Annual Report 2017 - · PDF fileWateen continued to improve its revenues in FY17to PKR 7,024...

CONTENTS

Wateen Telecom Ltd. Annual Report 201701

2

4

6

9

Corporate Information

Directors’ Report

Attendance of the Board Members

Auditors' Report to the Members

FINANCIAL STATEMENTS

Balance Sheet

Profit & Loss Account

Statement of Comprehensive Income

Cash Flow Statement

Statement of Changes in Equity

Notes to and forming part of the Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

Auditors' Report to the Members

Consolidated Balance Sheet

Consolidated Profit & Loss Account

Consolidated Statement of Comprehensive Income

Consolidated Cash flow Statement

Consolidated Statement of Changes in Equity

Notes to and forming part of the Consolidated Financial Statements

ANNEXURES

Pattern of Shareholding

Categories of Shareholding

Notice of Annual General Meeting

Form of Proxy

10

12

13

14

16

17

55

56

58

59

60

62

63

105

106

107

109

CORPORATE INFORMATION

BOARD OF DIRECTORS

List of Board of Directors as of June 30, 2017

H.H. NAHAYAN MABARAK AL NAHAYAN

ADEEL KHALID BAJWA

RIZWAN ALI TIWANA

ABID HASAN

KHWAJA AHMAD HOSAIN

MANAGEMENT TEAMManagement as of June 30, 2017

RIZWAN ALI TIWANACHIEF EXECUTIVE OFFICER

MUHAMMAD AQIB ZULFIQARCHIEF FINANCIAL OFFICER & COMPANY SECRETARY

HASSAN HAYAT QURESHIHEAD OF LEGAL

ZAFAR IQBAL CH.VICE PRESIDENT HR & ADMIN

TAHIR HAMEEDCHIEF COMMERCIAL OFFICER- BROADBAND & MEDIA BUSINESS

ZAFAR MASOODDIRECTOR PROGRAM MANAGEMENT OFFICE

JAUHER ALIVICE PRESIDENT TECHNICAL

JUNAID SHEIKHCHIEF COMMERCIAL OFFICER- CARRIER & ENTERPRISE BUSINESS

AUDITORSEY Ford RhodesChartered Accountants96B-1 4th Floor Pace Mall Building M.M. Alam Road Gulberg IILahore

REGISTERED OFFICEMain Walton Road, Opp. Bab-e-Pakistan, Walton Cantt., Lahore.

PRESENT PLACE OF BUSINESSMain Walton Road, Opp. Bab-e-Pakistan, Walton Cantt., Lahore.

SHARE REGISTRARTHK Associates (Pvt.) Limited,

st1 Floor, 40-C, Block-6, P.E.C.H.S, Karachi.



BANKERSStandard Chartered Bank Pakistan LimitedHabib Bank LimitedBank Al Habib LimitedNational Bank of PakistanPak Libya Holding Company (Pvt.) LimitedSummit Bank LimitedAskari Bank LimitedSoneri Bank LimitedPak Brunei Investment Company LimitedThe Bank of KhyberBank Alfalah Ltd.Allied Bank of PakistanTelenor Micro Finance BankNIB Bank LimitedThe Bank of PunjabDubai Islamic Bank LimitedMeezan Bank LtdUnited Bank LimitedMobilink Microfinance Bank Limited

LEGAL ADVISORSIjaz Ahmed & Associates

Suite No. 425, 4th Floor, Siddique Trade Centre,

72 Main Boulevard, Gulberg, Lahore, Pakistan

DIRECTORS' REPORT

The Directors' of Wateen Telecom Ltd (the 'Company') are pleased to present the audited financial statements of the Company for the year ended June 30, 2017.

INDUSTRY OUTLOOK

Data demand for Pakistan is gradually evolving as the country continues to adopt primary ICT services for

businesses and personal use. According to PTA, broadband subscribers in the country have grown to 45.5m

by July-17 (Source: PTA Telecom Indicators), majority of which are served by mobile broadband (approx.

95%). These rapid changes in the ecosystem, has resulted in increased demand for services such as tele

housing, for which Wateen has been well-placed to serve the needs of the Mobile Network Operators.

For the period, Wateen grew its Triple Play services business for consumer and SME market with offerings in

new cities primarily led by demand for reliable quality services as well as premium TV services.

With emerging signs of a modern economy and steady economic turn-around in Pakistan, growth is coming in new avenues of ICT related services, for which a start-up culture is evolving in the country. These new services will also utilize data services, which is a healthy sign for the economy. Wateen continues to sustain and grow its operations with the evolving needs of its customers.

FINANCIAL PERFORMANCE

Wateen continued to improve its revenues in FY17to PKR 7,024 million, as compared to PKR 6,957 million in

FY16. This growth can be attributed to the enterprise and consumer business, led by demand for reliable

connectivity services.For the current period, Wateen recorded its highest EBIDTA - post 2009, amounting to

PKR 1,721 million in FY17 compared to PKR 1,581 million in FY16 and a continued reliance on cash-flow

from operations PKR 1,004million in FY17 as compared to PKR 1,245 million in FY16.

Enterprise and consumer business, have continued to show significant growth this year and closed at PKR 1,647 million in FY17, compared to PKR 1,264 million in FY16. This is mainly attributable to huge investment of PKR 460 million by the Company, growth in branch network connectivity of the Financial Sector in the Enterprise business and increased demand for reliable broadband and TV services in the Consumer sector especially in Gulberg Lahore. This growth is a result of well-coordinated sales efforts as well as the Managements' focus on grabbing more land/area as well as continuously improving service quality levels for all products and services.

LDI has shown a steady performance despite fierce competition and closed at PKR 2,158 million in FY17, as

compared to PKR 2,143 million in FY16.

OFC revenue shown decline which is mainly due to shifting of some projects in FY 18, OFC revenue close at

PKR 2,686 million in FY 17, as compared to PKR 2,858 million in FY16.

Tele housing contributed significant growth in revenues, approximately 140%, which was mainly attributable

to the newly merged Jazz Company and CM Pak, who continue to trust Wateen as their reliable

infrastructure partner, and was closed at PKR 463 million in FY17, compared to PKR 193 million in FY16.


FY 17

Revenue (PKR million) 7,024

EBITDA (PKR million) 1,721

Cash flow from Operations

(PKR million)

Loss per share – PKR (1.87)

1,004

FY 16

6,957

1,581

(3.18)

1,245


Despite significant improved performance of the Company in past three years, Company has still posted net

losses after taxation PKR 1,156 million as compared to PKR 1,961 million in FY 16, losses are mainly on

account of finance cost of PKR 1,791 million in FY 17.

In view of the current performance and management focus on investing in profitable ventures along with

further restructuring of its existing debts, the management believes that these steps will further improve the

profitability of the Company in the ensuing years.

SIGNIFICANT DISCLOSURES

(I) MANAGEMENT'S ASSESSMENT OF GOING CONCERN

As fully explained in note 2(iii) to the annexed financial statements the management of the Company has carefully assessed a number off actors in assessing the going concern status of the Company covering the operational performance of the business, the ability to implement a significant debt restructuring of the Company's existing debts and the appetite of majority shareholder to continue financialsupport. Based on the analysis of these, management is comfortable that the Company will be able to continue as a going concern in the foreseeable future.

(II) DEBT RESTRUCTURING

As fully explained in note 9 to the annexed financial statements, Company's local loans were

restructured in October 2014 and Second Amendatory Agreement (SAA) was signed and a facility of

Subsidiary Company Wateen WiMAX (Pvt) Limited (WWL) also emerged on account of Company

Restructuring Syndicate Term Finance Agreement (STFA).

WWL was conceived as a corollary of a joint venture ('JV') contemplated between the Company and Augere

Pakistan for consolidation of the WiMAX business, through a Master Transaction Agreement (MTA) dated

4th December, 2013 (“Consolidated Business”). The parties considered that the synergy established

through the creation of the JV would provide the necessary impetus to make the struggling WiMAX related

business viable.

The envisaged JV for the Consolidated Business within WLL did not materialize and the Company is in

negotiation with lenders to settle this matter. Loan Installments under STFA are paid till April 2016 and last

two installments of the Subsidiary Company WWL are not paid on due dates, however Conditions

Precedents (CP) under STFA are fully complied.

Loan installments under SAA are paid as per repayment schedule. Only one CP under SAA is pending and

the management of the Company is taking all necessary steps to fulfill that CP. Once the CP of the SAA has

been fulfilled, the banks will formally issue letter to the Company which will complete the entire restructuring

process.

As a part of further restructuring with the Company's international lenders, the Deutsche Bank AG facility has

been assigned on 10th August 2017 to Parent Company Warid Telecom International (WTI) and the facility

from ECGD will also be restructured in the same manner. The management is of view that restructuring will

further improve the financial position of the Company.

EARNINGS PER SHARE

Earnings per share are PKR (1.87) for FY 2017 as compared to PKR (3.18) in FY 2016.

DIVIDENDDue to net loss, the Company has been unable to declare any dividends.

FUTURE OUTLOOK Pakistan, being the sixth most populous country in the world is yet to fully exploit its existing infrastructure and market potential to foster growth. Advanced economies adopt digitization to disrupt and innovate, thus facilitating socio-economic growth and productivity even when the global economy is weak. By contrast, Pakistan's emerging ICT market often fails to attract foreign investment due to inconsistent government policies, lacking skills, and security concerns. For the next financial year, political upheaval is likely to subdue economic activity, as the next general elections in the country approach.

Keeping in view the above, the Management has initiated a drive for 'idea generation' to bring out new opportunities for Wateen to capitalize on in addition to its existing business lines. Wateen also intends to increase its residential areas of offerings in order to benefit from the growing demand for reliable broadband and TV services.

Holding Company InformationWarid Telecom International LLC, UAE18thFloor, Al Neem Tower, Khalifa Street, P.O.Box 44222, Abu Dhabi, U.A.E

BOARD AUDIT COMMITTEEThe Board Audit Committee of the Company has been established with the purpose of assisting the Board of Directors in fulfilling their oversight responsibilities relating to internal controls, financial and accounting matter, compliance and risk management practices.

COMPOSITION OF BOARD AUDIT COMMITTEEMEETINGS ATTENDED

ABID HASAN (Independent Director) Chairman 3KHWAJA AHMAD HOSAIN (Independent Director) Member 3

CONSOLIDATED FINANCIAL STATEMENTSConsolidated financial statements of the Company are also included as part of this annual report.

AUDITORSThe present Auditors M/s EY Ford Rhodes, Chartered Accountants have completed their assignment for the year ended June 30, 2017 and shall retire on the conclusion of the Annual General Meeting. Audit Committee and the Board of Directors considered and recommended the re- appointment of M/s EY Ford Rhodes, Chartered Accountants as Auditors of the Company for the year ending June 30, 2018.

WEB PRESENCEAnnual financial statements of the Company are also available on the Wateen website www.wateen.com for information of the shareholders and others.

ACKNOWLEDGEMENTSThe Board of Directors of the Company, would like to thank all our customers, suppliers, contractors, service providers, sponsors and shareholders for their continued support. We would like to commend the diligent and dedicated efforts of our employees across the country which has enabled the Company to successfully face the challenges of a highly competitive telecom environment. We would also like to express our special thanks to the Government of Pakistan and the Abu Dhabi Group for their continued support and encouragement.

ATTENDANCE OF THE BOARD MEMBERS


S. No.

Name of Directors

Board Meetings

Attendance during

2016 -17

1.

H.H. NAHAYAN MABARAK AL NAHAYAN

NIL

2.

ADEEL KHALID BAJWA

3

3. RIZWAN ALI TIWANA 3 4. ABID HASAN 3 5.

KHWAJA AHMAD HOSAIN

3

Financial Statements


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Wateen Telecom Limited (the Company) as at 30 June 2017 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof (hereinafter referred to as the 'financial statements'), for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

(a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984;

(b) in our opinion:

i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied, except for the changes in Note 4 and 5 with which we concur;

ii) the expenditure incurred during the year was for the purpose of the Company's business; and

iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;

(c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at 30 June 2017 and of the loss, comprehensive income, its cash flows and changes in equity for the year then ended; and

(d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980(XVIII of 1980).

Emphasis of Matter

We draw attention to note 2 (iii) to the financial statements related to management's assessment of going concern. The majority shareholders have committed to provide financial support to the Company to enable it to continue its operations. Our opinion is not qualified in respect of this matter.

Other Matters

The financial statements for the year ended 30 June 2016 were audited by another firm of chartered accountants. The audit report dated 29 November 2016 expressed an unmodified opinion with an emphasis of matter paragraph in relation to management's assessment of going concern.

Chartered AccountantsAudit Engagement Partner: Farooq Hameed Lahore: November 06, 2017


BALANCE SHEETAS AT JUNE 30, 2017


Note 2017 2016

(Rupees in thousand)

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital

Issued, subscribed and paid-up capital

General reserves

Accumulated loss

NON-CURRENT LIABILITIES

Long term finance - secured

Long term portion of deferred mark up

Long term finance from shareholders - unsecured

Medium term finance from an associated company - unsecured

DEFERRED LIABILITIES

Deferred government grants

CURRENT LIABILITIES

Current portion of long term finance - secured

Current portion of deferred mark up

Current portion of Medium term finance from an associated

company - unsecured

Short term running finance - secured

Short term finance from associated company - unsecured

Trade and other payables

Interest / markup accrued

TOTAL EQUITY AND LIABILITIES

CONTINGENCIES AND COMMITMENTS

7

7

8

9

10

11

12

13

9

10

12

14

15

16

17

18

The annexed notes 1 to 49 form an integral part of these financial statements.

10,000,000

6,174,746

134,681

(36,814,375)

(30,504,948)

-

-

14,334,440

-

14,334,440

2,419,524

16,896,335

4,899,393

600,000

687,664

100,000

4,921,303

3,166,060

31,270,755

17,519,771

10,000,000

6,174,746

134,681

(35,675,906)

(29,366,479)

-

-

14,041,457

-

14,041,457

2,567,744

16,865,384

3,924,871

600,000

765,512

-

4,819,062

2,450,281

29,425,111

16,667,832

______________ __________

Chief Executive Director

BALANCE SHEET AS AT JUNE 30, 2017


Note 2017 2016


ASSETS

NON-CURRENT ASSETS

Property and equipment

Operating assets 19

Capital work in progress 20

Intangibles 21

Long term investment in subsidiary companies 22

Deferred tax assets 23

Long term loan to subsidiary company 24

Long term deposits and prepayments

Long term deposits 25

Long term prepayments 26Long term trade debts 27

CURRENT ASSETS

Trade debts 27

Contract work in progress

Stores, spares and loose tools 28

Advances, deposits and prepayments 29

Tax refunds due from the Government


Cash and bank balances 30

TOTAL ASSETS

9,725,435 525,433

11,228 10,262,096

137,661

-

-

419,515

33,196

593,501

1,046,212

2,252,052

-

452,489

2,509,783

593,255

9,702

256,521

6,073,802

17,519,771

9,167,410

1,028,815

15,212 10,211,437

137,661

-

-

479,760

40,116

634,447

1,154,323

1,703,037

61,884

378,537

2,217,375

548,309

9,768

245,501

5,164,411

16,667,832

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED JUNE 30, 2017


2017 2016

Note


Revenue 31 7,024,292

6,956,578

Cost of sales (excluding depreciation and amortisation) 32 4,010,396

3,957,949

General and administration expenses 33 1,784,782

1,360,070

Advertisement and marketing expenses 23,737

21,188

Selling and distribution expenses 2,735

91

Provisions 34 132,998 557,380

Other income 35 (651,040) (521,312)

Earnings before interest, taxation, impairment

depreciation and amortisation 1,720,684 1,581,212

Less: Depreciation and amortisation 741,005 699,489

Finance cost 36 1,790,853 2,428,743

Provision for long term loan to and impairment of

investment in subsidary company 37 74,479 153,243

Finance income 38 (177,510) (182,022)

Loss before taxation (708,143)

(1,518,242)

Taxation 39 447,810

442,737

Loss for the year (1,155,953)

(1,960,979)


______________ __________


STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED JUNE 30, 2017


Note 2017 2016


Loss for the year (1,155,953) (1,960,979)

Other comprehensive income

Other comprehensive income not to be reclassified to profit or loss

in subsequent periods:

Remeasurement gain/(loss) on staff retirement benefit plan 43.4 17,484 (11,808)

Total comprehensive income for the year (1,138,469) (1,972,787)


______________ __________


CASH FLOWS STATEMENT



2017 2016


CASH FLOW FROM OPERATING ACTIVITIES


(1,518,242)

Adjustment of non cash items:

Depreciation and amortisation 741,005

699,489

Finance cost 1,790,853

2,428,743

Loss on sale of operating assets 208,063

115,075

Cost associated with IRU of optic fiber cable 248,783

273,007

Deferred USF grant recognised during the year (148,220)

(143,561)

Provisions 132,998

557,380

Reversal of provision for store obsolesce (95,789)

-

Reversal of provision for doubtful advances and other receivables (49,092)

-

Provision for long term loan to and impairment of investment in subsidiary company 74,479

153,243

Provision of markup on advances to associated companies -

60,388

Stores and spares written off 16,599

Write back of liability (553,563)

(493,876)

2,349,517

3,666,487

1,641,374

2,148,246

Changes in working capital:Increase in trade debts (612,497)

(238,677)

Decrease in contract work in progress 61,884

168,841

Decrease in stores, spares and loose tools 21,837 21,523

Increase in advances, deposits and prepayments (271,886) (52,334)

(Increase)/decrease in Interest Accrued 67 (95)

Increase/(decrease) in trade and other payables 664,303 (542,394)

(136,292) (643,135)

Income taxes paid (492,756) (244,953) Contribution made in gratuity fund (8,500) (14,768) Cash flow from operating activities 1,003,826 1,245,390

CASH FLOW FROM INVESTING ACTIVITIES

Property, plant and equipment additions (1,179,968) (1,280,853) Proceeds from sale of property, plant and equipment 13,966

30,236

Long term loan to subsidiary company (74,479)

(155,243)

Long term deposits receivable/received 60,245

(11,113)

Long term prepayments paid 6,919

16,011 Cash flow from investing activities (1,173,317) (1,400,963)

-


CASH FLOWS STATEMENT

FOR THE YEAR ENDED JUNE 30, 2017 2017 2016


______________ __________


CASH FLOW FROM FINANCING ACTIVITIES

Long term finance from shareholders - unsecured received 251,547

315,000 Short Term Finance from Associated Company 100,000

-

Long term finance repaid (15,000)

(8,934)

Deferred grants received -

112,204

Finance cost paid-net (78,188)

(85,404)

Cash flow from financing activities 258,359

332,866

INCREASE IN CASH AND CASH EQUIVALENTS 88,868

177,293

Cash and cash equivalents at beginning of the year (520,011)

(697,304)

CASH AND CASH EQUIVALENTS AT END OF THE YEAR (431,143)

(520,011)

CASH AND CASH EQUIVALENTS COMPRISE:Cash and bank balances 256,521

245,501

Short term running finance - secured (687,664)

(765,512)

(431,143)

(520,011)


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2017


______________ __________


Share General Accumulatedcapital reserve loss Total

Balance as at July 1, 2015 6,174,746

134,681

(33,703,119)

(27,393,692)

Loss for the year - - (1,960,979) (1,960,979)

Other comprehensive loss - - (11,808) (11,808)

Total comprehensive loss for the year - - (1,972,787) (1,972,787)

Balance as at June 30, 2016 6,174,746 134,681 (35,675,906) (29,366,479)

Loss for the year - - (1,155,953) (1,155,953) Other comprehensive income - - 17,484 17,484 Total comprehensive loss for the year - - (1,138,469) (1,138,469)

Balance as at June 30, 2017 6,174,746 134,681 (36,814,375) (30,504,948)


------------------------------(Rupees in thousand) ----------------------------------

1. Legal status and operations

2. Basis of preparation

(i) Statement of compliance

(ii) Accounting convention

(iii) Management's assessment of going concern

Operational performance

Wateen Telecom Limited (the Company) was incorporated in Pakistan as a private limited company underCompanies Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public voicetelephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company commenced itsLDI business commercial operations from May 1, 2005. The Company transferred its WLL license to whollyowned subsidiary Wateen WiMAX (Private) Limited (WWL) during the year ended June 30, 2015. The legalstatus of the Company was changed from "Private Limited" to "Public Limited" with effect from October 19,2009 and thereafter, the Company was listed on Karachi, Lahore and Islamabad Stock Exchanges.Subsequently, the Karachi, Lahore and Islamabad Stock Exchanges accepted the request for delisting of the Company and accordingly the Company stood delisted from these stock exchanges with effect fromFebruary 17, 2014. The registered office of the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, United Arab Emirates (WTI) and its ultimate parent is Abu DhabiGroup.

