting
of environmental permits and licences, and
dealing with authorities for the necessary
authorisations and notifications.
The overall objective is to comply in all
material respects of environmental, health
control and permit requirements, but also
exceed targets where possible.
For example, in the UAE the regulations for
using radio frequencies for mobile phones
follow the maximum limits outlined by the
International Commission for Non-Ionising
Radiation Protection. And, there are network
infrastructure strategies now in place to
achieve even lower radiation emission ranges.
Environmental matters
Globally, Etisalat is increasing its focus on the
environment. As well as ensuring all
operations are compliant with the various
laws and regulations, Etisalat is establishing
new programmes that will help fuel the
green agenda for the company in the future.
Globally, Etisalat is increasing its
focus on the environment. As
well as ensuring all operations
are compliant with the various
laws and regulations,
Etisalat is establishing new
programmes that will help
fuel the green agenda for
the company in the future.
27
Management Review continued
Etisalat Services Holding (ESH)
Tamdeed projects
E-Marine
2010 has been a successful year for Etisalat
Services Holding, which consists of eight
business units working as independent
service providers for Etisalat and other
telecommunications-related entities.
With over 14 years of experience, Tamdeed
leads turnkey solutions for large-scale
outdoor fibre optic networks for Etisalat.
It has become the leading supplier in the
UAE and is a key player and integrator for
indoor structured networks and in-building
solutions. By the end of 2010 more than
8,400 kilometres of fibre cable, with over
72,000 joints and 120,000 terminations,
had been completed in outside-plant (OSP)
projects. Inside-plant (ISP) projects involved
more than 6,000 kilometres of fibre with
over 144,000 fibre optic terminations.
Tamdeed has succeeded well in its plans
to bring fibre-to-the-home in the UAE,
enabling more and more customers to enjoy
triple and quad play services from Etisalat.
Year after year, E-Marine proves its
leadership of the submarine cable industry
in the region and beyond, continuously
striving towards fulfilling and exceeding
client expectations and keeping islands,
countries and continents connected. With
25 years’ experience, E-Marine ended 2010
with a number of successfully closed
projects of local and international importance.
One was the reconnection of the SE-ME-WE
4 cable in the Mediterranean in April, which
affected internet services throughout the
region for a few days. To its advantage,
E-Marine can quickly reroute any of the
three cable ships to deal with such incidents
swiftly to reduce the interruption of service
for customers, enterprises and countries
alike before returning to projects in hand.
Now in its third year of independence, all
of the business units have achieved their
own momentum with sustained revenue
and profitability growth. All have reached,
and in some cases surpassed, the EBIT for
their respective industry standards as new
approaches and strategic initiatives have
translated into overall growth.
To help set the future direction for continued
growth, ESH undertook a Competitive Industry
Analysis Study 2010 (CIA Study). The study
articulated market-share, global EBIT range,
regional market-share and regional growth
rates, as well as competitive readiness for each
business unit. Comparisons were made against
industry benchmarks, establishing a clear focus
for ongoing improvement and achievement.
Etisalat Academy
The Etisalat Academy is one of the largest
development and training centres in the GCC
& MENA region. It continues to grow in
strength as a single source provider with full
in-house facilities ranging from auditoriums,
training rooms and accommodation for over
260 delegates. During 2010, the Academy
has continued its curriculum within business,
ICT, telecommunications and leadership, and
at the same time expanded into areas of
psychometric assessment for recruitment,
career development planning and other HR
consulting services.
The Academy delivered a range of key public
events and conferences, such as the 9th
Middle East HR Conference & Expo in May;
Eye on Government 1 and 2 in June and
December respectively; plus major
development programmes for the UAE
Armed Forces (amongst others), where tailored
leadership and development programmes
were designed and delivered.
Internationally, the Academy signed joint
venture agreements with ZTE and Huawei
and developed succession programmes for
the operations in Afghanistan.
Now in its third year of
independence, all of the business
units have achieved their own
momentum with sustained
revenue and profitability growth.
28
Etisalat Directory Services
With an ever-increasing volume of traffic
on both internet and mobile portals, Etisalat
Directory Services has continued to
emphasise the online services it provides
in enhancing usability and search functionalities
for users. The newly launched website is
fully bilingual in English and Arabic and
additional functionalities - especially for
mobile applications - are being developed
for launch in 2011. Meanwhile, the printed
publication of the annual white and yellow
pages continues, with distribution across
the nation to key stakeholders such as
hotels, information centres and libraries.
Etisalat Real Estate (E-RE)
The Corporation’s real estate portfolio
includes more than 410 buildings, 850 GSM
sites with shelters, 480 towers, and 500
monopoles. Other related facilities include
building services and power plant with a
total land area of 2 million square metres
across the UAE. These properties are used
for a wide range of business such as
telecommunication exchanges, offices for
staff, public offices, stores, vehicle
maintenance centres, etc. E-RE has
continued to ensure that all properties are
used to maximise their business potential.
As facilities become available for external
usage, E-RE markets these through
high-end estate shows such as Abu Dhabi
Cityscape, Big-5 exhibition, and the Arabian
World Construction Summit.
All have reached, and in some
cases surpassed, the EBIT
for their respective industry
standards as new approaches
and strategic initiatives have
translated into overall growth.
In 2010, E-Marine was the regional leader in
providing maintenance, storage and repair
services to customers in the Arabian Gulf,
Indian Ocean, East Africa and Red Sea, with
new long-term contracts in place both for
the EASSy cable system in August and the
IMEWE cable system in November 2010.
The IMEWE cable project (India-Middle
East-Western Europe) has a designed
capacity of 3.84 terabits per second, and will
be the most advanced cable connecting
India in South Asia to Italy and France in
Western Europe via the Middle East, with
landings en route in Pakistan, UAE, Saudi
Arabia, Egypt and Lebanon stretching over
13,000 kilometres of seabed.
Engaging business and people
Etisalat Facilities Management L.L.C (E-FM)
Emirates Data Clearing House (EDCH)
Ebtikar Card Systems
With a workforce of approximately 1,800
staff, Etisalat Facilities Management extends
across the UAE, covering more than 5,000
site locations in all Emirates. E-FM maintains
and manages all types of facilities and assets
for a client base that includes Etisalat, Sheikh
Zayed Grand Mosque Centre, Abu Dhabi
Airports Company, and Sharjah International
Airport. Its facilities range from airports,
high-rise towers and data centres, to GSM
sites where services such as maintenance
of power plant equipment, UPS systems,
generators and DC systems, cleaning and
security are all provided through a single
point of contact.
Emirates Data Clearing House (EDCH) provides
a complete solution to GSM operators for
roaming facilities. As the first data clearing
house in the Middle East, EDCH served many
leading groups, such as Etisalat, Zain, Atlantique
Telecom, Warid, Wataniya and Vodacom,
offering comprehensive financial clearing
and settlement services for handling
reconciliation of GSM roaming records and
net settlement of financial accounts between
its clients and their roaming partners, as well
as financial clearing services. EDCH continued
to grow market share during 2010 with the
customer base increasing 20%, and growth
projected to continue during 2011. Being
part of a telco group provides EDCH with
infrastructure and invaluable information
on the real issues facing operators, giving
EDCH an advantageous position in its market.
Providing physical support to international
telecommunications operators to deliver
airtime and value-added service to
end-users, Ebtikar Card Systems continued
in 2010 to be a major provider of Smart
Card solutions for Middle East, African and
Asian operators. The company also brought
on new customers such as Sabafon from
Yemen, Zantel from Tanzania and Etisalat
DB Telecom from India, adding to the evergrowing list of customers not only in
telecommunications but in areas as diverse
as banks, airports and governmental entities.
Built on a good reputation, E-FM secured
new major customers during 2010 such as
Musanada (governmental building in Western
Region, Al Ain and Abu Dhabi), Asteco Real
Estate, and KUS-TAR.
Major projects such as GSM site construction
at 35 different locations was completed in a
record 63 days, in addition to a special taskforce
developing over 215 sites in 90 days.
Ebtikar was the first in the region to
produce the Micro-SIM card for Etisalat,
with a special dual usage design making
it compatible with both a normal mobile
phone and iPad/iPhone devices. Another
achievement was producing the LiM (Less
is More) SIM card which is half the size of a
standard SIM card body – cutting the amount
of plastics used in its production by 50%.
29
Management Review continued
Etisalat is a leader in telecommunications,
with significant success in all facets
of building, managing and operating
successful telecommunication businesses
– success made possible through
the dedication and professionalism
of our employees.
30
Engaging business and people
Human Capital
Etisalat can confidently and proudly give
credit to its employees in all parts of the
operations for their diligence, high levels of
creativity, and energy to deliver this success
time and again.
During 2010, corporate initiatives focused on
creating more synergy and consistency among
employees. Integrating employees across
functions and countries is key to achieving
these objectives. This is being achieved through
an integrated programme of identifying
high-potential employees and providing them
with cross-functional and cross-regional job
experiences, supplemented by off-the-job
development. These high-potential employees
will ensure effective transfer of knowledge and
support the needs of the operating companies.
Top management across the operations are
covered under a comprehensive leadership
development strategy, coordinated at a central
level and focusing on purpose and goals,
and relevant learning and development
through a variety of delivery strategies and
methodologies. Great importance is given to
mobility of management, both functionally
and geographically, to successfully leverage
opportunities as they arise. With harmonisation
across the operations in areas such as
performance evaluation and career paths,
the mobility and transition of management
becomes increasingly easier for both the
organisation and the employee. Etisalat firmly
believes that this approach to managing
the operations enables maximisation of
cost-effective knowledge transfer opportunities,
from more mature markets to those in a
different stage of development, further
supporting profit growth.
Etisalat believes strongly in the continued
development of its employees, especially
due to the nature of telecommunications
technology and markets, which are everchanging and evolving. To this end, special
focus is given to frontline staff to ensure
that they are trained and equipped to enhance
the customer experience and services, and
to create a stronger bond and relationship
between Etisalat and its customers.
Top management across the
operations are covered under
a comprehensive leadership
development strategy, coordinated
at a central level and focusing
on purpose and goals,
Self-development and coaching opportunities
are projects that are being developed in some
operations, where the employee can not only
utilise online libraries and courses to develop
themselves (and have these accredited in their
individual files), but also develop their skills
and knowledge through sharing and coaching
others – thereby increasing the internal
knowledge pool. In a unique position, the
UAE operation has also retained its strong
drive on the Emiratisation programme to
continue to increase the level of nationals
serving the organisation. Etisalat (UAE) is
deeply committed to the belief that all UAE
nationals have a critical part to play in the
country’s development, as well as that of
the Corporation.
As the operations expand in the region and
worldwide, Etisalat remains committed to
attracting the best talent in all the countries
it operates in. This way, Etisalat continues
to contribute to preparing and creating
generations of telecom professionals
whose skills define ways of working with
professionalism, diligence and creativity.
and relevant learning and
development through a
variety of delivery strategies
and methodologies.
31
Management Review continued
Corporate Social Responsibility (CSR)
Enabling reach is not only accomplished
by the operating companies through their
roles in telecommunications deployment
and development in the marketplace.
We believe in global reach with people,
society and environment, using our
resources to provide a better life for
the people and communities we serve.
32
Engaging business and people
Whether reaching many or a select few,
the CSR projects we take on enable, affect
and change life for many in the various
projects undertaken under the pillars of
environment, health, education and sports,
as well as emergency assistance in times
of natural disasters.
In delivering on the CSR strategy, each unit
identifies projects that are important in the
specific markets and where a difference can
be made. This provides a plethora of activities
that reflect relevant ‘on-the-ground’ projects
across the various operations, some of which
are highlighted here.
Like many other telecommunications
companies, and given the nature of the
industry, Etisalat values education and learning.
It is therefore quite natural for many of the
CSR initiatives to be linked to education. Etisalat
Nigeria, in addition to the Adopt-a-School
programme, has also set up scholarships for
premier students in the fields of electrical
engineering, computer sciences and
management courses. In XL, the work with the
Komputer untuk Seolah (Computers for Village
Schools) continues on its five-year path in
setting up computer facilities in rural schools
across the country, where the target is to
reach at least 300 schools within five years.
In Pakistan, Ufone partnered with the
Citizens’ Foundation, where employees
spend at least ten weekends as mentors and
advisors with groups of youngsters, giving
insights into career paths and the corporate
world. Etisalat Afghanistan continued its
support of the Women Counsel, which
aims to enlighten women to improve and
strengthen their socio-economic status in
society through multilateral involvement
in development activities.
In Pakistan, Ufone partnered with
the Citizens’ Foundation, where
employees spend at least ten
weekends as mentors and advisors
with groups of youngsters,
giving insights into career paths
and the corporate world.
In other education work, this time in the area
of health issues, Etisalat Nigeria set out to
educate people on malaria prevention and
control through an alternative channel in an
entertaining radio drama series created in
partnership with health institutions, as well
as engaging student clubs in distributing
insecticide-treated nets. Canar set out to
work on cancer prevention, with a special
focus on children, and will continue to do
so during 2011 in an even larger campaign.
The ‘Origin’ project, which addresses water
problems, continues in Etisalat Misr (Egypt)
with a further addition to the scheme – Care
for Children. Zantel made life special for
one little girl suffering from a serious heart
condition who required surgery in the UK.
Under the wing of Zantel the operation was
carried out and the girl is now on her way
to recovery.
While the organisations streamline processes
internally in order to reduce the environmental
footprint in daily operations, environmentallysound CSR initiatives are also in the portfolio
of Etisalat. In the UAE, the recycling of mobile
phones continues, and several projects involving
planting trees around offices and other contact
points have commenced in various operations.
