Wateen HY Report Dec 2010.pdf

contents 

02 Corporate Information 

03 Director’s Report 

Condensed Financial Information 

05 Auditors’ Review Report to the Members 

06 Condensed Interim Balance Sheet 

08 Condensed Interim Profit and Loss Account 

09 Condensed Interim Statement of Comprehensive Income 

10 Condensed Interim Cash Flow Statement 

12 Condensed Interim Statement of Changes in Equity 

13 Selected Notes to and Forming Part of the Condensed Interim Financial Information 

Condensed Consolidated Financial Information 

28 Condensed Consolidated Interim Balance Sheet 

30 Condensed Consolidated Interim Profit and Loss Account 

31 Condensed Consolidated Interim Statement of Comprehensive Income 

32 Condensed Consolidated Interim Cash Flow Statement 

34 Condensed Consolidated Interim Statement of Changes in Equity 

35 Selected Notes to and Forming Part of the Condensed Consolidated Interim Financial Information 

WATEEN TELECOM LIMITED half yearly report dec ‘10 

01

CORPORATE INFORMATION 

Management Team 

Naeem Zamindar 

Chief Executive Officer 

Sajjeed Aslam 

Chief Financial Officer 

Sajid Farooq Hashmi 

Company Secretary & Head of Legal 

Syed Jibran Ali 

Chief Commercial Officer 

Faisal Sattar 

Chief Technology Officer 

Asad Rezzvi 

Chief Transformation Officer 

Zafar Iqbal Ch. 

GM HR, Admin & Infrastructure 

Zeeshan Hasan 

GM Customer Care 

Ali Khan 

GM Enterprise & Carrier Sales 

Adnan Kareem 

Head of Product Development 

Brig (R) Mazhar Qayyum Butt 

GM Corporate Affairs 

Saleem Akhtar 

Head of Project Management Office 

Naila Bhatti 

GM Media 

Auditors 

A.F. Ferguson & Co. 

Chartered Accountants 

PIA Building, 3rd Floor, 

49 - Blue Area, P.O. Box 3021, 

Islamabad. 

Registered Office 

4th Floor, New Auriga Complex, 

Main Boulevard, Gulberg II 

Lahore. 

Share Registrar 

THK Associates (Pvt.) Limited 

Ground Floor, 

State Life Building No.3, 

Dr. Zia-ud-Din Ahmed Road, 

Karachi. 

Bankers 

Standard Chartered Bank (Pakistan) Limited 

Bank Al Habib Limited 

Habib Bank Limited 

Bank Alfalah Limited 

National Bank of Pakistan Limited 

Pak Libya Holding Company (Pvt.) Limited 

Summit Bank Limited (Formerly Arif Habib Bank Limited) 

Askari Bank Limited 

Soneri Bank Limited 

Pak Brunei Investment Company Limited 

The Bank Of Khyber 

HSBC Bank Middle East Limited 

Allied Bank Limited 

United Bank Limited 

Dubai Islamic Bank Limited 

02 

WATEEN TELECOM LIMITED half yearly report dec ‘10

DIrectors’ report 

The Directors of Wateen Telecom Limited are 

pleased to present the financial statements for the 

second quarter and six months ended December 

31, 2010. These financial statements have been 

reviewed by the statutory auditors. 

Wateen reassessed its overall strategy given the 

current socio-economic situation of Pakistan, 

evolving consumer needs and the current trends in 

the telecom sector worldwide. New management 

and governance structures were introduced 

during FY’2011 with the major changes in the 

Board of Directors, establishment of an Executive 

Management Committee, reconstitution of the 

Board Audit Committee and appointments of 

a new Chief Executive Officer, Chief Financial 

Officer and Company Secretary along with other 

key positions. These changes were necessary to 

reinforce compliance with rigorous requirements of 

corporate governance and enhancing transparency 

in the overall operations. 

The new Board of Directors appreciate and 

recognize the significance of sound corporate 

governance practices are hence, giving high priority 

to regularize matters to ensure compliance with the 

legal and regulatory requirements. 

The company has posted consolidated revenues 

of Rs 1,478 million for the second quarter ended 

December 31, 2010 and cumulative revenues 

of Rs 3,409 million for the six months ended 

December 31, 2010. A 30% decline in the revenue 

is attributable to the change in market dynamics of 

long distance international business which remained 

under severe pressure of grey traffic. Gross profit 

has been improved to 25% compared to 18% in 

same period last year. Sponsors’ has injected Rs 

2,063 million directly and Rs 600 million through 

an associated company to improve the liquidity 

situation of the company compared to Nil for the 

same period last year. 


03

New Management has evaluated the current market 

dynamics and recommended a focused approach 

to consolidate the position of the Company and 

make significant progress in areas with high growth 

opportunities and discontinue certain operations 

to ensure best possible return on investments. 

This has resulted in provisions and write offs of Rs 

1,542 million compared to Rs 18 million in the same 

period last year and brought EBITDA loss to the 

tune of Rs 1,649 million. We believe these drastic 

measures were inevitable and overdue to build a 

profitable business going forward. 

Demand for data services in Pakistan and 

neighboring countries from carriers, businesses 

and consumers with more innovative value added 

services like mobile banking and cloud computing 

will be the key drivers for growth in the years to 

come. Your company is well placed and prepared 

to claim a fair share in the growth and profitability 

with the capacity to provide services in the region. 

The Company recognizes the importance of 

its human resources which play a critical role 

for a service organization like Wateen Telecom. 

Conscious efforts are being made to obtain and 

retain best available human resources as well as 

to enhance the productivity of the existing ones so 

as to create a work force suitable to meet today’s 

challenges. 

The Board would like to thank our valued customers 

for their continued support and the regulatory 

authorities for their guidance and patronage. 

On behalf of the Board, 

Naeem Zamindar 

Chief Executive Officer & 

Member Board of Directors 

04 


~ 

pwc ~ 

pwc 

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

INFORMATION 

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

INFORMATION 

We have reviewed the accompanying condensed interim balance sheet of Wateen Telecom 

Limited as at December 31, 2010 and the related condensed interim profit and loss account, 

condensed interim statement of comprehensive income, condensed interim cash flow 

We have reviewed the accompanying condensed interim balance sheet of Wateen Telecom 

statement and condensed interim statement of changes in equity and notes to the interim 

Limited 

financial 

as 

information 

at December 

for the 

31, 

six 

2010 

months 

and the 

period 

related 

ended 

condensed 

(here-in-after 

interim 

referred 

profit 

to 

and 

as the 

loss 

"interim 

account, 

condensed 

financial information"). 

interim statement 

Management 

of 

is 

comprehensive 

responsible for 

income, 

the preparation 

condensed 

and presentation 

interim cash 

of this 

flow 

statement interim financial and condensed information interim accordance statement with of approved changesaccounting equity standards notesastoapplicable 

the interim 

financial Pakistan. information Our responsibility for the sixismonths to express period a conclusion ended (here-in-after on this interim referred financial to as information the "interim 

financial based oninformation"). our review. The Management figures of the is responsible condensed interim for the profit preparation and lossand account presentation for quarters of this 

interim ended financial Decemberinformation 31, 2010 and in accordance 2009 have not withbeen approved reviewed, accounting as we are standards requiredastoapplicable 

review 

inonly Pakistan. the cumulative Our responsibility figures for the is to sixexpress months period a conclusion ended December on this interim 31, 2010. financial information 

based on our review. The figures of the condensed interim profit and loss account for quarters 

ended December 31, 2010 and 2009 have not been reviewed, as we are required to review 

only the cumulative figures for the six months period ended December 31, 2010. 

We conducted our review in accordance with International Standard on Review Engagements 

2410, "Review of Interim Financial Information Performed by the Independent Auditor of the 

Entity". A review of interim financial information consists of making inquiries, primarily of 

We persons conducted responsible our review for financial accordance and accounting with International matters, Standard applying on analytical Review Engagements 

and other 

2410, review"Review procedures. of Interim A review Financial is substantially Information less Performed in scope by the than Independent an audit conducted Auditor ofinthe 

Entity". accordance A review with International of interim financial Standards information on Auditing consists and consequently of makingdoes inquiries, not enable primarily us to of 

persons obtain assurance responsiblethat for we financial would and become accounting aware matters, of all significant and applying matters analytical that might and be other 

review 

identified 

procedures. 

in an audit. 

A 

Accordingly, 

review is 

we 

substantially 

do not express 

less 

an 

in 

audit 

scope 

opinion. 

than an audit conducted in 

accordance with International Standards on Auditing and consequently does not enable us to 

obtain assurance that we would become aware of all significant matters that might be 

identified in an audit. Accordingly, we do not express an audit opinion. 

Based on our review, nothing has come to our attention that causes us to believe that the 

accompanying interim financial information as of and for the six months period ended 

December 31, 2010 is not prepared, in all material respects, in accordance with approved 

accounting standards as applicable in Pakistan. 

Based on our review, nothing has come to our attention that causes us to believe that the 

accompanying interim financial information as of and for the six months period ended 

December H~ 31, 2010 is not prepared, in all material respects, in accordance with approved 

accounting Chartered Accountants 

standards as applicable in Pakistan. 

Islamabad: January 20, 2012 

H~ 

Chartered Accountants 

Islamabad: January 20, 2012 

............................................................................................................................................................................................................................................................................ 