These financial statements have been prepared in accordance with the approved accounting standards asapplicable in Pakistan. Approved accounting standards comprise of such International Financial ReportingStandards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under theCompanies Ordinance, 1984 (repealed), provisions of and directives issued under the CompaniesOrdinance, 1984 (repealed). In case requirements differ, the provisions or directives of the CompaniesOrdinance, 1984 (repealed) shall prevail.

The Company’s operating performance reflected improvement during the year ended June 30, 2017 byposting the earnings before interest, taxation, depreciation and amortization (EBITDA) of Rs. 1,721 million(June 30, 2016: Rs. 1,581 million) as a highest EBITDA after financial year 2008 - 2009. Further, during theyear, the Company has been able to generate positive cashflows from operations for an amount of Rs.1,004 million (June 30, 2016: Rs. 1,245 million).

The Companies Ordinance, 1984 has been repealed after the enactment of Companies Act, 2017. However,as allowed by the SECP vide its Circular No. 17 dated 20 July 2017 read with related press release, thesefinancial statements have been prepared in accordance with the provisions of the repealed CompaniesOrdinance, 1984.

These financial statements are the separate financial statements of the Company. In addition to theseseparate financial statements, the Company also prepares consolidated financial statements.

These financial statements have been prepared on the basis of 'historical cost convention' except asotherwise stated in the respective accounting policies notes.

In assessing the going concern status of the Company, management has carefully assessed a number offactors covering the operational performance of the business, the ability to implement a significant debtrestructuring of the Company’s existing debts and the appetite of majority shareholder to continue financialsupport. Based on the analysis of these, management is comfortable that the Company will be able tocontinue as a going concern in the foreseeable future. Set out below are the key areas of evidence thatmanagement has considered:

NOTES TO THE FINANCIAL STATEMENTS




Ongoing Shareholder Support

(iv) Critical accounting estimates and judgments

(i)

(ii) Impairment of DSL assets (note 20)

(iii) Impairment of investment in and loan to subsidiary company (note 22 & 24)

(iv) Provision for doubtful debts (note 27)

(v) Provision for obsolete stores (note 28)

(vi) Provision for doubtful advances and other receivables (note 29)

(vii) Provision for current and deferred tax (note 23 & 39)

(viii) Employees' retirement benefits (note 43)

(ix) Deferred government grants (note 13)

During the year ended June 30, 2017 Company incurred net loss after taxation of Rs. 1,156 million (June30, 2016: Rs. 1,961 million) and had net current liabilities as at June 30, 2017 of Rs. 25,197 million (June30, 2016: Rs. 24,261 million) of which Rs. 10,029 million (June 30, 2016: Rs. 12,212 million) and Rs. 4,899million (June 30, 2016: Rs. 3,925 million) relate to loan installments and deferred markup, respectively duefor repayment after June 30, 2017 but classified as current liabilities as mentioned in notes 9 and 10respectively. Net current liabilities also include markup of Rs. 1,771 million (June 30, 2016: Rs. 1,358million) on account of subordinated loan from shareholders of the Company. Further, during the past fiveyears, the majority shareholder has provided financial support in the form of long term finance amounting toUSD 136.4 million to meet the capital requirements of the Company (un availed finance facility fromshareholder amounts to USD 72.6 million (June 30, 2016: USD 75 million) at June 30, 2017. Theshareholders have committed to provide financial support to enable the Company to continue its operations and fulfil its financial obligation.

The Company's majority shareholder Warid Telecom International LLC, UAE (WTI) continues to providemanagement with comfort with regards to its ongoing support and this is evident from further loan of USD2.4 million extended to the Company during the year ended June 30, 2017 (June 30, 2016: USD 3 million)for the Company.

In addition, Warid Telecom International LLC, UAE (WTI) guarantees the local Syndicate Finance Facility,and certain sponsors' guarantees are also provided to the foreign debt holders. The continued support ofWTI including the guarantees and financial assistance from WTI is likely to enable the Company to continueits operations and fulfill its financial obligations for a minimum period of twelve months from the year end.Based on the above the Board and management is confident that WTI will continue to provide strongsupport to the Company.

Keeping in view the foregoing and other related operational facts, the management believes that theCompany is able to operate on a going concern basis in the foreseeable future and these financialstatements have been prepared reflecting this assumption.

The preparation of financial statements in conformity with approved accounting standards requires the useof certain critical accounting estimates. It also requires management to exercise its judgment in the processof applying the Company’s accounting policies. Estimates and judgments are continually evaluated and arebased on historic experience, including expectations of future events that are believed to be reasonableunder the circumstances. The areas involving a higher degree of judgment or complexity, or areas whereassumptions and estimates are significant to the financial statements, are as follows:

Operating assets - estimated useful life of property, plant and equipment (note 19)

Debt restructuring

As part of further restructuring the Company is negotiating with lenders whereby it is proposed that Deutsche Bank AGfacility will be novated to Warid Telecom International LLC,UAE (WTI) and facility from ECGD will also be restructured.The management is of the view that above restructuring will further improve the financial position of the Company.Subsequent to year end, on August 10, 2017, Deutsche Bank AG facility has been novated from the Company to WaridTelecom International LLC, UAE (WTI). Accordingly, the amount is payable by the company to WTI on same terms. now

majority


3.

IFRS 2

IFRS 10

IAS 7

IAS 12

IFRS 4

IAS 40

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 23 Uncertainty over Income Tax Treatments

IFRS 14

IFRS 16 IFRS 17

IASB Effective

Dates (Annual

periods

beginning on or

after)Standard or Interpretation

01 Jan 2018

01 Jan 2018

01 Jan 2019

Share-based Payments – Classification and Measurement of Share-based Payments Transactions (Amendments)

Consolidated Financial Statements and IAS 28 Investment in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendment)

Financial Instruments: Disclosures - Disclosure Initiative - (Amendment)

Income Taxes – Recognition of Deferred Tax Assets for Unrealized losses (Amendments)

Insurance Contracts: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – (Amendments)

Investment Property: Transfers of Investment Property (Amendments)

LeasesInsurance Contracts

01 Jan 2016

01 Jan 201901 Jan 2021

IFRS 9 01 Jan 2018Financial Instruments: Classification and Measurement

Regulatory Deferral Accounts

IFRS 15 01 Jan 2018Revenue from Contracts with Customers

The Company expects that the adoption of the above standards will have no material effect on theCompany’s financial statements, in the period of initial application, except for IFRS 16. The management is in the process of determining the effect of application of IFRS 16.

Effective Dates

(Annual periods

beginning on or

after)

01 Jan 2018

Not yet finalized

01 Jan 2017

01 Jan 2017

01 Jan 2018

The following standards, amendments and interpretations with respect to the approved accountingstandards as applicable in Pakistan would be effective from the dates mentioned below against therespective standard or interpretation.

Standard note for standards, interpretations and amendments to approved accounting standards

that are not yet effective

Standard or Interpretation

The above standards and amendments are not expected to have any material impact on the Company'sfinancial statements in the period of initial application except for IFRS 15. The management is in the process of determining the effect of application of IFRS 15.

In addition to the above standards and amendments, improvements to various accounting standards havealso been issued by the IASB in December 2016. Such improvements are generally effective for accountingperiods beginning on or after January,01 2018. The Company expects that such improvements to thestandards will not have any impact on the Company's financial statements in the period of initial application.

Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan.


4.

5 Improvements to Accounting Standards Issued by the IASB in September 2014

IFRS 7 Financial Instruments: Disclosures - Servicing contracts

IAS 19 Employee Benefits - Discount rate: regional market issue

IAS 34 Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report.

IFRIC 4 Determining whether an arrangement contains lease

IFRIC 12 Service concession arrangements

6. Summary of significant accounting policies

6.1 Employees' retirement benefits

(i)

(ii)

IFRS 11 Joint Arrangements - Accounting for Acquisition of Interest in Joint Operation (Amendment)

IAS 1 Presentation of Financial Statements - Disclosure Initiative (Amendment)

IAS 16 Property, Plant and Equipment and IAS 38 intangible assets - Clarification of Acceptable Method ofDepreciation and Amortization (Amendment)

IAS 16 Property, Plant and Equipment IAS 41 Agriculture - Agriculture: Bearer Plants (Amendment)

IAS 27 Separate Financial Statements – Equity Method in Separate Financial Statements (Amendment)

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal.

IFRS 7 Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interimfinancial statements

IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27Separate Financial Statements – Investment Entities: Applying the Consolidation Exception (Amendment)

The adoption of the above amendments, improvements to accounting standards and interpretations did not have any effect on the financial statements.

Upto February 28, 2015, the Company provided gratuity to all permanent employees in accordance with therules of the Company. Effective March 1, 2015, the benefit was discontinued and amount due to employeesas at February 28, 2015 was to be paid at the time of final settlement. However, during the year ended 30June 2017, the company has reinstated the benefit effective from March 1, 2015 as if the scheme had neverbeen discontinued. Actuarial valuation is conducted periodically using Projected Unit Credit Method, andlatest valuation was carried out at June 30, 2017. The details of actuarial valuation are given in note 43.

Contributory provident fund for all permanent employees of the Company is in place. Contribution for theyear amounted to Rs. 28.399 million (June 30, 2016: Rs. 28.421 million) (8.33% per employee) and ischarged to income for the year.

New accounting standards, interpretations, and amendments applicable to the financial statements

for the year ended 30 June 2017

The Company has adopted the following accounting standards and the amendments and interpretation ofIFRSs which became effective for the current year:

The following interpretations issued by the IASB have been waived off by SECP effective January 16, 2012:

Actuarial gains and losses (remeasurement gains / losses) on employees’ retirement benefit plans arerecognized immediately in other comprehensive income and past service cost is recognized in profit andloss when they occur. Calculation of gratuity requires assumptions to be made of future outcomes whichmainly includes increase in remuneration, expected long-term return on plan assets and the discount rateused to convert future cash flows to current values. Calculations are sensitive to changes in the underlyingassumptions.


6.2 Taxation

Current

Deferred

6.3 Government grant

6.4 Borrowings and borrowing costs

6.5 Trade and other payables

6.6 Provisions

Grants that compensate the Company for expenses incurred, are recognized on a systematic basis in theincome for the year in which the related expenses are recognized. Grants that compensate the Company forthe cost of an asset are recognized in income on a systematic basis over the expected useful life of therelated asset.

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortized cost; any difference between proceeds (net of transaction costs) and theredemption value is recognized in the income statement over the period of the borrowings using effectiveinterest method.

Liabilities for creditors and other amounts payable including payable to related parties are carried at cost,which is the fair value of the consideration to be paid in the future for the goods and / or services received,whether or not billed to the Company.

Borrowing costs incurred that are directly attributable to the acquisition, construction or production ofqualifying assets are capitalized as part of the cost of that asset. All other borrowing costs are charged toincome for the year. Qualifying assets are assets that necessarily takes substantial period of time to getready for their intended use.

The tax expense for the year comprises of current and deferred tax, and is recognized in income for theyear, except to the extent that it relates to items recognized directly in other comprehensive income, inwhich case the related tax is also recognized in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted atthe date of the balance sheet. Management periodically evaluates positions taken in tax returns, withrespect to situations in which applicable tax regulation is subject to interpretation, and establishesprovisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is accounted for using the balance sheet liability method in respect of all temporarydifferences arising between the carrying amounts of assets and liabilities in the financial statements and thecorresponding tax base used in the computation of taxable profit.

Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets arerecognized to the extent that it is probable that taxable profits will be available against which the deductibletemporary differences, unused tax losses and tax credits can be utilized.

Deferred income tax is calculated at the rates that are expected to apply to the period when the differencesreverse, and the tax rates that have been enacted, or substantively enacted, at the date of the statement offinancial position.

Government grants are recognized at their fair values and included in non-current liabilities, as deferredincome, when there is reasonable assurance that the grants will be received and the Company will be ableto comply with the conditions associated with the grants.

Provisions are recognized when the Company has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at eachbalance sheet date and are adjusted to reflect the current best estimate.


6.7 Contingent liabilities

6.8 Dividend distribution

6.9 Property and equipment

6.10 Intangible assets

(i) Licenses

(ii) Computer software

The amortization on licenses acquired during the year, is charged from the month in which a license isacquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license.

These are carried at cost less accumulated amortization and any identified impairment losses. Amortizationis calculated using the straight line method, to allocate the cost of the software over its estimated useful life,and is charged to profit and loss account. Costs associated with maintaining computer software, arerecognized as an expense as and when incurred.

The amortization on computer software acquired during the year is charged from the month in which thesoftware is acquired or capitalized, while no amortization is charged for the month in which the software isdisposed off.

Property and equipment, except freehold land and capital work-in-progress, is stated at cost lessaccumulated depreciation and any identified impairment losses; freehold land is stated at cost less identifiedimpairment losses, if any. Cost includes expenditure, related overheads, mark-up and borrowing costs (note6.4) that are directly attributable to the acquisition of the asset.

Depreciation on operating assets is calculated, using the straight line method, to allocate their cost overtheir estimated useful lives, at the rates mentioned in note 19.

Subsequent costs, if reliably measurable, are included in the asset’s carrying amount, or recognized as aseparate asset as appropriate, only when it is probable that future economic benefits associated with thecost will flow to the Company. The carrying amount of any replaced parts as well as other repair andmaintenance costs, are charged to income during the period in which they are incurred.

A contingent liability is disclosed when the Company has a possible obligation as a result of past events, theexistence of which will be confirmed only by the occurrence or non-occurrence, of one or more uncertainfuture events, not wholly within the control of the Company; or when the Company has a present legal orconstructive obligation, that arises from past events, but it is not probable that an outflow of resourcesembodying economic benefits will be required to settle the obligation, or the amount of the obligation cannotbe measured with sufficient reliability.

The distribution of the final dividend, to the Company’s shareholders, is recognized as a liability in thefinancial statements in the period in which the dividend is approved by the Company’s shareholders; thedistribution of the interim dividend is recognized in the period in which it is declared by the Board ofDirectors.

These are carried at cost less accumulated amortization and any identified impairment losses. Amortizationis calculated using the straight line method from the date of commencement of commercial operations, toallocate the cost of the license over its estimated useful life specified in note 21, and is charged to incomefor the year.

Depreciation on additions to property and equipment, is charged from the month in which the relevant assetis acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off.Impairment loss, if any, or its reversal, is also charged to income for the year. Where an impairment loss isrecognized, the depreciation charge is adjusted in future periods to allocate the asset’s revised carryingamount, less its residual value, over its estimated useful life.

The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and thecarrying amount of the asset, is recognized in profit or loss for the year.


6.11 Impairment of non-financial assets

6.12 Non current assets/disposal group held for sale

6.13 Investment in subsidiaries

6.14 Right of way charges

6.15 Trade debts and other receivables

6.16 Stores, spares and loose tools

6.17 Cash and cash equivalents

6.18 Revenue recognition

Non-current assets are classified as assets held-for-sale when their carrying amount is to be recoveredprincipally through a sale transaction and sale is considered highly probable. They are stated at the lower ofcarrying amount and fair value less cost to sell.

Investments in subsidiaries, where the Company has control or significant influence, are measured at cost inthe Company’s financial statements. The profits and losses of subsidiaries are carried in the financialstatements of the respective subsidiaries, and are not dealt within the financial statements of the Company,except to the extent of dividends declared by these subsidiaries.

Right of way charges paid to local governments, concerned authorities and land owners for access of landare carried at cost, which is charged to profit and loss account on straight line basis over the period of rightof way.

Cash and cash equivalents are carried at cost. For the purpose of the cash flow statement, cash and cashequivalents comprise cash in hand and bank and short term highly liquid investments with original maturitiesof three months or less, and that are readily convertible to known amounts of cash, and subject to aninsignificant risk of changes in value.

Dividend income is recognized when the right to receive payment is established.

Revenue is recognized as related services are rendered.

Revenue from granting of Indefeasible Right of Use (IRU) of dark fiber upto 20 years or more is recognizedat the time of delivery and acceptance by the customer.

Revenue from sale of equipment is recognized when the goods are delivered to the customers.

Trade debts and other receivables are carried at their original invoice amounts, less any estimates made fordoubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off whenidentified.

Assets that have an indefinite useful life, for example freehold land, are not subject to depreciation and aretested annually for impairment. Assets that are subject to depreciation or amortization are reviewed forimpairment on the date of balance sheet, or whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognized, equal to the amount by whichthe asset’s carrying amount exceeds its recoverable amount. An asset’s recoverable amount is the higher ofits fair value less costs to sell and value in use. For the purposes of assessing impairment, assets aregrouped at the lowest levels for which there are separately identifiable cash flows. Non financial assets thatsuffered an impairment, are reviewed for possible reversal of the impairment at each balance sheet date.Reversals of the impairment loss are restricted to the extent that asset’s carrying amount does not exceedthe carrying amount that would have been determined, net of depreciation or amortization, if no impairmentloss has been recognized. An impairment loss, or the reversal of an impairment loss, are both recognized inthe income statement.

Stores, spares and loose tools are carried at cost less allowance for obsolescence. Cost is determined onweighted average cost formula basis. Items in transit are valued at cost, comprising invoice values andother related charges incurred up to the date of the statement of financial position.

Interest income is recognized using the effective yield method.


6.19 Functional and presentation currency

6.20 Foreign currency transactions and translations

6.21 Financial instruments

(a) Financial assets

Classification and subsequent measurement

(i) Fair value through profit and loss

(ii) Held to maturity

(iii) Loans and receivables

The Company classifies its financial assets in the following categories: fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The classificationdepends on the purpose for which the financial assets were acquired. Management determines theclassification of its financial assets at initial recognition. Regular purchases and sales of financial assets arerecognized on the trade date - the date on which the Company commits to purchase or sell the asset.

Financial assets at fair value through profit or loss, include financial assets held for trading andfinancial assets, designated upon initial recognition, at fair value through profit or loss.

Financial assets at fair value through profit or loss are carried in the balance sheet at their fairvalue, with changes therein recognized in the income for the year. Assets in this category areclassified as current assets.

Items included in the financial statements of the Company are measured using the currency of the primaryeconomic environment in which the entity operates (the functional currency). These financial statements arepresented in Pakistan Rupees (Rs.), which is the Company’s functional currency.

Foreign currency transactions are translated into the functional currency, using the exchange ratesprevailing on the date of the transaction. Monetary assets and liabilities, denominated in foreign currencies,are translated into the functional currency using the exchange rate prevailing on the date of the balancesheet. Foreign exchange gains and losses resulting from the settlement of such transactions, and from thetranslation of monetary items at year end exchange rates, are charged to income for the year.

Financial assets and liabilities are recognized when the Company becomes a party to the contractualprovisions of the instrument and derecognized when the Company loses control of the contractual rights thatcomprise the financial assets and in case of financial liabilities when the obligation specified in the contractis discharged, cancelled or expires. All financial assets and liabilities are initially recognized at fair valueplus transaction costs other than financial assets and liabilities carried at fair value through profit or loss.Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value,and transaction costs are charged to income for the year. These are subsequently measured at fair value,amortized cost or cost, as the case may be. Any gain or loss on derecognition of financial assets andfinancial liabilities is included in profit or loss for the year.

Non derivative financial assets with fixed or determinable payments and fixed maturities areclassified as held-to-maturity when the Company has the positive intent and ability to hold theseassets to maturity. After initial measurement, held-to-maturity investments are measured atamortized cost using the effective interest method, less impairment, if any.

Loans and receivables are non derivative financial assets with fixed or determinable payments,that are not quoted in an active market. After initial measurement, these financial assets aremeasured at amortized cost, using the effective interest rate method, less impairment, if any.

The Company’s loans and receivables comprise 'Long term deposits', ‘Trade debts’, 'Contractwork in progress', ‘Advances, deposits and other receivables,' ‘Tax refund due from government’and ‘Bank balances’.

(iv) Available for sale

Available-for-sale financial assets are non-derivatives, that are either designated in this category,or not classified in any of the other categories. These are included in non current assets, unlessmanagement intends to dispose them off within twelve months of the date of the statement offinancial position.


Impairment

(b) Financial liabilities

Initial recognition and measurement

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

(i)

(ii)

(c) Offsetting of financial assets and liabilities

6.22 Derivative financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet, when there is alegally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis,or realise the asset and settle the liability simultaneously. Legally enforceable right must not be contingenton future events and must be enforceable in normal course of business and in the event of default,insolvency or bankruptcy of the Company or the counter party.

Derivates are initially recognized at fair value on the date a derivative contract is entered into and aresubsequently remeasured at fair value. Changes in fair value of derivates that are designated and qualify asfair value hedges are recorded in income statement together with any changes in the fair value of thehedged asset or liability that are attributable to the hedged risk.