The Origin project also falls under this sector,
having a dual purpose and objectives. One of
the more diverse projects is recycling marketing
communications material into reusable bags.
This project is run in Sri Lanka by small groups
of women, not only providing them with an
occupation but also a worthwhile livelihood.
2010 being the year of the FIFA World Cup,
Zantel also set out to share the joy of football
with a full tour around Tanzania celebrating
the Cup and the game. With the game being
played around the world, sponsorships in
Mobily and Etisalat UAE continued, bringing
a new generation of players into the game
with the intent of fostering next generation
players. Etisalat Afghanistan continues to be
the proud sponsor of the Afghanistan cricket
team, which not only took home the silver
medal at the Asian Games 2010 but also turned
out to be one of the fans’ favourites at the
Twenty20 games in the West Indies. In Egypt,
Etisalat Misr continued its support of the
Para-Olympics committee.
Zantel made life special for one
little girl suffering from a serious
heart condition who required
surgery in the UK. Under the
wing of Zantel the operation
was carried out and the girl is
now on her way to recovery.
Sadly, natural disasters struck many of the
areas Etisalat operates in. Thuraya was quick
to respond, as always. Apart from signing
up with the UAE-based National Crisis and
Emergency Management Authority, Thuraya
also deployed telephones in Uganda and
Pakistan during the flooding and in China and
Indonesia following the earthquakes, where
they were used as support in large-scale
search and rescue operations. XL has set up
two disaster relief programmes consisting of
an emergency response programme providing
not only basic necessities such as food and
sanitary kits, but also vital communication kits
with starter packs, chargers etc. Post disaster,
XL has set up an SMS donation programme
and contributed to rebuilding schools in
affected areas.
Late in July 2010, devastating floods inundated
northern parts of Pakistan, affecting millions
of people. Both PTCL and Ufone were quick
to offer support and assistance in the relief
work, arranging the dispatch of medical
supplies and food as well as setting up medical
camps in Peshawar, Nowshera and Charsadda
amongst others. Ufone assisted in setting
up camps in the areas of Multan, Sukkur
and Charsadda, giving shelter to some of
the affected families as well as dispatching
food supplies.
On a more personal note, PTCL employees
donated part of their salaries towards
the Prime Minister’s Fund as individual
contributions to affected people.
CSR initiatives and projects undertaken during
2010 have been many and varied, reconfirming
Etisalat’s strong belief in being part of society
in areas important to the local entities – but
more importantly, making a difference to
these societies and the individuals in them.
In the UAE, the recycling of
mobile phones continues, and
several projects involving planting
trees around offices and other
contact points have commenced
in various operations.
33
Independent Auditors’ Report to the Shareholders
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Emirates Telecommunications Corporation (“the Corporation”) and its
subsidiaries (together “the Group”) which comprise the consolidated statement of financial position as of 31 December 2010 and the consolidated
income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group
as of 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial
Reporting Standards.
Report on Other Legal and Regulatory Requirements
We have obtained all the information and explanations considered necessary for the purposes of our audit. The Corporation has maintained
proper books of account and has carried out physical verification of stores in accordance with properly established procedures and the
financial information included in the Chairman’s statement is consistent with the books of account of the Corporation. Nothing has come to
our attention, which causes us to believe that the Corporation has breached any of the applicable provisions of the UAE Federal Act No. (1) of
1991 as amended by Decretal Federal Code No. 3 of 2003, or its Articles of Association, which would materially affect its activities or financial
position at 31 December 2010.
Deloitte & Touche (M.E.)
Abu Dhabi, United Arab Emirates
Saba Y. Sindaha (Reg. No. 410)
PricewaterhouseCoopers
Abu Dhabi, United Arab Emirates
Jacques E. Fakhoury (Reg. No. 379)
22 February 2011
35
Consolidated Income Statement
for the year ended 31 December 2010
2010
AED’000
2009
AED’000
31,929,488
31,334,387
5
13, 14
(18,545,525)
1,243,229
(14,365,129)
682,051
5
14,627,192
(7,630,750)
17,651,309
(8,836,346)
6,996,442
8,814,963
Notes
Revenue
Operating expenses
Share of results of associates and joint ventures
Operating profit before federal royalty
Federal royalty
Operating profit
Finance income
Finance costs
6
7
Profit before tax
Taxation
7,529,184
8
Profit for the year
Non-controlling interests
Profit for the year attributable to the equity holders of the Corporation
Earnings per share
Basic and diluted
Mohammad Hassan Omran
Chairman
917,578
(384,836)
34
(100,406)
583,055
(571,493)
8,826,525
(243,792)
7,428,778
8,582,733
201,972
253,613
7,630,750
8,836,346
AED 0.97
AED 1.12
Khalaf Bin Ahmed Al Otaiba
Vice Chairman
The accompanying notes on pages 41 to 73 form an integral part of these consolidated financial statements. The Independent Auditors’ report is set out on page 35.
36
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2010
Profit for the year
2010
AED’000
2009
AED’000
7,428,778
8,582,733
Exchange differences on translation of foreign operations
Gain on revaluation of available-for-sale investments
(351,934)
341
54,183
10,706
Other comprehensive income/(loss)
(351,593)
64,889
Total comprehensive income for the year
Non-controlling interests
Total comprehensive income attributable to the equity holders of the Corporation
7,077,185
8,647,622
290,553
205,189
7,367,738
8,852,811
The accompanying notes on pages 41 to 73 form an integral part of these consolidated financial statements. The Independent Auditors’ report is set out on page 35.
37
Consolidated Statement of Financial Position
as at 31 December 2010
Notes
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investments in associates and joint ventures
Other investments
Advances to associates
Loans to associates
Finance lease receivables
Deferred tax assets
As at 31 December
2010
2009
AED’000
AED’000
3,120,704
12,429,597
20,675,359
47,910
16,165,069
517,140
2,963,422
12,673
361,465
3,127,914
13,650,474
17,585,386
162,800
15,722,411
493,507
912,275
24,753
136,491
56,293,339
51,816,011
316,261
8,448,082
260,624
12,080
10,276,744
272,410
7,638,302
331,173
11,515
11,309,185
19,313,791
19,562,585
75,607,130
71,378,596
20,078,214
1,195,071
2,956,017
66,725
181,961
19,389,237
1,079,387
2,902,961
56,709
60,086
24,477,988
23,488,380
1,089,769
5,204,599
19,841
382,145
772,499
172,137
88,544
834,283
2,118,289
3,421,704
42,318
333,134
538,464
124,781
39,894
882,334
8,563,817
7,500,918
Total liabilities
33,041,805
30,989,298
Net assets
42,565,325
40,389,298
7,906,140
28,036,163
2,773,622
7,187,400
26,636,679
2,567,530
Equity attributable to the equity holders of the Corporation
Non-controlling interests
38,715,925
3,849,400
36,391,609
3,997,689
Total equity
42,565,325
40,389,298
Current assets
Inventories
Trade and other receivables
Due from associates and joint ventures
Finance lease receivables
Cash and cash equivalents
9
9
10
11
13, 14
15
16
16
17
8
18
19
16
17
20
Total assets
Current liabilities
Trade and other payables
Borrowings
Payables related to investments and licences
Finance lease obligations
Provisions
Non-current liabilities
Trade and other payables
Borrowings
Payables related to investments and licences
Derivative financial instruments
Deferred tax liabilities
Finance lease obligations
Provisions
Provision for end of service benefits
Equity
Share capital
Reserves
Retained earnings
Mohammad Hassan Omran
Chairman
21
22
23
24
25
21
22
23
26
8
24
25
27
28
29
Khalaf Bin Ahmed Al Otaiba
Vice Chairman
The accompanying notes on pages 41 to 73 form an integral part of these consolidated financial statements. The Independent Auditors’ report is set out on page 35.
38
39
7,187,400
7,187,400
718,740
-
7,906,140
Balance at 31 December 2009
Balance at 1 January 2010
Profit for the year
Other comprehensive income
Acquisition of non-controlling interests (Note 30)
Other movements in non-controlling interests
Transfer to reserves
Loss of interest in subsidiaries undertakings (Note 15)
Bonus issue of 718.7 million fully paid shares of AED 1
Dividends (Note 33)
Balance at 31 December 2010
7,650,000
6,950,000
700,000
-
6,950,000
6,000,000
950,000
-
Development
reserve
AED’000
7,822,000
7,098,000
724,000
-
7,098,000
6,124,000
974,000
-
Asset
replacement
reserve
AED’000
10,332
6,714
3,618
-
6,714
3,408
3,306
-
Statutory
reserve
AED’000
12,167,505
10,362,099
3,003,306
(1,197,900)
-
General
reserve
AED’000
9,429 12,402,383
272,782 12,167,505
(263,353)
953,618
(718,740)
-
272,782
267,023
5,759
-
Translation
reserve
AED’000
Reserves (see note 29)
Attributable to the equity holders of the Corporation
The accompanying notes on pages 41 to 73 form an integral part of these consolidated financial statements. The Independent Auditors’ report is set out on page 35.
5,989,500
1,197,900
-
Share
capital
AED’000
Balance at 1 January 2009
Profit for the year
Other comprehensive income
Other movements in non-controlling interests
Transfer to reserves
Bonus issue of 1,197.9 million fully paid shares of AED 1
Dividends (Note 33)
for the year ended 31 December 2010
Consolidated Statement of Changes in Equity
142,019
141,678
341
-
141,678
130,972
10,706
-
Investment
revaluation
reserve
AED’000
36,391,609
31,431,973
8,836,346
16,465
(3,893,175)
Total
shareholders’
equity
AED’000
2,773,622
38,715,925
2,567,530 36,391,609
7,630,750 7,630,750
(263,012)
(467,515)
(467,515)
(70,585)
(70,585)
(2,381,236)
(13,197)
(13,197)
(4,492,125) (4,492,125)
2,567,530
2,554,971
8,836,346
(4,930,612)
(3,893,175)
Retained
earnings
AED’000
40,389,298
35,619,762
8,582,733
64,889
15,089
(3,893,175)
Total
equity
AED’000
3,849,400 42,565,325
3,997,689 40,389,298
(201,972) 7,428,778
(88,581)
(351,593)
132,474
(335,041)
9,790
(60,795)
(13,197)
- (4,492,125)
3,997,689
4,187,789
(253,613)
48,424
15,089
-
Noncontrolling
interests
AED’000
Consolidated Statement of Cash Flows
for the year ended 31 December 2010
Notes
Operating profit
Adjustments for:
Depreciation
Amortisation
Share of results of associates and joint ventures
Provisions and allowances
Dividend income from other investments
Other non cash movements
10,11
9
13, 14
2010
AED’000
2009
AED’000
6,996,442
8,814,963
2,179,967
804,684
(1,243,229)
530,109
(10,641)
209,699
1,603,920
930,581
(682,051)
(281,922)
(21,121)
-
9,467,031
10,364,370
(55,202)
70,549
(1,997,400)
474,300
(90,193)
(92,865)
(1,524,788)
1,554,219
7,959,278
(137,492)
(15,230)
10,210,743
(75,301)
(10,747)
7,806,556
10,124,695
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of other investments
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchase of other intangible assets
Proceeds on disposal of intangible assets
Dividend income received from associates and other investments
Proceeds on maturity of investments classified as held-to-maturity
Advances to associates
Finance income received
(335,041)
(23,292)
(5,534,732)
88,294
(364,258)
50,611
335,936
929,093
(320,391)
(9,053)
(5,546,483)
34,283
(1,251,666)
244,860
128,590
(644,916)
594,032
Net cash used in investing activities
(4,853,389)
(6,770,744)
Cash flows from financing activities
Proceeds from borrowings and finance lease obligations
Repayments of borrowings and finance lease obligations
Loans to associated undertakings
Finance costs paid
Redemption of preference shares in a subsidiary
Dividends paid
Contributions from non-controlling interests
2,939,899
(747,803)
(1,735,469)
(288,635)
(47,469)
(4,492,125)
-
1,431,775
(560,361)
(400,618)
(3,893,175)
15,089
Net cash used in financing activities
(4,371,602)
(3,407,290)
Net decrease in cash and cash equivalents
(1,418,435)
(53,339)
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
11,309,185
385,994
11,294,868
67,656
10,276,744
11,309,185
Changes in working capital:
Inventories
Due from associates and joint ventures
Trade and other receivables
Trade and other payables
Cash generated from operations
Income taxes paid
Payment of end of service benefits
27
Net cash generated from operating activities
Cash and cash equivalents at the end of the year
20
The accompanying notes on pages 41 to 73 form an integral part of these consolidated financial statements. The Independent Auditors’ report is set out on page 35.
40
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
1.
General information
The Emirates Telecommunications Corporation Group (“the Group”) comprises the holding company Emirates Telecommunications Corporation
(“the Corporation”) and its subsidiaries. The Corporation was incorporated in the United Arab Emirates (“UAE”), with limited liability, in 1976 by
UAE Federal Government decree No. 78, which was revised by the UAE Federal Act No. (1) of 1991 and further amended by Decretal Federal
Code No. 3 of 2003 concerning the regulation of the telecommunications sector in the UAE. In accordance with Federal Law No. 267/10 for 2009,
the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from
1 January 2008, which is ultimately controlled by the UAE Federal Government. The address of the registered office is P.O. Box 3838, Abu Dhabi,
United Arab Emirates. The Corporation’s shares are listed on the Abu Dhabi Securities Exchange.