:A. F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC network 

PIA Building, 3rd FloOr, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000, Pakistan 

Tel: +92 (51) 2273457-60/2870045-8; Fax: +92 (51) 2277924; < www.pwc.com/pk> 

Karachi: State Life Building No. 1-C, 1.1. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan; Tel: +92 (21) 32426682-5132426711-5; Fax: +92 (21) 32415007 

............................................................................................................................................................................................................................................................................ 

Lahore: 23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660, Pakistan; Tel: +92 (42) 35715864-71; Fax: +92 (42) 35715872 

:A. Kabul: F. FERGUSON House No. 1916, & CO., Street Chartered NO.1, BehindAccountants, Cinema Bariqot, aNahar-e-Darsan, member firm Karte-4, of the PwC Kabul, network Afghanistan; Tel: +93 (779) 315320, +93 (799) 315320 

PIA Building, 3rd FloOr, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000, Pakistan 

Tel: +92 (51) 2273457-60/2870045-8; Fax: +92 (51) 2277924; < www.pwc.com/pk> 


Karachi: State Life Building No. 1-C, 1.1. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan; Tel: +92 (21) 32426682-5132426711-5; Fax: +92 (21) 32415007 

Lahore: 23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660, Pakistan; Tel: +92 (42) 35715864-71; Fax: +92 (42) 35715872 

Kabul: House No. 1916, Street NO.1, Behind Cinema Bariqot, Nahar-e-Darsan, Karte-4, Kabul, Afghanistan; Tel: +93 (779) 315320, +93 (799) 315320 

05

CONDENSED INTERIM BALANCE SHEET (UN-AUDITED) 

AS AT DECEMBER 31, 2010 

Note 

December 31, June 30, 

2010 2010 

(Rupees in thousand) 

SHARE CAPITAL AND RESERVES 

Authorised capital 1,000,000,000 

(June 30, 2010: 1,000,000,000) 

ordinary shares of Rs 10 each 10,000,000 10,000,000 

Issued, subscribed and paid–up capital 6,174,746 6,174,746 

617,474,620 (June 30, 2010: 617,474,620) 

ordinary shares of Rs 10 each 

General reserve 134,681 134,681 

Accumulated loss (4,900,856) (2,099,760) 

1,408,571 4,209,667 

NON–CURRENT LIABILITIES 

Long term finance – secured 5 – – 

Medium term finance from an associated company – unsecured 6 – – 

Long term finance from a shareholder – unsecured 7 2,063,379 – 

Cross currency and interest rate swap – fair value 5.5 – 139,053 

Obligations under finance leases 4,638 5,429 

Long term deposits 64,759 110,455 

2,132,776 254,937 

DEFERRED LIABILITIES 

Employees’ retirement benefits – 43,690 

Deferred income tax liability 8 – 74,593 

Deferred USF grant 9 1,046,248 827,159 

1,046,248 945,442 

CURRENT LIABILITIES 

Current portion of long term finance – secured 5 11,858,743 12,411,659 

Current portion of medium term finance from an 

associated company – unsecured 6 600,000 – 

Payable to supplier to be settled through long term finance – 433,798 

Cross currency and interest rate swap liability 5.5 517,000 217,397 

Current portion of obligations under finance leases 2,035 1,556 

Finance from supplier – unsecured 77,941 77,668 

Short term borrowings – secured 10 4,092,484 4,604,346 

Trade and other payables 11 4,898,324 5,922,431 

Interest / markup accrued 661,615 631,491 

22,708,142 24,300,346 

CONTINGENCIES AND COMMITMENTS 12 

27,295,737 29,710,392 

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

06 


Note 


2010 2010 


NON-CURRENT ASSETS 

Property, plant and equipment 

Operating assets 13 18,712,000 17,045,929 

Capital work in progress 14 2,791,644 3,883,565 

Intangible assets 197,592 204,726 

21,701,236 21,134,220 

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

DEFERRED INCOME TAX ASSET 8 773,395 – 

LONG TERM DEPOSITS AND PREPAYMENTS 


Long term prepayments 71,328 79,139 

345,214 317,723 

CURRENT ASSETS 

Trade debts 16 1,274,874 3,097,982 

Contract work in progress 18,805 18,782 

Stores, spares and loose tools 17 558,096 847,528 

Advances, deposits, prepayments and 

other receivables 18 1,923,479 2,001,340 

Income tax refundable 192,412 238,841 

Cash and bank balances 19 370,565 1,996,915 

4,338,231 8,201,388 

27,295,737 29,710,392 

______________ 

Chief Executive 

_____________ 

Director 


07

CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) 

FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 

Note 

3 months to 6 months to 

December 31, December 31, December 31, December 31, 

2010 2009 2010 2009 


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

Cost of sales (excluding 

depreciation and amortisation) 21 1,208,553 1,708,023 2,439,071 3,757,814 

General and administration expenses 567,792 374,426 854,964 730,756 

Advertisement and marketing expenses 44,664 71,605 75,271 166,196 

Selling and distribution expenses 1,478 6,901 8,830 14,093 

Provisions and write off 22 1,516,803 – 1,516,803 18,273 

Other charges – 28,936 – 28,936 

Other income 23 128,652 (9,492) (176,790) (33,394) 

3,467,942 2,180,399 4,718,149 4,682,674 

Loss before interest, taxation, 

depreciation and amortisation (2,036,279) (16,990) (1,460,959) (149,239) 

Depreciation and amortisation 518,211 395,312 987,327 757,205 

Finance cost 24 799,334 561,266 1,282,557 984,956 

Finance income (78,349) (52,714) (81,759) (60,405) 

Loss before taxation (3,275,475) (920,854) (3,649,084) (1,830,995) 

Deferred income tax credit 791,649 290,184 847,988 580,369 

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

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


______________ 


_____________ 

Director 

08 


CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) 




2010 2009 2010 2009 



Other comprehensive income – – – – 

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


______________ 


_____________ 

Director 


09

CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) 


6 months to 

December 31, December 31, 

2010 2009 


CASH FLOW FROM OPERATING ACTIVITIES 

Loss before taxation (3,649,084) (1,830,995) 

Adjustment of non cash items: 

Depreciation/ Amortisation 987,327 757,205 

(Profit)/loss on sale of operating assets 6,798 (22,953) 

Finance cost 1,282,557 984,956 

Deferred grant recognised during the period (25,939) – 

Dividend income from subsidiary company (156,060) – 

Provisions and write off (note 22) 1,516,803 18,273 

3,611,486 1,737,481 

(37,598) (93,514) 

Changes in working capital: 

Decrease/ (Increase) in trade debts 1,399,405 (282,265) 

(Increase) in contract work in progress (23) (3,140) 

Decrease in stores, spares and loose tools 17,434 223,188 

(Increase)/Decrease in advances, deposits, 

prepayments and other receivables (140,297) 205,756 

Increase in cross currency and interest rate swap liability 160,550 43,813 

(Decrease)/ Increase in trade and other payables (1,062,810) 708,113 

374,259 895,465 

Taxes (paid)/refunded 46,429 (20,710) 

Cash flows from operating activities 383,090 781,241 

CASH FLOW FROM INVESTING ACTIVITIES 

Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,011) 

Intangible assets additions (4,300) – 

Sale of property, plant and equipment 10,000 163,024 

Long term deposits receivable – (paid)/received (35,302) 213 


Advance against purchase of shares (85,000) – 

Dividend income received 156,060 – 

Cash flows from investing activities (1,871,087) (2,636,960) 

10 


6 months to 

December 31, December 31, 

2010 2009 


CASH FLOW FROM FINANCING ACTIVITIES 

Long term finance received 579,241 5,691,156 

Long term finance repaid (1,132,158) (470,929) 

Long term finance received from associated company 600,000 – 

Long term finance received from sponsor 2,063,379 – 

Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226) 

Long term payable to supplier received/(repaid) 273 (210,212) 

Employees’ accumulated absences paid (4,987) 4,228 

Deferred USF grant received – 297,960 

Obligations under finance leases repaid (312) (1,683) 

Long term deposits payable – (repaid)/received (45,696) 13,594 

Short term borrowings repaid (1,545,415) – 

Finance cost paid (1,252,433) (769,511) 

Cash flows from financing activities (1,171,906) 1,682,377 

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,659,903) (173,341) 

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

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

CASH AND CASH EQUIVALENTS COMPRISE: 

Cash and bank balances 370,565 337,838 

Short term running finance (3,957,734) (2,835,867) 

(3,587,169) (2,498,029) 


______________ 


_____________ 

Director 


11

CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) 


Share General Accumulated 

capital reserve loss Total 


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

Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) – 

Total comprehensive loss for the period – – (1,250,626) (1,250,626) 

Balance at December 31, 2009 4,174,746 134,681 (1,250,626) 3,058,801 

Balance at January 1, 2010 4,174,746 134,681 (1,250,626) 3,058,801 

Issue of 200,000,000 shares for cash 

on April 20, 2010 2,000,000 – – 2,000,000 

Shares issue cost (net of tax benefit) – – (79,247) (79,247) 

Total comprehensive loss for the period – – (769,887) (769,887) 

Balance at June 30, 2010 6,174,746 134,681 (2,099,760) 4,209,667 

Balance at July 1, 2010 6,174,746 134,681 (2,099,760) 4,209,667 

Total comprehensive loss for the period – – (2,801,096) (2,801,096) 

Balance at December 31, 2010 6,174,746 134,681 (4,900,856) 1,408,571 


______________ 


_____________ 

Director 

12 


SELECTED NOTES TO AND FORMING PART OF THE 

CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) 


1. Legal status and operations 

The Company was incorporated in Pakistan as a Private Limited Company under Companies 

Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public voice 

telephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company commenced 

its commercial operations from May 1, 2005. The legal status of the Company was changed from 

“Private Limited” to “Public Limited” with effect from October 19, 2009. The Company is listed on 

Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the Company is situated at 

Lahore. The Company is a subsidiary of Warid Telecom International LLC, U.A.E. 