The Company assesses at the end of each reporting period whether there is an objective evidence that afinancial asset or group of financial assets is impaired as a result of one or more events that occurred afterthe initial recognition of the asset (a ‘loss event’), and that loss event (or events) has an impact on theestimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Company classifies its financial liabilities in the following categories: fair value through profit or loss andother financial liabilities. The Company determines the classification of its financial liabilities at initialrecognition. All financial liabilities are recognized initially at fair value and, in the case of other financialliabilities, also include directly attributable transaction costs.

Fair value through profit or loss

Financial liabilities at fair value through profit or loss, include financial liabilities held-for-tradingand financial liabilities designated upon initial recognition as being at fair value through profit orloss. Financial liabilities at fair value through profit or loss are carried in the statement of financialposition at their fair value, with changes therein recognized in the income for the year.

After initial measurement, available-for-sale financial assets are measured at fair value, withunrealized gains or losses recognized as other comprehensive income, until the investment isderecognized, at which time the cumulative gain or loss is recognized in income for the year.

Other financial liabilities

After initial recognition, other financial liabilities which are interest bearing are subsequentlymeasured at amortized cost, using the effective interest rate method.

Number of Number of

7. Share capital Shares Shares

Authorised share capital:Ordinary shares of Rs 10 each 1,000,000,000

10,000,000

1,000,000,000

10,000,000

Issued, subscribed and paid upshare capital:Shares alloted for consideration paid in cash:Ordinary shares of Rs 10 each 408,737,310

4,087,373

408,737,310

4,087,373

Shares alloted as bonus shares:Bonus shares of Rs 10 each 208,737,310

2,087,373

208,737,310

2,087,373

617,474,620

6,174,746

617,474,620

6,174,746

June 30, 2017 June 30, 2016

(Rupees in

thousand)



7.1

8. General reserves

Note 2017 20169. Long term finance - secured

Syndicate of banks 9.1 7,775,471

7,789,921

Export Credit Guarantee Department (ECGD) 9.2 2,688,009

2,680,329

Dubai Islamic Bank (DIB) 9.3 334,674

335,224

Deutsche Bank AG 9.4 5,038,694

5,024,298

Loan guarantee on behalf of WWL 9.5 1,109,000

1,109,000

16,945,848

16,938,772

Unamortised transaction and other ancillary cost

Opening balance 73,387 102,927

Amortisation for the year (23,874) (29,540) (49,513) (73,387)

16,896,335 16,865,384 Less: Amount shown as current liability

Amount payable within next twelve months (6,867,832)

(4,653,075) Amount due after twelve months (10,028,503)

(12,212,309)

9.6 (16,896,335)

(16,865,384) -

-

9.1

The parent company, Warid Telecom International LLC, U.A.E held 600,747,211 (June 30, 2016: 588,577,066)ordinary shares.


The Company obtained syndicate term finance facility from a syndicate of local banks to finance the capitalrequirements of the Company. During the year ended June 30, 2015, the Company and the Syndicate of Banks signedsecond amendatory agreement to restructure Syndicate term finance facility and the short term running finance fromBank Alfalah Limited (related party) running finance facility-I. The principal is now repayable in twenty unequal sixmonthly instalments. The first such installment was due on April 1, 2015 and subsequently every six months untilOctober 1, 2024. The Company is required to mandatorily prepay the outstanding amount out of net cash proceedsfrom sale of WWL or any excess cash generated by the Company after taking into account a minimum cash balance,capital expenditure and working capital requirements in each financial year. The rate of mark-up is 12% per annumfrom July 1, 2013 which shall stand deferred till payment of the final installment of principal portion (deferred payment)as referred to in note 10.1. Earlier, principal was repayable in ten unequal semi annual installments with firstinstallment due on July 1, 2014 and it carried a mark up of 6 months KIBOR per annum till December 31, 2013 and 6months KIBOR + 2.5% per annum for remaining period.

This represents reserve created in line with Board of Directors' decision to place atleast 10% of the profits in GeneralReserve Account of the company till it reaches 50% of the paid up capital of the company.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current/ fixed assets, a mortgage by deposit of title deeds in respect of immoveableproperties of the Company, pledge over fully paid ordinary shares (entire present and future) owned by the Companyin WWL and owned by WTI in the capital of the Company, a guarantee from WTI for amounts payable under secondamendatory agreement and undertaking from shareholders from WTI for retaining the shareholding and control ofWTI. Syndicate is entitled to designate one nominee to be appointed as director in the Board of Directors of theCompany.

Certain conditions precedent to the second amendatory agreement are not yet fulfilled, the management of theCompany is taking steps to fulfill those conditions. Once conditions precedent to restructured agreements are fulfilled,a formal letter shall be issued to the Company by the Syndicate of aforesaid Banks, which shall complete therestructuring process. The Company has been making payments according to second amendatory agreement.


9.2

9.3

9.4

Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company is takingsteps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled, bank will formallyissue letter to the Company which will complete the restructuring process. The company has been making paymentsaccording to terms of revised restructuring agreement.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current / fixed assets (movable and immoveable), pledge over fully paid ordinaryshares (entire present and future) owned by the Company in WWL and owned by WTI in the capital of the Company, acorporate guarantee from WTI and undertaking from shareholders from WTI for retaining the shareholding and controlof WTI.

The Company obtained term finance facility of USD 65 million (June 30, 2016: USD 65 million) from Motorola CreditCorporation (MCC) of which USD 64 million (June 30, 2016: USD 64 million) has been availed till June 30, 2017. OnAugust 19, 2011, MCC had transferred all of its rights, title benefits and interests in the original facility agreement toDeutsche Bank AG as lender, effective August 19, 2011. During the year ended June 30, 2012, the Company andDeutsche Bank AG signed an agreement to restructure the terms of loan agreement. Amount outstanding at June 30,2017 is USD 48 million (June 30, 2016: USD 48 million). The principal is repayable in ten semi annual installmentscommencing from July 1, 2014 until and including the final maturity date which is December 31, 2019. The rate ofmark-up is six month LIBOR + 1% per annum provided that rate shall be capped at 2.5% per annum. If the Companyfails to pay any amount payable on its due date, interest shall accrue on the unpaid sum from the due date up to thedate of actual payment at a rate which is 2% higher than the rate of interest in effect thereon at the time of suchdefault until the end of the current interest period. Thereafter, for each successive interest period, 2% above the six-month LIBOR plus margin provided the Company is in breach of its payment obligations hereof.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current / fixed assets (excluding assets under specific charge of CM Pak and assetswhich are subject to lien in favour of USF), a mortgage by deposit of title deeds in respect of immoveable properties ofthe Company, lien over collection accounts and Debt Service Reserve Account and personal guarantees by threeSponsors of the Company.

As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above finance facility.

The Company obtained Ijarah finance facility of Rs 530 million (June 30, 2016: Rs 530 million) from DIB. During theyear ended June 30, 2015, the Company and DIB signed an agreement to restructure the terms of the Ijarah financefacility. The principal is now repayable in twenty unequal six-monthly installments. The first such installment was dueon April 1, 2015 and subsequently every six months until October 1, 2024. The rate of mark-up is 12% per annum from commencement date which shall stand deferred till payment of the final installment of principal portion (deferredpayment) as referred to in note 10.2. Earlier, principal was repayable in ten unequal semi annual installments with firstsuch installment due on July 1, 2014 and it carried a markup of 6 months KIBOR per annum till December 31, 2013and 6 months KIBOR + 2.5% per annum for remaining period.

The Company obtained long term finance facility amounting to USD 42 million (June30, 2016: USD 42 million) fromECGD UK, of which USD 35 million (2016: USD 35 million) was availed till June 30, 2017. During the year ended June30, 2012, the Company and ECGD UK signed an agreement to restructure the terms of loan agreement includingrepayment schedule. Amount outstanding at June 30, 2017 is USD 25.60 million (2016: 25.60 million). The principal isrepayable in ten semi annual installments. The first such installment was due on July 1, 2014 and subsequently everysix months until January 1, 2019. The rate of mark-up is six month LIBOR + 1.5% per annum till June 30, 2011 and sixmonth LIBOR + 1.9% for the remaining period. If the amount of installment payable and/or interest payable is not paidon the due date, the Company shall pay interest on such amount at the applicable interest rate plus 2% per annum.

9.5 The Company transferred a portion of outstanding principal amount under Syndicate Term Finance Agreement to itswholly owned subsidiary WWL. Under the terms of agreement, the Company guaranteed the amount on behalf ofWWL and the amount guaranteed has been recognized by the Company due to curtailed scale of operations of WWL,negative value in use of WWL, loss for the year, termination of Master Transaction Agreement (MTA) and existence ofno realistic basis of preparation of financial statements of WWL on a going concern basis.

The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari passu withunsecured and unsubordinated creditors.

Subsequent to year end,

on August 10, 2017, Deutsche Bank AG facility has been novated from the company to WTI. Accordingly, the amount is now payable by the company to WTI on same terms.


9.6 Latest restructured loan agreements (as referred in note 9.1 and 9.3) with the syndicate of local banks and DIB havenot yet become effective as certain conditions precedent to the restructured agreements are not yet fulfilled.Accordingly, the lenders are entitled to declare all outstanding amount of the loans immediately due and payable.Further, the Company has not paid loan installments of ECGD amounting to USD 13.749 million (June 30, 2016:USD8.713 million) and of Deutsche Bank AG amounting to USD 25.774 million (June 30, 2016: USD 16.334 million) whichfell due till the year ended June 30, 2017. The Company was also not able to make payments of markup to ECGD andDeutsche Bank AG of Rs. 56.547 million (June 30, 2016: Rs 59.160 million) and Rs. 119.929 million (June 30, 2016:Rs. 91.810 million), respectively on due dates.

In terms of provisions of International Accounting Standard 1 - 'Presentation of Financial Statements', since theCompany does not have an unconditional right to defer settlement of liabilities for at least twelve months after thebalance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Basedon above, loan installments for an amount of Rs. 10,029 million and markup amount of Rs. 4,899 million due afterJune 30, 2017 have been shown as current liability.

10. Long term portion of deferred mark upNote 2017 2016

10.1 4,765,768

3,831,455

10.2 133,625

93,416

4,899,393

3,924,871

-

-

Syndicate of banks

Dubai Islamic Bank (DIB)

Less:

Amount shown as current liability

Amount payable within next twelve months

Amount due after twelve months (4,899,393)

(3,924,871)

10.3 (4,899,393)

(3,924,871)

-

-

10.1

i)

ii)

iii)

iv)


As explained in note 9.1, the markup (deferred payments) has been restructured under the secondamendatory agreement. The deferred payments are payable in following order of priority and sequence:

Deferred payment of Rs 1,023 million pertaining to the period of January 1, 2011 till June 30, 2013shall be paid in seven unequal six-monthly installments starting from April 1, 2025 and ending on April1, 2028;

Deferred payment at 8% per annum for the period from July 1, 2013 till March 31, 2014 shall be paid in four unequal six-monthly installments starting from April 1, 2028 and ending on October 1, 2029;

Deferred payment at 5% per annum for the period from April 1, 2014 upto final due date under secondamendatory agreement shall be paid in two unequal installments due on October 1, 2029 and April 1,2030; and

After payments of all amounts above, the deferred payment at 4% per annum for the period of July 1,2013 till March 31, 2014 and at 7% per annum for the period from April 1, 2014 upto final date undersecond amendatory agreement shall be payable as a bullet payment in the year 2030 subject toavailability of the excess cash generated by the Company.

10.2

i)

ii)

10.3

As explained in note 9.3, the markup (deferred payments) has been restructured. The markup is payable inthe following sequence:

Markup calculated at 5% per annum for the period from commencement date till October 1, 2024 shallbe paid in eleven unequal six-monthly installments starting from April 1, 2025 and ending on April 1,2030; and

Markup at 7% per annum shall be paid as a bullet payment in the year 2030 subject to availability ofthe excess cash generated by the Company.

As explained in note 9.6, the entire amount has been shown as current liability.


11. Long term finance from shareholders - unsecured

Note 2017 2016

Facility 1 11.1 2,522,625

2,515,418

Facility 2 11.2 11,811,815

11,526,040

14,334,440

14,041,457

11.1

11.2

This loan together with accrued interest will have at all times priority over all unsecured debts of theCompany except as provided under Law. In the event the Company defaults on its financial loans or incase Warid Telecom International LLC, Abu Dhabi, UAE, no longer remains the holding company of theCompany and sells its 100% shares to any other person or party or relinquishes the control of itsmanagement then, unless otherwise agreed in writing by the lender, the entire loan together with theaccrued interest will become due and payable forthwith and shall be paid within 15 working days of theevent of default or decision of the Board of Directors of the Company accepting such a change in theshareholding as the case may be, and until repaid in full, the loan shall immediately become part offinancial loans, ranking pari passu therewith subject to the consent of the Company's existing financial loanproviders. As the loan is subordinated to all secured finance facilities availed by the Company, the entireamount of loan has been classified as non current liability.

The rights of the lender in respect of the loan are subordinated to any indebtedness of the Company to anysecured lending by any financial institution in any way, both present and future notwithstanding whethersuch indebtedness is recoverable by process of law or is conditional or unconditional. However, the loantogether with the interest shall have priority over all other unsecured debts of the Company. Further, afterthe execution of this agreement, the Company shall not avail any other loan or funding facility from anyother source without prior written consent of the lender. The Company undertakes that it shall not declaredividends, make any distributions or pay any other amount to its shareholders unless the repayment of theloan and the interest in full to the lender. As the loan is subordinated to all secured finance facilities availedby the Company, the entire amount of loan has been classified as non current liability.

The Company obtained long term finance from a shareholder amounting to USD 24 million (June 30, 2016:USD 24 million). This loan is subordinated to all secured finance facilities availed by the Company. Thisloan was repayable within 30 days of the expiry of a period of five years from the last date the lender haddisbursed the loans, which was due by the end of January 2015. The rate of mark-up is 6 months LIBOR +1.5% with 24 months grace period payable half yearly. Alternatively loans may be converted into equity byway of issuance of the Company's ordinary shares at the option of the lender at any time prior to, at or afterthe repayment date on the best possible terms but subject to fulfillment of all legal requirements at the costof the Company. The said conversion of loan shall be affected at such price per ordinary share of theCompany as shall be calculated after taking into account the average share price of the last 30 calendardays, counted backwards from the conversion request date, provided that such conversion is permissibleunder the applicable laws of Pakistan.

The Company obtained long term finance facility from a shareholder amounting to USD 185 million (June30, 2016: USD 185 million) of which USD 112.4 million (June 30, 2016: USD 110 million) has been availedat June 30, 2017. The rate of mark-up is 6 months LIBOR + 1.5% payable half yearly. As per theagreement, the Company is required to repay the full amount of loan in five equal annual installments fromJune 30, 2014 with final maturity date of June 30, 2018. However, no such installment has been paid by theCompany, as the loan is sub-ordinated to the financial loans. The lender has an option to instruct theCompany any time during the term of this agreement to convert the remaining unpaid amount of the loanand the interest in part, or in its entirety into equity by way of issuance of ordinary shares of the Company infavour of the lender in compliance with all applicable laws of Pakistan.

Upon the request of the Company for conversion of the loan and the interest into equity, the lender and theCompany shall, with mutual consent, appoint an independent auditor to determine the fair market value pershare of the borrower prevailing at the time of such request. lf the lender agrees to the price per share asdetermined by the independent auditor then the loan and the interest shall be converted into equity at therate per share decided by the independent auditor. In case the lender, in its sole discretion, disagrees withthe price per share as determined by the independent auditor then the request for conversion shall standrevoked and the loan shall subsist.



12. Medium term finance from an associated company - unsecured Note 2017 2016

Medium term finance from an associated company - unsecured 600,000

600,000

Less: Amount shown as current liability 12.1 (600,000)

(600,000)

-

-

12.1

13. Deferred government grants

Movement during the year is as follows:

Note 2017 2016

Balance at beginning of the year 2,567,744

2,599,101

Amount received during the year -

112,204

Amount recognised as income during the year 35 (148,220)

(143,561)

Balance at end of the year 2,419,524 2,567,744

14. Short term running finance - secured

Facility - II 14.1 687,664 765,512

14.1

15. Short term finance from associated company - unsecured

Note 2017 2016

16. Trade and other payables

Creditors 16.1 577,307

887,227

Due to related parties 16.2 137,624

164,396

Due to international carriers 371,831

442,464

Payable to Pakistan Telecommunication Authority 581,607

591,475

Accrued liabilities 2,151,368

2,177,151

Payable to provident fund 82,209

72,094

Payable to gratuity fund 43 173,847

-

Sales tax payable 123,800

98,045

Advance from customers 286,606 154,978

Security deposits from customers 16.3 33,181 35,680

Income tax deducted at source 401,923 195,552

4,921,303 4,819,062

The company obtained a short term finance facility of Rs. 100 million (June 30, 2016: Nil) from an associatedcompany, Wincom (Pvt) Limited. The loan is repayable within 30 days of the expiry of one year from the effectivedate of the agreement. The rate of markup is six months KIBOR per annum.



The Company obtained an aggregate medium term finance facility of Rs 600 million (June 30, 2016: Rs. 600million) from an associated company, Taavun (Pvt) Limited. The principal was repayable within 30 days of theexpiry of twenty four months from the effective date i.e. September 30, 2010, which was further extendable totwelve months. The rate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. Asthe loan is overdue and payable on demand, the entire amount is classified as current liability.

This represents amount received from Universal Service Fund (USF) as subsidy to assist in meeting the cost ofdeployment of USF Fiber Optic Network for providing USF Fiber Optic Communication Services in Sindh,Baluchistan, Punjab and broad band services in Faisalabad Telecom Region, Hazara Telecom Region andGujranwala Telecom Region. USF Fiber Optic Network and broad band network will be owned and operated by theCompany.


The Company has a cash finance facility of Rs. 790 million (2016: Rs 790 million) of which Rs. 102.336 million(June 30, 2016: Rs. 24.488 million) was unutilised as at June 30, 2017. The facility has an expiry till June 30, 2017but has been subsequently renewed till August 31, 2017. Markup on the facility is to be serviced on quarterly basis.The rate of mark-up is 3 months KIBOR + 1% per annum.

This facility is secured by lien marked on an amount of USD 8.44 million held under the name "Dhabi OneInvestment Services LLC" maintained at Bank Alfalah.


2017 2016

16.1 Creditors include following amounts due to related parties:

Wateen Solutions (Pvt) Limited 221,457

221,457

16.2 Due to related parties

Wateen Satellite Services (Pvt) Limited 120,541

146,232

Bank Alfalah Limited 16,964

16,932

119

1,232

137,624

164,396

16.3

Note 2017 2016

17. Interest / markup accrued

Long term finance from shareholders 1,771,125

1,357,967

Long term finance - secured 578,188

585,390

Medium term finance - unsecured 17.1 500,115

448,577

Short term running finance - secured 17.2 32,648 33,784

Short term finance from associates 3,720 -

280,264 24,563 3,166,060 2,450,281

17.1

17.2

2017 201618. Contingencies and Commitments

18.1 Claims against the Company not acknowledged as debt 482,453

438,875

18.2 1,413,004 1,410,309

18.3


This represents markup payable to an associated company Taavun (Private) Limited.


This includes markup payable to an associated company Bank Alfalah Limited amounting to Rs. 12.062 million(June 30, 2016: 13.197 million).

Performance guarantees issued by banks on behalf of the company

These represent security deposits received from customers. These are interest free and refundable ontermination of relationship with the Company. As per agreement, company has sole descretion to utilize alldeposits.

Pakistan Mobile Communication (Pvt) Ltd (PMCL) (Also includes Warid Telecom (Private) Limited (WTL))


Under the Access Promotion Regulations, 2005, Wateen Telecom Limited (the “Company”) was required tomake payments of Access Promotion Charges (hereinafter referred to as “APC”) for the purpose of UniversalService Fund (hereinafter referred to as “USF”) within 90 days from the close of the month to which suchpayment relates. The Company however, challenged APC Regulations, 2005 in Islamabad High Court and thesame is still a pending adjudication whereby interim injunction granted in favor of the Company is intact till date.Furthermore, the show cause notice dated November 17, 2016 issued by Pakistan Telecommunication Authority(PTA) demanding Rs. 3,681 million in lieu of APC and delayed payment surcharge was duly challenged by theCompany before the Sindh High Court, whereby Honorable Court was pleased to grant interim injunction in favorof the Company restraining PTA to take any coercive action against the Company till the disposal of the suit. Thelegal counsels of the Company are of the view that the Company has a strong case to contest and the matterwould most likely be decided in favour of the Company.