The principal activity of the Group is to provide telecommunications services, media and related equipment including the provision of related
contracting and consultancy services to international telecommunications companies and consortia. These activities are carried out through
the Corporation (which holds a full service licence from the UAE Telecommunications Regulatory Authority valid until 2025), its subsidiaries,
associates and joint ventures.
These financial statements were approved by the Board of Directors and authorised for issue on 22 February 2011.
2.
Significant accounting policies
The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments and
in accordance with the accounting policies set out herein.
At the date of the consolidated financial statements, the following Standards, Amendments and Interpretations which have not been applied
in these financial statements were in issue but not yet effective:
Effective for annual periods
beginning on or after
IFRS 7 (revised 2010) Disclosures – Transfers of Financial Assets
IFRS 9 Financial Instruments IAS 12 (revised 2010) Deferred Tax: Recovery of Underlying Assets
IAS 24 (revised 2009) Related Party Disclosures
IAS 32 (revised 2009) Classification of Rights Issues IFRIC 14 (revised 2009) Prepayments of a Minimum Funding Requirement
IFRIC 19 Extinguishing Financial Liabilities with Equity instruments
Improvements to IFRSs 2010 (all improvements except for those relating to IFRS 3 and IAS 27)
Improvements to IFRSs 2010 (IFRS 3 and IAS 27)
1 July 2011
1 January 2013
1 January 2012
1 January 2011
1 February 2010
1 January 2011
1 July 2010
1 January 2011
1 July 2010
The directors are currently assessing the impact that the adoption of these Standards, Amendments and Interpretations will have on the
consolidated financial statements of the Group.
Within the results for year ended 31 December 2009, interconnect and other direct costs amounting to AED 670.4 million have been reclassified
from revenue to operating expenses. In addition, interconnect revenue and costs between the group entities amounting to AED 167.4 million
have been eliminated. The cumulative reclassification and elimination amounting to AED 503 million has been performed to facilitate a direct
comparison with results in the current period and has no impact on the profit or the statement of financial position in the current or prior period.
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the Corporation and entities controlled by the Corporation
up to 31 December 2010. Control is achieved where the Group has the power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group has the power to control another entity.
Non-controlling interests (previously referred to as minority interests) in the net assets of consolidated subsidiaries are identified separately
from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination
and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s
interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding
obligation and is able to make an additional investment to cover the losses.
Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are excluded from consolidation from
the date that control ceases.
Intercompany transactions, balances and any unrealised gains/losses between Group entities have been eliminated in the consolidated
financial statements.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those
used by the Group.
41
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Basis of consolidation (continued)
In the current financial year, the Group has adopted IFRS 3 Business Combinations (revised 2008) and IAS 27 Consolidated and Separate Financial
Statements (revised 2008). The most significant changes to the Group’s previous accounting policies for business combinations are as follows:
•
•
•
•
acquisition related costs which previously would have been included in the cost of a business combination are included in administrative
expenses as they are incurred;
any pre-existing equity interest in the entity acquired is remeasured to fair value at the date of obtaining control, with any resulting
gain or loss recognised in profit or loss;
any changes in the Group’s ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no
adjustment to goodwill; and
any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are
recognised in profit or loss. Previously, such changes resulted in an adjustment to goodwill.
The revised standards have been applied to the acquisition of minority interest shares in Atlantique Telecom S.A., Zanzibar Telecom Limited,
Canar Telecommunications Co. Limited and Etisalat DB Telecom Private limited as described in Note 30.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of an acquisition is measured as the aggregate of the fair
value, at the date of exchange, of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributed
to the acquisition. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3
Business Combinations, are recognised at their fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment,
the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in the consolidated income statement.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities
and contingent liabilities recognised.
Associates and joint ventures
Associates and joint ventures are those companies which the Group jointly controls or over which it exercises significant influence but it does
not control. Investments in associates and joint ventures are accounted for using the equity method of accounting. Investments in associates
and joint ventures are carried in the consolidated statement of financial position at cost as adjusted by post-acquisition changes in the Group’s
share of the net assets of the associates and joint ventures less any impairment in the value of individual investments. Losses of the associates
and joint ventures in excess of the Group’s interest are not recognised unless the Group has an obligation to fund such losses. The carrying
values of investments in associates and joint ventures are reviewed on a regular basis and if an impairment in the value has occurred, it is written
off in the period in which those circumstances are identified.
Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the associates at the date of
acquisition is recognised as goodwill and included as part of the cost of investment. Any deficiency of the cost of acquisition below the Group’s
share of the fair values of the identifiable net assets of the associates at the date of acquisition is credited to the consolidated income
statement in the year of acquisition.
The Group’s share of associates’ and joint ventures’ net income is based on the most recent financial statements or interim financial statements
drawn up to the Group’s statement of financial position date. Accounting policies of associates and joint ventures have been adjusted, where
necessary, to ensure consistency with the policies adopted by the Group.
Where a Group company transacts with an associate or joint venture of the Group, unrealised gains and losses are eliminated to the extent
of the Group’s interest in the relevant entity. Losses may provide evidence of an impairment of the asset transferred in which case appropriate
provision is made for impairment.
Dilution gains and losses arising on deemed disposal of investments in associates and joint ventures are recognised in the consolidated
income statement.
Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for telecommunication
products and services provided in the normal course of business. Revenue is recognised net of sales taxes, discounts and rebates. Revenue
from telecommunication services comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging,
the provision of other mobile telecommunications services, including data services and information provision and fees for connecting users
of other fixed line and mobile networks to the Group’s network.
Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as revenue
over the related access period, with unbilled revenue resulting from services already provided from the billing cycle date to the end of each
period accrued and unearned revenue from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid
credit is deferred until such time as the customer uses the airtime, or the credit expires.
42
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Revenue (continued)
Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the
nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission
for facilitating the service.
Incentives are provided to customers in various forms and are usually offered on signing a new contract or as part of a promotional offering.
Where such incentives are provided on connection of a new customer or the upgrade of an existing customer, revenue representing the fair
value of the incentive, relative to other deliverables provided to the customer as part of the same arrangement, is deferred and recognised in
line with the Group’s performance of its obligations relating to the incentive.
In revenue arrangements including more than one deliverable, the arrangement consideration is allocated to each deliverable based on the fair
value of the individual element. The Group generally determines the fair value of individual elements based on prices at which the deliverable
is regularly sold on a standalone basis.
Contract revenue is recognised under the percentage of completion method. Profit on contracts is recognised only when the outcome of the
contracts can be reliably estimated. Provision is made for foreseeable losses estimated to complete contracts.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as lessor
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance
lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding
in respect of the leases.
Revenues from the sale of transmission capacity on terrestrial and submarine cables are recognised on a straight-line basis over the life
of the contract.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis
over the lease term.
The Group as lessee
Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the relevant
lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
Foreign currencies
Functional currencies
The individual financial statements of each of the Group’s subsidiaries, associates and joint ventures are presented in the currency of the
primary economic environment in which they operate (its functional currency). For the purpose of the financial statements, the results, financial
position and cash flows of each Group company are expressed in UAE Dirhams, which is the functional currency of the Corporation, and the
presentation currency for the financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency are
recorded at exchange rates prevailing at the dates of the transactions. At each year end, monetary assets and liabilities that are denominated
in foreign currencies are retranslated into the entity’s functional currency at rates prevailing at the statement of financial position date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Consolidation
On consolidation, the assets and liabilities of the Group’s foreign operations are translated into UAE Dirhams at exchange rates prevailing on
the date of the consolidated statement of financial position. Goodwill and fair value adjustments arising on the acquisition of a foreign entity
are also translated at exchange rates prevailing on the statement of financial position date. Income and expense items are translated at the
average exchange rates for the period unless exchange rates fluctuate significantly during that period, in which case the exchange rates at
the date of transactions are used. Exchange differences arising are classified as a separate component of equity. Such translation differences
are recognised as income or as expense in the period in which the operation is disposed of.
Foreign exchange differences
Exchange differences are recognised in the consolidated income statement in the period in which they arise except for exchange differences
that relate to assets under construction for future productive use. These are included in the cost of those assets when they are regarded as
an adjustment to interest costs on foreign currency borrowings. Exchange differences on transactions entered into to hedge certain foreign
currency risks; and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither
planned nor likely to occur, which form part of the net investment in a foreign operation are recognised in the foreign currency translation
reserve and recognised in the consolidated income statement on disposal of the net investment.
43
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the consolidated income statement in the period in which they are incurred.
Government grants
Government grants relating to non-monetary assets are recognised at nominal value. Grants that compensate the Group for expenses are
recognised in the consolidated income statement on a systematic basis in the same period in which the expenses are recognised. Grants that
compensate the Group for the cost of an asset are recognised in the consolidated income statement on a systematic basis over the expected
useful life of the related asset upon capitalisation.
End of service benefits
Payments to defined contribution schemes are charged as an expense as they fall due. Payments made to state-managed pension schemes
are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising
in a defined contribution scheme.
Provision for employees’ end of service benefits for non-UAE nationals is made in accordance with the Projected Unit Cost method as per IAS
19 Employee Benefits taking into consideration the UAE Labour Laws. The provision is recognised based on the present value of the defined
benefit obligations.
The present value of the defined benefit obligations is calculated using assumptions on the average annual rate of increase in salaries, average
period of employment of non-UAE nationals and an appropriate discount rate. The assumptions used are calculated on a consistent basis for
each period and reflect management’s best estimate. The discount rates are set in line with the best available estimate of market yields currently
available at the statement of financial position date.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated income
statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that
are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the statement of financial position date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method.
Deferred tax is calculated using relevant tax rates and laws that have been enacted or substantially enacted by the statement of financial
position date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that
it is probable that sufficient taxable profits will be available in the future against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Such assets and liabilities are
not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither taxable profit nor the accounting profit.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in
joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and any impairment. Cost comprises the cost of equipment
and materials, including freight and insurance, charges from contractors for installations and building works, direct labour costs and asset
retirement costs.
Assets in the course of construction are carried at cost, less any impairment. Cost includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets commences when the assets are
ready for their intended use.
44
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Property, plant and equipment (continued)
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs
and maintenance costs are charged to income during the period in which they are incurred.
Other than land (which is not depreciated), the cost of property, plant and equipment is depreciated on a straight line basis over the estimated
useful lives of the assets as follows:
Buildings
Permanent – the lesser of 20 – 50 years and the period of the land lease.
Temporary – the lesser of 4 years and the period of the land lease.
Plant and equipment
Submarine – fibre optic cables
– coaxial cables
Cable ships
Coaxial and fibre optic cables
Line plant
Exchanges
Switches
Radios/towers
Earth stations/VSAT
Multiplex equipment
Power plant
Subscribers’ apparatus
General plant
Other assets
Motor vehicles
Computers
Furniture and fittings
Years
20
10
15
15
15
5 – 10
5 – 10
10 – 15
5 – 10
10
5
3–8
2–5
3–5
4–5
4 – 10
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in consolidated income statement.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is carried at cost less accumulated depreciation
and impairment loss. Investment property in the course of construction is included in property, plant and equipment.
Investment properties are depreciated on a straight-line basis over the lesser of 20 years and the period of the lease.
Intangible assets
(I)
Goodwill
Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured
at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs) expected to benefit from the
synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there
is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other non financial
assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not
reversed in a subsequent period.
On disposal of a subsidiary, associate or joint venture, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
(II) Licences
Acquired telecommunication licences are initially recorded at cost or, if part of a business combination, at fair value. Licences are amortised
on a straight line basis over their estimated useful lives from when the related networks are available for use. The estimated useful lives range
between 10 and 25 years and are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and
whether licences are dependent on specific technologies.
45
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Intangible assets (continued)
(III) Internally-generated intangible assets
An internally-generated intangible asset arising from the Group’s IT development is recognised at cost only if all of the following conditions
are met:
•
•
•
an asset is created that can be identified (such as software and new processes);
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives of 3-10 years. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
(IV) Indefeasible Rights of Use (“IRU”)
IRUs correspond to the right to use a portion of the capacity of a terrestrial or submarine transmission cable granted for a fixed period. IRUs
are recognised at cost as an asset when the Group has the specific indefeasible right to use an identified portion of the underlying asset, generally
optical fibres or dedicated wavelength bandwidth, and the duration of the right is for the major part of the underlying asset’s economic life.
They are amortised on a straight line basis over the shorter of the expected period of use and the life of the contract which ranges between
10 to 15 years.
Impairment of tangible and intangible assets excluding goodwill
The Group reviews the carrying amounts of its tangible and intangible assets whenever there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any
impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life (including goodwill) is tested
for impairment annually.
Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting
date. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss
is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
Inventory
Inventory is measured at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs
and those overheads that have been incurred in bringing the inventories to their present location and condition. Allowance is made, where
appropriate, for deterioration and obsolescence. Cost is determined in accordance with the weighted average cost method. Net realisable value
represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments
Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party
to the contractual provisions of the instrument.
(I)
Fair value
The fair values of financial assets and financial liabilities are determined as follows:
•
•
the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models
based on discounted cash flow analysis using prices from observable current market transactions.
(II) Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose
terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value,
plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets and
‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
46
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Financial instruments (continued)
(III) Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
life of the financial asset, or, where appropriate, a shorter period.
Income is recognised on an effective interest rate basis for debt instruments that are held-to-maturity, are available-for-sale, or are loans
and receivables.
(IV) Held-to-maturity investments
Bonds and Sukuks bonds with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to
hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective
interest method less any impairment, with revenue recognised on an effective yield basis. The Group considers the credit risk of counterparties
in its assessment of whether such financial instruments are impaired.