2. Statement of compliance 

This condensed interim financial information of the Company for the six months period ended 

December 31, 2010 has been prepared in accordance with the requirements of the International 

Accounting Standard 34 - Interim Financial Reporting and provisions of and directives issued under 

the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives 

issued under the Companies Ordinance, 1984 have been followed. 

3. Accounting policies 

The accounting policies and methods of computation adopted for the preparation of this condensed 

interim financial information are the same as those applied in preparation of the financial statements 

for the year ended June 30, 2010. 

4. Net current liabilities 

Net current liabilities as at December 31, 2010 were Rs 18.370 billion of which Rs 10.613 billion 

relate to loan installments due for repayment after December 31, 2011 and Rs 4.660 billion relates 

to current portion of long term finance and short term finance. A shareholder of the Company has 

provided financial support in the form of long term finance amounting to Rs 2.063 billion to meet 

the requirements of the Company and this arrangement is expected to continue. Subsequent to 

the period end, the Company has negotiated with the lenders to restructure long term finance and 

convert short term finance, except for short term running finance from Bank Alfalah Limited amounting 

to Rs 1.795 billion, into long term finance facilities. The tenure of the restructured facilities is eight 

years w.e.f January 1, 2011 (inclusive of grace period of three years). The principal of restructured 

facilities will be repayable in 10 semiannual installments commencing July 1, 2014. Compliance with 

financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio 

of 80:20, which should not be breached during the grace period. The Company is in the phase of 

finalizing addendum agreements to restructure term finance facilities with lenders. 

The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its 

medium term finance facility. The associated company has agreed to reschedule its facility. Principal 

will be repayable in semi-annual equal installments within two years after the expiry of grace period i.e. 

from January 01, 2011 to December 31, 2019. The rate of markup will be 6 months KIBOR, subject 

to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum 

agreement to restructure the term finance facility with lender. 


13




Note 


2010 2010 


5. Long term finance - secured 

Syndicate of banks 5.1 4,766,000 4,766,000 

Export Credit Guarantee Department – (ECGD) 5.2 2,199,048 2,450,304 

Standard Chartered Bank (SCB) 5.3 40,500 54,000 

Dubai Islamic Bank (DIB) 5.4 477,000 477,000 

Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 

Standard Chartered Bank (SCB) 5.6 508,830 – 

Total 12,113,605 12,711,123 

Unamortized transaction and other ancillary cost 

Opening balance 299,464 – 

Additions during the period/year – 400,862 

Amortisation for the period/year (44,602) (101,398) 

(254,862) (299,464) 

11,858,743 12,411,659 

Less: Amount shown as current liability 

Amount payable within next twelve months (1,845,763) (1,991,174) 

Amount due after Dec 31, 2011 5.7 (10,012,980) (10,420,485) 

(11,858,743) (12,411,659) 

– – 

5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard 

Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National 

Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company 

amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till December 31, 2010. The 

tenure of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six 

unequal stepped -up- semi annual installments. The first such installment shall be due on June 30, 

2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 

6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years. 

The facility is secured by way of hypothecation over all present and future moveable assets (including 

all current assets) and present and future current/fixed assets (excluding assets under specific charge 

of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in 

respect of immoveable properties of the Company, lien over collection accounts and Debt Service 

Reserve Account and a corporate guarantee from Warid Telecom International LLC. 

5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit 

Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till December 31, 2010. 

Amount outstanding at December 31, 2010 was USD 25.600 million. The loan is repayable in 14 

semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of 

mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default 

payment from the due date for payment upto the date of payment. If the finance charge is not paid 

14 


then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the 

period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The 

loan is secured by personal guarantees by three Sponsors of the Company. 

5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard 

Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from 

October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by 

first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 

million. 

5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The 

principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, 

2010. The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on 

default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. 

The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries). 

During the period the bank has rescheduled the second installment due on August 01, 2010 to 

January 31, 2011. Remaining repayments are due on their respective dates. 

5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million 

(June 30, 2010: USD 64 million) has been availed till December 31, 2010. Amount outstanding at 

December 31, 2010 was USD 47.989 million. The principal amount of outstanding facility is repayable 

in 12 unequal semi annual installments commencing from June 30, 2009 until and including the 

final maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% 

per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum 

from the due date for payment upto the date of payment. The loan is secured through hypothecation 

charge over specific assets of the Company supplied under supply & services agreements with 

Motorola. 

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) 

amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged 

through cross currency swap contract with SCB. In consideration, the Company paid the difference 

between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was 

terminated by the Company on January 18, 2011 and the cost of termination has been recognised in 

profit and loss account. 

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 

53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest 

rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. 

The contract was terminated by the Company on January 18, 2011 and the cost of termination has 

been recognised in profit and loss account. 

Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the 

original facility agreement to the Deutsche Bank AG as lender, effective August 19, 2011. 

5.6 During the period, the Company has obtained term finance facility from Standard Chartered Bank 

amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010. The principal 

is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months 

KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets 

(excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 


15




million, which charge shall no later than thirty days from the execution of this agreement be enhanced 

to a first pari passu charge inter se, SCB and the existing creditors of the customer. 

During the period the Company has obtained term finance facility from Standard Chartered Bank 

amounting to Rs 217 million. The principal is repayable in five installments commencing from June 

30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of 

hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO 

& Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days 

from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the 

existing creditors of the customer. 

5.7 The Company is required to make payments of long term loans on due dates and to maintain certain 

ratios as specified in loan agreements. The Company paid ECGD loan installment of USD 3.025 million 

on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 

thousand on January 31, 2011 which was due on October 25, 2010. Further, certain ratios specified 

in the loan agreements have not been maintained at December 31, 2010. As a consequence, the 

lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. 

In terms of provisions of International Accounting Standard on Presentation of financial statements 

(IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for 

at least twelve months after the balance sheet date, all liabilities under these loan agreements are 

required to be classified as current liabilities. Based on above, loan installments due as per loan 

agreements after December 31, 2011 amounting to Rs 10,012,980 thousand have been shown as 

current liability. 

Subsequent to period end, the Company has negotiated with the lenders to restructure its existing 

long term finance facilities as explained in note 4. 

6. Medium term finance from an associated company - unsecured 

During the period, the Company has obtained an aggregate medium term finance facility of Rs 600 

million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured 

finance facilities availed by the Company. The principal is repayable within 30 days of the expiry 

of twenty four months from the effective date i.e September 30, 2010. The rate of mark-up is six 

month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan 

installments due as per loan agreement after December 31, 2011 amounting to Rs 600 million have 

been shown as current liability. 

Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) 

Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility 

as explained in note 4. 

7. Long term finance from a shareholder - unsecured 

During the period, the Company has obtained loan from a shareholder amounting to USD 24 million. 

This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable 

within 30 days of the expiry of a period of five years from the last date the lender has disbursed the 

loan, which shall be on or about January 29, 2015. The rate of mark-up is LIBOR + 1.5%. Alternatively 

the loan may be converted into equity by way of issuance of the Company’s ordinary shares at the 

option of the lender at any time after the repayment date on the best possible terms but subject to 

fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at 

the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value 

16 


shall be calculated after taking into account the average share price of the last 30 calendar days, 

counted backwards from the repayment date, provided that such conversion is permissible under the 

applicable laws of Pakistan. 


2010 2010 

Note 


8. Deferred income tax asset/ (liability) 

Taxable temporary differences between accounting 

and tax depreciation (3,745,267) (3,423,807) 

Unused tax losses 8.1 3,973,860 3,268,671 

Unused tax benefit related to share issue cost 39,462 34,138 

Deductible temporary differences on account of provisions 505,340 46,405 

773,395 (74,593) 

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

thousand representing business losses of Rs 1,367,386 thousand which will expire in tax year 2016. 

8.2 The existence of future taxable profits sufficient to absorb these losses is based on a business 

plan prepared by management of the Company which involves making judgments regarding key 

assumptions underlying the estimation of future taxable profits estimated in the plan. These 

assumptions if not met have a significant risk of causing a material adjustment to the carrying amount 

of the deferred tax asset. In the management’s view it is probable that the company will be able to 

achieve the profits projected in the plan. 