Due to Parent Company- Warid Telecom International LLC, UAE

18.4 WWL under the terms of the MTA served the communication notice to Augere Holdings and claimed certainexpenditures as reimbursable to WWL on account of business consolidation not successful as per MTA. Inresponse to Company’s communication notice, Augere Pakistan (Pvt) Limited served notice to the Company asacknowledgement of communication of MTA and claimed certain charges. WWL and the Company, being aparty to MTA, are in process of negotiating a settlement in respect of the claims raised by the parties in theirrespective notices. The management believes that no amount shall be payable by the Company, accordingly, noprovision is carried in these financial statements in this respect.

18.10 DCIR raised tax demand of Rs. 55 million for tax year 2013 on account of non-deduction of tax under section152 of the Ordinance while making payments to foreign telecom operators. The Company filed appeals againstthe order. The CIR (A) and ATIR both upheld the action of DCIR. The Company also filed misclleneousapplication in the ATIR against the Orders of the ATIR. The Company filed references before High Court on thepremise that the payments made to foreign operators falls under the ambit of business income and is exemptfrom withholding tax. High Court remanded the case back to ATIR and same is pending. Company foresees afavorable decision.


18.5

18.6

18.7

18.8

18.9

The Additional Commissioner Inland Revenue, Audit - II, Large Taxpayers Unit, Islamabad (Add. CIR) issuedshow cause notice dated June 6, 2014 whereby Add. CIR alleged the Company is claiming inadmissible inputtax, suppression of sale, non-payment of sales tax on fixed asset, non-compliance of sales tax special procedurewithholding rules, penalty on late filing of sales tax and federal excise returns and non-withholding of federalexcise duty on advertisement services. The Company could not furnish the requisite information to the Add. CIRbecause of fire effected records further; the assessment was barred by time. The Add. CIR passed ex-parteorders and raised the demand of Rs. 518 million along with penalty and default surcharge. The Company filedappeal before CIR (A) and same was rejected. Being aggrieved with the order, appeal was filed before ATIR andATIR confirmed the order passed by CIR (A). Resultantly, the Company filed reference application before HighCourt which is pending and company foresees a favorable decision.

The ACIR issued notice to the Company for the period of July 2010 to June 2011 and confronted to charge salestax on the difference of sales reported in audited accounts and sales reported in monthly sales tax returns andpassed ex-parte order with tax demand of Rs. 1,048 million. Being aggrieved, the Company filed appeal beforeCIR (A) and same was rejected. An appeal was filed by the Company before ATIR which is pending andcompany foresees a favorable decision.

The Assistant Commissioner Inland Revenue (ACIR), Enforcement Unit IV, LTU, Islamabad, issued show causenotices based on the observation that Company has not furnished sales tax and federal excise returns for theperiods from August 2009 to March 2010, November 2010 and December 2010. In this respect, ACIR issuedOrder-in-Original and assessed demand of Rs. 249.471 million (calculated on the basis of alleged minimumliability) payable along with penalty and default surcharge and also issued recovery notice. The Companydeposited principal amount of Rs. 138.709 million and default surcharge of Rs. 26.231 million based on actualliability as per own working of the Company. The ATIR, Islamabad remanded the case to the assessing officerwith certain directions. The Company submitted information in response to the related proceedings initiated byACIR, Enforcement-IV, LTU, Islamabad and proceedings are not yet concluded by the ACIR. As of now, no taxdemand is in field and company foresees a favorable decision in reassessment proceedings.

The ACIR alleged that Company has not withheld tax from payments made to foreign telecom operators duringthe tax years 2008, 2009, 2010 and 2011. Further the ACIR ordered the Company to pay alleged demand of Rs.477.767 million representing principal amount and default surcharge for the aforesaid tax years. The CIR (A)upheld the contentions of the assessing officer and directed the assessing officer to recalculate the withholdingtax by applying the rates as given in the Division II of Part III of the First Schedule to the Income Tax Ordinance,2001. The Company filed appeal before ATIR, and same was rejected. The Company filed references before theHigh Court and case was remanded back for fresh proceedings. The proceedings were finalized by the assessingofficer and a tax demand of Rs. 1,911 million was created. The Company preferred an appeal before CIR (A)and CIR (A) remanded the case to DCIR. The DCIR raised demand of Rs. 1,131 million against which theCompany preferred appeal before CIR (A) who upheld the orders of DCIR. The Company preferred appealagainst the aforesaid appellate orders before ATIR, whereby ATIR up-held the decision of CIR (A) regarding taxwithholding on payments and has remanded the case to the officer for levy of withholding tax on lower of treatyrates or the Ordinance rates. The Company filed references before High Court, on the premise that the paymentsmade to foreign operators falls under the ambit of business income and is exempt from withholding tax, which ispending and company foresees a favorable decision.

The Deputy Commissioner Inland Revenue (DCIR), Enforcement Unit IV, Large Taxpayers Unit (LTU),Islamabad issued Order-in-Original based on the observations of Director General Intelligence and Investigationand raised a demand of Rs. 31.830 million to be paid along with penalty and default surcharge and also issuedrecovery notice. The Commissioner Inland Revenue - Appeals [CIR (A)] and Appellate Tribunal Inland Revenue(ATIR) upheld the order of the DCIR. The Company filed reference before the Honorable High Court whereby thecase has been remanded to ATIR. The appeal is pending for adjudication with ATIR and company foresees afavorable decision.


18.11

18.12

18.13

18.14

18.15

18.16

18.17

18.18

Additional Commissioner Inland Revenue (Add. CIR) raised a tax demand of Rs. 74.5 million for tax year 2009under section 122(5A) by disallowing certain expenses. Being aggrieved, company filed appeal before CIR(A).CIR(A) confirmed the disallowance of exchange loss and depreciation however, remanded the other points toAdd. CIR for fresh proceedings. Company filed appeal before ATIR which is pending. Add. CIR has not initiatedreassessment proceedings till date. As of now no tax demand is in field and case is likely to be concluded infavor of Company.

Add. CIR disallowed expenses under various heads and raised a tax demand of Rs. 5,697 million for tax year2010. The Company preferred an appeal before CIR (A) on the grounds that the order passed by Add. CIR wasbarred by time in the terms of section 122 (2). CIR (A) disposed of the appeal by remanding the case back toAdd. CIR to re-examine the issues. Company has filed appeal before ATIR on ground of time barred and hasobtained stay for abeyance of re-assessment proceedings initiated by Add. CIR. Based on this company foreseesa favorable decision.

Additional Commissioner Inland Revenue (Add. CIR) raised a tax demand of Rs. 2,406 million for tax year 2008under section 122 (5A) by disallowing certain expenses on arbitrary basis. Being aggrieved, company filedappeal before CIR(A) on the ground that assessment is barred by time. CIR (A) remanded the case back to Add.CIR to re-examine the case in light of order passed by Supreme Court of Pakistan in a similar case of a thirdparty. Add. CIR again issued the order of same tax demand without considering the judgement of SupremeCourt of Pakistan as referred above. Resultantly, company has filed appeal before CIR (A) which is pending.Based on this company foresees a favorable decision.

DCIR issued notice to the Company and required to provide the details of tax deduction while making paymentof finance cost for tax year 2012. Subsequently, the DCIR raised a demand of Rs. 253 million on gross amountof finance cost paid. The Company contended that DCIR did not consider the impact of exchange loss and bankcharges. Appeal was filed before CIR (A) and rectification application before DCIR. The CIR (A) remanded thecase to DCIR for fresh proceedings. As of now no tax demand is in field and likely to be concluded in favor ofCompany.

The OIR also levied minimum tax under section 113 of the Income Tax Ordinance, 2001 for tax years 2010, 2011,2012 & 2013 by rejecting the stance of Company of gross loss. The Company preferred appeals against theaforesaid orders before CIR (A) and same were rejected. The Company preferred appeal before the ATIR andATIR rejected the company’s appeal for tax year 2010 and 2012. As per Income Tax Ordinance 2001 the abovementioned section is not applicable in case of gross loss of that particular year by the company. Company hasfiled reference applications before High Court and is likely to be decided in the favor of Company. However,company’s appeal for tax year 2011 and 2013 is pending before ATIR.

The Officer Inland Revenue, Audit - V, Large Taxpayers Unit, Islamabad (OIR) issued orders and raised taxdemand of Rs. 163 million relating to tax years 2008, 2009, 2011, 2012 and 2013 by holding that the taxes paidunder section 148 (7) on imports of the Company are not adjustable against the income tax liability as theCompany is not covered under the definition of industrial undertaking. The Company preferred appeal beforeCIR (A) who upheld the order of OIR, consequently the Company filed appeal before ATIR. The ATIR hasrejected Company's appeal for tax years mentioned above. The Company filed the references before High Courtwhich are pending and company foresees a favorable decision.

The Assistant Commissioner - I, Sindh Revenue Board, disallowed input tax claim of the Company for themonths of March 2014 to June 2014 and raised a demand of Rs. 66 million. The Company filed appeal beforeCommissioner Appeals however, no appellate order is received to-date. Certain related evidence has beenprovided by the company in support of its contention and company foresees a favorable decision at appellateforums.

DCIR raised tax demand for Rs. 133 million in respect of tax year 2014 on account of non-deduction of tax undersection 152 of the Ordinance while making payments to foreign telecom operators. The Company preferredappeal before the CIR (A) against the order of the DCIR. The CIR (A) remanded the case to the DCIR with thedirection to charge the withholding on the actual payment and not on the amount of expense but has confirmedthe levy of withholding tax. No appeal effect notice has been issued as yet. The Company also preferred appealagainst the order of the CIR (A) in ATIR and the same is pending. The payments made to foreign operators fallsunder the ambit of business income and is exempt from withholding tax. Based on this company foresees afavorable decision.


18.19

18.20

2017 2016

18.21 Outstanding commitments for capital expenditure 557,523

635,844

The Company is in dispute with Spacecom International LLC (Spacecom) regarding alleged liabilities arisingunder a Master Service Agreement (MSA) dated 15 August 2014 (MSA).The Company engaged SpaceComInternational LLC (‘SpaceCom’) to provide certain satellite services; which arrangement was subsequentlyterminated by the Company, through notice dated 17th April 2015, on account of SpaceCom’s material breach ofMSA, caused by significant and chronic service outages. In response, SpaceCom has commenced arbitrationproceedings against the Company, before the DIFC-LCIA Arbitration Centre in DIFC, wherein SpaceCom claimsUS$4.52m in respect of allegedly due and outstanding invoices plus costs of US $ 0.17 million and interest onthese. The management beleives that the Company has a good defence in respect to entire claim on thegrounds that Company was entitled to terminate the MSA and did so lawfully and Spacecom has initiated theproceedings at wrong forum. On these basis, no provision has been recorded in financial statements.


No provision on account of contingencies disclosed in note 18.3 - 18.20 above has been made in these financialstatements as the management and its advisors are of the view, that these matters will eventually be settled infavor of the Company.

Add. Commissioner PRA raised a tax demand of Rs. 59 million and charged a penalty of Rs. 2.9 million inrespect of input tax claimed by the Company during the period from August 2012 to June 2015. Being aggrieved,the Company preferred an appeal before CIR (A) on the ground that the Add. Commissioner PRA has erred inpassing the aforesaid order without considering the facts. CIR (A) remanded the case back to Add.Commissioner PRA for denovo proceedings. As of now no tax demand is in field and case is likely to beconcluded in favor of Company.


19

.O

pera

tin

g a

ss

ets

ow

ne

dle

as

ed

At

Ju

ne 3

0, 20

15

Co

st7

0,5

43

93

4,1

38

16

5,4

42

5,2

57

,958

4,7

09

,59

815

2,9

20

15

3,6

64

79

9,4

55

23

7,9

86

99

,33

413

,40

812

,59

4,4

46

Acc

um

ula

ted

de

pre

cia

tion

-(1

78

,97

0)

(58

,12

8)

(84

1,4

79

)(1

,82

6,1

84

)(1

22

,987

)(6

3,5

99

)(7

69

,989

)(1

15

,89

0)

(87,6

38

)(1

0,2

72

)(4

,07

5,1

36)

Ne

t b

oo

k va

lue

70

,54

375

5,1

68

10

7,3

14

4,4

16

,479

2,8

83

,41

429

,93

390

,06

529

,46

61

22

,09

611

,696

3,1

36

8,5

19

,31

0

Ye

ar

en

de

d J

un

e 3

0, 20

16

Op

en

ing

net b

oo

k am

oun

t7

0,5

43

75

5,1

68

10

7,3

14

4,4

16

,479

2,8

83

,41

4

29

,93

3

90

,06

5

29

,46

6

12

2,0

96

11,6

96

3,1

36

8,5

19

,31

0A

dd

ition

s-

3,0

80

47

,88

9

1,3

43

,363

25

5,9

31

32

,05

0

11,5

12

23

,25

8

7,5

41

34

,00

6-

1,7

58

,63

0D

isp

osa

ls/ tr

an

sfe

r -

Co

st-

-

-

(27

8,2

00

)

(35

2,4

31

)

-

(2,2

74)

(42,1

02

)

-

-(1

3,4

08

)(6

88

,415

)- A

ccum

ula

ted

de

pre

cia

tion

-

-

-

5,1

93

211

,16

2

-

1,3

68

42

,10

2

-

-10

,27

22

70

,09

7-

Ne

t b

oo

k va

lue

-

-

-

(27

3,0

07

)

(14

1,2

69

)

-

(906

)

-

-

-(3

,13

6)

(418

,318

)

De

pre

cia

tion c

ha

rge

-

(23

,33

9)

(19

,44

9)

(23

1,3

59

)

(32

9,8

74

)

(19

,98

3)

(15

,42

2)

(20,3

11)

(23,8

83)

(8,5

92)

-(6

92

,213

)C

losi

ng

ne

t b

oo

k va

lue

70

,54

3

73

4,9

09

13

5,7

54

5,2

55

,476

2,6

68

,20

2

42

,00

0

85

,24

9

32

,41

3

10

5,7

54

37

,110

-9,1

67

,41

0

At

Ju

ne 3

0, 20

16

Co

st7

0,5

43

93

7,2

18

21

3,3

31

6,3

23

,121

4,6

13

,09

8

18

4,9

70

16

2,9

02

78

0,6

11

24

5,5

27

13

3,3

40

-13

,66

4,6

62

Acc

um

ula

ted

de

pre

cia

tion

-

(202

,30

9)

(77

,57

7)

(1,0

67,6

45

)

(1,9

44,8

96

)

(142

,970

)

(77

,65

3)

(748

,198

)

(13

9,7

73

)

(96,2

30

)-

(4,4

97

,25

1)

Clo

sin

g n

et b

oo

k va

lue

70

,54

3

73

4,9

09

13

5,7

54

5,2

55

,476

2,6

68

,20

2

42

,00

0

85

,24

9

32

,41

3

10

5,7

54

37

,110

-9,1

67

,41

0

Ye

ar

en

de

d J

un

e 3

0, 20

17

Op

en

ing

ne

t b

oo

k v

alu

e7

0,5

43

73

4,9

09

13

5,7

54

5,2

55

,476

2,6

68

,20

2

42

,00

0

85

,24

9

32

,41

3

10

5,7

54

37

,11

0-

9,1

67

,41

0A

dd

itio

ns

3,9

96

18

,78

2

4,1

30

1,2

08

,530

32

9,8

59

42

,71

4

6,9

19

13

,42

5

28

8

54

,70

8-

1,6

83

,35

1C

os

t A

dju

stm

en

t-

-

-

-

-

-

-

-

-

10

,27

2-

10

,27

2D

isp

os

als

/ tr

an

sfe

r -

Co

st

-

-

-

(26

4,6

39

)

(40

4,2

42

)

-

(4,4

07)

(24,2

68

)

(638

)

(504

)-

(698

,697

)-

Acc

um

ula

ted

de

pre

cia

tio

n-

-

-

15

,85

6

26

4,8

11

-

4,3

44

24

,26

8

611

50

4-

31

0,3

94

- N

et

bo

ok

va

lue

-

-

-

(24

8,7

83

)

(13

9,4

31

)

-

(63

)

-

(27)

--

(388

,303

)

De

pre

cia

tio

n c

ha

rge

-

(23

,52

1)

(21

,40

8)

(25

4,5

33

)

(33

8,3

82

)

(28

,12

2)

(15

,22

9)

(16,1

68

)

(23,7

06)

(15,9

51

)-

(737

,021

)A

cc

um

ula

ted

De

pre

cia

tio

n a

dju

stm

en

t-

-

-

-

10

,69

7

-

(872

)

(9,8

26

)

-

(10,2

72

)-

(10,2

73

)

Clo

sin

g n

et

bo

ok

valu

e7

4,5

39

73

0,1

70

118

,47

65,9

60

,690

2,5

30

,94

556

,59

276

,00

419

,84

482

,30

975

,86

7-

9,7

25

,43

5

At

Ju

ne 3

0, 20

17

Co

st

74

,53

995

6,0

00

21

7,4

61

7,2

67

,012

4,5

38

,71

522

7,6

84

16

5,4

14

76

9,7

68

24

5,1

78

19

7,8

16

-14

,65

9,5

87

Ac

cu

mu

late

d d

ep

rec

iati

on

-(2

25

,83

0)

(98

,98

5)

(1,3

06,3

22

)(2

,00

7,7

70

)(1

71

,092

)(8

9,4

10

)(7

49

,925

)(1

62

,868

)(1

21

,949

)-

(4,9

34

,15

2)

Ne

t b

oo

k v

alu

e7

4,5

39

73

0,1

70

118

,47

65,9

60

,690

2,5

30

,94

556

,59

276

,00

419

,84

482

,30

975

,86

7-

9,7

25

,43

5

An

nu

al ra

te o

f d

ep

rec

iati

on

%-

2.5

10

46

.67

-20

33

.33

10

33

.33

10

20

20

Mo

tor

Ve

hic

les

T

ota

l

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

---(

Ru

pe

es

in

th

ou

sa

nd

) --

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

--

Fre

eh

old

La

nd

Bu

ild

ing

s

fre

eh

old

Le

as

e h

old

imp

rove

me

nts

Lin

e a

nd

wir

eN

etw

ork

eq

uip

me

nt

To

ols

an

d

ge

ars

Off

ice

eq

uip

me

nt

Co

mp

ute

rs a

nd

ac

ce

ss

ori

es

Fu

rnit

ure

an

d

fix

ture

19

.1T

he

co

st

of

fully

de

pre

cia

ted

asse

tsw

hic

ha

restill

inu

se

as

at

Ju

ne

30

,2

01

7is

Rs.

1,0

12

mill

ion

(20

16

:R

s.

98

3m

illio

n).


Note 2017 201620. Capital work in progress

Lease hold improvements 2,142

9,826

Line and wire 435,169

923,844

Network equipment-net of impairment of DSL assetsRs 353.515 million (June 30, 2016: Rs 353.515 million). 88,122

95,145

20.1 525,433

1,028,815

20.1 Movement during the year

Balance as at July 01 1,028,815

1,506,592

Additions during the year 766,297

925,361

Capitalised during the year (1,269,679)

(1,403,138)

Balance as at June 30 525,433

1,028,815

21. Intangibles

LDI license 21.1 10,246

11,692

Computer software 21.2 982 3,520

11,228 15,212

21.1 LDI license

Cost 21.1.1 28,934 28,934 Less: Amortisation

Opening balance 17,242

15,795 Amortisation for the year 1,447

1,447

18,688

17,242 Net book value 10,246

11,692

21.1.1

21.2 Computer software

Cost 21.2.1 84,417

84,417

Less: Amortisation


75,068

Amortisation for the year 2,538

5,829

83,435

80,897

Net book value 982

3,520

21.2.1 Software license is amortised over a period of 5 years.

21.2.2


Pakistan Telecommunication Authority (PTA) granted Long Distance International (LDI) license for a period of 20years from July 26, 2004.

The cost of fully amortized computer softwares which are still in use as at June 30, 2017 is Rs. 80.452 million(June 30, 2016: Rs. 71.739 million).

23. Deferred tax assets Note 2017 2016

Deferred Income tax asset 23.1 - -

23.1


The aggregate deferred tax asset available to the Company for set off against future taxable profits at June 30,2017 amounted to Rs. 6,072 million (June 30, 2016: Rs. 7,332 million). Of these, deferred tax asset aggregatingRs.1,659 million (June 30, 2016: Rs 1,592 million) have been recognized in the financial statements againstdeferred tax liability as at June 30, 2017.


22.