(V) Available-for-sale financial assets (“AFS”)
Listed securities held by the Group that are quoted in an active market are classified as being AFS and are stated at fair value. Gains and losses
arising from changes in fair value are recognised directly in equity in the investment revaluation reserve with the exception of impairment losses,
interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly
in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the
investments revaluation reserve is included in the consolidated income statement.
Dividends on AFS equity instruments are recognised in the consolidated income statement when the Group’s right to receive the dividends
is established.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange
rate prevailing at the statement of financial position date. The foreign exchange gains/losses that are recognised in the consolidated income
statement are determined based on the amortised cost of the monetary asset. Other foreign exchange gains/losses are recognised in equity.
The Group assesses at each statement of financial position date whether there is objective evidence that AFS assets are impaired. In the case
of equity securities, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the
securities are impaired. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through
the consolidated income statement.
(VI) Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified
as ‘loans and receivables’. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method less impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables
when the recognition of interest would be immaterial.
Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated income statement where there is objective
evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
The allowance for doubtful debts reflects estimates of losses arising from the failure or inability of the Group’s customers to make required
payments. The estimates are based on the ageing of customer’s accounts and the Group’s historical write-off experience.
(VII) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
(VIII) Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ (“FVTPL”) or other financial liabilities.
(IX) Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:
•
•
the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets; and
the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition
policies set out above.
47
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Financial instruments (continued)
(X) Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as such. A financial liability
is classified as held for trading if it has been incurred principally for the purpose of disposal in the near future or it is a derivative that is not
designated and effective as a hedging instrument. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised
in the consolidated income statement.
(XI) Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently
measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective
interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period.
(XII) Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
(XIII) Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including
forward foreign exchange contracts, interest rate swaps and cross currency swaps.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their
fair value at each reporting date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative
fair value is recognised as a financial liability. The Group does not designate any financial instruments as hedging instruments, and accordingly
all resulting gains or losses arising from the remeasurement of derivatives are recognised in the consolidated income statement immediately.
(XIV) Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics
are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised
in the consolidated income statement.
(XV) Hedge accounting
The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign
exchange risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange
risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash
flows of the hedged item.
(XVI) Put option arrangements
The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial
liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number
of shares in the subsidiary.
The amount that may become payable under the option on exercise is initially recognised at fair value within borrowings with a corresponding
charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to
non-controlling interests in the net assets of consolidated subsidiaries. For options that involve a fixed amount of cash for a fixed number
of shares in the subsidiary, the Group recognises the cost of writing such put options, determined as the excess of the fair value of the option
over any consideration received, as a financing cost.
Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the
amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. In the
event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.
(XVII) Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial
asset or substantially all the risk and rewards of ownership to another entity. If the Group neither transfer nor retains substantially all the risks
and reward of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
48
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
2.
Significant accounting policies (continued)
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required
to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the statement
of financial position date, and are discounted to present value where the effect is material.
Transactions with non-controlling interests
The Group applies a policy of treating transactions with non-controlling interest holders as transactions with parties external to the Group.
Disposals to non-controlling interest holders result in gains and losses for the Group and are recorded in the consolidated income statement.
Purchases from non-controlling interest holders result in goodwill, being the difference between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary.
Dividends
Dividend distributions to the Group’s shareholders are recognised as a liability in the consolidated financial statements in the period in which
the dividends are approved.
3.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 2, the directors are required to make judgements, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
disclosed below.
(I)
Fair value of other intangible assets
On the acquisition of mobile network operators, the identifiable intangible assets may include licences, customer bases and brands. The fair
value of these assets is determined by discounting estimated future net cash flows generated by the asset, where no active market for the
assets exist. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation
of the intangible assets.
The relative size of the Group’s intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives critical
to the Group’s financial position and performance.
The useful lives used to amortise intangible assets relate to the future performance of the assets acquired and management’s judgement
of the period over which economic benefit will be derived from the asset.
(II) Impairment of goodwill and associates
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating unit to which the goodwill has
been allocated. The value-in-use calculation for goodwill and associates requires the Group to calculate the net present value of the future
cash flows for which certain assumptions are required, including management’s expectations of:
•
•
•
long term growth rates in cash flows;
timing and quantum of future capital expenditure; and
the selection of discount rates to reflect the risks involved.
The key assumptions used are detailed on Note 9 of the consolidated financial statements. A change in the key assumptions or forecasts might
result in an impairment of goodwill and investment in associates.
(III) Property, plant and equipment
Property, plant and equipment represents a significant proportion of the total assets of the Group. Therefore, the estimates and assumptions
made to determine their carrying value and related depreciation are critical to the Group’s financial position and performance. The charge in
respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at
the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the consolidated
income statement.
49
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
4.
Segmental information
Information regarding the Group’s operating segments is set out below in accordance with IFRS 8 Operating Segments. IFRS 8 requires operating
segments to be identified on the basis of internal reports that are regularly reviewed by the Group’s chief operating decision maker and used
to allocate resources to the segments and to assess their performance.
a) Products and services from which reportable segments derive their revenues
The Group is engaged in a single line of business, being the supply of telecommunications services and products. The majority of the Group’s
revenues, profits and assets relate to its operations in the UAE. Outside of the UAE, the Group operates through its subsidiaries and associates
in eighteen countries, the majority of which are considered by the Group to be one international operating segment. Revenue is attributed to
an operating segment based on the location of the Group company reporting the revenue. Inter-segment sales are charged at arms’ length prices.
b) Segment revenues and results
Segment results represent operating profit earned by each segment without allocation of finance income and finance costs. This is the measure
reported to the Group’s Board of Directors (“Board of Directors”) and the Executive Committee for the purposes of resource allocation and
assessment of segment performance.
Segment results previously separately reported the impact of certain IFRS adjustments. However, these adjustments are now no longer separately
reported to the Board of Directors and are now reported within the results of each segment.
For the current and prior periods, the Group’s share of results from associates and joint ventures has been allocated to the segments based
on the geographical location of the operations of the associate and joint venture investments. The allocation is in line with how results from
investments in associates and joint ventures are reported to the Board of Directors.
The following is an analysis of the Group’s revenue and results by reportable segment:
UAE
AED’000
International
AED’000
Eliminations
AED’000
Consolidated
AED’000
Revenue
External sales
Inter-segment sales
24,671,114
92,312
7,258,374
173,253
(265,565)
31,929,488
-
Total revenue
24,763,426
7,431,627
(265,565)
31,929,488
5,930,287
1,066,155
31 December 2010
Segment result
Finance income
Finance costs
-
6,996,442
917,578
(384,836)
Profit before tax
Taxation
7,529,184
(100,406)
Profit for the year
7,428,778
31 December 2009
Revenue
External sales
Inter-segment sales
26,364,892
91,004
4,969,495
129,186
(220,190)
31,334,387
-
Total revenue
26,455,896
5,098,681
(220,190)
31,334,387
8,187,054
627,909
-
8,814,963
Segment result
Finance income
Finance costs
583,055
(571,493)
Profit before tax
Taxation
8,826,525
(243,792)
Profit for the year
8,582,733
c) Segment assets
For the purposes of monitoring segment performance and allocating resources between segments, the Group’s Board of Directors and the
Executive Committee monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable
segments. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments.
For the current and prior periods, the Group’s investments in associates and joint ventures have been allocated to the segments based on the
geographical location of the operations of the associate and joint venture investments. The allocation is in line with how investments in associates
and joint ventures are reported to the Board of Directors.
50
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
4.
Segmental information (continued)
c)
Segment assets (continued)
2010
AED’000
2009
AED’000
UAE
International
53,100,425
43,747,329
49,413,330
41,123,246
Total segment assets
Eliminations
96,847,754
(21,240,624)
90,536,576
(19,157,980)
75,607,130
71,378,596
Consolidated total assets
d)
Other segment information
Depreciation and amortisation
2010
AED’000
UAE
International
Eliminations
5.
Operating expenses and federal royalty
a)
Operating expenses (before federal royalty)
Staff costs
Interconnect costs
Depreciation (Note 10,11)
Amortisation (Note 9)
Regulatory expenses
Foreign exchange losses/(gains)
Operating lease rentals
Cost of equipment and other direct costs
Repairs and maintenance
General financial expenses
Other operating expenses
Total operating expenses (before federal royalty)
2009
AED’000
Capital additions
2010
AED’000
2009
AED’000
1,430,204
1,556,419
(1,972)
1,293,283
1,243,190
(1,972)
2,308,920
3,495,172
-
2,512,428
5,151,408
-
2,984,651
2,534,501
5,804,092
7,663,836
2010
AED’000
2009
AED’000
4,126,455
3,759,538
2,179,967
804,684
899,186
192,564
545,877
1,211,389
459,599
1,111,838
3,254,428
3,919,638
3,590,007
1,603,920
930,581
489,731
(62,495)
94,777
753,344
358,067
979,376
1,708,183
18,545,525
14,365,129
b) Federal royalty
In accordance with the Cabinet decision No. 558/1 for the year 1991, the Corporation was required to pay a federal royalty, equivalent to 40%
of its annual net profit before such federal royalty, to the UAE Government for use of federal facilities. With effect from 1 June 1998, Cabinet
decision No. 325/28M for 1998 increased the federal royalty payable to 50%.
The federal royalty has been treated as an operating expense in the consolidated income statement on the basis that the expenses the Corporation
would otherwise have had to incur for the use of the federal facilities would have been classified as operating expenses.
6.
Finance income
Income earned on financial assets is as follows:
Interest on bank deposits and held-to-maturity financial assets
Interest on loans to associated undertakings
Other finance income
2010
AED’000
2009
AED’000
507,192
315,384
95,002
572,078
10,977
917,578
583,055
51
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
7.
Finance costs
Interest on bank overdrafts and loans
Interest payable on other borrowings
Unwinding of discount on payables related to investments and licences
Other finance costs
Total borrowing costs
Less: amounts included in the cost of qualifying assets (Note 10)
2010
AED’000
2009
AED’000
236,270
48,037
57,516
43,013
383,165
9,949
134,754
43,625
384,836
571,493
405,481
(20,645)
580,586
(9,093)
384,836
571,493
All interest charges are generated on the Group’s financial liabilities measured at amortised cost. Borrowing costs included in the cost of qualifying
assets during the year arose on specific and general borrowing pools. Borrowing costs attributable to general borrowing pools are calculated
by applying a capitalisation rate of 6.0% (2009: 7.92%) to expenditure on such assets. Borrowing costs have been capitalised in relation to loans
by certain of the Group’s subsidiaries.
8.
Taxation
2010
AED’000
Current tax (credit) / expense
Deferred tax expense
2009
AED’000
(26,115)
126,521
50,237
193,555
100,406
243,792
a) Current tax
Corporate income tax is not levied in the UAE for telecommunication companies and accordingly the effective tax rate for the Corporation is 0%
(2009: 0%). The table below reconciles the difference between the expected tax expense of nil (2009: nil) (based on the UAE effective tax rate)
and the Group’s tax charge for the year.
Profit before tax
2010
AED’000
2009
AED’000
7,529,184
8,826,525
Tax at the UAE corporation tax rate of 0% (2009: 0%)
Effect of different tax rates of subsidiaries operating in other jurisdictions
(26,115)
50,237
Current tax (credit) / expense for the year
(26,115)
50,237
b) Deferred tax
The following represent the major deferred liabilities recognised by the Group and movements thereon during the current and prior reporting period.
Accelerated tax
depreciation
AED’000
Deferred tax on
overseas earnings
AED’000
Total
AED’000
At 1 January 2009
(Charge)/credit to the consolidated income statement
Exchange differences
326,007
193,555
18,902
-
326,007
193,555
18,902
At 31 December 2009
(Charge)/credit to the consolidated income statement
Exchange differences
538,464
84,271
107,514
42,250
-
538,464
126,521
107,514
At 31 December 2010
730,249
42,250
772,499
52
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
8.
Taxation (continued)
b) Deferred tax (continued)
At the 31 December 2010, the Group has unused tax losses of AED 5,622 million (2009: AED 5,428 million) available for offset against future
profits. A deferred tax asset has been recognised in respect of AED 296 million (2009: AED 652 million) of such losses. No deferred tax asset
has been recognised in respect of the remaining AED 5,326 million (2009: AED 4,776 million) due to the unpredictability of future taxable
profit streams. Included in unrecognised tax losses are losses of AED 3,932 million (2009: AED 2,137 million) that will expire within the next
three years, AED 717 million (2009: AED 1,922 million) that will expire in the next four years and AED nil (2009: AED 717 million) that will expire
within the next five years. Other losses may be carried forward indefinitely.
9.
Goodwill and other intangible assets
Goodwill
AED’000
Other intangible
assets
AED’000
Total
AED’000
Cost
At 1 January 2009
Additions
Acquired on acquisition of subsidiaries
Changes to provisional fair values
Disposals
Exchange differences
2,915,190
3,048
362,635
(120,726)
(32,233)
15,191,932
1,217,485
34,432
(9,006)
64,833
18,107,122
1,220,533
397,067
(120,726)
(9,006)
32,600
At 31 December 2009
3,127,914
16,499,676
19,627,590
Amortisation
At 1 January 2009
Charge for the year
Changes to provisional fair values
Disposals
Exchange differences
-
1,903,404
930,581
33,793
(7,637)
(10,939)
1,903,404
930,581
33,793
(7,637)
(10,939)
At 31 December 2009
-
2,849,202
2,849,202
Carrying amount
At 31 December 2009
3,127,914
13,650,474
16,778,388
Cost
At 1 January 2010
Additions
Disposals
Exchange differences
3,127,914
(7,210)
16,499,676
259,339
(66,777)
(758,353)
19,627,590
259,339
(66,777)
(765,563)
At 31 December 2010
3,120,704
15,933,885
19,054,589
Amortisation
At 1 January 2010
Charge for the year
Disposals
Exchange differences
-
2,849,202
804,684
(4,915)
(144,683)
2,849,202
804,684
(4,915)
(144,683)
At 31 December 2010
-
3,504,288
3,504,288
Carrying amount
At 31 December 2010
3,120,704
12,429,597
15,550,301
Other intangible assets include licences, software and IRUs having net book values of AED 11,624.4 million (2009: AED 12,817 million),
AED 414.2 million (2009: AED 424 million), and AED 391 million (2009: AED 409 million), respectively.