2010 2010 


9. Deferred Universal Service Fund (USF) grant 

Balance at beginning of the period/year 827,159 212,428 

Amount received/receivable during the period/year 245,028 616,477 

Amount recognised as income during the period/year (25,939) (1,746) 

Closing balance 1,046,248 827,159 

10. Short term borrowings - secured 

Short term borrowings 134,750 1,680,165 

Short term running finance 3,957,734 2,924,181 

4,092,484 4,604,346 


17




11. Trade and other payables 

These include payable to related parties as follows: 


2010 2010 


Wateen Solutions (Pvt) Limited 175,392 165,283 

Wateen Satellite Services (Pvt) Limited 146,204 146,204 

Warid Telecom (Pvt) Limited 106,366 86,656 

Advances from Warid Telecom (Pvt) Limited 34,316 151,004 

Bank Alfalah Limited 3,950 – 

Warid Telecom Uganda Limited – 47,474 

Payable to gratuity fund 109,841 104,041 

Payable to provident fund 22,637 11,569 

598,706 712,231 

12. Contingencies and commitments 

(i) Claims against the Company not acknowledged as debt 260,267 264,038 

(ii) Performance guarantees issued by banks in favour of 

the Company 1,412,233 1,476,816 

(iii) Outstanding commitments for capital expenditure 1,208,145 1,799,824 

(iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 

49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of 

Directors of the Company in their meetings held on November 15, 2009 and November 19, 

2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir 

Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval 

of the Board of Directors of the Company, the Company entered into a Share Purchase 

Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% 

shareholding of Wateen Solutions. 

However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to 

Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the 

purposes of negotiating a downward revision to the purchase price as agreed in the SPA from 

Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the 

resultant change in utilization of the IPO proceeds was approved by the shareholders of the 

Company in the Extra Ordinary General Meeting dated August 13, 2010. 

Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as 

partial payment of the purchase price and the balance of Rs 255,000 thousand is payable 

by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen 

Solutions and the resultant devaluation of its share price, the new management entered into 

negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of 

Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 

thousand, however the finalization of renegotiated agreement is in process. 

Same have been approved by shareholders in Extra Ordinary General Meeting dated December 

31, 2011. 

18 


Note 

Six months to Year ended 


2010 2010 


13. Operating assets 

Opening net book value 17,045,929 14,050,553 

Additions – owned 2,658,762 4,803,102 

– leased – 9,293 

Disposals at net book value (16,798) (191,184) 

Depreciation charge (975,893) (1,625,835) 

18,712,000 17,045,929 

14. Capital work in progress 

Leasehold improvements 21,219 23,334 

Line and wire 1,240,781 1,319,762 

Network equipment 14.1 1,529,644 2,540,469 

2,791,644 3,883,565 

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

14.2 Finance cost of Rs 234 million was capitalised during the six months period ended December 31, 

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

Six months to 

Year ended 

December 31, 2010 June 30, 2010 

%age (Rupees in %age (Rupees in 

Holding thousand) Holding thousand) 

15. Long term investment in 

subsidiary companies 

Unquoted 

Wateen Solutions (Pvt) Limited 

413,212 fully paid ordinary shares of Rs 100 each 51 52,656 51 52,656 

Advance against purchase of shares 85,000 - 

137,656 52,656 

Wateen Satellite Services (Pvt) Limited 

500 fully paid ordinary shares of Rs 10 each 100 5 100 5 

Netsonline Services (Pvt) Limited 

4,000 fully paid ordinary shares of Rs 100 each 100 4,400 100 4,400 

142,061 57,061 

Provision for impairment of investment in 

Netsonline Services (Pvt) Limited (4,400) - 

137,661 57,061 

All the companies are incorporated in Pakistan. 


19




Note 


2010 2010 


16. Trade debts 

Trade debts – related parties 16.1 224,956 1,807,657 

– other parties 1,399,981 1,422,911 

1,624,937 3,230,568 

Less: Provision for doubtful debts – other parties 16.2 (350,063) (132,586) 

1,274,874 3,097,982 

16.1 Trade debts include due from related parties as follows: 


Warid International LLC, UAE – Parent company 85,700 85,400 

Bank Alfalah Limited 14,392 12,125 

Warid Telecom Congo S.A – 1,060,716 


Wateen Telecom UK Limited – 105,643 

224,956 1,807,657 

These balances are net of trade debts written off during the period related to following associated 

companies, which have been approved by the shareholders in Extra Ordinary General Meeting held 

on December 31, 2011. 


2010 2010 


Warid Telecom (Private) Limited 76,834 – 

Warid Telecom Congo Limited 125,127 – 

Warid Telecom Uganda Limited 4,266 – 

Bank Alfalah Limited – 8,451 

206,227 8,451 

16.2 Provision for doubtful debts – other parties 

Opening balance 132,586 85,131 

Provision during the period 217,477 47,455 

Closing balance 350,063 132,586 

Provision during the period includes Rs 197,213 thousand based on age analysis of debts as follows: 

Balances 181 - 360 days past due - 50 % 

Balances over 360 days past due - 100 % 

20 


Note 


2010 2010 


17. Stores, spares and loose tools 

Cost 830,094 847,528 

Less: Provision for obsolete stores 271,998 – 

558,096 847,528 

18. Advances, deposits, prepayments 

and other receivables 

18.1 These include receivable from related parties as follows: 

Wateen Solutions (Pvt) Limited 370,376 488,943 

Wateen Telecom UK Limited 18.2 293,367 108,720 

Wateen Multimedia (Pvt) Limited 149,106 137,160 

Advance for construction of Warid Tower 68,916 65,716 


Amoon Media Group (Pvt) Limited 27,960 27,960 

Raseen Technology (Pvt) Limited 16,329 – 

Warid Telecom Georgia Limited 15,403 15,403 

Netsonline Services (Pvt) Limited 7,728 6,847 

Warid Telecom International – Bangladesh 5,587 5,587 


Warid Telecom Congo S.A – 5,384 

993,728 909,954 

Less: Provision for doubtful receivables 

from related parties 18.3 447,587 – 

546,141 909,954 

18.2 This includes investment in 51 % shares of Wateen Telecom UK Limited of par value GBP 5,099 (2010: 

51 % shares of par value of GBP 5,099). Subsequent to December 31, 2010 the Company acquired 

remaining 49 % shares of Wateen Telecom UK Limited of par value GBP 4,901. This company was 

incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank of 

Pakistan for investment in foreign equity abroad is in process and shares of Wateen Telecom UK 

Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of this 

specific approval, holding company cannot control the financial and operating policies of Wateen 

Telecom UK Limited to obtain the benefit in terms of dividend, repatriation of investment, advance or 

receive any loan or interest thereon. Hence despite the 51% ownership Wateen Telecom UK Limited 

is not treated as subsidiary of the Company. 


21




18.3 Provision for doubtful receivables from related parties 


2010 2010 


Wateen Telecom UK Limited 266,708 – 

Advance for construction of Warid Tower 68,916 – 

Warid International LLC, UAE 38,956 – 

Amoon Media Group (Pvt) Limited 27,960 – 


Warid Telecom Georgia Limited 15,403 – 

Netsonline Services (Pvt) Limited 7,728 – 

Warid Telecom International – Bangladesh 5,587 – 

447,587 - 

Provision for doubtful receivables other than Netsonline Services (Pvt) Limited have been approved by 

shareholders of the Company in Extraordinary General Meeting held on December 31, 2011. 

18.4 Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 

30, 2010: Rs Nil). 

19. Cash and bank balances 

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

20. Revenue 



2010 2009 2010 2009 


Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 

Optic Fiber Cable (OFC) 

Indefeasible Right of Use (IRU) (232,045) – – – 

Operation and Maintenance 155,147 169,317 298,690 295,709 

Managed capacity 21,991 23,669 34,734 52,582 

Broadband and voice 455,723 354,198 903,267 644,357 

Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 

Very Small Aperture Terminal services (VSAT) 218,387 467,346 470,895 861,073 

ADM sites rentals 43,174 – 74,172 – 

Others 84,941 55,641 220,360 170,035 

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

22 


21. Cost of sales 



2010 2009 2010 2009 


LDI Interconnect cost 616,022 735,525 1,069,463 1,531,653 

Leased circuit charges 84,230 80,330 181,471 163,327 

Contribution to PTA Funds 49,006 234,296 123,384 627,848 

PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 

Operational cost 247,880 329,407 588,260 732,966 

Bandwidth cost of VSAT services 196,248 297,816 398,726 624,642 

Others 9,241 21,641 64,629 65,118 

22. Provisions and write off 

1,208,553 1,708,023 2,439,071 3,757,814 

Trade debts written off – related parties 206,227 – 206,227 8,451 

Provision for doubtful trade debts – other parties 217,477 – 217,477 9,822 

Provision for doubtful advances 


– related parties 447,587 – 447,587 – 

– other parties 15,599 – 15,599 – 

Provision for impairment of capital work in progress 353,515 – 353,515 – 

Provision for impairment of long term 

investment in subsidiary company 4,400 – 4,400 – 

Provision for obsolete stores and spares 271,998 – 271,998 – 

23. Other income/ (loss) 

1,516,803 – 1,516,803 18,273 

Dividend income from subsidiary company – – 156,060 – 

USF grant recognised as income (121,608) – 25,939 – 

Profit/ (loss) on sale of fixed assets (6,709) – (6,798) 22,953 

Rental income – 3,892 – 3,892 

Other income/ (loss) (335) 5,600 1,589 6,549 

24. Finance cost 

(128,652) 9,492 176,790 33,394 

Interest/markup 500,971 163,886 1,012,486 676,875 

Cross currency and interest rate swap contracts cost 377,947 171,155 377,947 171,155 