%age %age

Unquoted Holding Holding

Wateen Solutions (Private) Limited810,239 fully paid ordinary shares of Rs 100 each 100

137,656 100

137,656

Wateen Satellite Services (Private) Limited 100

5 100

5 500 fully paid ordinary shares of Rs 10 each

Netsonline Services (Private) Limited 100

4,400

100

4,400

4,000 fully paid ordinary shares of Rs 100 each

Wateen Telecom UK Limited 10,000 fully paid ordinary shares of GBP 1 each 100

1,390

100

1,390

(note 23.2)

Wateen Wimax (Private) Limited (WWL)212,916,590 fully paid ordinary shares of Rs 10 each 100 2,129,250 100 2,129,250 (note 23.3)

2,272,701 2,272,701 Provision for impairment of investment in Netsonline Services (Private) Limited (4,400) (4,400)

Wateen Telecom UK Limited (1,390) (1,390)Wateen WiMax (Private) Limited (note 23.4) (2,129,250) (2,129,250)

(2,135,040) (2,135,040)

137,661

137,661

22.1

22.2

22.3

22.4 The amount has been provided for due to curtailed scale of operations of WWL, negative value in use of WiMax,substantial loss for the year, termination of Master Transaction Agreement (MTA) and existence of no realisticbasis of preparation of financial statements of WWL on a going concern basis.

(Rupees in

thousand)


Long term investment in subsidiary companies - at cost

All the companies are incorporated in Pakistan except for Wateen Telecom UK Limited which is incorporated inUnited Kingdom (UK).

Approval of State Bank of Pakistan for investing in equity abroad is in process and shares of Wateen Telecom UKLimited will be issued to the Company after receipt of such approval.

As per the terms of share issuance agreement dated September 9, 2014 between the Company and WWL, WWLissued 100% (212,916,590 fully paid ordinary shares of Rs 10 each) shares to the Company at par value forconsideration against transfer of assets and liabilities pertaining to the WiMAX operations.

2017 2016


Expiry of business and depreciation losses are as follows:

Note 2017 2016

-

3,340,083

3,717,062

3,717,062

508,268

508,268

1,030,395

1,030,395

808,214

808,214

322,622

322,622

459,674

-

6,846,235

6,389,901

7,269,775

6,664,251

67,087

67,087

24. Long term loan to subsidiary company

Loan guaranteed on behalf of WWL 1,109,000 1,109,000 Long term loan to subsidiary company 884,537 810,058

1,993,537 1,919,058 Less: provision for long term loan 24.1 (1,993,537) (1,919,058)

- -

24.1 1,919,058 1,765,815

74,479 153,243

1,993,537 1,919,058

24.2

25. Long term deposits

26. Long term prepayments

Note 2017 2016

27. Trade debts - unsecured

Considered good 27.1 2,845,553

2,337,484

Considered doubtful 1,434,681

1,431,754

4,280,234 3,769,238 Less: Long term trade debts (593,501) (634,447)

3,686,734 3,134,791 Provision for doubtful debts 27.4 (1,434,681) (1,431,754)

2,252,052 1,703,037

2022 Business lossBusiness loss2023

No Expiry Depreciation and amortization loss

(Rupees in thousand)Tax Year

Business loss

Nature

2017 Business loss

2018

These mainly represent the security deposits paid to domestic interconnect operators and government authoritieson account of utilities and suppliers on account of rent, DPLC and satellite bandwidth.


These mainly represent long term portion of right of way charges paid to local governments and various landowners for access of land.

This represents loan given to subsidiary company, WWL and is interest free. The amount has been provided fordue to curtailed scale of operations of WWL, negative value in use of WiMax, substantial loss for the year,termination of MTA and existence of no realistic basis of preparation of financial statements of WWL on a goingconcern basis.

Closing provision

Opening Provision

201920202021

Business lossBusiness lossBusiness loss

2019 Minimum Tax

Provision for the year


2017 201627.1 Trade debts include following balances due from related parties:

608,345

289,903

Innov8 Limited 70,737

-

Wateen Telecom UK Limited 14,509

391

Alfalah Insurance Company 2,664

13,292


121,821

816,406

425,407

27.2 Age analysis of trade debts from associated companies, past due but not impaired is as follows:

2017 2016

0 to 6 months 25,354

85,780

6 to 12 months 85,048

145,839

Above 12 months 706,004

193,789

816,406

425,407

27.3

2017Current portion

Not later than one year 135,885

94,527

41,358

Long term portionBetween one and five years 422,360

252,593

169,767

Later than five years 809,985

386,251

423,734

1,232,345

638,844

593,501

1,368,230

733,371

634,859

2016

Current portionNot later than one year 135,815 100,164 35,650

Long term portionBetween one and five years 543,260 333,743 209,517 Later than five years 823,639

398,710

424,929

1,366,899

732,453

634,446 1,502,714

832,617

670,096

2017 201627.4 Provision for doubtful debts

Related partiesOpening balance 101,500

-

Provision made during the year - related parties -

101,500

Write off during the year (101,500)

Closing balance -

101,500

Other parties

Opening balance 1,330,254

1,025,773

Provision made during the year - other parties 104,427

304,481

Closing balance 1,434,681

1,330,254

1,434,681

1,431,754

27.4.1


Unearned

Interest income Present value

Trade debts include receivable under finance lease of optic fiber cable and telecom equipment as follows:


…………..(Rupees in thousand)………….

- Balances over 360 days past due - 100 %


- Balances 181 - 360 days past due - 50 %These include Rs 1,357 million (2016: Rs. 1,281 million) based on age analysis of the debts as follows:

Total future

Payment


-


Note 2017 201628. Stores, spares and loose tools

532,690 571,126

Less: Provision for obsolete stores 28.1 (80,201)

(175,990)

Stores and spares written off -

(16,599)

452,489 378,537

28.1 Provision for obsolete stores

Opening balance 175,990 90,759 Provision for the year - 85,231 Reversal of provision (95,789) - Closing balance 80,201 175,990

29. Advances, deposits and prepayments

Advances to suppliers and contractors 659,044

678,225

Advances to employees - considered good 29.1 30,152

43,505

Security deposits and earnest money 128,281

128,950

Margin held by bank against letters of guarantee 222,725

170,571

Prepayments 29.2 126,784

88,614

Receivable from gratuity fund -

10,086

Due from associated companies 29.3 2,233,471

2,191,196

Others 97,983

127,151

3,498,441

3,438,297

Less:

29.4


Provisions written off during the year (211,742) -

Provision for the year - charged against finance income - 60,388 Closing balance 370,693 582,435


572,319 Provision for the year 28,570

66,168 Reversal of provision (49,092)

-

Closing balance 617,965

638,487

988,658

1,220,922

2,509,783

2,217,375

29.1

29.2

2017 2016

29.3 Due from associated companies

Wateen Solutions (Pvt) Limited 1,242,832

1,139,486

Wateen Telecom UK Limited 444,448

428,490

Wateen Telecom Inc. Malaysia 745

666

Wateen Multi Media (Pvt) Limited 199,852

228,263

Advance for construction of Warid Tower -

68,916

Warid International LLC, UAE - Parent company -

83,019

Raseen Technologies (Pvt) Limited -

27,844

Warid Telecom Georgia Limited -

23,459

Netsonline services (Pvt) Limited 8,398 8,351

Warid Telecom International - Bangladesh - 8,504

Innov8 Limited 337,196 174,198

2,233,471 2,191,196

This includes advances to employees on account of expenses amounting to Rs 19.405 million (June 30, 2016: Rs 33.210 million).


Provision for doubtful receivables - other parties

Provision for doubtful receivables - related parties

These include current portion of right of way charges of Rs. 13.341 million (2016: Rs. 17.773 million).

Cost



Note 2017 2016

29.4 Provision for doubtful receivables - related parties

362,382

362,382


68,916


83,019

-

27,844

-

23,459

8,311

8,311

-

8,504

370,693 582,435

30. Cash and bank balances

Balance with banks on

- current accounts 210,389

185,422

- collection accounts 9,415

27,728

- deposit accounts 30.3 36,197

31,997

Cash in hand 520

354

256,521

245,501

30.1

30.2

30.3

30.4

2017 2016

31. Revenue

Gross revenue 7,616,914

7,384,877

Less: Sales tax / Federal excise duty 592,622

428,299

7,024,292

6,956,578

32. Cost of sales

LDI Interconnect cost 1,582,329

1,679,240

Leased circuit charges 180,084

146,007

Contribution to PTA Funds 84,756

89,529

PTA regulatory fee 22,639

22,382

Cost associated with IRU of Optic Fibre Cable 248,783

273,007

Operational cost 975,354

741,589

Repairs and maintenance 442,532

361,311

Bandwidth cost of VSAT services 193,938 221,187

Store, spares and loose tools consumed 85,190 169,480

Others 194,791 254,2174,010,396

3,957,949

Warid Telecom International - Bangladesh

Balance with banks include Rs. 222.513 million (June 30, 2016: Rs. 196.651 million) maintained with Bank Alfallah Limited - related party.



Netsonline Services (Pvt) Limited

Wateen Telecom UK Limited

Bank balances amounting to Rs 23.585 million were under lien with banks (June 30, 2016: Rs. 29.651 million).

Warid Telecom Georgia Limited

Bank balances on deposit accounts carried interest at an average rate of 4%-5% per annum (June 2016: 5%-8%per annum).

Cash and bank balances include foreign currency balances aggregating USD 1.863 million (June 30, 2016: USD1.728 million).

Raseen Technologies (Pvt) Limited


Note 2017 2016

33.

33.1 1,457,835

1,046,623

78,521

81,894

8,881

5,750

4,371

6,087

21,595

14,524

7,451 7,450

33.2 3,531 6,471 69,604 44,169 17,725 17,069 2,711 3,276

19,323

37,395

149

4,012 29,988

30,563 13,302

10,098

General and administration expenses

Salaries, wages and benefits RentRepairs and maintenanceVehicle repairs and maintenanceTravel and conveyancePostage and stationeryAuditor's remuneration Legal and professional chargesCommunication expensesEmployee trainingCustomer services chargesFees and subscriptionInsuranceEntertainmentGeneral office expenses 49,795

44,662

1,784,782

1,360,070

33.1 These include charges against employee's retirement benefits as referred in note 43.10.


Note 2017 2016

33.2 Auditor's remuneration

Annual audit 2,500 2,420Audit of consolidated accounts and review of

Other certifications 963 330Tax services - 3,648

Out of pocket expenses 68

733,531

6,471

34. Provisions

Provision for doubtful trade debts 27.4 104,427

405,981Provision for store obsolesce 28 -

85,231Provision for doubtful advances and other receivables 29 28,570

66,168132,998

557,380

35. Other income

Income from non-financial assets:Loss on sale of operating assets (208,063)

(115,075)Government grant recognised 13 148,220

143,561Reversal of provision for store obsolescence 28 95,789

-Reversal of provision for doubtful advances and other receivables 29 49,092

-Write back of liability 553,563

493,876Store and spares written off 28 -

(16,599)Others 12,439

15,549651,040

521,312

36. Finance cost

Markup on long term and medium term finance 36.1 1,623,043

1,596,500

Amortization of ancillary cost of long term finance 23,874

29,540Mark up on short term borrowings 36.2 48,701

55,127

Bank charges, commission, fees and other charges 12,133 32,964Late payment charges on other payables 7,430 70,937Exchange loss 74,918 643,676Others 754

-

1,790,853

2,428,743

36.1

36.2


This includes markup related to a running finance facility obtained from an associated company of Rs. 48.701 million (June 30, 2016:Rs. 55.127 million).

EY FORD

RHODESA F

FERGUSON

This includes markup related to long term finance from shareholders of Rs. 406.990 million (June 30, 2016: Rs. 303.257 million), mediumterm finance from an associated company of Rs 55.257 million (June 30, 2016: Rs. 56.649 million) and markup related to associatedcompany of Rs. 162.969 million (June 30, 2016: Rs. 163.274 million)

40. Financial instruments by category

40.1 Financial assets and liabilities

2017Financial assets

Maturity up to one year

Trade debts-net of provision

Advances, deposits and other receivables

Cash and bank balances

Maturity after one year

Long term deposits

Long term trade debts

Financial liabilities




company - unsecured



Interest/mark-up accrued

Short term from associated companies



Long term portion of deferred mark up

Long term finance from shareholders-unsecured

Medium term finance from an associated

company - unsecured

Long term deposits

2,252,052

2,252,052

2,341,920

2,341,920

256,521

256,521

4,850,493

4,850,493

419,515 419,515

593,501 593,501

1,013,016

1,013,016

6,867,832

6,867,832

600,000

600,000

687,664

687,664

4,634,697

4,634,697

3,166,060

3,166,060

100,000

-

16,056,252

15,956,252

10,028,503 10,028,503

4,899,393 4,899,393

14,334,440 14,334,440

- -

- -

29,262,336 29,262,336


Loans and

receivables Total(Rupees in thousand)

Other

financial

liabilities Total


37. Provision for long term loan to and impairment of Note 2017 2016investment in subsidary company

Provision for loan guaranteed on behalf of WWL -

(2,000)Provision for long term loan to subsidiary company 24 74,479

155,24374,479

153,243

38. Finance income

Finance income on lease 100,110

103,063Markup on advance to associated companies 76,036

137,425Provision of markup on advance to associated companies -

(60,388)76,036

77,037Income on bank deposit accounts 1,364

1,922177,510

182,022

39. Taxation

Current tax

437,489 442,737

10,321 -

39.1 447,810 442,737

39.1


Numerical reconciliation between tax expense and accounting profit has not been presented as the Company is subject to minimum tax.

For Current Year

For Prior Year

2016

Financial assets


Trade debts-net of provision

Contract work in progress


Bank balances


Long term deposits

Trade debts





company - unsecured



Interest/mark-up accrued

Maturity after one yearLong term finance - securedLong term portion of deferred mark upLong term finance from shareholders-unsecured

1,703,037

1,703,037

61,884

61,884

2,089,023

2,089,023

245,147

245,147

4,100,774

4,100,774

479,760

479,760

634,447

634,447

1,114,207

1,114,207

4,653,075

4,653,075

600,000

600,000

765,512 765,512

4,634,697 4,651,663

2,450,281 2,425,71813,103,565 12,495,968

12,212,309 12,212,3093,924,972 3,924,871

14,041,157 14,041,457

30,178,438 30,178,638

Other

financial

liabilities Total(Rupees in thousand)

Loans and



40.2 Credit quality of financial assets

Rating 2017 2016

Trade debts

Counterparties with external credit rating A1 7,946

109

A1+ -

154,098

A2 408

290

A-1 12,158

3,320

A-1+ 13,330

A-2 420 247

P-2 7,314 140

Counterparties without external credit rating

816,406

425,407

2,000,901

1,740,543

2,845,553

2,337,484


Counterparties with external credit rating A1+ 29,348

41,565

A-1+ 55,438

2,551

A1 125,000

A-1 125,000


1,842,042

1,608,761

290,092

312,829

2,341,920

2,090,706

Long term deposits

419,515

479,760

Bank balances

A1+ 229,505 202,841

A-1+ 10,035 28,770

A-1 13,703 13,536

P-1 75 1

A3 2,682

256,000 245,147

The credit quality of Company's financial assets assessed by reference to external credit ratings of counterparties determined by ThePakistan Credit Rating Agency Limited (PACRA), JCR - VIS Credit Rating Company Limited (JCR-VIS), Standard and Poor's andMoody's and other international credit rating agencies are as follows:


Due from related parties

Others

Due from related parties

Others

Others

-

-

-

-


41. Financial risk management

- Credit risk;- Liquidity risk; and

- Market risk

41.1 Credit risk

Credit risk is the risk of financial loss to the Company if a counter party to financial instruments fails to meet its contractual obligations,and arises principally from the Company's receivable from customers, deposits, contract work in progress, advances and deposits andbank balances. The Company assesses the credit quality of counterparties as satisfactory. The Company does not hold any collateralas security against any of its financial assets. The Company limits its exposure to credit risk by investing only in liquid securities.

The Company has exposure to the following risks from its use of financial instruments:

This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies andprocesses for measuring and managing risk, and the Company's management of capital. Further, quantitative disclosures are includedthroughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework.The Board is also responsible for developing and monitoring the Company's risk management policies.

Company's exposure to credit risk is influenced mainly by the individual characteristics of each operator including the default risk ofthe industry and country in which the operator works. Significant portion of the Company’s receivables is attributable to operators.Company regularly monitors the status of receivables.

The Company's policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits andcontrols, and to monitor risks. Management's policies and systems are reviewed regularly to reflect changes in market conditions andthe Company's activities. The Company, through its training and management standards and procedures, aims to develop adisciplined and constructive control environment in which all employees understand their roles and obligations.

The Board of directors oversees how management monitors compliance with the Company's policies and procedures, and reviews theadequacy of the risk management framework in relation to the risks faced by the Company. The directors are assisted in theiroversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls andprocedures, the results of which are reported to the Board of Directors.

2017 2016

Trade debts-net of provision 2,845,553 2,337,484

Contract work in progress - 61,884

Advances and deposits 2,341,920 2,090,706

Bank balances 256,521 245,147

Long term deposits 419,515

479,760

5,863,508

5,214,981

Gross Impairment Gross Impairment

Up to 3 months 1,150,065 -

1,018,152

-

3 to 6 months 578,750 -

330,687

-

6 to 12 months 413,402

206,701

390,654

99,977

Above 12 months 2,138,017

1,227,980

2,029,745

1,331,777

4,280,234

1,434,681

3,769,238

1,431,754

41.2 Liquidity risk



The aging of these trade debts at the reporting date is as follows:

2017 2016

The Company has recorded an allowance for impairment in respect of advances, deposits and other receivables of Rs.988 million

(June 30, 2016: Rs. 1,221 million).

Liquidity risk is the risk that Company will not be able to meet its financial obligations as they fall due. Company's approach tomanaging liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Company’s reputation.

Company ensures that it has sufficient cash on demand to meet expected cash outflows during its operating cycle. This excludes thepotential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Company's treasuryaims at maintaining flexibility in funding by keeping committed credit lines. Further, shareholders of the Company has providedfinancial support in the form of long term finance to meet capital requirements of the Company. Management believes the samesupport will continue in future. Further, the Company has restructured the long term finance facilities and short term borrowings whichwill facilitate the Company to greater extent to meet its obligations/ covenants under loan agreements.

As at June 30, 2017, the Company has financial assets of Rs. 5,904 million (June 30, 2016: Rs. 5,215 million) and Rs. 7,731 million(June 30, 2016: Rs. 7,981 million) unavailed borrowing facilities from financial institution.


2017

Long term finance - secured 16,896,335

16,945,848

6,869,360

3,698,606

6,328,370

Long term portion of deferred mark up 4,899,393

4,899,393

-

-

4,899,393

Long term finance from shareholders-unsecured 14,334,440

22,160,985

-

-

14,334,440

Medium term finance from an associated 600,000

600,000

-

company - unsecured

Short term finance from an associated 100,000

100,000

-

100,000

-

company - unsecured

Short term running finance - secured 687,664

687,664

687,664

-

-

Trade and other payables 4,659,260

4,659,260

4,659,260

-

-

Long term deposits -

-

-

-

-

Interest/mark-up accrued 3,141,497

3,141,497

3,141,497

-

-45,318,589

53,194,646

15,957,780

3,798,606

25,562,204

2016Long term finance - secured 16,865,384

16,938,772

4,653,075

4,664,398

7,547,912Long term portion of deferred mark up 3,924,871

3,924,871

-

-

3,924,871Long term finance from shareholders-unsecured 14,041,457 21,884,998 - - 14,041,457Medium term finance from an associated company - unsecured 600,000 600,000 -600,000Short term running finance - secured 765,512 790,000 765,512 - -Trade and other payables 4,651,663 4,651,663 4,651,663 - -Long term deposits 35,680 35,680 - 35,680 -Interest/mark-up accrued 2,425,718 2,425,718 2,425,718 - -

43,310,286 51,251,702 13,095,968 4,700,078 25,514,240

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at thestatement of financial position date to the maturity date. The amounts disclosed in the table are contractual undiscounted cash flowsexcept for employee's retirement benefit obligations.

Carrying Amount

Carrying

amount

Contractual

Cash flows

Less than 1

Year

Between 1 to

5 years

Above 5

years(Rupees in thousand)

41.3 Market risk

a) Interest rate risk

b) Currency Risk

The Company is exposed to currency risk on long term finance, bank balance and receivables/payables which are denominated incurrency other than the functional currency of the Company. Financial assets include Rs. 632 million (June 30, 2016: Rs. 1,222million) and financial liabilities include Rs. 24,223 million (June 30, 2016: Rs. 22,150 million) in foreign currency which were exposedto exchange risk.