Financial guarantees are secured against licences with a net book value of AED 250.1 million.
53
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
9.
Goodwill and other intangible assets (continued)
a) Analysis of goodwill
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination.
The carrying amount of goodwill (all relating to operations within the Group’s International reportable segment) is allocated as follows:
Atlantique Telecom, S.A. (“AT”)
Etisalat DB Telecom Private Limited
Canar Telecommunications Co. Limited
Etisalat Misr (Etisalat) S.A.E
Zanzibar Telecom Limited (“Zantel”)
Etisalat Lanka (Pvt) Limited
2010
AED’000
2009
AED’000
1,256,802
1,243,337
337,130
32,417
44,896
206,122
1,268,474
1,242,530
337,130
28,762
44,896
206,122
3,120,704
3,127,914
b) Impairment
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable
amounts of the CGUs are determined from value-in-use calculations. The Group has conducted a sensitivity analysis on the impairment test
of each of the CGU’s carrying value.
The key assumptions for the value in use calculations are:
(i)
Discount rates
The discount rates applied to the cash flows of each of the Group’s operations are based on an external third party study conducted by the
Group’s bankers. The study utilised market data and information from comparable listed mobile telecommunications companies and where
available and appropriate, across a specific territory. The discount rates use a forward looking equity market risk premium and range between
13.1% and 19.0% (2009: 8% and 22%).
(ii) Long term cash flows
The Group prepares cash flow forecasts derived from the most recent annual business plan approved by management for each location for
the next five years. These cash flows are sometimes extrapolated beyond this period, up to a maximum of ten years, based on estimated growth
rates of between 2.0% and 8.6% (2009: 4% and 5%).This rate does not exceed the average long-term growth rate for the relevant markets.
Cash flows incorporate management fees to be realised from each location.
(iii) Capital expenditure
The cash flow forecasts for capital expenditure are based on past experience and include the ongoing capital expenditure required to roll out
networks in emerging markets, to provide enhanced voice and data products and services and to meet the population coverage requirements
of certain licences of the Group. Capital expenditure includes cash outflows for the purchase of property, plant and equipment and
computer software.
54
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
10. Property, plant and equipment
Buildings
AED’000
Plant and
equipment
AED’000
Motor vehicles,
computers,
furniture
AED’000
Assets under
construction
AED’000
Total
AED’000
Cost
At 1 January 2009
Additions
Acquisition of subsidiaries
Transfers
Transfer - investment property
Exchange differences
Disposals
3,268,436
7,946
921
80,215
5,400
8,720
(1,604)
18,571,153
583,876
483,992
2,181,289
(464)
(263,247)
1,755,462
32,056
23,512
287,060
1,920
(45,032)
3,826,019
4,847,077
82,872
(2,548,564)
21,978
(38,271)
27,421,070
5,470,955
591,297
5,400
32,154
(348,154)
At 31 December 2009
3,370,034
21,556,599
2,054,978
6,191,111
33,172,722
Accumulated depreciation
At 1 January 2009
Charge for the year
Transfer - investment property
Exchange differences
Disposals
1,721,742
165,212
(7,500)
(677)
(4,134)
11,295,301
1,208,367
1,568
(198,400)
1,303,058
230,341
(1,431)
(126,111)
-
14,320,101
1,603,920
(7,500)
(540)
(328,645)
At 31 December 2009
1,874,643
12,306,836
1,405,857
-
15,587,336
Carrying amount
At 31 December 2009
1,495,391
9,249,763
649,121
6,191,111
17,585,386
Cost
At 1 January 2010
Additions
Transfers
Transfer - investment property
Exchange differences
Disposals
3,370,034
264,014
120,830
(7,313)
(42,396)
21,556,599
1,556,784
1,857,382
(242,654)
(289,963)
2,054,978
326,901
281,638
(82,648)
(62,015)
6,191,111
3,661,068
(2,403,034)
12,595
-
33,172,722
5,544,753
120,830
(320,020)
(394,374)
At 31 December 2010
3,705,169
24,438,148
2,518,854
7,461,740
38,123,911
Accumulated depreciation
At 1 January 2010
Charge for the year
Transfer - investment property
Impairment
Exchange differences
Disposals
1,874,643
157,385
12,060
(1,784)
(339)
12,306,836
1,697,618
(55,270)
(243,272)
1,405,857
318,844
(21,844)
(62,015)
59,833
-
15,587,336
2,173,847
12,060
59,833
(78,898)
(305,626)
At 31 December 2010
2,041,965
13,705,912
1,640,842
59,833
17,448,552
Carrying amount
At 31 December 2010
1,663,204
10,732,236
878,012
7,401,907
20,675,359
The carrying amount of the Group’s buildings includes a nominal amount of AED 1 (2009: AED 1) in relation to land granted to the Group by
the Government. There are no contingencies attached to this grant and as such no additional amounts have been included in the consolidated
income statement or the consolidated statement of financial position in relation to this.
An amount of AED 20.6 million (2009: AED 9 million) is included in property, plant and equipment on account of capitalisation of borrowing
costs for the year.
Borrowings are secured against property, plant and equipment with a net book value of AED 3,910 million (2009: AED 2,511 million).
55
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
11.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at depreciated cost and included separately
under non-current assets in the consolidated statement of financial position.
AED’000
Cost
At 31 December 2008
Transfer to property, plant and equipment
181,000
(5,400)
At 31 December 2009
175,600
Accumulated depreciation
At 31 December 2008
Charge for the year
Transfer to property, plant and equipment
5,300
7,772
(272)
At 31 December 2009
12,800
Carrying amount
At 31 December 2009
162,800
Cost
At 31 December 2009
Transfer to property, plant and equipment
At 31 December 2010
Accumulated depreciation
At 31 December 2009
Charge for the year
Transfer to property, plant and equipment
175,600
(120,830)
54,770
12,800
6,120
(12,060)
At 31 December 2010
6,860
Carrying amount
At 31 December 2010
47,910
Fair value
At 31 December 2010
63,233
At 31 December 2009
212,307
The fair value of the Group’s investment property at 31 December 2010 has been arrived at on the basis of a valuation carried out by internal
valuers that are not independent from the Corporation.
The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to
AED 15.0 million (2009: AED 38.1 million).
Direct operating expenses arising on the investment property in the period amounted to AED 5.2 million (2009: AED 4.6 million).
56
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
12. Subsidiaries
The Group’s principal subsidiaries at 31 December 2010 were as follows:
Name
Country of incorporation
Principal activity
Emirates Telecommunications and Marine Services FZE
Emirates Cable TV and Multimedia LLC
Etisalat International Pakistan LLC
Jebel Ali Free Zone, Dubai
UAE
UAE
E-Marine PJSC
EDCH FZE
Etisalat Services FZE
Etisalat Services Holding LLC
Etisalat Software Solutions (Private) Limited
Zanzibar Telecom Limited
Canar Telecommunications Co. Limited
Etisalat International Nigeria Limited
UAE
Jebel Ali Free Zone, Dubai
Jebel Ali Free Zone, Dubai
Abu Dhabi
India
Tanzania
Republic of Sudan
Jebel Ali Free Zone, Dubai
Etisalat International Indonesia Limited
Etisalat Afghanistan
Etisalat DB Telecom Private Limited
Etisalat Misr S.A.E
Atlantique Telecom S.A.
Etisalat Benin
Etisalat Lanka (Pvt) Limited**
Jebel Ali Free Zone, Dubai
Afghanistan
India
Egypt
Cote d’Ivoire
Benin
Sri Lanka
Telecommunications services
Cable television services
Holds investment in Pakistan
Telecommunication Co. Ltd
Submarine cable activities
Data management services
Management services
Infrastructure services
Technology solutions
Telecommunications services
Telecommunications services
Holds investment in Emerging Market
Telecommunications Services B.V.
Holds investment in PT XL Axiata TBK
Telecommunications services
Telecommunications services
Telecommunications services
Telecommunications services
Telecommunications services
Telecommunications services
Percentage
shareholding
100%
100%
90%
100%
100%
100%
100%
100%
65%
89%
100%
100%
100%
44.7%*
66%
100%
100%
100%
* The Group accounts for the investment in Etisalat DB Telecom Private Limited as a subsidiary as it exercises control.
** Tigo Private Limited was renamed Etisalat Lanka (Pvt) Limited during the course of the year.
13. Investments in associates
a)
Associated undertakings at 31 December 2010
Name
Country of
incorporation
Principal activity
Pakistan Telecommunication Company Limited (“PTCL”)
Etihad Etisalat Company (“Mobily”)
Thuraya Telecommunications Company PJSC (“Thuraya”)
PT XL Axiata Tbk (“PEPT”)
Emerging Markets Telecommunications Services Limited (“EMTS”)
Pakistan
Saudi Arabia
UAE
Indonesia
Nigeria
Telecommunications services
Telecommunications services
Satellite communication services
Telecommunications services
Telecommunications services
Percentage
shareholding
26%
27%
28%
13%
40%
The latest set of consolidated financial statements used to assess the carrying value of the investment in PTCL is for the year ended 30 June 2010.
The remaining period for PTCL has been assessed using unaudited interim consolidated financial information.
b)
Movement in investments in associates
AED’000
Net book amount at 1 January 2009
Dividends
Share of results
15,162,091
(223,732)
684,131
Net book amount at 31 December 2009
Share of results
Dividends
Loss on dilution of shareholding
Reclassification of loan
15,622,490
1,385,073
(335,026)
(149,866)
(451,639)
Net book amount at 31 December 2010
16,071,032
During the year the Group recognised a loss on dilution of its shareholding in PEPT of AED 149.9 million.
57
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
13. Investments in associates (continued)
b) Movement in investments in associates (continued)
In the quarter ended 31 March 2010, the capital structure of Emerging Market Telecommunications Services BV (“EMTS BV”) was finalised which
resulted in the presentation of an amount of AED 451.6 million under loans to associates. The loan carries an effective interest rate of 14.22% p.a.
Share of losses from EMTS amounting to AED 136 million have been offset against loans due from associates as the investment in associate
has already been fully written down by prior year losses.
c)
Aggregated amounts relating to associates
2010
AED million
2009
AED million
62,601
(38,100)
58,280
(35,902)
Net assets in associates
24,501
22,378
Total revenue
28,771
23,041
4,631
3,303
Total assets
Total liabilities
Total profit of associates
The aggregation above comprises the results and financial position of all associated undertakings as at 31 December 2010, with the exception
of PTCL whose results and financial position for the year ended 30 June 2010 have been included.
d) Market value of associates
The shares of two of the Group’s associated undertakings are quoted on public stock markets, the market value of the Group’s shareholding
is as follows:
Mobily
PEPT*
2010
AED’000
2009
AED’000
10,407,538
2,400,895
8,225,386
854,398
* Although the shares of PEPT are listed, trading in the shares is minimal, therefore in management’s view, the market value does not represent the fair value to the Group.
e)
Significant influence judgements
(i)
PTCL
The Corporation, through its majority owned subsidiary Etisalat International Pakistan LLC (“EIP”), owns the entire 1.326 billion Class B shares
of PTCL. These Class B shares represent 26% of PTCL’s issued capital and, in accordance with PTCL’s Articles of Association, provide the Corporation
with 53% of the voting rights. Under the terms of the Shareholders Agreement between EIP and the Government of Pakistan (“GOP”), EIP has
the right to appoint five of the nine members of the Board of Directors of PTCL in addition to the appointment of certain key management
personnel. However, management believes that there are certain control impediments, including but not limited to restrictions on the Corporation’s
financial and operating decision making ability, and because of these, PTCL has been accounted for as an associate using the equity method.
Management believes that some or all of these control impediments may be alleviated in the future which may result in the consolidation of PTCL.
(ii) PEPT
The Corporation holds 13.31% (2009: 13.31%) of the paid-up capital of PEPT. The Corporation exercises significant influence over PEPT by virtue
of its representation on the Board of Commissioners and accordingly, it is accounted for as an associate.