Amortization of ancillary cost of long term finance 22,301 – 44,602 – 

Finance cost of leased assets 596 190 852 595 

Bank charges, commission and fees 26,615 43,682 39,638 95,916 

Exchange (gain)/ loss (11,900) 328,542 41,424 332,792 

916,530 707,455 1,516,949 1,277,333 

Interest/mark up capitalised under 

property, plant and equipment (117,196) (146,189) (234,392) (292,377) 

799,334 561,266 1,282,557 984,956 


23




25. Related party transactions 

Aggregate transactions with related parties 

during the period were as follows: 

Parent Company 



2010 2009 2010 2009 


Warid Telecom International LLC, UAE (WTI) 

Markup charged to WTI 1,549 – 3,045 – 

Provision for doubtful advances 35,911 – 35,911 – 

Payments made by the Company on behalf of WTI – – 56 – 

Shareholder 

Long term finance received from shareholder 856,579 – 2,063,379 – 

Markup on long term finance from shareholder 8,693 – 8,693 – 

Subsidiary Companies 

Wateen Solutions (Private) Limited (WSPL) 

Cost and expenses charged by WSPL 30,191 – 30,630 – 

Markup charged to WSPL 25,951 57,225 – 

Purchase of intangible assets 4,300 – 4,300 – 

Dividend income – – 156,060 – 

Payments made by WSPL on behalf of the Company 65,357 – 176,952 35,588 

Payments made on behalf of WSPL – 21,797 – 21,797 

Netsonline Services (Pvt) Limited 


Provision for impairment in investment 4,400 – 4,400 – 

Associated Companies 

Warid Telecom (Private) Limited (WTL) 

Sale of services to WTL 500,478 546,934 891,537 1,097,493 

Cost and expenses charged by WTL 86,601 69,049 231,804 145,775 

Trade debts written off 76,834 – 76,834 – 

Wateen Multimedia (Pvt) Limited (WMM) 

Cost and expenses charged by WMM 13,674 – 22,791 – 

Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 

Wateen Telecom Limited - UK (Wateen UK) 

Sale of services 33,635 – 67,313 – 

Markup charged to Wateen UK 7,480 – 11,820 – 

Cost and expenses charged by Wateen UK 153,561 – 218,766 – 


Payments made by the Company on behalf of 

Wateen UK – – 173,458 – 

24 




2010 2009 2010 2009 


Bank Alfalah Limited (BAL) 

Sale of services to BAL 1,652 – 35,312 33,818 

Markup charged by BAL on short term borrowings 68,399 67,666 132,571 135,581 

Trade debts written off – 8,451 – 8,451 

Taavun (Pvt) Limited 

Long term finance received 50,000 – 600,000 – 

Markup on long term finance 23,789 – 23,789 – 

Warid Congo S.A (Warid Congo) 

Cost and expenses charged by Warid Congo – – – 3,675 


Payments made on behalf of Warid Congo – – 5,384 – 

Warid Telecom Uganda Limited (Warid Uganda) 


Warid Uganda – 26,537 47,474 39,933 


Warid Telecom Georgia Limited 


Warid Telecom International – Bangladesh 


Raseen Technology (Pvt) Limited (Raseen) 

Markup charged to Raseen – – 1,159 – 


Amoon Media Group (Private) Limited 


Advance for construction of Warid Tower 

Advance paid during the period – – 3,200 – 


Gratuity Fund 

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

Provident Fund Trust 

Employer contribution to trust 4,649 8,267 14,052 14,865 

Surcharge payable to trust on late payments 1,142 – 1,142 – 

Other related parties 

Remuneration of chief executive and 

key management personnel including 

benefits and perquisites 110,926 97,664 228,600 190,483 


25




26. Date of authorisation for issue 

This condensed interim financial information has been authorised for circulation to the shareholders 

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

______________ 


_____________ 

Director 

26 


CONDENSED 

CONSOLIDATED 

FINANCIAL 

INFORMATION 

27

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UN-AUDITED) 

AS AT DECEMBER 31, 2010 

Note 


2010 2010 


SHARE CAPITAL AND RESERVES 

Authorised capital 1,000,000,000 

(June 30, 2010: 1,000,000,000) 

ordinary shares of Rs 10 each 10,000,000 10,000,000 

Issued, subscribed and paid–up capital 6,174,746 6,174,746 

617,474,620 (June 30, 2010: 617,474,620) 

ordinary shares of Rs 10 each 

General reserve 134,681 134,681 

Accumulated loss (4,799,761) (1,794,123) 

1,509,666 4,515,304 

Non controlling interest in equity of Subsidiary Company 

Wateen Solutions (Pvt) Ltd 5,007 206,999 

1,514,673 4,722,303 

NON–CURRENT LIABILITIES 

Long term finance – secured 5 – – 

Medium term finance from an associated company – unsecured 6 – – 

Long term finance from a shareholder – unsecured 7 2,063,379 – 

Cross currency and interest rate swap – fair value 5.5 – 139,053 

Obligations under finance leases 4,638 5,429 


2,132,776 254,937 

DEFERRED LIABILITIES 

Employees’ retirement benefits 18,748 60,059 

Deferred income tax liability 8 – 76,807 

Deferred USF grant 9 1,046,248 827,159 

1,064,996 964,025 

CURRENT LIABILITIES 

Current portion of long term finance – secured 5 11,858,743 12,411,659 

Current portion of medium term finance from an 

associated company – unsecured 6 600,000 – 

Payable to supplier to be settled through long term finance – 433,798 

Cross currency and interest rate swap liability 5.5 517,000 217,397 

Current portion of obligations under finance leases 2,035 1,556 

Finance from supplier – unsecured 77,941 77,668 

Short term borrowings – secured 10 4,092,484 4,604,346 

Trade and other payables 11 4,909,744 6,030,371 

Interest / markup accrued 661,615 631,491 

22,719,562 24,408,286 

CONTINGENCIES AND COMMITMENTS 12 

27,432,007 30,349,551 

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

28 


Note 


2010 2010 


NON-CURRENT ASSETS 

Property, plant and equipment 

Operating assets 13 18,718,039 17,053,114 

Capital work in progress 14 2,791,644 3,883,565 

Intangible assets 295,943 310,843 

21,805,627 21,247,522 

ADVANCE AGAINST PURCHASE OF SHARES 15 85,000 – 

DEFERRED INCOME TAX ASSET 8 772,299 – 

LONG TERM DEPOSITS AND PREPAYMENTS 



345,214 318,613 

CURRENT ASSETS 

Trade debts 16 1,602,279 4,060,687 

Contract work in progress 39,390 47,394 

Stores, spares and loose tools 17 564,418 855,619 

Advances, deposits, prepayments and 

other receivables 18 1,634,177 1,558,692 

Income tax refundable 202,168 246,298 

Cash and bank balances 19 381,435 2,014,726 

4,423,867 8,783,416 

27,432,007 30,349,551 

______________ 


_____________ 

Director 


29

CONDENSED CONSOLIDATED INTERIM 

PROFIT AND LOSS ACCOUNT (UN-AUDITED) 


Note 



2010 2009 2010 2009 


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

Cost of sales (excluding 

depreciation and amortisation) 21 1,231,428 1,901,223 2,563,887 4,049,688 

General and administration expenses 595,323 379,899 891,505 762,691 

Provisions and write off 22 1,542,537 – 1,542,537 18,273 

Advertisement and marketing expenses 44,664 71,605 75,271 166,196 

Selling and distribution expenses 1,478 6,901 8,830 14,093 

Other charges – 28,936 – 28,936 

Other income 23 95,135 (10,163) (23,388) (34,695) 

3,510,565 2,378,401 5,058,642 5,005,182 

Loss before interest, taxation, 

depreciation and amortisation (2,032,191) 38,819 (1,649,302) (89,534) 

Depreciation and amortisation 519,782 400,533 990,472 762,748 

Finance cost 24 808,172 556,208 1,284,594 963,734 

Finance income (20,503) (52,460) (23,917) (60,405) 

Loss before taxation (3,339,642) (865,462) (3,900,450) (1,755,611) 

Deferred Income tax credit 25 785,965 287,635 842,760 575,268 


Non controlling interest in (profit)/loss of 

consolidated subsidiary company 34,506 (17,455) 52,052 (34,956) 


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


______________ 


_____________ 

Director 

30 



STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) 




2010 2009 2010 2009 



Other comprehensive income – – – – 

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


______________ 


_____________ 

Director 


31

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT (UN-AUDITED) 


6 months to 


2010 2009 


CASH FLOW FROM OPERATING ACTIVITIES 

Loss before taxation (3,900,450) (1,755,611) 

Adjustment of non cash items: 

Depreciation and amortisation 990,472 762,748 

Finance cost 1,284,594 963,734 

(Profit)/loss on sale of operating assets 6,798 (23,328) 

Deferred grant recognised during the period (25,939) – 

Provisions and write off (note 22) 1,542,537 18,273 

Provision for employees’ retirement benefits 4,052 6,655 

3,801,858 1,728,082 

(98,593) (27,529) 

Changes in working capital: 

Decrease/(Increase) in trade debts 2,002,607 (384,933) 