Market risk is the risk of changes in market prices, such as foreign exchange rates and interest rates. The objective of market riskmanagement is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

As the significant financial assets and liabilities carry variable interest rates, Company's operating cash flows are dependent onchanges in the market interest rates. Financial assets of Rs. 36.2 million (June 30, 2016: Rs. 1,129 million) and financial liabilitiesof Rs. 32,618 million (June 30, 2016: Rs. 32,272 million) were subject to interest rate risk.

At June 30, 2017, had interest rates been 1% higher/lower with all other variables held constant, loss for the year would have beenRs. 326 million (June 30, 2016: Rs. 311 million) higher/lower.

At June 30, 2017, if the currency had weakened/strengthened by 10% against US dollar with all other variables held constant, net lossfor the year would have been Rs. 2,359 million (2016: Rs. 2,093 million) higher/lower.

c) Fair value of financial instruments:

2017 2016

Trade debts 2,845,553

2,337,484Contract work in progress -

61,884Advances, deposits and other receivables 2,341,920

2,090,706Bank balances 256,521

245,147Long term deposits 419,515

479,760

5,863,508 5,214,981


Financial assets

The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values.

600,000 -

-

42 Offsetting of financial assets and financial liabilities

42.1 Financial assets subject to offsetting

As at June 30, 2017Trade debts

Due from international carriers 1,147,717

334,199

813,518

As at June 30, 2016Trade debts

Due from international carriers 1,113,738 781,294 332,444

Gross

amounts of

recognized

financial

assets

Gross amounts

of recognized

financial

liabilities set off

in the balance

sheet

----------------------Rupees in thousand----------------------

Net amounts of

financial assets

presented in the

balance sheet



Long term finance - secured 16,896,335 16,865,384 Long term portion of deferred mark up 4,899,393 3,924,871 Long term finance from shareholders - unsecured 14,334,440 14,041,457 Medium term finance from an associated company - unsecured 600,000 600,000 Short term borrowings - secured 687,664 765,512 Trade and other payables 4,921,303 4,651,663 Long term deposits - Interest / markup accrued 3,166,060 2,425,718

45,505,195 43,274,606

d) Capital risk management

The Company manages the capital structure in the context of economic conditions and the risk characteristics of the underlyingassets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend to shareholders, issue newshares or sell assets to reduce debts. The Company is required to maintain debt equity ratio as specified in loan agreements andcontinuation of support from majority shareholder is vital for the Company's operations. Under the terms of loan agreements, theCompany can not declare dividends, make any distributions or pay any other amount to its shareholders until the repayment of loanand the interest in full to the lenders. Further, the Syndicate shall be entitled to designate one nominee to be appointed as director inthe Board of directors of the Company as referred in note 9.1.

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern and to maintaina capital base to support the sustained development of its businesses.

2017 2016


42.2 Financial liabilities subject to offsetting

As at June 30, 2017Trade and other payables

Due to international carriers 706,030 334,199 371,831 Creditors 594,195 16,889

577,307

1,300,225 351,088 949,138

As at June 30, 2016Trade and other payables

Due to international carriers 1,223,758 781,294 442,464 Creditors 1,020,653

133,426

887,227 2,244,411 914,720 1,329,691

Gross

amounts of

recognized

financial

liabilities

Gross amounts

of recognized

financial assets

set off in the

balance sheet

Net amounts of

financial

liabilities

presented in the

balance sheet


-


2017 2016

43 Employees' retirement benefits

43.1 Liability/(asset) for funded staff gratuity 173,847 (10,086)

The amounts recognised in the statement of financial position:

Present value of defined benefit obligation 299,903 101,724 Benefits due but not paid 4,732 4,835 Fair value of plan assets (130,788) (116,645)Net liability / (asset) 173,847 (10,086)

43.2 The amounts recognised in the statement of financial position are as follows:

Opening liability / (asset) (10,086) (5,582)Expense recognised in income statement 209,917 (1,544)Contributions made during the year (8,500) (14,768)Remeasurement loss/(gain) recognised in statement of - comprehensive income (17,484) 11,808 Closing liability / (asset) 173,847 (10,086)

43.3 The amounts recognised in income statement are as follows:

Current service cost - - Past service cost/(credit) 211,479 - Interest cost on defined benefit obligation 6,829 9,489 Interest cost on plan assets (8,391) (11,033)

209,917

(1,544)

43.4

Remeasurement loss/(gain) on obligations:Experience adjustments (1,360)

(5,727)

Actuarial loss / (gain) from changes in financial assumptions (3,716)

11,722

(5,076)

5,995

Loss/(gain) due to remeasurement of investment return (12,408)

5,813

(17,484)

11,808


Remeasurements recognised in Other comprehensive income (OCI) are as follows:

43.5 Changes in the present value of defined benefit obligation are as follows:

Opening defined benefit obligation 101,724

108,187

Current service cost -

-

Past service cost/(credit) 211,479

-

Interest cost 6,829

9,489

Remeasurement loss (5,076)

5,995

Benefits due but not paid (4,732)

(219)

Benefits paid (10,322)

(21,728)

Closing defined benefit obligation 299,902

101,724

43.6 Changes in fair value of plan assets:

Opening fair value of plan assets 116,645

118,385

Remeasurement gain / (loss) 12,408

(5,813)

Contributions by employer 8,500

14,768


(21,728)

Interest income on planned assets 8,391

11,033

Closing fair value of plan assets 130,788

116,645

Actual return on plan assets for the year is Rs 8.4 million (2016: 11 million).

During the next financial year, the Company expects to contribute Rs. 60.86 million (2016: Rs Nil) to the definedbenefit plan.


43.7 Break-up of category of assets in respect of staff gratuity:

%age

Bond-Listed 49,869

-

0.00%Equity-Listed 53,139

101,948

87.40%

Cash and Deposits 14,491

14,697

12.60%Others 13,288 - 0.00%

130,788

%age

38.13%40.63%11.08%10.16%

100% 116,645

100%

43.8 Significant actuarial assumptions:

2017 2016

Discount rate used for year end obligation 8.00% 7.25%

Discount rate used for interest cost in profit and loss 7.25% 9.75%

Expected rate of increase in salaries-p.a 8.00% 0.00%Average expected remaining workinglife time of employees 9 years 6 years

43.9 Sensitivity Analysis

Increase (Decrease)

276,315 327,347

Effect of salary 328,001 275,265

Discount rate

2017 2016

Effect of 1%


Defined benefit obligation

The Projected Unit Credit Method using the following significant assumptions was used for the valuation:

The calculation of the defined benefit obligation is sensitive to assumptions set out above. The following tablesummarizes how the defined benefit obligation at the end of reporting period would have increased/ (decreased)as a result of change in respective assumptions by one percent.

(Rupees in

thousand) (Rupees in thousand)

43.10

2017 2016

28,399 28,421

209,917 (1,544)

238,316 26,877

44. Defined contribution plan

Details of provident funds are as follows:Staff provident fund

Net assets 264,359

207,377

Cost of investments made 114,091

96,654

Fair value of investments made 145,614

106,007

%age of investments made 55% 51%

Breakup of investment - at cost Rs '000 %age Rs '000 %age

Shares 23,756 21% 23,756 25%

Mutual Funds 72,851 64% 40,000 41%

Bank deposits 17,484 15% 32,898 34%114,091 100% 96,654 100%

44.1 Investments out of provident funds have been made in accordance with the provisions of section 227 of theCompanies Ordinance, 1984 and the rules formulated for the purpose.

20162017

include amounts in respect of the following:

Provident fund


The Company contributes to gratuity fund on the advice of fund’s actuary. The contribution is equal to currentservice cost with the adjustment for any deficit.

Salaries, wages and benefits as appearing in note 34

Gratuity fund

2017 2016(Rupees in thousand)


45. General

45.1 Related party transactions

Aggregate transactions with related parties during the year were as follows:

2017 2016

Parent Company

Warid Telecom International LLC, UAE (WTI)Payments on behalf of WTL 255,701

24,563

Trade debts-write off 101,500

-

Advances-write off 83,019

-

Markup charged to WTI 13,007

Shareholders

Long term finance received from shareholders 251,547 315,000

Markup on long term finance from shareholders 408,635 303,257

Subsidiary companies

Wateen Solutions (Private) Limited (WSPL) Receipt of services 3,454 3,353 Markup charged to WSPL - 63,471 Payments made by WTL on behalf of WSPL 69,187 - Payments made by WSPL on behalf of Company -

50,447

General and administrative expenses reimbursable on behalf of WSPL 34,159

19,317

Wateen Satellite Services Private Limited

Payment made on behalf of Wateen Satellite 50

65 Payment made by Wateen Satellite on behalf of the Company - 287

Wateen Telecom UK Limited (Wateen UK)Revenue earned 141,633

135,222 Markup charged to Wateen UK 18,887

43,180

Netsonline Services (Private) Limited (NOSPL) Payments made by the Company on behalf of NOSPL 58 46

Wateen WiMAX (Private) Limited (WWL) Payments made by the Company on behalf of WWL 72,480

155,243 Reversal / provision for loan guaranteed on behalf of WWL -

2,000 Provision for long term loan to WWL 74,479

155,243

Associated companies:

Wincom (Private) Limited (WPL)Short term finance 100,000

- Markup charged by WPL on shortterm finance 3,719

-

Sale of services 1,185,317

1,259,444

Cost and expenses charged by WTL 196,584

398,042

Wateen Multimedia (Private) Limited (WMM) Markup charged to WMM 9,921 6,116

General and administrative expenses reimbursable on behalf of WMM 59,017 39,008

The Company's related parties comprise its subsidiaries, associated undertakings, employees' retirementbenefit plans and key management personnel. Amounts due from / (to) related parties, are shown underreceivables and payables respectively. Remuneration of key management personnel is disclosed in note45.2.



-


2017 2016

Warid Telecom Georgia Limited Markup charged on advances -

1,639

Writeoff during the year 23,459

-

Innov8 Limited Sale of services 14,124

52,585


103,108

Receipt / (payment) by WTL on behalf of Company

24,424

Markup charged by WTL on advances and debts 47,150

-

Short term loans extended during the year 45,000

Raseen Technology (Pvt) Limited Markup charged on advances - 1,967

Write off during the year 27,844 -

Warid Telecom International - Bangladesh Markup charged on advances - 595

Write off during the year 8,504 -

Wateen Malaysia Inc. (WM) Payments made by the Company on behalf of WM - 666 Markup charged 79 -

Bank Alfalah Limited (BAL) Sale of services 99,309

122,696

Markup charged by BAL on short term running finance 48,701

55,127

Markup charged by BAL on Long Term Loan 163,012

163,616

Markup charged on bank deposits with BAF -

465

Taavun (Private) Limited Markup on long term finance 51,538

56,649

Provident Fund TrustEmployer contribution to trust 28,399

28,421

Gratuity Fund

Employer contribution to fund 209,917

14,768


Remuneration of CEO, Executive Directors and Executives

2017 2016 2017 2016 2017 2016 2017 2016

Managerial remuneration 17,120

15,755

11,518

12,535

314,415

287,868

343,053

316,158

Housing and utilities 9,416

8,665

-

-

172,928

158,328

182,344

166,993

Company's contribution to provident and gratuity funds 1,495 1,312 - - 26,328 23,999 27,823 25,311

Commission / Bonus -

-

-

-

18,020

7,828

18,020

7,828

Leave fair assistance 1,496

1,313

-

-

26,287

23,969

27,783

25,282

29,527

27,045

11,518

12,535

557,978

501,992

599,023

541,572

Number of persons 1

1

1

1

339 285

341

287

The Chief Executive has been provided with Company maintained two cars with unlimited fuel facility.

Meeting fee has been paid to independent directors amounting to Rs 5.035 million. (June 30, 2016: Rs 2.504 million).

The aggregate amount charged in the financial statements for remuneration, including all benefits to CEO, Executive Directors and Executives of the Company is as follows:

--------------------------------------(Rupees in thousand)---------------------------------------------

ExecutivesDirectorsChief Executive Total

45.2

45.2.1

45.2.2

-

-


______________ __________


46 Capacity

47 Number of employees2017 2016

Total number of employees at end of the year 499 445Average number of employees for the year 469 453

48 Date of authorisation for issue

49 Reclassification

From To 2017Rs. in thousand

33,181

24,563

600,000

Security deposits from customers Long term deposits Trade and other payables

Considering the nature of the Company's business, information regarding capacity has no relevance.

These financial statements have been authorised for issue by the Board of Directors of the Company on November 02, 2017.

Corresponding figures have been re-arranged, wherever necessary, for better presentation. However no significantreclassifications have been made during the year except as given below:

Description

Interest / markup accrued Advances, deposits, prepayments and other receivables

Interest / markup accrued 9,768

Interest accrued on long term loan Trade and other payables Interest / markup accrued

Current Portion of Medium term finance from an associated company - unsecured



The above reclassification does not have any material effect on information presented in the balance sheet and cash flowstatement. Therefore, third balance sheet has not been presented.

Consolidated Financial Statements


INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

We have audited the annexed consolidated financial statements comprising consolidated Balance Sheet of Wateen Telecom Limited (the Holding Company) and its subsidiary companies as at 30 June 2017 and the related consolidated Profit and Loss Account, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement together with the notes forming part thereof, for the year then ended. We have also expressed separate opinions on the financial statements of Wateen Telecom Limited and its subsidiary company, Wateen Solutions (Private) Limited. The financial statements of subsidiary companies, Wateen Satellite Services (Private) Limited, Wateen WiMAX (Private) Limited, Wateen Telecom UK Limited and Netsonline Services (Private) Limited have been audited by other firms of chartered accountants and whose reports have been furnished to us. Our opinion, in so far as it relates to the amounts included for such subsidiary companies, is based solely on the reports of such other auditors. These consolidated financial statements are the responsibility of the Holding Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion the consolidated financial statements present fairly the financial position of Wateen Telecom Limited and its subsidiary companies as at 30 June 2017 and the results of its operations for the year then ended. Emphasis of Matter

We draw attention to note 2 (iv) to the consolidated financial statements related to management's assessment of going concern. The majority shareholders of Wateen Telecom Limited have committed to provide financial support to the Holding Company to enable it to continue its operations. Our opinion is not qualified in respect of this matter.

Other Matters

The consolidated financial statements for the year ended 30 June 2016 were audited by another firm of chartered accountants whose audit report dated 29 November 2016 expressed an unmodified opinion with an emphasis of matter paragraph in relation to management's assessment of going concern.

Chartered AccountantsAudit Engagement Partner: Farooq HameedLahore: November 06, 2017

Wateen Telecom Ltd and its Subsidiary Companies Annual Report 201755

CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 2017

Annual Report 201756

2017 2016

Note


EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital 7 10,000,000

10,000,000

Issued, subscribed and paid-up capital 7 6,174,746

6,174,746

General reserve 8 134,681

134,681

Accumulated loss (37,984,947)

(36,821,046)

Currency translation reserve 38,931

37,807

(31,636,589)

(30,473,812)

NON CURRENT LIABILITIES

Long term finance - secured 9 - -

Long term portion of deferred mark up 10 - -

Long term finance from shareholders - unsecured 11 14,334,440 14,041,457

Medium term finance from an associated company - unsecured 12 - -

14,334,440 14,041,457

DEFERRED LIABILITIES

Deferred government grants 13 2,419,524 2,567,744

CURRENT LIABILITIES

Current portion of long term finance - secured 9 16,896,335 16,865,384 Current portion of deferred mark up 10 5,140,075 4,069,768 Current portion of Medium term finance from an associated

company - unsecured 12 600,000 600,000 Short term running finance - secured 14 687,664 765,512 Short term finance from associated company - unsecured 15 415,000 314,100 Trade and other payables 16 5,319,933 5,180,237 Interest / markup accrued 17 3,166,060 2,450,281 Taxation 27,016 -

32,252,083

30,245,282

TOTAL EQUITY AND LIABILITIES 17,369,458

16,380,671

CONTINGENCIES AND COMMITMENTS 18

The annexed notes 1- 47 form an integral part of these consolidated financial statements.

Wateen Telecom Ltd and its Subsidiary Companies

DirectorChief Executive

CONSOLIDATED BALANCE SHEETAS AT JUNE 30, 2017


2017 2016

Note


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

Operating assets Capital work in progressIntangible assets

Deferred tax assets

Long term deposits and prepaymentsLong term deposits Long term prepaymentsLong term trade debts

CURRENT ASSETS

Trade debtsContract work in progressStores, spares and loose tools Stocks

Advances, deposits and prepaymentsTax refunds due from the GovernmentInterest accruedCash and bank balances

TOTAL ASSETS 16,380,671

19 9,171,008 20 1,028,815 21 109,563 10,309,386

22 22,947

23 479,760

24 40,116

25 634,447

1,154,323

25 2,138,761

175,934

26 378,537

27 8,713

28 1,208,124

588,262

11,107

29 384,577

4,894,016

17,369,458

9,728,432 525,433 105,578 10,359,443

24,283

419,515

33,196

593,501

1,046,212

2,693,262

185,178

452,489

25,079

1,438,191 664,462

11,015

469,844

5,939,520


CONSOLIDATED PROFIT AND LOSS ACCOUNT



2017 2016

Note


Revenue 30 7,782,926

7,567,818

Cost of sales (excluding depreciation and amortisation) 31 4,716,115

4,580,533

General and administration expenses 32 1,855,745 1,437,151

Advertisement and marketing expenses 23,814 23,052

Selling and distribution expenses 8,801 1,701

Provisions 33 156,812 518,403

Other income 34 (793,244) (588,963)

Earnings before interest, taxation, impairment 1,814,883 1,595,941

depreciation and amortisation

Less: Depreciation and amortisation 741,823 700,240

Finance cost 35 1,889,727 2,523,774

Impairment of WiMAX assets 3,123 100,075

Finance income 36 (142,710) (118,317)

Loss before taxation (677,080) (1,609,831)

Income tax expense 37 (504,305) (449,156)

Loss for the year (1,181,385) (2,058,987)

Loss attributable to:

-Equity holders of the parent (1,181,385) (2,058,987)

-Non-controlling interests - -

(1,181,385)

(2,058,987)




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME




2017 2016

Note


Loss for the year (1,181,385)

(2,058,987)

Other comprehensive income

Other comprehensive income to be reclassified to

profit or loss in subsequent periods

Currency translation differences 1,124 45,804

Other comprehensive income not to be reclassified to

profit or loss in subsequent periods

Remeasurement gain/(loss) loss on staff retirement

benefit plan 41.4 17,484 (11,808)

18,608 33,996

Total comprehensive loss for the year (1,162,777) (2,024,991)

Loss attributable to: (1,162,777) (2,024,991) -Equity holders of the parent -

-

-Non-controlling interests (1,162,777)

(2,024,991)



CONSOLIDATED STATEMENTCASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017


2017 2016


CASH FLOW FROM OPERATING ACTIVITIES


(1,609,831)

Adjustment of non cash items:

Depreciation and amortisation 741,823

700,240

Finance cost 1,889,727

2,523,774

Loss on sale of operating assets 194,213

101,662

Impairment/ of WiMAX assets 3,123

100,075

Cost associated with IRU of optic fiber cable 248,783

273,007

Deferred USF grant recognised during the year (148,220)

(143,561)

Provisions 156,812

503,559

Provision of markup on advances to associated companies -

17,208

Stores and spares written off -

16,599

Reversal of provision for doubtful advances and other receivables (49,092)

-

Reversal of provision for stores (125,335)

-

Reversal of provision for stock (14,413)

Write back of liability (563,810) (516,690)

2,333,611 3,575,873

1,656,531 1,966,042

Changes in working capital:

Increase in trade debts (633,231) (327,027)

(Increase)/ decrease in contract work in progress (9,244) 163,830

Increase in stores, spares and loose tools 51,383 121,598

Increase in stocks (1,953) (1,807)

(Increase)/ decrease in advances, deposits and prepayments (218,111) 74,892

Decrease in Interest Accrued 92 -

Increase/ (decrease) in trade and other payables 703,506 (496,110)

(107,558) (464,624)

Income taxes paid (554,825) (288,962)

Cash flow from operating activities 994,148 1,212,456

CASH FLOW FROM INVESTING ACTIVITIES

Property, plant and equipment additions (1,183,414) (1,381,813) Proceeds from sale of property, plant and equipment 27,816 43,649 Long term deposits receivable-net 60,245 (11,113) Long term prepayments paid 6,920 16,011 Cash flow from investing activities (1,088,433) (1,333,266)




2017 2016 (Rupees in thousand)


CASH FLOW FROM FINANCING ACTIVITIES

Long term finance from shareholders - unsecured received 251,547 315,000 Short Term Finance from Associated Company 100,900

-

Long term finance repaid (15,000)

(8,935)

Deferred grants received -

112,204

Finance cost paid-net (80,378)

(98,592)

Cash flow from financing activities 257,069

319,677

`INCREASE IN CASH AND CASH EQUIVALENTS 162,784

200,648

Effects of exchange rates on cash and cash equivalents 331

(1,782)

Cash and cash equivalents at beginning of the year (380,935)

(579,801)

CASH AND CASH EQUIVALENTS AT END OF THE YEAR (217,820)

(380,935)

CASH AND CASH EQUIVALENTS COMPRISE:

Cash and bank balances 469,844

384,577 Short term running finance - secured (687,664)

(765,512)

(217,820)

(380,935)


CONSOLIDATED STATEMENTCASH FLOWS


CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

OF

CH

AN

GE

S IN

E

QU

ITY

FO

R T

HE

YE

AR

EN

DE

D J

UN

E 3

0, 2

01

7

__

__

__

__

__

__

__

_

__

__

__

__

__

_

C

hie

f E

xecu

tive

Dire

cto

r


To

tal

Ba

lan

ce a

t J

un

e 3

0, 2

01

56

,17

4,7

46

13

4,6

81

(3

4,7

50

,25

1)

(7

,99

7)

(28

,44

8,8

21

)

Tota

l co

mp

reh

en

sive

inco

me

/ (lo

ss)

for

the

ye

ar

Lo

ss fo

r th

e y

ea

r-

-

(2

,05

8,9

87

)

-

(2

,05

8,9

87

)

O

the

r co

mp

reh

en

sive

inco

me

/ (lo

ss)

-

-

(1

1,8

08

)

45

,80

4

3

3,9

96

-

-

(2

,07

0,7

95

)

4

5,8

04

(2

,02

4,9

91

)

Ba

lan

ce

at

Ju

ne

30

, 2

01

66

,17

4,7

46

13

4,6

81

(3

6,8

21

,04

6)

3

7,8

07

(3

0,4

73

,81

2)

Tota

l co

mp

reh

en

sive

inco

me

/ (lo

ss)

for

the

ye

ar

Lo

ss fo

r th

e y

ea

r-

-

(1

,18

1,3

85

)

-

(1

,18

1,3

85

)

Oth

er

com

pre

he

nsi

ve in

com

e-

-

1

7,4

84

1

,12

4

1

8,6

08

-

-

(1

,16

3,9

01

)

1

,12

4

(1

,16

2,7

77

)

Ba

lan

ce

at

Ju

ne

30

, 2

01

76

,17

4,7

46

13

4,6

81

(3

7,9

84

,94

7)

3

8,9

31

(3

1,6

36

,58

9)

Th

e a

nn

exe

d n

ote

s 1

- 4

7 fo

rm a

n in

teg

ral p

art

of th

ese

co

nso

lida

ted

fin

an

cia

l sta

tem

en

ts.