14. Investments in joint ventures
a)
Joint ventures at 31 December 2010
Name
Country of incorporation
Principal activity
Ubiquitous Telecommunications Technology LLC
UAE
Smart Technology Services DWC – LLC
DWC Free Zone, Dubai, UAE
Installation and management
of network systems
ICT services
58
Percentage shareholding
50%
50%
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
14. Investments in joint ventures (continued)
b)
Movement in investments in joint ventures
2010
AED’000
2009
AED’000
Net book amount at 1 January
Share of results
99,921
(5,884)
102,001
(2,080)
Net book amount at 31 December
94,037
99,921
2010
AED’000
2009
AED’000
Aggregated amounts relating to joint ventures
Group’s share of current assets
Group’s share of non-current assets
Group’s share of current liabilities
31,570
73,969
(11,502)
40,445
64,734
(5,258)
Group’s share of net assets in joint ventures
94,037
99,921
Group’s share of income in joint ventures
Group’s share of expenditure in joint ventures
26,642
(32,526)
6,112
(8,192)
Group’s share of results in joint ventures (loss)
(5,884)
(2,080)
c)
Aggregated amounts relating to joint ventures
15. Other investments
Equity
investments
AED’000
Other
investments
AED’000
335,289
10,706
-
At 31 December 2009
Additions
Investment revaluation
At 31 December 2010
At 1 January 2009
Additions
Investment revaluation
Proceeds on maturity of investment
Bonds and
Sukuks
AED’000
Total
AED’000
46,609
9,053
-
220,440
(128,590)
602,338
9,053
10,706
(128,590)
345,995
341
55,662
23,292
-
91,850
-
493,507
23,292
341
346,336
78,954
91,850
517,140
Equity investments represent investments in listed equity securities that present the Group with opportunity for return through dividend income
and fair value gains. These shares are not held for trading and accordingly are classified as available-for-sale. The fair values of all equity securities
are based on quoted market prices.
Other investments represent non-quoted equity investments including those made by Atlantique Telecom S.A. amounting to AED 61.5 million
(2009: AED 54.3 million). These investments are carried at cost as they are unquoted equity instruments that do not have a quoted market price
in an active market and whose fair value cannot be reliably measured.
On 26 November 2010, the Corporation acquired an 8.8% shareholding in SoftAtHome SA, a company focussed on next generation residential
digital connectivity, for AED 12.5 million.
Due to a conflict between a subsidiary of AT (Telecel Faso) and its minority shareholder, AT has temporarily lost control over the subsidiary based
on the decision made by the jurisdiction authorities. Accordingly, this has been deconsolidated from the date AT ceased to exercise control.
The matter is currently under legal dispute.
Sukuks are bonds structured to conform with the principles of Islamic Sharia law and are classified as held-to-maturity financial assets.
At 31 December 2010, the market value of these investments was AED 84.0 million (2009: AED 78.9 million).
59
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
16. Related party transactions and balances
Transactions between the Corporation and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its associates are disclosed below.
a) Federal Government and state controlled entities
As stated in note 1, in accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the
Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government.
The Group provides telecommunication services to the Federal Government (including Ministries and local bodies). These transactions are at
normal commercial terms. The credit period allowed to Government customers ranges from 90 to 120 days. At 31 December 2010, trade receivables
include an amount of AED 297 million (2009: AED 398 million), receivable from Federal Ministries and local bodies. See Note 5 for disclosure
of the royalty payable to the Federal Government of the UAE.
In accordance with IAS 24 (revised 2009) Related Party Disclosures the Group has elected not to disclose transactions with the UAE Federal
Government and other entities over which the Federal Government exerts control, joint control or significant influence. The nature of the
transactions that the Group has with such related parties is the provision of telecommunication services.
b)
Joint ventures and associates
Associates
Trading transactions
Telecommunication services – sales
Telecommunication services – purchases
Management and other services
Net amount due from related parties
Advances to associates
Loans to associates
Interest income (Note 6)
Amount due from related party
Joint ventures
2010
AED million
2009
AED million
2010
AED million
2009
AED million
220.1
383.5
421.4
246.3
269.8
414.5
313.7
347.6
2.1
1.1
0.6
-
912.3
-
-
315.4
3,344.9
-
-
-
Sales to related parties comprise management fees and the provision of telecommunication products and services (primarily voice traffic and
leased circuits) by the Group. Purchases relate exclusively to the provision of telecommunication products and services by associates to the Group.
The principal management and other services provided to the Group’s associates are set out below.
(i)
Etihad Etisalat Company
Pursuant to the Communications and Information Technology Commission’s (CITC) licensing requirements, EEC (then under incorporation)
entered into a management agreement (“the Agreement”) with the Corporation as its operator from 14 August 2004. Amounts invoiced by
the Corporation relate to annual management fees, fees for staff secondments and other services provided under the Agreement. The term
of the Agreement is for a period of seven years and can be automatically renewed for successive periods of five years unless the Corporation
serves a 12 month notice of termination or EEC serves a 6 month notice of termination prior to the expiry of the applicable period.
(ii) Thuraya Telecommunications Company PJSC
The Corporation provides a primary gateway facility to Thuraya including maintenance and support services. The Corporation receives annual
income from Thuraya in respect of these services.
(iii) Pakistan Telecommunication Company Limited
Pursuant to the shareholders agreement entered into between Etisalat International Pakistan and the Government of Pakistan dated 12 April 2006,
the Corporation entered into an agreement for the provision of technical services and know-how (“the PTCL Agreement”) with PTCL with effect
from 10 October 2006. Under the terms of the PTCL Agreement, the Corporation is entitled to an annual service fee of 3.5% of the gross consolidated
revenue of PTCL for that year. The Agreement is valid for a period of 5 years and limits the fee to US$ 50 million per annum.
(iv) Emerging Markets Telecommunications Services Ltd
Amounts invoiced by the Corporation relate to annual management fees, fees for staff secondments and other services.
As described in note 13, during the year the Corporation reclassified an amount of AED 451.6 million from investments in associates to loans
to associates following a capital restructuring of EMTS B.V. This amount has been added to the existing balance due from the company in
respect of the on-going financing of its network development. The loan bears interest at a rate of 14.2% per annum. The Corporation advanced
an additional loan of AED 1.7 billion to EMTS B.V. in the course of the year at the same interest rate.
60
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
16. Related party transactions and balances (continued)
c) Remuneration of key management personnel
The remuneration of the Board of Directors, who are the key management personnel of the Group, is set out below in aggregate for the category
specified in IAS 24 Related Party Disclosures.
2010
AED’000
2009
AED’000
28,261
51,123
2010
AED’000
2009
AED’000
Amounts receivable under finance leases:
Minimum lease payments:
Within one year
In the second to fifth years inclusive
13,294
13,294
13,294
26,588
Less: unearned finance income
26,588
(1,835)
39,882
(3,614)
Present value of minimum lease payments receivable
24,753
36,268
Present value of minimum lease payments:
Within one year (current)
In the second to fifth years inclusive (non-current)
12,080
12,673
11,515
24,753
24,753
36,268
Short-term benefits
17.
Finance lease receivables
The Group holds a finance lease arrangement in relation to building and installations in the UAE leased out to Thuraya Telecommunications
Company PJSC, an associate of the Group.
The interest rate inherent in the leases is fixed at the contract date for all of the lease term. The average effective interest rate contracted
approximates to 4.9% per annum (2009: 4.9% per annum). The directors consider that the carrying amount of the Group’s finance lease
receivables approximates to their fair value.
18. Inventories
Subscriber equipment
Maintenance and consumables
2010
AED’000
2009
AED’000
232,810
83,451
171,482
100,928
316,261
272,410
2010
AED’000
2009
AED’000
19. Trade and other receivables
Amount receivable for the services rendered
Allowance for doubtful debts
5,287,329
(1,217,695)
4,883,612
(865,995)
Net trade receivables
Amounts due from other telecommunication administrations
Prepayments
Accrued income
Other debtors
4,069,634
2,147,034
303,338
639,507
1,288,569
4,017,617
2,185,098
293,675
206,254
935,658
8,448,082
7,638,302
61
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
19. Trade and other receivables (continued)
The Group’s credit period ranges between 30 and 120 days (2009: 30 and 120 days).
The Group provides for all past due trade receivables and as such there were no past due receivables not considered for impairment as at
31 December 2010. Out of the past due receivables of AED 3,043 million (2009: AED 2,900 million), the Group provided for an amount of
AED 1,218 million (2009: AED 866 million) based on its assessment of the credit quality of the amounts due. It was assessed that a portion
of the past due receivables is expected to be recovered.
2010
AED’000
Movement in allowance for doubtful debts
Opening balance as at 1 January
Net increase/(decrease) in allowance for doubtful debts
Closing balance as at 31 December
2009
AED’000
865,995
351,700
1,318,983
(452,988)
1,217,695
865,995
No interest is charged on the receivables. With respect to the amount receivable from the services rendered the Group holds AED 344 million
(2009: AED 295 million) of collateral in the form of cash deposits from customers.
Within the Trade and other receivables balance for the year ended 31 December 2009, trade receivables amounting to AED 753 million have
been reclassified from other debtors to amounts receivable for services rendered. The reclassification has been performed to facilitate a direct
comparison with balances in the current period and has no impact on the total balance of trade and other receivables in the statement of financial
position for the period.
20. Cash and cash equivalents
Cash and cash equivalents
2010
AED’000
2009
AED’000
10,276,744
11,309,185
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. These are denominated
primarily in UAE Dirham, with financial institutions and banks. The carrying amount of these assets approximates to their fair value.
Interest is earned on these deposits at prevailing market rates. Cash and cash equivalents include an amount of AED 2,633 million
(2009: AED 1,892 million) representing bank and cash balances of the Corporation’s subsidiaries maintained overseas.
21. Trade and other payables
Included within current liabilities:
Federal royalty
Trade payables
Amounts due to other telecommunication administrations
Deferred revenue
Other payables
Included within non-current liabilities:
Trade payables
Other payables
2010
AED’000
2009
AED’000
7,630,750
2,441,976
1,657,874
1,216,437
7,131,177
8,836,346
2,205,041
1,484,563
987,913
5,875,374
20,078,214
19,389,237
1,046,699
43,070
1,796,728
321,561
1,089,769
2,118,289
Federal royalty for the year ended 31 December 2010 is paid on a monthly basis to the Ministry of Finance and Industry, UAE after the first
quarter of 2011.
62
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
22. Borrowings
Borrowings comprise the following:
Bank borrowings
Other borrowings
Disclosed as:
Due for settlement within 12 months
Due for settlement after 12 months
2010
AED’000
2009
AED’000
4,378,036
2,021,634
2,915,257
1,585,834
6,399,670
4,501,091
1,195,071
5,204,599
1,079,387
3,421,704
6,399,670
4,501,091
Analysis of total borrowings by currency
31 December 2010
Bank borrowings
Other borrowings
31 December 2009
Bank borrowings
Other borrowings
AED and US$
AED’000
Egyptian Pounds
AED’000
Euro
AED’000
Indian Rupees
AED’000
Total
AED’000
1,423,956
1,465,496
1,538,601
556,006
784,608
-
630,871
132
4,378,036
2,021,634
2,889,452
2,094,607
784,608
631,003
6,399,670
1,632,291
1,015,282
615,686
525,300
667,280
-
45,252
2,915,257
1,585,834
2,647,573
1,140,986
667,280
45,252
4,501,091
a) Bank borrowings
The carrying value and estimated fair value of the Group’s bank borrowings (measured at amortised cost) are as follows:
Fair value
Bank overdrafts
Bank loans
Carrying value
2010
AED’000
2009
AED’000
2010
AED’000
2009
AED’000
85,347
4,608,105
85,916
3,067,850
85,347
4,292,689
85,916
2,829,341
4,693,452
3,153,766
4,378,036
2,915,257
The fair values of the Group’s bank borrowings are calculated using discounted cash flows using an appropriate discount factor that includes
credit risk.
(i)
Bank overdrafts
The majority of the overdraft balance (AED 72.0 million, 2009: nil) is held by the Corporation’s subsidiary, Etisalat Lanka (Pvt) Limited. Zantel
has an amount of AED 2.8 million (2009: AED 24.6 million) representing a bank overdraft which is utilised for the purpose of non-operating
activities. The remainder of the balance AED 10.5 million (2009: AED 61.3 million) relates to overdraft balances held by Atlantique Telecom.
(ii) Bank loans
Borrowings as at 31 December 2010 are held by the Group’s subsidiary entities, as discussed below.
Misr
Etisalat Misr signed an agreement for syndicated interest bearing loans on 13 December 2007, for:
•
•
•
a long term loan facility amounting to LE 2 billion (AED 1.3 billion) (Portion A);
a revolving credit facility amounting to LE 1.0 billion (AED 0.6 billion) (Portion B); and
a long term loan facility amounting to US$ 300 million (AED 1,102 million) (Portion C).
The syndicated loan bears interest at mid-corridor plus 0.5% for the Egyptian Pound Portion and LIBOR plus 0.75% for the US Dollar Portion.
At 31 December 2010 Etisalat Misr had utilised an amount of AED 1,519.5 million (2009: AED 595.4 million) from Portion A and B and AED 1,102 million
(2009: AED 1,102 million) from Portion C, which are included in non-current borrowings. The syndicated loan is secured by a commercial mortgage
over Etisalat Misr’s property, plant and equipment, a pledge over its bank accounts, real estate mortgage and an insurance assignment.
63
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
22. Borrowings (continued)
a)
Bank borrowings (continued)
(ii)
Bank loans (continued)
Misr (continued)
On 21 December 2010, Etisalat Misr re-financed and replaced the above facility with a new syndicated interest bearing loan facility amounting
to LE 7.2 billion (AED 4.6 billion). As per the terms of the new loan facility, the earliest repayment date is 31 March 2012 for the long term loan
facilities and 31 December 2015 for the revolving credit facility. The new syndicated loan is secured by a commercial mortgage over Etisalat
Misr’s property, plant and equipment and intangible assets.
Portion
A - Long term loan facility
B – Long term loan facility
C – Revolving credit facility
Currency
Total facility
Total facility
AED
EGP
USD
EGP
3,000,000,000
300,000,000
2,500,000,000
1,899,000,000
1,102,200,000
1,582,500,000
Interest rate
Mid-corridor +1.4%
LIBOR + 2.9%
Mid-corridor +1.4%
Etisalat Misr also has a loan of AED 19.1 million (2009: AED 18.7 million) which bears interest at a fixed rate of 10.0% and is repayable in 2012.