Decrease/(Increase) in contract work in progress 8,004 (9,527) 

Decrease in stores, spares and loose tools 19,203 336,191 

(Increase)/Decrease in advances, deposits, 

prepayments and other receivables (285,259) 561,588 

Increase in cross currency and interest rate swap liability 160,550 43,813 

(Decrease)/Increase in trade and other payables (1,159,330) 235,153 

745,776 782,285 

Employees’ retirement benefits paid (6,661) – 

Taxes refund/(paid) 37,786 (28,958) 

Cash flows from operating activities 678,308 725,798 

CASH FLOW FROM INVESTING ACTIVITIES 

Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,024) 

Intangible assets additions (4,300) – 

Sale of property, plant and equipment 10,000 163,656 

Long term deposits receivable – (paid)/received (34,412) 213 


Advance against purchase of shares (85,000) – 

Cash flows from investing activities (2,026,257) (2,636,340) 

32 


6 months to 


2010 2009 


CASH FLOW FROM FINANCING ACTIVITIES 

Long term finance received 579,241 5,691,156 

Long term finance repaid (1,132,158) (470,929) 

Long term finance received from associated company 600,000 – 

Long term finance received from a shareholder 2,063,379 – 

Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226) 

Long term payable to supplier 273 (210,212) 

Deferred USF grant received – 297,960 

Obligations under finance leases repaid (311) (1,683) 

Long term deposits payable – (repaid)/received (45,696) 13,594 

Dividend paid to non controlling shareholders (149,940) – 

Short term borrowings repaid (1,545,415) – 

Finance cost paid (1,254,470) (748,289) 

Cash flows from financing activities (1,318,895) 1,699,371 

(DECREASE) IN CASH AND CASH EQUIVALENTS (2,666,844) (211,171) 

Cash and cash equivalents at beginning of the period (909,455) (2,261,349) 

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

CASH AND CASH EQUIVALENTS COMPRISE: 

Cash and bank balances 381,435 363,347 

Short term running finance (3,957,734) (2,835,867) 

(3,576,299) (2,472,520) 


______________ 


_____________ 

Director 


33


STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) 


Non controlling 

Share General Accumulated interest in equity 

capital reserve loss Total of subsidiary Total 


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

Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) – – – 

Total comprehensive loss for the period – – (1,215,298) (1,215,298) 34,956 (1,180,342) 

Balance at December 31, 2009 4,174,746 134,681 (936,814) 3,372,613 214,456 3,587,069 

Balance at January 1, 2010 4,174,746 134,681 (936,814) 3,372,613 214,456 3,587,069 

Issue of 200,000,000 shares for cash 2,000,000 – – 2,000,000 – 2,000,000 

on April 20, 2010 

Shares issue cost (net of tax benefit) – – (79,247) (79,247) – (79,247) 

Total comprehensive loss for the period – – (778,062) (778,062) (7,457) (785,519) 

Balance at June 30, 2010 6,174,746 134,681 (1,794,123) 4,515,304 206,999 4,722,303 

Balance at July 1, 2010 6,174,746 134,681 (1,794,123) 4,515,304 206,999 4,722,303 

Dividend paid to non–controlling shareholders – – – – (149,940) (149,940) 

Total comprehensive loss for the period – – (3,005,638) (3,005,638) (52,052) (3,057,690) 

Balance at December 31, 2010 6,174,746 134,681 (4,799,761) 1,509,666 5,007 1,514,673 


______________ 


_____________ 

Director 

34 



CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) 


1. Legal status and operations 

The condensed consolidated interim financial information includes the financial information of Wateen 

Telecom Limited and its subsidiary companies Wateen Solutions (Pvt) Limited (51% owned), Wateen 

Satellite Services (Pvt) Limited (100% owned) and Netsonline Services (Pvt) Limited (100% owned). 

For the purpose of this financial information, Wateen and consolidated subsidiaries are referred to as 

the Company. 

Wateen Telecom Limited was incorporated in Pakistan as a Private Limited Company under 

Companies Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public 

voice telephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company 

commenced its commercial operations from May 1, 2005. The legal status of the Company was 

changed from “Private Limited” to “Public Limited” with effect from October 19, 2009. The Company 

was listed on Karachi, Lahore and Islamabad Stock Exchanges with effect from May 27, 2010. The 

registered office of the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom 

International LLC, U.A.E. 

The subsidiary company Wateen Solutions (Pvt) Limited , is incorporated under Companies Ordinance, 

1984 as a private Limited company on May 17, 2004. The principal activities of the company are to 

sell and deploy telecom equipment and provide related services. The registered office of the company 

is situated at Lahore. Wateen acquired 100 % interest in Wateen Solutions (Pvt) Limited on August 

2, 2006. Wateen sold 49% shares (397,027 fully paid ordinary shares of Rs 100 each) of Wateen 

Solutions (Pvt) Limited on July 1, 2008. 

The subsidiary company Wateen Satellite Services (Pvt) Limited (WSS) ,is incorporated as a private 

limited company under the Companies Ordinance, 1984 and is engaged in providing back haul 

and satellite data connectivity services in Pakistan. On March 1, 2009, the Company transferred all 

contracts for providing back haul and satellite data connectivity services to Wateen Telecom Limited. 

Wateen acquired 100% shares of Wateen Satellite Services (Pvt) Limited on July 1, 2008. 

WSS has transferred all of its assets to parent company on March 31, 2009. Further, subsequent to 

year end the Board of Directors of the parent company in their meeting held on November 22, 2011 

has decided to voluntary winding up the Company. Accordingly, the financial statements of the WSS 

has not been prepared on a going concern basis. 

The subsidiary company Netsonline Services (Pvt) Limited, is incorporated as a private limited 

company under the Companies Ordinance, 1984 and is engaged in providing internet and other 

technology related services in Pakistan. Wateen acquired 100% shares of Netsonline Services (Pvt) 

Limited on July 1, 2008. 

Further, subsequent to year end the Board of Directors of the parent company in their meeting held 

on November 22, 2011 has decided to voluntary winding up the Company. Accordingly, the financial 

statements of the NetsOnline Services (Pvt) Limited has not been prepared on a going concern basis. 

Subsidiaries are all entities over which the parent has the power to govern the financial and operating 

policies generally accompanying a shareholding of more than one half of the voting rights. The existence 

and effect of potential voting rights that are currently exercisable or convertible are considered when 

assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date 

on which control is transferred to the group. They are de-consolidated from the date control ceases. 

The purchase method of accounting is used to account for the acquisition of subsidiaries by the 

group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments 

issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable 

to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a 


35




business combination are measured initially at their fair values at the acquisition date. The excess of 

the cost of acquisition over the fair value of the parent share of the identifiable net assets acquired 

is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the 

subsidiary acquired, the difference is recognised directly in the income statement. 

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

consolidation. 

The group applies a policy of treating transactions with non-controlling interests as transactions with 

parties external to the group. Disposals to non-controlling interests result in gain and losses for the 

company and are recorded in the income statement if the parent losses control of the subsidiary and 

in the statement of changes in equity if the change in ownership of subsidiary does not result in loss 

of control. Purchases from minority interests results in goodwill, being the difference between any 

consideration paid and the relevant share acquired of the carrying value of the assets of the subsidiary. 

2. Statement of compliance 

The presentation of this condensed consolidated interim financial information of the Company 

for the six months period ended December 31, 2010 has been prepared in accordance with the 

requirements of the International Accounting Standard 34 - Interim Financial Reporting and provisions 

of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the 

provisions of or directives issued under the Companies Ordinance, 1984 have been followed. 

3. Accounting policies 

The accounting policies and methods of computation adopted for the preparation of this condensed 

consolidated interim financial information are the same as those applied in preparation of the published 

financial statements for the year ended June 30, 2010. 

4. Net current liabilities 

Net current liabilities as at December 31, 2010 were Rs 18.272 billion of which Rs 10.613 billion 

relate to loan installments due for repayment after December 31, 2011 and Rs 4.660 billion relates 

to current portion of long term finance and short term finance. A shareholder of the Company has 

provided financial support in the form of long term finance amounting to Rs 2.063 billion to meet 

the requirements of the Company and this arrangement is expected to continue. Subsequent to the 

period end, the Company has negotiated with the lenders to restructure long term finance and convert 

short term finance, except for short term running finance from Bank Alfalah Limited amounting to 

Rs 1.795 billion, into long term finance facilities. The tenure of the restructured facilities is eight years 

w.e.f January 1, 2011 (inclusive of grace period of three years). The principal amount of restructured 

facilities will be repayable in 10 semiannual installments commencing July 1, 2014. Compliance with 

financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio 

of 80:20, which should not be breached during the grace period. The Company is in the phase of 

finalizing addendum agreements to restructure term finance facilities with lenders. 

The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its 

medium term finance facility. The associated company has agreed to reschedule its facility. Principal 

will be repayable in semi-annual equal installments within two years after the expiry of grace period 

(from January 01, 2011 to December 31, 2019). The rate of markup will be 6 months KIBOR, subject 

to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum 

agreement to restructure the term finance facility with lender. 