Att

rib

uta

ble

to

eq

uit

y h

old

ers

of

the

pa

ren

t

----

----

----

----

----

----

----

----

----

----

----

-(R

up

ee

s in

th

ou

sa

nd

)---

----

----

----

----

----

----

----

----

----

----

C

urr

en

cy

tra

ns

lati

on

res

erv

e

Ac

cu

mu

late

d

los

s

Ge

ne

ral

res

erv

e

Sh

are

ca

pit

al


NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONSOLIDATED



1. Legal status and operations

The Wateen Group ("the Group") comprises of Wateen Telecom Limited ("WTL") ("the Holding Company"), Wateen Solution(Private) Limited ("WSPL") (100% owned), Wateen Wimax (Private) Limited ("WWPL") (100% owned), Wateen Telecom UKLImited ("WTUK") (100% owned), Wateen Sattelite Services (Private) Limited ("WSSPL") (100% owned) and Netsonline Services(Private) Limited ("NSPL") (100% owned). For the purpose of these financial statements, Wateen and consolidated subsidiariesare referred to as the Group.

The subsidiary company, Wateen WiMAX (Private) Limited (WWL), is incorporated as a Private Limited Company under theCompanies Ordinance, 1984 on December 6, 2012 to carry on business of WiMAX telecommunications services. The shareholders of WTL in their Extra Ordinary General Meeting held during the year consented for the approval of transfer of WiMAX related netassets as at July 10, 2014 to the WWL for consideration other than cash in terms of the share issuance agreement datedSeptember 9, 2014 between WWL and the Company.

Wateen Telecom Limited is part of Wateen Group which consists of:

Holding Company

Wateen Telecom Limited

Subsidiary Companies %age of holding

Wateen Settelite Services (Pvt) LimitedWateen Telecom UK LimitedWateen Wimax (Private) Limited

Netsonline services (Pvt) Limited

Wateen Solution (Private) Limited 100%100%100%100%100%

Wateen Solution (Private) Limited

The subsidiary company, Wateen Solutions (Pvt) Limited (WSPL), is incorporated under Companies Ordinance, 1984 as a PrivateLimited Company on May 17, 2004. The principal activities of the Company are to sell and deploy telecom equipment and providerelated services. The registered office of the Company is situated at Lahore. WTL acquired 100 % interest in Wateen Solutions(Pvt) Limited on August 2, 2006. WTL sold 49% shares (397,027 fully paid ordinary shares of Rs 100 each) of Wateen Solutions(Pvt) Limited on July 1, 2008, and acquired back 49% shares (397,027 fully paid ordinary shares of Rs 100 each) on November18, 2014 for Rs 85 million.

The Holding Company is incorporated in Pakistan as a Private Limited Company under the Companies Ordinance, 1984 on March4, 2005 for providing Long Distance and International public voice telephone (LDI) services and Wireless Local Loop (WLL)service in Pakistan. The Company commenced its LDI business commercial operations from May 1, 2005. The legal status of theCompany was changed from "Private Limited" to "Public Limited" with effect from October 19, 2009 and thereafter, it was listed onKarachi, Lahore and Islamabad Stock Exchanges. Subsequently, the Karachi, Lahore and Islamabad Stock Exchanges acceptedthe request for delisting of the Company and accordingly it stood delisted from these stock exchanges with effect from February17, 2014. The registered office of the Company is situated at Lahore. The Holding Company is a subsidiary of Warid TelecomInternational LLC, United Arab Emirates (WTI) and its ultimate parent is Abu Dhabi Group.

The subsidiary company, Wateen Telecom UK Limited, is incorporated as a Private Limited Company under the UK CompaniesAct, 2006 and is engaged in providing internet and other technology related services in United Kingdom. WTL held 51% shares inWateen Telecom UK Limited since its incorporation. WTL acquired remaining shares of Wateen Telecom UK Limited on March31, 2011.

The financial statements of Wateen Wimax (Pvt) Limited have not been prepared on a going concern basis. The auditor ofWateen Wimax (Pvt) Limited has given emphasis of matter paragraph in this regard.

Wateen Wimax (Private) Limited

Wateen Telecom UK Limited

Wateen Satellite Services (Private) Limited

The financial statements of Wateen Satellite Services (Pvt) Limited have not been prepared on a going concern basis. The auditorof Wateen Satellite Services (Pvt) Limited has given emphasis of matter paragraph in this regard.

The subsidiary company, Wateen Satellite Services (Pvt) Limited (WSS), is incorporated as a Private Limited Company under theCompanies Ordinance, 1984 and is engaged in providing back haul and satellite data connectivity services in Pakistan. On March1, 2009, WSS transferred all contracts for providing back haul and satellite data connectivity services to the Company. WTLacquired 100% shares of WSS on July 1, 2008.



1.1

1.2

The Holding Company applies the acquisition method to account for business combinations. The consideration transferred for theacquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquireeand the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resultingfrom a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date. The Holding Company recognizes any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest’sproportionate share of the recognized amounts of acquiree’s identifiable net assets. The Financial Statements of the HoldingCompany and its subsidiaries are prepared upto the same reporting date using consistent accounting policies.

Basis of Consolidation

Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from thedate that control ceases.

Subsidiaries are all entities over which the Holding Company has the power to govern the financial and operating policies generallyaccompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that arecurrently exercisable or convertible are considered when assessing whether the Holding Company controls another entity. TheHolding Company also assesses existence of control where it does not have more than 50% of the voting power but is able togovern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the sizeof the Holding Company’s voting rights relative to the size and dispersion of holdings of other shareholders give the Company thepower to govern the financial and operating policies, etc.

Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date fairvalue of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date throughincome statement.

Any contingent consideration to be transferred by the Holding Company is recognised at fair value at the acquisition date.Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized inaccordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that isclassified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Non-controlling interest

The Group applies a policy of treating transactions with non- controlling interests as transaction with parties external to the Group.Disposals of non-controlling interests results in gain and losses for the Group that are recorded in the profit and loss account.

The financial statements of subsidiaries have been consolidated on line by line basis. All significant inter-company transactions,balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognized in assets are also eliminated.

When the Holding Company ceases to have control any retained interest in the entity is re-measured to its fair value at the datewhen control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount forthe purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, anyamounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the HoldingCompany had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in othercomprehensive income are reclassified to profit or loss.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, astransactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and therelevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity.

Netsonline Services (Private) Limited

The subsidiary company, Netsonline Services (Private) Limited, is incorporated as a Private Limited Company under theCompanies Ordinance, 1984 and is engaged in providing internet and other technology related services in Pakistan. WTL acquired100% shares of Netsonline Services (Private) Limited on July 1, 2008.

The Group Financial Statements include the Financial Statements of Holding Company ("WTL") and its subsidiaries.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controllinginterest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the netassets of the subsidiary acquired, the difference is recognized in income statement. After initial recognition, is is measured atcarrying value i.e. cost at the date of acquisition less any accumulated impairment.



2. Basis of preparation

(i) Statement of compliance

(ii) Functional and presentation currency

(iii) Accounting convention

(iv) Management's assessment of going concern

Operational Performance

These consolidated financial statements have been prepared in accordance with the approved accounting standards as applicable inPakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the InternationalAccounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984 (repealed), provisions of and directives issuedunder the Companies Ordinance, 1984 (repealed). In case requirements differ, the provisions or directives of the Companies Ordinance,1984 (repealed) shall prevail.

The Companies Ordinance, 1984 has been repealed after the enactment of Companies Act, 2017. However, as allowed by the SECP videits Circular No. 17 dated 20 July 2017 read with related press release, these consolidated financial statements have been prepared inaccordance with the provisions of the repealed Companies Ordinance, 1984.

These financial statements are the consolidated financial statements of the Group in which investment in subsidiaries is accounted for on

the basis of acquisition method. Standalone financial statements of the Holding company and its subsidiaries are prepared separately.

Items included in the financial statements of the Company are measured using the currency of the primary economic environment inwhich the entity operates (the functional currency). These financial statements are presented in Pakistan Rupees (Rs), which is theCompany’s functional currency.

These financial statements have been prepared on the basis of 'historical cost convention' except as otherwise stated in the respectiveaccounting policies notes.

In assessing the going concern status of the Holding Company, management has carefully assessed a number of factors covering theoperational performance of the business, the ability to implement a significant debt restructuring of the Holding Company’s existing debtsand the appetite of majority shareholder to continue financial support. Based on the analysis of these, management is comfortable that theHolding Company will be able to continue as a going concern in the foreseeable future. Set out below are the key areas of evidence thatmanagement has considered:

The Group’s operating performance reflected improvement during the year ended June 30, 2017 by posting the earnings before interest,taxation, depreciation and amortization (EBITDA) of Rs. 1,815 million (June 30, 2016: Rs. 1,596 million) as a highest EBITDA afterfinancial year 2008 - 2009. Further, during the year, the Group has been able to generate positive cashflows from operations for anamount of Rs. 994 million (June 30, 2016: Rs. 1,212 million).

During the year ended June 30, 2017 Group incurred net loss after taxation of Rs. 1,181 million (June 30, 2016: Rs 2,059 million) and hadnet current liabilities as at June 30, 2017 of Rs 26,313 million (June 30, 2016: Rs. 25,351 million) of which Rs. 10,029 million (June 30,2016: Rs. 12,212 million) and Rs. 5,140 million (June 30, 2016: Rs. 4,070 million) relate to loan installments and deferred markup,respectively due for repayment after June 30, 2018 but classified as current liabilities as mentioned in notes 9 and 10 respectively. Netcurrent liabilities also include markup of Rs. 1,771 million (June 30, 2016: Rs. 1,358 million) on account of subordinated loan fromshareholders of the Group. Further, during the past five years, the majority shareholder has provided financial support in the form of longterm finance amounting to USD 136.4 million to meet the capital requirements of the Group (un availed finance facility from shareholderamounts to USD 72.6 million (June 30, 2016: USD 75 million) at June 30, 2017. The majority shareholders have committed to providefinancial support to the Group to enable it to continue its operations and fulfil its obligation.

The Holding Company's majority shareholder Warid Telecom International LLC, UAE (WTI) continues to provide management withcomfort with regards to its ongoing support and this is evident from further loan of USD 2.4 million extended to the Group during the yearended June 30, 2017 (year ended June 30, 2016: USD 3 million) for the Group.


Debt restructuring

As part of further restructuring the Company is negotiating with lenders whereby it is proposed that Deutsche Bank AGfacility will be novated to Warid Telecom International LLC,UAE (WTI) and facility from ECGD will also be restructured.The management is of the view that above restructuring will further improve the financial position of the Company.Subsequent to year end, on August 10, 2017, Deutsche Bank AG facility has been novated from the Company to WaridTelecom International LLC, UAE (WTI). Accordingly, now the amount is payable by the company to WTI on same terms.


(v) Critical accounting estimates and judgments

(i) Operating assets - estimated useful life of property, plant and equipment (note 19)

(ii) Impairment of DSL assets (note 20)

(iii) Impairment of intangible assets (note 21)

(iv) Provision for doubtful debts (note 25)

(v) Provision for obsolete stores (note 26)

(vi) Provision for obsolete stocks (note 27)

(vii) Provision for doubtful advances and other receivables (note 28)

(viii) Provision for current and deferred income tax (note 22 & 37)

(ix) Employees' retirement benefits (note 41)

(x) Deferred government grants (note 13)

3.

IFRS 2 01 Jan 2018

IFRS 10 Not yet finalized

IAS 7 01 Jan 2017

IAS 12 01 Jan 2017

IFRS 4 01 Jan 2018

IAS 40 01 Jan 2018

IFRIC 22 Foreign Currency Transactions and Advance Consideration 01 Jan 2018

IFRIC 23 Uncertainty over Income Tax Treatments 01 Jan 2019

Keeping in view the foregoing and other related operational facts, the management believes that the Group is able to operate on agoing concern basis in the foreseeable future and these consolidated financial statements have been prepared reflecting thisassumption.

In addition, Warid Telecom International LLC, UAE (WTI) guarantees the local Syndicate Finance Facility, and certain sponsorsguarantees are also provided to the foreign debt holders. The continued support of WTI including the guarantees and financialassistance from WTI will enable the Group to continue its operations and fulfill its financial obligations for a minimum period oftwelve months from the year end. Based on above, the Board and management is confident that WTI will continue to provide strongsupport to the Group.

The preparation of financial statements in conformity with approved accounting standards requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accountingpolicies. Estimates and judgments are continually evaluated and are based on historic experience, including expectations of futureevents that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are as follows:

The following standards, amendments and interpretations with respect to the approved accounting standards as applicable inPakistan would be effective from the dates mentioned below against the respective standard or interpretation.

Standard note for standards, interpretations and amendments to approved accounting standards that are not yet

effective

Effective Dates

(Annual periods

beginning on or

after)Standard or Interpretation

Share-based Payments – Classification and Measurement of Share-basedPayments Transactions (Amendments)

Consolidated Financial Statements and IAS 28 Investment in Associates and JointVentures - Sale or Contribution of Assets between an Investor and its Associate orJoint Venture (Amendment)

Financial Instruments: Disclosures - Disclosure Initiative - (Amendment)

Income Taxes – Recognition of Deferred Tax Assets for Unrealized losses(Amendments)

Insurance Contracts: Applying IFRS 9 Financial Instruments with IFRS 4 InsuranceContracts – (Amendments)

Investment Property: Transfers of Investment Property (Amendments)


Financial Instruments: Classification and MeasurementIFRS 9

IFRS 15

01 Jan 2018

01 Jan 2018Revenue from Contracts with Customers


4.

IFRS 10

IFRS 11

IAS 1

IAS 16

IAS 16

IAS 27

5. Improvements to Accounting Standards Issued by the IASB in September 2014

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal.

IFRS 7 Financial Instruments: Disclosures - Servicing contracts

IFRS 7

IAS 19 Employee Benefits - Discount rate: regional market issue

IAS 34 Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report.

IFRIC 4

IFRIC 12

Standard or Interpretation

IASB Effective Dates

(Annual periods

beginning on or

after)

The Group expects that the adoption of the above standards will have no material effect on the Group’s consolidated financialstatements, in the period of initial application, except for IFRS 16. The management is in the process of determining the effectof application of IFRS 16.

New accounting standards, interpretations, and amendments applicable to the financial statements for the year ended 30

June 2017

The above standards and amendments are not expected to have any material impact on the Group financial statements in theperiod of initial application except for IFRS 15. The management is in the process of determining the effect of application of IFRS 15.

In addition to the above standards and amendments, improvements to various accounting standards have also been issued by theIASB in December 2016. Such improvements are generally effective for accounting periods beginning on or after January,01 2018. The Company expects that such improvements to the standards will not have any impact on the Group's consolidated financialstatements in the period of initial application.

Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose ofapplicability in Pakistan.

The Group has adopted the following accounting standards and the amendments and interpretation of IFRSs which becameeffective for the current year:

IFRS 14 01 Jan 2016Regulatory Deferral Accounts

IFRS 16 01 Jan 2019Leases

IFRS 17 01 Jan 2021Insurance Contracts

Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate FinancialStatements – Investment Entities: Applying the Consolidation Exception (Amendment)

Joint Arrangements - Accounting for Acquisition of Interest IN Joint Operation (Amendment)

Presentation of Financial Statements - Disclosure Initiative (Amendment)

Property, Plant and Equipment and IAS 38 intangible assets - Clarification of Acceptable Method of Depreciation andAmortization (Amendment)

Property, Plant and Equipment IAS 41 Agriculture - Agriculture: Bearer Plants (Amendment)

IAS 27 Separate Financial Statements – Equity Method in Separate Financial Statements (Amendment)

Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interim financial statements

The adoption of the above amendments, improvements to accounting standards and interpretations did not have any effect on thefinancial statements.

The following interpretations issued by the IASB have been waived off by SECP effective January 16, 2012:

Determining whether an arrangement contains lease

Service concession arrangements



6. Summary of significant accounting policies

6.1 Employees' retirement benefits

(i)

(ii)

6.2 Taxation

Current

Deferred

6.3 Government grant

6.4 Borrowings and borrowing costs

Actuarial gains and losses (remeasurement gains / losses) on employees’ retirement benefit plans are recognised immediately inother comprehensive income and past service cost is recognized in profit and loss when they occur. Calculation of gratuity requiresassumptions to be made of future outcomes which mainly includes increase in remuneration, expected long-term return on planassets and the discount rate used to convert future cash flows to current values. Calculations are sensitive to changes in theunderlying assumptions.

Contributory provident fund for all permanent employees of the Holding Company is in place. Contribution for the year amountedto Rs. 28.399 million (June 30, 2016: Rs. 28.421 million) (8.33% per employee) and is charged to income for the year.

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortizedcost; any difference between proceeds (net of transaction costs) and the redemption value is recognized in the income statementover the period of the borrowings using effective interest method.

Borrowing costs incurred that are directly attributable to the acquisition, construction or production of qualifying assets arecapitalized as part of the cost of that asset. All other borrowing costs are charged to income for the year. Qualifying assets areassets that necessarily takes substantial period of time to get ready for their intended use.

Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extentthat it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses andtax credits can be utilized.

Grants that compensate the Group for expenses incurred, are recognized on a systematic basis in the income for the year in whichthe related expenses are recognized. Grants that compensate the Group for the cost of an asset are recognized in income on asystematic basis over the expected useful life of the related asset.

The tax expense for the year comprises of current and deferred tax, and is recognized in income for the year, except to the extentthat it relates to items recognized directly in other comprehensive income, in which case the related tax is also recognized in othercomprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of thebalance sheet. Management periodically evaluates positions taken in tax returns, with respect to situations in which applicable taxregulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paidto the tax authorities.

Deferred income tax is calculated at the rates that are expected to apply to the period when the differences reverse, and the taxrates that have been enacted, or substantively enacted, at the date of the statement of financial position.

Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary differences arisingbetween the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in thecomputation of taxable profit.