Zantel
Zantel has a number of loans totalling AED 244.4 million (2009: AED 499.3 million), of which AED 29.3 million (2009: 271.7 million) is due within
one year. Loans obtained at fixed rates carry interest at a rate of 14.0% per annum (2009: 14.0%) (reducing balance), whereas the loans obtained
at variable rates carry interest ranging from US LIBOR plus 4.5% to 5.5% per annum (2009: 4.5% to 5.5% per annum). Bank borrowings are
secured by a fixed and floating charge over the company’s property, plant and equipment, both present and future, including a charge over
the escrow accounts.
Atlantique SA
Atlantique Telecom has Euro denominated loans of AED 774.1 million (2009: AED 667.2 million). During the year Atlantique Telecom entered
into a long term loan of AED 64.1 million which bears a variable rate of interest of LIBOR +3.5%, of which AED 59.7 million is due for repayment
after one year. At 31 December 2010 medium term loans were AED 77.1 million (2009: AED 30.8 million), which are subject to fixed rates
of interest of 9.0% - 10.0%. Short term loans represent AED 657.7 million (2009: AED 559.0 million) which are repayable in within one year.
AED 607.6 million of these loans are subject to a floating interest rate of EURIBOR plus 8.72% with the remaining short term loans subject to
fixed rates of interest ranging from 9.0% – 11.0%. The remaining borrowings comprise overdrafts of AED 10.5 million (2009: AED 61.3 million)
which bears a fixed rate of interest of 10% - 14.5% (2009: 11.0% – 14.8%).
Etisalat DB
During the year, Etisalat DB entered into a long term loan of AED 630.9 million, which bears a fixed interest rate of 11.4% and is repayable in 2012.
Maturity of bank borrowings
The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
After the fifth year
2010
AED’000
2009
AED’000
806,787
3,870,789
74,211
39,610
956,360
2,269,330
-
4,791,397
3,225,690
The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows.
The weighted average interest rate paid on bank borrowings during the year was 7.10% (2009: 8.99%).
The US$ borrowings are aggregated with AED because the AED is pegged to the US$. At 31 December 2010, the Group had available AED 1,148.5 million
(2009: AED 1,126.9 million) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.
64
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
22. Borrowings (continued)
b) Other borrowings
The carrying value and estimated fair value of the Group’s other borrowings (measured at amortised cost) are as follows:
Fair value
Loans from non-controlling interests
Vendor financing
Other
Advances from non-controlling interests
Carrying value
2010
AED’000
2009
AED’000
2010
AED’000
2009
AED’000
593,740
896,366
8,754
574,350
411,940
44,370
547,722
873,277
8,453
525,300
414,307
45,252
1,498,860
1,030,660
1,429,452
984,859
592,182
600,975
2,021,634
1,585,834
The fair value of advances from non-controlling interests is not equivalent to its carrying value due to the fact that it is non-interest bearing.
However, as there is no repayment date, a fair value cannot be reasonably determined.
Maturity of other borrowings
The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
2010
AED’000
2009
AED’000
384,989
904,488
841,648
56,940
1,025,360
600,975
2,131,125
1,683,275
The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The table includes both interest and principal cash flows. The weighted average interest rate paid during the
year on other borrowings was 4.14% (2009: 4.13%).
(i)
Loans from non-controlling interests
Loans from non-controlling interests includes the minority share of a shareholders’ loan advanced to Etisalat Misr amounting to AED 547.7 million
(2009: AED 525.3 million). This loan carries interest at a fixed rate of 10.0% per annum. Of the total amount outstanding AED 285.1 million
is due for repayment within one year with the remainder due in 2012.
(ii) Advances from non-controlling interests
Advances from non-controlling interests of AED 592.2 million (2009: AED 601.0 million) represents advances paid by the minority shareholder
of Etisalat International Pakistan LLC towards the Group’s acquisition of its 26% stake in PTCL, net of repayments. The amount is interest free,
does not have any fixed repayment terms, and is not repayable within 12 months of the statement of financial position date and accordingly,
the full amount is carried in non-current liabilities.
(iii) Vendor financing
Vendor financing includes AED 410.6 million (2009: AED 403.1 million) in respect of Etisalat Misr relating to the acquisition of network equipment.
The financing is due to expire in 2012 and interest is payable at a variable rate of LIBOR +2.1%. The remaining vendor financing balance relates
to network equipment acquired by Etisalat Afghanistan during the year. At the balance sheet date, AED 462.6 million was outstanding, which
bears a fixed rate of interest of 3.6% and is repayable in instalments over a period of five years.
65
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
23. Payables related to investments and licences
31 December 2010
Investments
Etisalat International Pakistan LLC
Licences
Republic of Benin
31 December 2009
Investments
Etisalat International Pakistan LLC
Licences
Republic of Benin
Current
AED’000
Non-current
AED’000
Total
AED’000
2,936,654
-
2,936,654
19,363
19,841
39,204
2,956,017
19,841
2,975,858
2,882,060
-
2,882,060
20,901
42,318
63,219
2,902,961
42,318
2,945,279
According to the terms of the shareholders’ agreement between Etisalat International Pakistan LLC and the Government of Pakistan (“GOP”)
payments of AED 6,612 million (2009: AED 6,612 million) have been made to GOP with the balance of AED 2,937 million (2009: AED 2,937 million)
to be paid in 6 equal semi-annual instalments of AED 489.5 million each. The amounts payable are being withheld pending completion of certain
conditions in the shareholders’ agreement.
All amounts payable on acquisitions are financial liabilities measured at amortised cost and are mostly denominated in either US$ or AED and
thus do not result in significant exchange rate risk.
24. Obligations under finance leases
Minimum lease payments
Present value of minimum lease payments
2010
AED’000
2009
AED’000
2010
AED’000
2009
AED’000
Amounts payable under finance leases
Within one year
In the second to fifth years inclusive
After five years
55,615
199,975
45,130
58,267
139,077
-
107,277
129,778
1,807
56,709
124,781
-
Less: future finance charges
300,720
(61,858)
197,344
(15,854)
238,862
-
181,490
-
Present value of lease obligations
238,862
181,490
238,862
181,490
66,725
172,137
56,709
124,781
238,862
181,490
Analysed as:
Amounts due within 12 months
Amounts due after 12 months
It is the Group’s policy to lease certain of its plant and machinery under finance leases. The average lease term is 2 years (2009: 2 years). For
the year ended 31 December 2010, the average effective borrowing rate was 12.6% (2009: 5.1%). The fair value of the Group’s lease obligations
is approximately equal to their carrying value.
66
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
25. Provisions
Asset retirement
obligations
AED’000
Retirement
provision
AED’000
At 1 January 2009
Acquisition of a subsidiary
Additional provision in the year
Utilisation of provision
23,711
9,469
6,711
-
1,231
494
-
At 31 December 2009
Additional provision in the year
Utilisation of provision
Release of provision
Reclassification
Unwinding of discount
39,891
19,684
(8)
484
1,725
(1,725)
-
At 31 December 2010
60,051
-
Other
AED’000
Total
AED’000
5,584
286
67,895
(15,401)
30,526
9,755
75,100
(15,401)
58,364
123,380
28,710
-
99,980
143,064
(8)
(1,725)
28,710
484
210,454
270,505
181,961
88,544
Included in current liabilities
Included in non-current liabilities
270,505
Asset retirement obligations relate to certain assets held by Atlantique Telecom and Etisalat Lanka (Pvt) Limited that will require restoration at
a future date that has been approximated to be equal to the end of the useful economic life of the assets. There are no expected reimbursements
for these amounts.
26. Financial instruments
Capital management
The Group’s capital structure is as follows:
2010
AED’000
2009
AED’000
(4,378,036)
(2,021,634)
10,276,744
(2,915,257)
(1,585,834)
11,309,185
Net funds
Total equity
3,877,074
(42,565,325)
6,808,094
(40,389,298)
Capital
(38,688,251)
(33,581,204)
Bank borrowings
Other borrowings
Cash and cash equivalents
The capital structure of the Group consists of bank borrowings disclosed in note 22, cash and cash equivalents and total equity comprising
share capital, reserves and retained earnings as disclosed in notes 20, 28 and 29, respectively.
The Group monitors the balance between equity and debt financing and establishes internal limits on the maximum amount of debt relative
to earnings. The limits are assessed, and revised as deemed appropriate, based on various considerations including the anticipated funding
requirements of the Group and the weighted average cost of capital. The overall objective is to maximise returns to its shareholders through
the optimisation of the net debt and equity balance.
67
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
26. Financial instruments (continued)
Categories of financial instruments
The Group’s financial assets and liabilities consist of the following at 31 December 2010:
Financial assets
Loans and receivables, held at amortised cost:
Advances to/due from associates and joint ventures (Note 16)
Finance lease receivables (Note 17)
Trade and other receivables, excluding prepayments (Note 19)
Available-for-sale financial assets (Note 15)
Held-to-maturity investments (Note 15)
Cash and cash equivalents (Note 20)
Financial liabilities
Other financial liabilities held at amortised cost:
Trade and other payables, excluding deferred revenue (Note 21)
Borrowings (Note 22)
Payables related to investments and licences (Note 23)
Obligations under finance leases (Note 24)
Derivative financial instruments (see below)
2010
AED’000
2009
AED’000
3,224,046
24,753
8,144,744
1,243,448
36,268
7,344,627
11,393,543
425,290
91,850
10,276,744
8,624,343
401,657
91,850
11,309,185
22,187,427
20,427,035
19,951,546
6,399,670
2,975,858
238,862
382,145
20,519,613
4,501,091
2,945,279
181,490
333,134
29,948,081
28,480,607
Derivative financial instruments represent the fair value of a written put option over the equity of an overseas subsidiary.
Financial risk management objectives
The Group’s corporate finance function has overall responsibility for monitoring the domestic and international financial markets and managing
the financial risks relating to the operations of the Group. Any significant decisions about whether to invest, borrow funds or purchase derivative
financial instruments are approved by either the Executive Committee or the Board of Directors of either the Corporation or of the individual
subsidiary. The Group’s risk includes market risk, credit risk and liquidity risk.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and price risks on
equity investments.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk during the year.
Foreign currency risk
The Group has limited transactional exposure to exchange rate risk as it generally enters into contracts in the functional currency of the entity.
These currencies include Indian Rupee, Nigerian Naira, Egyptian Pounds, Pakistani Rupee, Indonesian Rupee and CFA Francs. The Group also
enters into contracts in USD in the UAE and in Euros as the currencies of these countries (AED and CFA Francs, respectively) are pegged to the
USD and Euro and therefore result in limited exposure. At 31 December 2010, the Group did have financial assets and liabilities in its Egyptian
and Indian subsidiaries that were in USD and other limited financial liabilities in Tanzania that are in currencies other than its respective functional
currency. In instances where the Group has a foreign currency transactional exposure, it considers whether to purchase derivative financial
instruments to manage the exposure and reassess this conclusion based on the level of exposure. The Group’s exposure to transactional exchange
rate risk has not historically resulted in material impacts on profitability.
In addition to transactional foreign currency exposure, the Group is exposed to risk upon the translation of the Group’s foreign subsidiaries
into AED. The Group recognises the impact of the translation as a movement in equity.
Foreign currency sensitivity
The following table presents the Group’s sensitivity to a 10 per cent change in the Dirham against the Egyptian Pound, the Indian Rupee and
the Nigeria Naira. These three currencies account for a significant portion of profits and losses recognised in the Group’s financial statements
in respect of subsidiaries and associates whose functional currency is not the Dirham. The impact has been determined by assuming a strengthening
in the foreign currency exchange of 10% occurred at the beginning of the period and was held constant throughout the reporting period.
A positive number indicates an increase in profit and equity, if the AED /USD were to strengthen against the foreign currency.
68
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
26. Financial instruments (continued)
Market risk (continued)
Foreign currency sensitivity (continued)
Increase in profit/(loss) for the year and increase/(decrease) in equity
Egyptian pounds
Indian Rupees
Nigerian Naira
2010
AED’000
2009
AED’000
33,433
(45,475)
(13,596)
(45,525)
(580)
(28,308)
The Group’s sensitivity to foreign currency has increased during the year owing to the growth and roll-out of its operations in Nigeria and India.
Interest rate risk
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates, detailed at note 22.
The Group monitors the market interest rates in comparison to its current borrowing rates and determines whether or not it believes it should
take action related to the current interest rates. This includes a consideration of the current cost of borrowing, the projected future interest
rates, the cost and availability of derivate financial instruments that could be used to alter the nature of the interest and the term of the debt
and, if applicable, the period for which the interest rate is currently fixed.
Interest rate sensitivity
Based on the borrowings outstanding at 31 December 2010, if interest rates had been 2% higher or lower during the year and all other variables
were held constant, the Group’s net profit and equity would have decreased or increased by AED 79.9 million (2009: AED 18.0 million). This impact
is primarily attributable to the Group’s exposure to interest rates on its variable rate borrowings.
The Group’s sensitivity to interest rate has not changed significantly during the year.
Other price risk
The Group is exposed to equity price risks arising from its equity investments. Equity investments are held for strategic rather than trading purposes.
The Group does not actively trade these investments. See note 15 for further details on the carrying value of these investments.
The Group’s sensitivity to other prices has not changed significantly during the year.
Credit risk management
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group and arises
principally from the Group’s bank balances and trade and other receivables. The Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s
exposure and the credit ratings of its counterparties are monitored and the aggregate value of transactions concluded is spread amongst
approved counterparties.