36 


Note 


2010 2010 


5. Long term finance - secured 

Syndicate of banks 5.1 4,766,000 4,766,000 

Export Credit Guarantee Department – (ECGD) 5.2 2,199,048 2,450,304 

Standard Chartered Bank (SCB) 5.3 40,500 54,000 

Dubai Islamic Bank (DIB) 5.4 477,000 477,000 

Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 

Standard Chartered Bank (SCB) 5.6 508,830 – 

Total 12,113,605 12,711,123 

Unamortized transaction and other ancillary cost 

Opening balance 299,464 – 

Additions during the period/year – 400,862 

Amortisation for the period/year (44,602) (101,398) 

(254,862) (299,464) 

11,858,743 12,411,659 

Less: Amount shown as current liability 

Amount payable within next twelve months (1,845,763) (1,991,174) 

Amount due after Dec 31, 2011 5.7 (10,012,980) (10,420,485) 

(11,858,743) (12,411,659) 

– – 

5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard 

Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National 

Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company 

amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till December 31, 2010. The 

tenure of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six 

unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 

2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 

6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years. 

The facility is secured by way of hypothecation over all present and future moveable assets (including 

all current assets) and present and future current/fixed assets (excluding assets under specific charge 

of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in 

respect of immoveable properties of the Company, lien over collection accounts and Debt Service 

Reserve Account and a corporate guarantee from Warid Telecom International LLC. 

5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit 

Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till December 31, 2010. 

Amount outstanding at December 31, 2010 was USD 25.600 million. The loan is repayable in 14 

semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of 

mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default 

payment from the due date for payment upto the date of payment. If the finance charge is not paid 


37




then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the 

period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The 

loan is secured by personal guarantees by three Sponsors of the Company. 

5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard 

Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from 

October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by 

first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 

million. 

5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The 

principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, 

2010. The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on 

default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. 

The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries). 

During the period the bank has rescheduled the second installment due on August 01, 2010 to 

January 31, 2011. Remaining repayments are due on their respective dates. 

5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million 

(June 30, 2010: USD 64 million) has been availed till December 31, 2010. Amount outstanding at 

December 31, 2010 was USD 47.989 million. The principal amount of outstanding facility is repayable 

in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final 

maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% per 

annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from 

the due date for payment upto the date of payment. The loan is secured through hypothecation 

charge over specific assets of the Company supplied under supply & services agreements with 

Motorola. 

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) 

amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged 

through cross currency swap contract with SCB. In consideration, the Company paid the difference 

between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was 

terminated by the Company on January 18, 2011 and the cost of termination has been recognised in 

profit and loss account. 

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 

53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest 

rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. 

The contract was terminated by the Company on January 18, 2011 and the cost of termination has 

been recognised in profit and loss account. 

Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the 

original facility agreement to the Deutsche Bank AG as lender, effective August 19, 2011. 

5.6 During the period, the Company has obtained term finance facility from Standard Chartered bank 

amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010. The principal 

is repayable in five installments commencing from June 30, 2011. The rate of mark-up is six months 

KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets 

(excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 

38 


million, which charge shall no later than thirty days from the execution of this agreement be enhanced 

to a first pari passu charge inter se, SCB and the existing creditors of the customer. 

During the period the Company has obtained term finance facility from Standard Chartered bank 

amounting to Rs 217 million. The principal is repayable in five installments commencing from June 

30, 2011. The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of 

hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO 

& Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days 

from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the 

existing creditors of the customer. 

5.7 The Company is required to make payments of long term loans on due dates and to maintain certain 

ratios as specified in loan agreements. The Company paid ECGD loan installment of USD 3.025 million 

on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 

thousand on January 31, 2011 which was due on October 25, 2010. Further, certain ratios specified 

in the loan agreements have not been maintained at December 31, 2010. As a consequence, the 

lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. 

In terms of provisions of International Accounting Standard on Presentation of financial statements 

(IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for 

at least twelve months after the balance sheet date, all liabilities under these loan agreements are 

required to be classified as current liabilities. Based on above, loan installments due as per loan 

agreements after December 31, 2011 amounting to Rs 10,012,980 thousand have been shown as 

current liability. 

Subsequent to period end, the Company has negotiated with the lenders to restructure its existing 

long term finance facilities as explained in note 4. 

6. Medium term finance from an associated company - unsecured 

During the period, the Company has obtained an aggregate medium term finance facility of Rs 600 

million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured 

finance facilities availed by the Company. The principal is repayable within 30 days of the expiry 

of twenty four months from the effective date i.e September 30, 2010. The rate of mark-up is six 

month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan 

installments due as per loan agreement after December 31, 2011 amounting to Rs 600 million have 

been shown as current liability. 

Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) 

Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility 

as explained in note 4. 

7. Long term finance from a shareholder - unsecured 

During the period, the Company has obtained loan from a shareholder amounting to USD 24 million. 

This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable 

within 30 days of the expiry of a period of five years from the last date the lender has disbursed the 

loan, which shall be on or about January 29, 2015. The rate of mark-up is LIBOR + 1.5%. Alternatively 

the loan may be converted into equity by way of issuance of the Company’s ordinary shares at the 

option of the lender at any time after the repayment date on the best possible terms but subject to 

fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at 

the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value 


39




shall be calculated after taking into account the average share price of the last 30 calendar days, 

counted backwards from the repayment date, provided that such conversion is permissible under the 

applicable laws of Pakistan. 

Note 


2010 2010 


8. Deferred income tax asset/ (liability) 

Temporary differences between accounting 

and tax depreciation (3,745,161) 3,423,722 

Unused tax losses 8.1 3,973,860 (3,268,671) 

Unused tax benefit related to share issue cost 39,462 (34,138) 

Deductible temporary differences on account of provisions 506,037 (47,102) 

Deferred cost 36 (72) 

Trade debts - exchange gain (1,935) 3,068 

772,299 76,807 

8.1 Potential tax benefit of Rs 478,585 thousand has not been recognised representing business losses 

of Rs 1,367,386 thousand which will expire in tax year 2016. 

8.2 The existence of future taxable profits sufficient to absorb these losses is based on a business 

plan prepared by management of the Company which involves making judgments regarding key 

assumptions underlying the estimation of future taxable profits estimated in the plan. These 

assumptions if not met have a significant risk of causing a material adjustment to the carrying amount 

of the deferred tax asset. In the management’s view it is probable that the company will be able to 

achieve the profits projected in the plan. 


2010 2010 


9. Deferred Universal Service Fund (USF) grant 

Balance at beginning of the period/year 827,159 212,428 

Amount received/receivable during the period/year 245,028 616,477 

Amount recognised as income during the period/year (25,939) (1,746) 

Closing balance 1,046,248 827,159 

10. Short term borrowings - secured 

Short term borrowings 134,750 1,680,165 

Short term running finance 3,957,734 2,924,181 

4,092,484 4,604,346 

40 


11. Trade and other payables 

These include payable to related parties as follows: 


2010 2010 



Advances from Warid Telecom (Pvt) Limited 34,316 151,004 

Bank Alfalah Limited 3,950 – 


Payable to gratuity fund 109,841 104,041 

Payable to provident fund 22,637 11,569 

311,426 400,744 

12. Contingencies and commitments 

(i) Claims against the Company not acknowledged as debt 260,267 264,038 

(ii) Performance guarantees issued by banks in favour of 

the Company 1,412,233 1,476,816 

(iii) Outstanding commitments for capital expenditure 1,208,145 1,799,824 

(iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 

49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of 

Directors of the Company in their meetings held on November 15, 2009 and November 19, 

2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir 

Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval 

of the Board of Directors of the Company, the Company entered into a Share Purchase 

Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% 

shareholding of Wateen Solutions. 

However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to 

Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the 

purposes of negotiating a downward revision to the purchase price as agreed in the SPA from 

Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the 

resultant change in utilization of the IPO proceeds was approved by the shareholders of the 

Company in the Extra Ordinary General Meeting dated August 13, 2010. 

Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as 

partial payment of the purchase price and the balance of Rs 255,000 thousand is payable 

by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen 

Solutions and the resultant devaluation of its share price, the new management entered into 

negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of 

Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 

thousand, however the finalization of renegotiated agreement is in process. 

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


41




Note 

Six months to Year ended 


2010 2010 


13. Operating assets 

Opening net book value 17,053,114 14,062,017 

Additions – owned 2,658,762 4,804,160 

– leased – 9,293 

Disposals at net book value (16,798) (191,532) 

Depreciation charge (977,039) (1,630,824) 

Closing net book value 18,718,039 17,053,114 

14. Capital work in progress 

Leasehold improvements 21,219 23,334 

Line and wire 1,240,781 1,319,762 

Network equipment 14.1 1,529,644 2,540,469 

2,791,644 3,883,565 

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

14.2 Finance cost of Rs 234 million was capitalised during the six months period ended December 31, 

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


2010 2010 

Note 


15. Advance against purchase of shares 

Advance paid against purchase of shares 

Wateen Solutions (Pvt) Limited 12 (iv) 85,000 – 

16. Trade debts 

Trade debts – related parties 16.1 328,258 1,807,657 

– other parties 1,680,630 1,422,911 

Less: Provision for doubtful debts – other parties 16.2 (406,609) (157,035) 

1,602,279 4,060,687 

42 


16.1 Trade debts include due from related parties as follows: 


2010 2010 



Warid International LLC, UAE - Parent company 85,700 85,400 

Bank Alfalah Limited 96,631 22,095 

Warid Telecom Congo S.A – 1,191,305 


Wateen Telecom UK Limited – 105,643 

328,258 2,166,610 

These balances are net of trade debts written off during the period related to following associated 

companies, which have been approved by the shareholders in Extra Ordinary General Meeting held 

on December 31, 2011. 