For its bank balance, the Group considers various factors in determining with which banks to invest its money including whether the bank is
owned by and/or has received government support, the rating of the bank by rating agencies and the level of security by way of governmental
deposit guarantees. The assessment of the banks and the amount to be invested in each bank is assessed annually or when there are significant
changes in the marketplace.
At 31 December 2010, the Group’s bank balances were invested 74% (2009: 83%) in the UAE and 26% (2009: 17%) outside of the UAE. Of the
amounts in the UAE, an aggregate of AED 1.4 billion (2009: AED 2.9 billion) was with banks rated A+ by Fitch, AED 1.8 billion (2009: AED 1 billion)
with banks rated A by Fitch and AED 750 million (2009: AED 743 million) rated A - by Standard and Poor’s.
In relation to its trade receivables, the trade receivables consist of a large number of customers, spread across diverse industries and geographical
areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, collateral is received
from customers usually in the form of a cash deposit.
The carrying amount of consolidated financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s
maximum exposure to credit risk without taking account of the value of any collateral obtained.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management
framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group
manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities. The details of the available undrawn facilities that
the Group has at its disposal at 31 December 2010 to further reduce liquidity risk is included in note 22.
The majority of the Group’s financial liabilities as detailed in the consolidated statement of financial position are due within one year. Further
information related to the borrowings due in more than one year is provided in note 22.
Fair value of financial instruments
Except for all financial liabilities classified as held at amortised cost and advances from non-controlling interests, the carrying amounts of financial
assets and financial liabilities recorded in the financial statements approximate their fair values.
69
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
27. Provision for end of service benefits
The movement in the provision for end of service benefits is as follows:
AED’000
Balance as at 1 January 2009
Charge for the year
Payments during the year
791,198
101,883
(10,747)
Balance as at 31 December 2009
Reclassification
Charge for the year
Payments during the year
Release of provision
882,334
(69,665)
46,068
(15,230)
(9,224)
Balance as at 31 December 2010
834,283
The above provision was based on the following significant assumptions:
2010
2009
3.61%
3.94%
15 years
4.25%
7.27%
16 years
2010
AED’000
2009
AED’000
Authorised:
8,000 million (2009: 8,000 million) ordinary shares of AED 1 each
8,000,000
8,000,000
Issued and fully paid:
7,906.1 million (2009: 7,187.4 million) ordinary shares of AED 1 each
7,906,140
7,187,400
Reconciliation of movement in share capital
At 1 January
Bonus issue of 718,740 (2009: 1,197,900) fully paidshares
7,187,400
718,740
5,989,500
1,197,900
At 31 December 2010
7,906,140
7,187,400
Discount rate
Average annual rate of salary increase
Average period of employment
28. Share capital
On 23 March 2010, the shareholders at the Extraordinary General Meeting approved the issue of one bonus share for every ten shares held.
The Corporation has one class of ordinary shares which carry no guaranteed dividend rights.
29. Reserves
Development reserve
Asset replacement reserve
Statutory reserve
Translation reserve
General reserve
Investment revaluation reserve
2010
AED’000
2009
AED’000
7,650,000
7,822,000
10,332
9,429
12,402,383
142,019
6,950,000
7,098,000
6,714
272,782
12,167,505
141,678
28,036,163
26,636,679
a) Development reserve, asset replacement reserve and general reserve
These reserves are all distributable reserves and comprise amounts transferred from unappropriated profit at the discretion of the Group to
hold reserve amounts for future activities including the issuance of bonus shares.
70
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
29. Reserves (continued)
b) Statutory reserve
In accordance with the UAE Federal Law No.8 of 1984, as amended, and the respective Memoranda of Association of some of the Group’s
subsidiaries, 10% of their respective annual profits should be transferred to a non-distributable statutory reserve. The Corporation’s share
of the reserve has accordingly been disclosed in the consolidated statement of changes in equity.
c) Translation reserve
Cumulative foreign exchange differences arising on the translation of overseas operations are taken to the translation reserve.
d) Investment revaluation reserve
The cumulative difference between the cost and carrying value of available-for-sale financial assets is recorded in the Investment revaluation reserve.
30. Significant acquisition of shares in subsidiary undertakings
During the year ended 31 December 2010, the Group acquired additional shares in the following subsidiaries:
a) Atlantique Telecom SA
The Group acquired additional shares representing an 18% shareholding of Atlantique Telecom SA, thus increasing the total shareholding
from 82% to 100%, for a consideration of USD 75 million (AED 276 million).
b) Zanzibar Telecom Limited
The Group acquired additional shares representing a 14% shareholding of Zanzibar Telecom Limited, thus increasing the total shareholding
from 51% to 65%, for a consideration of USD 16 million (AED 58.9 million).
c) Canar Telecommunications Co. Ltd.
The Group acquired an additional 8,600,000 shares (of Euro 10 each) of Canar Telecommunications Co. Limited for a consideration of Euro 86 million.
At the end of the reporting period, the Group’s shareholding of Canar Telecommunications Co. Limited has increased to 89.4%.
d) Etisalat DB Telecom Private Limited
The Group acquired, for a consideration of USD 24 million (AED 89 million), an additional 1 share in Etisalat DB Telecom Private Limited in
relation to the purchase by Etisalat DB Telecom Private Limited of the share capital of Allianz Infratech Private Limited, in accordance with
the Share Subscription Agreement. Furthermore, a minority shareholder of Etisalat DB Telecom Private Limited redeemed preference shares
amounting to AED 48 million. The preference shares did not have any ownership or voting rights attached to them and the redemption did
not result in any change to the minority interest’s stake in Etisalat DB Telecom Private Limited.
31. Commitments
a) Capital commitments
The Group has approved future capital projects and investments commitments to the extent of AED 4,536 million (2009: AED 6,787 million)
of which AED 3,200 million (2009: AED 3,351 million) had been committed at 31 December 2010.
b)
Lease commitments
The Group as lessee
Minimum lease payments under operating leases recognised as an expense in the year (Note 5)
2010
AED’000
2009
AED’000
545,877
94,777
At the statement of financial position date, the Group had outstanding commitments for future minimum lease payments under noncancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2010
AED’000
2009
AED’000
418,781
1,835,553
1,374,760
240,268
1,032,605
914,929
3,629,094
2,187,802
Operating lease payments represent rentals payable by the Group for certain of its office and retail properties. Leases are negotiated for an
average term of two years and rentals are fixed for an average of two years.
71
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
31. Commitments (continued)
b)
Lease commitments (continued)
The Group as lessor
Property rental income earned during the year was AED 15 million (2009: AED 38.1 million). All of the properties held have committed
tenants for the next 2-5 years.
At the statement of financial position date, the Group had contracted with tenants for the following future minimum lease payments:
Within one year
In the second to fifth years inclusive
After five years
32.
2010
AED’000
2009
AED’000
16,459
37,782
21,129
29,951
188
-
75,370
30,139
Contingent liabilities
a) Bank guarantees
At 31 December 2010, the Group’s bankers had issued performance bonds and guarantees for AED 1,053 million (2009: AED 774 million) in relation
to contracts. Guarantees relating to the Corporation’s overseas investments amounted to AED 999.7 million.
b)
Regulatory and other matters
Infrastructure sharing agreement
During the year ended 31 December 2009, Etisalat DB Telecom Private Limited (“Etisalat DB”) had signed a Passive Telecom Infrastructure
Sharing Agreement with Reliance Infratel Limited (“RITL”) for sharing of passive infrastructure. However, due to certain technical matters,
claims totalling INR 1,952 million (AED 160.1 million) have been made by RITL in relation to this agreement, which Etisalat DB has rejected.
No provision has been made in these consolidated financial statements as the Group’s management do not believe that there is any
probable loss arising from the above matter.
Licence fees
Etisalat DB’s liability towards licence fees, Wireless Planning and Co-ordination charges and Spectrum charges (including interest and penalty),
calculated based on the Adjusted Gross Revenue (“AGR”) comprising of interest income and other income earned in the period to 31 December 2010
totalled INR 309.1 (AED 25.3 million), of which INR 234.8 million (AED 19.3 million) has been paid to date. The amounts paid to date were
made under protest to the Department of Telecommunication (“DoT”) as it included items of income that should be specifically excluded
from the liability calculation.
In accordance with an Order, dated 30 August 2007, issued by the Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”) income from
interest, dividend and certain other heads of income have to be excluded while calculating the AGR. Based on a joint petition filed by Etisalat
DB on 7 May 2010 with TDSAT, the benefit of the original TDSAT order has now been extended to Etisalat DB and other petitioners from the
date the petition was filed, 30 March 2009. Accordingly, Etisalat DB has filed a refund application with the DoT with respect to the amounts
paid subsequent to 30 March 2009 of INR 162.2 million (AED 13.3 million), which has been recognised in the current year income statement.
The DoT has appealed against the said Order in the Honourable Supreme Court of India and the final verdict of is awaited.
No provision has been made in these consolidated financial statements as the Group’s management do not believe that there is any probable
loss arising from the above matter.
Minimum Roll-out obligations
During the year ended 31 December 2010, the DoT served demand notices on Etisalat DB towards the imposition of liquidated damages for
non-fulfillment of rollout obligations in 13 out of 15 circles totalling INR 349.0 million (AED 28.6 million). Etisalat DB has made the payment
of liquidated damages for all the aforesaid notices under protest and has sought time to file a detailed response to DoT. Etisalat DB expects to
file suitable replies for all notices in due course. On 19 January 2011, Etisalat DB received similar notices for the remaining two circles totalling
INR 117.5 million (AED 9.6 million) towards liquidated damages.
Show cause notices on licence application eligibility
Etisalat DB has received ‘show cause’ notices from the Department of Telecommunications (DOT) seeking explanations on whether they met
the eligibility criteria for the UAS (Universal Access Services Licence) Application as per the DoT guidelines. Etisalat DB is in the process of
drafting its reply to present the correct factual position and will respond before the stipulated deadline. Based on management’s assessment
of the facts, Etisalat DB does not expect any adverse consequences arising from these notices.
72
Notes to the Consolidated Financial Statements
for the year ended 31 December 2010
33. Dividends
AED’000
Amounts recognised as distributions to the equity holders:
31 December 2010
Final dividend for the year ended 31 December 2009 of AED 0.35 per share
Interim dividend for the year ended 31 December 2010 of AED 0.25 per share
2,515,590
1,976,535
4,492,125
31 December 2009
Final dividend for the year ended 31 December 2008 of AED 0.35 per share
Interim dividend for the year ended 31 December 2009 of AED 0.25 per share
2,096,325
1,796,850
3,893,175
A final dividend of AED 0.35 per share was declared by the Board of Directors on 23 February 2010, bringing the total dividend to AED 0.60 per
share for the year ended 31 December 2009.
An interim dividend of AED 0.25 per share was declared by the Board of Directors on 19 July 2010 for the year ended 31 December 2010.
A final dividend of AED 0.35 per share was declared by the Board of Directors on 22 February 2011, bringing the total dividend to AED 0.60 per
share for the year ended 31 December 2010.
34. Earnings per share
2010
2009
Earnings (AED’000)
Earnings for the purposes of basic earnings per share being the profit attributable
to the equity holders of the Corporation
7,630,750
8,836,346
Number of shares (‘000)
Weighted average number of ordinary shares for the purposes of basic earnings per share
7,906,140
7,906,140
The Group does not have potentially dilutive shares and accordingly, diluted earnings per share equals to basic earnings per share. Earnings
per share for 2009 was adjusted for bonus shares issued in 2010 as approved by the shareholders at the Extraordinary General Meeting held
on 23 March 2010.
35.
Subsequent events
During the year ended 31 December 2010, the Group had submitted a preliminary conditional offer to buy a 46% stake of Mobile Telecommunications
Company (“Zain”) for an amount of 1.70 Kuwaiti Dinars per share. No final agreement has been reached at the date of approval of the consolidated
financial statements as this offer depends on the fulfilment of specific requirements and conditions that must be met to finalise the deal.
Conditions include the satisfactory completion of due diligence procedures, receipt of regulatory approvals and the lack of material changes
in Zain’s business prior to acquisition.
The Corporation is currently progressing with the performance of its due diligence procedures on the transaction.
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Notice of Meeting
Notice is hereby given that the General Annual Shareholders’ Meeting will be held at 5.00 p.m, Tuesday 22nd March, 2011 at the Etisalat
Head Office Building, Abu Dhabi, for the purpose of transacting the following ordinary business;
Annual general meeting
1.
To note the minutes of the Annual Shareholders Meeting held on Monday 23 March 2010.
2.
To listen to the report of the Board of Directors on the Corporation’s activities and financial position and to consider and adopt the
Corporations audited consolidated financial statements for the year ended 31 December 2010 as well as the external Auditors report.
3.
To look into the Board of Directors recommendation on the distribution of dividends.
4.
To absolve Members of the Board of Directors of liability in respect of the year ending 31 December 2010.
5.
To absolve the External Auditors of liability in respect of the year ending 31 December 2010.
6.
To appoint the auditors for the current financial year.
By Order of the Board
Corporation Secretary
Notes:
i.
A shareholder entitled to attend and vote at the annual shareholders’ meeting is entitled to appoint a proxy to attend and vote on
his/her behalf. Such a proxy need not be a shareholder of the Corporation.
ii.
Proxy forms may be obtained from Etisalat offices during official working hours
iii.
Shareholders are requested to notify Abu Dhabi Securities Exchange (“ADX”) of any change in address.
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