2010 2010 


Warid Telecom (Private) Limited 76,834 – 

Warid Telecom Congo Limited 125,127 – 

Warid Telecom Uganda Limited 4,266 – 


206,227 8,451 

16.2 Provision for doubtful debts – other parties 

Opening balance 157,035 110,875 

Provision during the period 249,574 47,203 

Recovery during the year – (1,043) 

Closing balance 406,609 157,035 

Provision during the period includes Rs 197,213 thousand based on age analysis of debts as follows: 

Balances 181 - 360 days past due - 50 % 

Balances over 360 days past due - 100 % 


2010 2010 


17. Stores, spares and loose tools 

Cost 836,416 855,619 

Less: Provision for obsolete stores 271,998 – 

564,418 855,619 


43




Note 


2010 2010 


18. Advances, deposits, prepayments 


18.1 These include receivable from related parties as follows: 

Wateen Telecom UK Limited 293,998 108,720 

Wateen Multimedia (Pvt) Limited 149,106 137,160 

Advance for construction of Warid Tower 68,916 65,716 


Amoon Media Group (Pvt) Limited 27,960 27,960 


Warid Telecom Georgia Limited 15,403 15,403 

Warid Telecom International – Bangladesh 5,587 5,587 


Warid Telecom Congo S.A – 5,384 

616,255 414,164 

Less: Provision for doubtful receivables from 

related parties 18.2 439,859 – 

176,396 414,164 

18.2 Provision for doubtful receivables from related parties 

Wateen Telecom UK Limited 18.3 266,708 – 

Advance for construction of Warid Tower 68,916 – 

Warid International LLC, UAE 38,956 – 

Amoon Media Group (Pvt) Limited 27,960 – 


Warid Telecom Georgia Limited 15,403 – 

Warid Telecom International – Bangladesh 5,587 – 

439,859 – 

Provision for doubtful receivables have been approved by shareholders of the Company in Extraordinary 

General Meeting held on December 31, 2011. 

18.3 This includes investment in 51% shares of Wateen Telecom UK Limited of par value GBP 5,099 (June 

30, 2010: 51% shares of par value of GBP 5,099). Subsequent to December 31, 2010 the Company 

acquired remaining 49% shares of Wateen Telecom UK Limited of par value GBP 4,901. This company 

was incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank 

Of Pakistan as per investment in foreign equity abroad is in process and shares of Wateen Telecom 

UK Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of 

this specific approval holding company cannot control the financial and operating policies of Wateen 

Telecom UK Limited to obtain the benefit in term of dividend, repatriation of investment, advance 

or receive any loan or interest thereon. Hence despite of the 100% ownership Wateen Telecom UK 

Limited is not treated as subsidiary of the Company. 

44 


18.4 Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 

30, 2010: Rs Nil). 

19. Cash and bank balances 

Bank balances amounting to Rs 34 million were under lien with banks (June 30, 2010: Rs 42.2 

million). 



2010 2009 2010 2009 


20. Revenue 

Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 

Optic Fiber Cable (OFC) 

Indefeasible Right of Use (IRU) (232,045) – – – 

Operation and Maintenance 155,147 169,317 298,690 295,709 

Managed capacity 21,991 23,669 34,734 52,582 

Broadband and voice 455,723 354,198 903,267 777,854 

Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 

Very Small Aperture Terminal services (VSAT) 218,387 467,346 470,895 861,073 

ADM sites rentals 43,174 – 74,172 – 

Sale of product and services 33,282 105,634 149,090 377,576 

Margin/commission 13,429 148,177 3,060 4,637 

Others 84,941 55,641 220,360 36,538 

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

21. Cost of sales 

LDI Interconnect cost 616,022 735,525 1,069,463 1,531,653 

Leased circuit charges 84,230 80,330 181,471 163,327 

Contribution to PTA Funds 49,006 234,296 123,384 627,848 

PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 

Cost associated with IRU of Optic Fiber 

Cable – – – – 

Operational cost 247,880 443,369 630,116 849,017 

Bandwidth cost of VSAT services 196,248 297,816 398,726 624,642 

Equipment and material consumed 22,875 79,238 82,960 159,320 

Others 9,241 21,641 64,629 81,621 

1,231,428 1,901,223 2,563,887 4,049,688 


45




22. Provisions and write off 



2010 2009 2010 2009 


Trade debts written off - related parties 206,227 – 206,227 8,451 

Provision for doubtful trade debts – other parties 249,574 – 249,574 9,822 

Provision for doubtful advances 


– related parties 439,859 – 439,859 – 

– other parties 15,599 – 15,599 – 

Provision for impairment of capital work in progress 353,515 – 353,515 – 

Provision for impairment of goodwill on 

acquisition of subsidiary company 5,765 – 5,765 – 

Provision for obsolete stores and spares 271,998 – 271,998 – 

23. Other income/ (loss) 

1,542,537 – 1,542,537 18,273 

Profit/(loss) on sale of fixed assets (6,709) – (6,798) 23,326 

Rental income – 3,892 – 3,892 

USF grant recognised as income (84,816) – 25,939 – 

Other income/ (loss) (3,610) 6,271 4,247 7,477 

24. Finance cost 

(95,135) 10,163 23,388 34,695 

Interest/markup 507,699 163,886 1,012,486 669,926 

Cross currency and interest rate swap contracts cost 377,947 171,155 377,947 171,155 

Amortization of ancillary cost of long term finance 22,301 – 44,602 – 

Finance cost of leased assets 596 190 852 595 

Bank charges, commission and fees 28,762 44,006 41,849 103,785 

Exchange loss/(gain) (11,937) 323,160 41,250 310,650 

925,368 702,397 1,518,986 1,256,111 

Mark up on long term finance capitalised under 

property, plant and equipment (117,196) (146,189) (234,392) (292,377) 

25. Income tax charge/(credit) 

808,172 556,208 1,284,594 963,734 

Current (12,894) 4,310 3,747 8,621 

Prior Period – – 2,601 – 

Deferred (773,071) (291,944) (849,108) (583,889) 

(785,965) (287,634) (842,760) (575,268) 

46 




2010 2009 2010 2009 


26. Related party transactions 

Aggregate transactions with related parties 

during the period were as follows: 

Parent Company 

Warid Telecom International LLC, UAE (WTI) 

Markup charged to WTI 3,045 – 6,090 – 

Payments made by the Company on behalf of WTI – – 56 – 


Shareholder 

Long term finance received from shareholder 856,579 – 2,063,379 – 

Markup on long term finance from shareholder 8,693 – 8,693 – 

Associated Companies 

Warid Telecom (Private) Limited (WTL) 

Sale of services 500,478 546,934 891,537 1,097,493 

Cost and expenses charged by company 86,601 69,049 423,818 145,775 


Unearned revenue reversed 147,315 – 147,315 – 

Wateen Multimedia (Pvt) Limited (WMM) 

Cost and expenses charged by (WMM) 13,674 – 22,791 – 

Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 

Bank Alfalah Limited (BAL) 

Sale of services 1,652 – 35,312 33,818 

Markup charged by company on 

running finance facility 68,399 67,666 132,571 135,581 

Trade debts written off – 8,451 – – 

Taavun (Pvt) Limited 

Long term finance received 50,000 – 600,000 – 

Markup charged by company on long term finance 23,789 – 23,789 – 

Wateen Telecom Limited – UK (Wateen UK) 

Sale of services 33,635 – 67,313 – 

Markup charged to Wateen UK 7,480 – 11,820 – 

Cost and expenses charged by Wateen UK 153,561 – 218,766 – 

Provision for advance against purchase of shares 266,708 – 266,708 – 


Wateen UK 86,729 – 173,458 – 


47






2010 2009 2010 2009 


Warid Congo S.A (Warid Congo) 

Cost and expenses charged by Warid Congo – – – 3,675 

Trade Debts written off 125,127 – 125,127 – 

Payments made on behalf of Warid Congo – – 5,384 – 

Warid Telecom Uganda Limited (Warid Uganda) 


Warid Uganda – 26,537 47,474 39,933 

Trade Debts written off 4,266 – 4,266 – 

Warid Telecom Georgia Limited 


Warid Telecom International – Bangladesh 


Raseen Technology (Pvt) Limited (Raseen) 

Markup charged to Raseen – – 1,159 – 


Amoon Media Group (Private) Limited 


Advance for construction of Warid Tower 

Advance paid during the period – – 3,200 – 


Gratuity Fund 

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

Provident Fund Trust 

Employer contribution to trust 4,649 8,267 14,052 14,865 

Surcharge charged by trust on late payments 1,142 – 1,142 – 

Other related parties 

Remuneration of chief executive and 

key management personnel including 

benefits and perquisites 110,926 97,664 228,600 190,483 

27. Date of authorisation for issue 

This condensed interim financial information has been authorised for circulation to the shareholders 

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

______________ 


_____________ 

Director 

48

Wateen HY Report Dec 2010.pdf

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