Upto February 28, 2015, the Holding Company provided gratuity to all permanent employees in accordance with the rules of theHolding Company. Effective March 1, 2015, the benefit has been discontinued and amount due to employees as at February 28,2015 was to be paid at the time of final settlement. However, during the year ended June 30,2017, the Holding Company hasreinstated the benefits effective March 01, 2015 as if the scheme has never been discontinued. Actuarial valuation is conductedperiodically using "Projected Unit Credit Method" and latest valuation was carried out at June 30, 2017. The details of actuarialvaluation are given in note 41.

Government grants are recognized at their fair values and included in non-current liabilities, as deferred income, when there isreasonable assurance that the grants will be received and the Group will be able to comply with the conditions associated with thegrants.



6.5 Trade and other payables

6.6 Provisions

6.7 Contingent liabilities

6.8 Dividend distribution

6.9 Property plant and equipment

6.10 Intangible assets

(i) Licenses

(ii) Computer software

Liabilities for creditors and other amounts payable including payable to related parties are carried at cost, which is the fair value ofthe consideration to be paid in the future for the goods and / or services received, whether or not billed to the Group.

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probablethat an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of theamount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.

A contingent liability is disclosed when the Group has a possible obligation as a result of past events, the existence of which will beconfirmed only by the occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of theGroup; or when the Group has a present legal or constructive obligation, that arises from past events, but it is not probable that anoutflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannotbe measured with sufficient reliability.

The distribution of the final dividend, to the Holding Company’s shareholders, is recognized as a liability in the financial statementsin the period in which the dividend is approved by the Group’s shareholders; the distribution of the interim dividend is recognized inthe period in which it is declared by the Board of Directors.

Depreciation on operating assets is calculated, using the straight line method, to allocate their cost over their estimated usefullives, at the rates mentioned in note 18.

Depreciation on additions to property, plant and equipment, is charged from the month in which the relevant asset is acquired orcapitalized, while no depreciation is charged for the month in which the asset is disposed off. Impairment loss, if any, or itsreversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted infuture periods to allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.

These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using thestraight line method from the date of commencement of commercial operations, to allocate the cost of the license over itsestimated useful life specified in note 21, and is charged to income for the year.

The amortization on licenses acquired during the year, is charged from the month in which a license is acquired / capitalized, whileno amortization is charged in the month of expiry / disposal of the license.

These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using thestraight line method, to allocate the cost of the software over its estimated useful life, and is charged in income statement. Costsassociated with maintaining computer software, are recognised as an expense as and when incurred.

The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying amount of theasset, is recognized in profit or loss for the year.

Property and equipment, except freehold land and capital work-in-progress, is stated at cost less accumulated depreciation andany identified impairment losses; freehold land is stated at cost less identified impairment losses, if any. Cost includes expenditure,related overheads, mark-up and borrowing costs (note 6.4) that are directly attributable to the acquisition of the asset.

Subsequent costs, if reliably measurable, are included in the asset’s carrying amount, or recognized as a separate asset asappropriate, only when it is probable that future economic benefits associated with the cost will flow to the Group. The carryingamount of any replaced parts as well as other repair and maintenance costs, are charged to income during the period in which theyare incurred.

The amortization on computer software acquired during the year is charged from the month in which the software is acquired orcapitalized, while no amortization is charged for the month in which the software is disposed off.



(iii)

(iv)

6.11 Impairment of non-financial assets

6.12 Right of way charges

6.13 Trade debts and other receivables

6.14 Stores, spares and loose tools

6.15

6.16

6.17 Revenue recognition

Non compete fee is stated at cost less accumulated amortization. Amortization is calculated using the straight-line method toallocate the cost over its estimated useful life.

On acquisition of an entity, difference between the purchase consideration and the fair value of the identifiable assets and liabilities acquired, is initially recognised as goodwill. Following initial recognition, goodwill is measured at cost less accumulated impairment, if any.

Interest income is recognised using the effective yield method.

Stocks are valued at lower of cost and net realizable value. Cost is determined on weighted average cost formula basis.

Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash equivalentscomprise cash in hand and bank and short term highly liquid investments with original maturities of three months or less, and thatare readily convertible to known amounts of cash, and subject to an insignificant risk of changes in value.

Cash and cash equivalents

Dividend income is recognised when the right to receive payment is established.

Revenue from sale of goods is recognised upon dispatch of goods to customers.

Trade debts and other receivables are carried at their original invoice amounts, less any estimates made for doubtful debts basedon a review of all outstanding amounts at the year end. Bad debts are written off when identified.

Assets that have an indefinite useful life, for example freehold land, are not subject to depreciation and are tested annually forimpairment. Assets that are subject to depreciation or amortisation are reviewed for impairment on the date of the statement offinancial position, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognized, equal to the amount by which the asset’s carrying amount exceeds its recoverable amount. Anasset’s recoverable amount is the higher of its fair value less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non financial assets thatsuffered an impairment, are reviewed for possible reversal of the impairment at each statement of financial position date.Reversals of the impairment loss are restricted to the extent that asset’s carrying amount does not exceed the carrying amount thatwould have been determined, net of depreciation or amortization, if no impairment loss has been recognized. An impairment loss,or the reversal of an impairment loss, are both recognized in the income statement.

Revenue arising from sharing of spectrum, customers and infrastructure with other parties is recognized as other income on thebasis of terms agreed with respective parties.

Revenue is recognised as related services are rendered.

Revenue from granting of Indefeasible Right of Use (IRU) of dark fiber upto 20 years or more is recognised at the time of deliveryand acceptance by the customer.

Revenue from prepaid cards is recognised as credit is used, unutilized credit is carried in balance sheet as unearned revenue intrade and other payables.

Revenue from sale of equipment is recognised when the goods are delivered to the customer.

Stocks

Stores, spares and loose tools are carried at cost less allowance for obsolescence. Cost is determined on weighted average costformula basis. Items in transit are valued at cost, comprising invoice values and other related charges incurred up to the date ofthe statement of financial position.

Right of way charges paid to local governments, concerned authorities and land owners for access of land are carried at cost lessamortisation. Amortisation is provided to write off the cost on straight line basis over the period of right of way.



6.18 Foreign currency translation

a) Foreign currency transactions and translations

b) Foreign operations

(i)

(ii)

(iii)

6.19 Financial instruments

(a) Financial assets

Classification and subsequent measurement

(i) Fair value through profit and loss

(ii) Held to maturity

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposalinvolving loss of control over a subsidiary that includes a foreign operation) all of the exchange differences accumulated in equityin respect of that operation attributable to the equity holders of the Group are reclassified to profit or loss.

The Group classifies its financial assets in the following categories: fair value through profit or loss, held-to-maturity investments,loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financialassets were acquired. Management determines the classification of its financial assets at initial recognition. Regular purchases andsales of financial assets are recognized on the trade date - the date on which the Group commits to purchase or sell the asset.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation,the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognisedin profit or loss.

Financial assets at fair value through profit or loss, include financial assets held for trading and financial assets,designated upon initial recognition, at fair value through profit or loss.

Financial assets at fair value through profit or loss are carried in the statement of financial position at their fair value,with changes therein recognized in the income for the year. Assets in this category are classified as current assets.

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument andderecognized when the Group loses control of the contractual rights that comprise the financial assets and in case of financialliabilities when the obligation specified in the contract is discharged, cancelled or expires. All financial assets and liabilities areinitially recognized at fair value plus transaction costs other than financial assets and liabilities carried at fair value through profit orloss. Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value, and transactioncosts are charged to income for the year. These are subsequently measured at fair value, amortized cost or cost, as the case maybe. Any gain or loss on derecognition of financial assets and financial liabilities is included in profit or loss for the year.

income and expenses for each statement of comprehensive income are translated at average exchange rates (unlessthis average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,in which case income and expenses are translated at the rate on the dates of the transactions), andall resulting currency translation differences are recognised in the statement of comprehensive income.

Non derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold these assets to maturity. After initialmeasurement, held-to-maturity investments are measured at amortized cost using the effective interest method, lessimpairment, if any.

The results and financial position of all the Group that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date ofthat financial position;

Foreign currency transactions are translated into the functional currency, using the exchange rates prevailing on the date of thetransaction. Monetary assets and liabilities, denominated in foreign currencies, are translated into the functional currency using theexchange rate prevailing on the date of the statement of financial position. Foreign exchange gains and losses resulting from thesettlement of such transactions, and from the translation of monetary items at year end exchange rates, are charged to income forthe year.



(iii) Loans and receivables

(iv) Available for sale

Impairment

(b) Financial liabilities

Initial recognition and measurement

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

(i)

(ii)

(c) Offsetting of financial assets and liabilities

6.20 Derivative financial instruments

Available-for-sale financial assets are non-derivatives, that are either designated in this category, or not classified inany of the other categories. These are included in non current assets, unless management intends to dispose them offwithin twelve months of the date of the statement of financial position.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position, when there is a legallyenforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settlethe liability simultaneously. Legally enforceable right must not be contingent on future events and must be enforceable in normalcourse of business and in the event of default, insolvency or bankruptcy of the Group or the counter party.

The Group classifies its financial liabilities in the following categories: fair value through profit or loss and other financial liabilities.The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initiallyat fair value and, in the case of other financial liabilities, also include directly attributable transaction costs.

Fair value through profit or loss

Financial liabilities at fair value through profit or loss, include financial liabilities held-for-trading and financial liabilitiesdesignated upon initial recognition as being at fair value through profit or loss. Financial liabilities at fair value throughprofit or loss are carried in the statement of financial position at their fair value, with changes therein recognized in theincome for the year.

Other financial liabilities

Loans and receivables are non derivative financial assets with fixed or determinable payments, that are not quoted inan active market. After initial measurement, these financial assets are measured at amortized cost, using the effectiveinterest rate method, less impairment, if any.

The Group’s loans and receivables comprise 'long term deposits', ‘trade debts’, 'contract work in progress', ‘advances,deposits and other receivables,' ‘income tax refundable’ and ‘bank balances’.

After initial measurement, available-for-sale financial assets are measured at fair value, with unrealized gains or lossesrecognized as other comprehensive income, until the investment is derecognized, at which time the cumulative gain orloss is recognized in income for the year.

After initial recognition, other financial liabilities which are interest bearing are subsequently measured at amortizedcost, using the effective interest rate method.

The Group assesses at the end of each reporting period whether there is an objective evidence that a financial asset or group offinancial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’),and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assetsthat can be reliably estimated.

Derivates are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured atfair value. Changes in fair value of derivates that are designated and qualify as fair value hedges are recorded in incomestatement together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.



Number of Rs Number of Rs

Shares '000 Shares '0007. Share capital

Authorised share capital:Ordinary shares of Rs 10 each 1,000,000,000

10,000,000

1,000,000,000

10,000,000

Issued, subscribed and paid upshare capital:Shares issued for cashOrdinary shares of Rs 10 each 408,737,310

4,087,373

408,737,310

4,087,373

Shares issued as fully paidbonus shares of Rs 10 each 208,737,310

2,087,373

208,737,310

2,087,373

617,474,620

6,174,746

617,474,620

6,174,746

7.1

8. General reserve

Note 2017 20169. Long term finance - secured


8,853,175

Export Credit Guarantee Department - (ECGD) 9.2 2,688,009 2,680,329

Dubai Islamic Bank (DIB) 9.3 380,419 380,969 Deutsche Bank AG 9.4 5,038,694 5,024,298 Total 16,945,848 16,938,771

Unamortized transaction and other ancillary costOpening balance 73,387

102,927

Amortisation for the year (23,874)

(29,540) (49,513)

(73,387) 16,896,335

16,865,384

Less: Amount shown as current liabilityAmount payable within next twelve months (6,867,832)

(4,653,075)

Amount due after twelve months (10,028,503)

(12,212,309)

9.5 (16,896,335)

(16,865,384)

- -

9.1 Syndicate of banks

9.1.1 7,775,471 7,789,921 9.1.2 1,063,255 1,063,254

8,838,726 8,853,175

9.1.1

June 30, 2016June 30, 2017

This represents reserve created in line with Board of Directors' decision to place atleast 10% of the profits in GeneralReserve Account of the company till it reaches 50% of the paid up capital of the company.

The parent company, Warid Telecom International LLC, U.A.E held 600,747,211 (2016: 588,577,066) ordinaryshares at year end.


The Holding Company obtained syndicate term finance facility from a syndicate of local banks to finance the capitalrequirements of the Group. During the year ended June 30, 2015, the Company and the Syndicate of Banks signedsecond amendatory agreement to restructure Syndicate term finance facility and the short term running finance fromBank Alfalah Limited (related party) running finance facility-I. The principal is now repayable in twenty unequal sixmonthly instalments. The first such installment was due on April 1, 2015 and subsequently every six months untilOctober 1, 2024. The Company is required to mandatorily prepay the outstanding amount out of net cash proceedsfrom sale of WWL or any excess cash generated by the Company after taking into account a minimum cashbalance, capital expenditure and working capital requirements in each financial year. The rate of mark-up is 12% perannum from July 1, 2013 which shall stand deferred till payment of the final installment of principal portion (deferredpayment) as referred to in note 10.1. Earlier, principal was repayable in ten unequal semi annual installments withfirst installment due on July 1, 2014 and it carried a mark up of 6 months KIBOR per annum till December 31, 2013and 6 months KIBOR + 2.5% per annum for remaining period.

Holding Company (Wateen Telecom limited)Subsidiary Company (Wateen Wimax (Pvt) Limited



9.1.2

9.2

Note 2017 2016

9.3 Dubai Islamic Bank (DIB)

9.3.1 334,674 335,224

9.3.2 45,745 45,745

380,419 380,969

9.3.1

The Company obtained long term finance facility amounting to USD 42 million (June30, 2016: USD 42 million) fromECGD UK, of which USD 35 million (2016: USD 35 million) was availed till June 30, 2017. During the year endedJune 30, 2012, the Company and ECGD UK signed an agreement to restructure the terms of loan agreementincluding repayment schedule. Amount outstanding at June 30, 2017 is USD 25.60 million (2016: 25.60 million). Theprincipal is repayable in ten semi annual installments. The first such installment was due on July 1, 2014 andsubsequently every six months until January 1, 2019. The rate of mark-up is six month LIBOR + 1.5% per annum tillJune 30, 2011 and six month LIBOR + 1.9% for the remaining period. If the amount of installment payable and/orinterest payable is not paid on the due date, the Company shall pay interest on such amount at the applicableinterest rate plus 2% per annum.

Certain conditions precedent to the second amendatory agreement are not yet fulfilled, the management of theCompany is taking steps to fulfill those conditions. Once conditions precedent to restructured agreements arefulfilled, a formal letter shall be issued to the Holding Company by the Syndicate of aforesaid Banks, which shallcomplete the restructuring process. The Holding Company has been making payments according to secondamendatory agreement.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current/ fixed assets, a mortgage by deposit of title deeds in respect of immoveableproperties of the Company, pledge over fully paid ordinary shares (entire present and future) owned by the Companyin WWL and owned by WTI in the capital of the Company, a guarantee from WTI for amounts payable under second amendatory agreement and undertaking from shareholders from WTI for retaining the shareholding and control ofWTI. Syndicate is entitled to designate one nominee to be appointed as director in the Board of Directors of theCompany.

During the year ended June 30, 2015, the holding company transferred a portion of principal amount outstandingunder Syndicate Term Finance Agreement (STFA) to the Company. Accordingly, the Company entered into anagreement with Syndicate of banks for transfer of loan with Standard Chartered Bank Limited (SCB), Bank AlfalahLimited (BAFL), Bank Al-Habib Limited (BAHL) and Habib Bank Limited (HBL) being lead arrangers. Under the termof agreement between the Company and Syndicate of banks, the principal is repayable by the Company in eightunequal semi-annual installments. The first such installment was due on April 1, 2015 and subsequently every sixmonths untill October 1, 2018. The rate of mark-up is 6% per annum. Entire market is paid by the Wateen Wimax(Private) Limited on a date falling six months from the date of payment of last installment of principal amount.

The facility is secured with a margin of 25% over the principal amount outstanding, by way of hypothecation over allWiMAX assets, corporate guarantee from holding Company and pledge over fully paid ordinary shares (entire presentand future shareholding) owned by the holding Company in the capital of the Wateen Wimax (Private) Limited.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current / fixed assets (excluding assets under specific charge of CM Pak and assetswhich are subject to lien in favour of USF), a mortgage by deposit of title deeds in respect of immoveable propertiesof the Company, lien over collection accounts and Debt Service Reserve Account and personal guarantees by threeSponsors of the Company.

As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above finance facility.

The Holding Company obtained Ijarah finance facility of Rs 530 million (June 30, 2016: Rs 530 million) from DIB.During the year ended June 30, 2015, the Company and DIB signed an agreement to restructure the terms of theIjarah finance facility. The principal is now repayable in twenty unequal six-monthly installments. The first suchinstallment was due on April 1, 2015 and subsequently every six months until October 1, 2024. The rate of mark-upis 12% per annum from commencement date which shall stand deferred till payment of the final installment ofprincipal portion (deferred payment) as referred to in note 11.2. Earlier, principal was repayable in ten unequal semiannual installments with first such installment due on July 1, 2014 and it carried a markup of 6 months KIBOR perannum till December 31, 2013 and 6 months KIBOR + 2.5% per annum for remaining period.

Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company istaking steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled, bank willformally issue letter to the Company which will complete the restructuring process. The company has been makingpayments according to terms of revised restructuring agreement.


Holding Company (Wateen Telecom limited)Subsidiary Company (Wateen Wimax (Pvt) Limited



9.3.2

9.4

9.5

Note 2017 2016

10. Long term portion of deferred mark up


3,957,869

Dubai Islamic Bank (DIB) 10.2 142,626

98,854

Dhabi One Investment Services LLC (DOIS) 10.3 22,454

13,045

Total 5,140,075

4,069,768

Less: Amount shown as current liabilityAmount payable within next twelve months - -Amount due after twelve months (5,140,075) (4,069,768)

10.4 (5,140,075) (4,069,768)

- -


Latest restructured loan agreements (as referred in note 9.1.1 and 9.3.1) with the syndicate of local banks and DIBhave not yet become effective as certain conditions precedent to the restructured agreements are not yet fulfilled.Accordingly, the lenders are entitled to declare all outstanding amount of the loans immediately due and payable.Further, the Company has not paid loan installments of ECGD amounting to USD 13.749 million (June 30,2016:USD 8.713 million) and of Deutsche Bank AG amounting to USD 25.774 million (June 30, 2016: USD 16.334million) which fell due till the year ended June 30, 2017. The Company was also not able to make payments ofmarkup to ECGD and Deutsche Bank AG of Rs. 56.547 million (June 30, 2016: Rs 59.160 million) and Rs. 119.929million (June 30, 2016: Rs. 91.810 million), respectively on due dates.

The Company obtained term finance facility of USD 65 million (June 30, 2016: USD 65 million) from Motorola CreditCorporation (MCC) of which USD 64 million (June 30, 2016: USD 64 million) has been availed till June 30, 2017. OnAugust 19, 2011, MCC had transferred all of its rights, title benefits and interests in the original facility agreement toDeutsche Bank AG as lender, effective August 19, 2011. During the year ended June 30, 2012, the Company andDeutsche Bank AG signed an agreement to restructure the terms of loan agreement. Amount outstanding at June30, 2017 is USD 48 million (June 30, 2016: USD 48 million). The principal is repayable in ten semi annualinstallments commencing from July 1, 2014 until and including the final maturity date which is December 31, 2019.The rate of mark-up is six month LIBOR + 1% per annum provided that rate shall be capped at 2.5% per annum. Ifthe Company fails to pay any amount payable on its due date, interest shall accrue on the unpaid sum from the duedate up to the date of actual payment at a rate which is 2% higher than the rate of interest in effect thereon at thetime of such default until the end of the current interest period. Thereafter, for each successive interest period, 2%above the six-month LIBOR plus margin provided the Company is in breach of its payment obligations hereof.

During the year ended June 30, 2016, WTL transferred a portion of principal amount outstanding under Ijara FinanceFacility to WWL. Accordingly, WWL entered into an agreement with DIB for transfer of loan amounting to Rs 45.9million. Under the terms of agreement between DIB and the Company, the principal is repayable by the Company ineight unequal semi-annual installments. The first such installment was due on April 1, 2015 and subsequently everysix months until October 1, 2018. The rate of mark-up is 6% per annum. Payment of markup shall be deferred untilthe date of payment of last installment of principal amount and aggregate of all such deferred amounts shall be paidby the Company on April 1, 2019.

The facility is secured with a margin of 25% over the principal amount outstanding, by way of hypothecation over allWiMAX assets, corporate guarantee from parent company and pledge over fully paid ordinary shares (entire presentand future shareholding) owned by the parent company in the capital of the Wateen Wimax (Private) Limited.

The facility is secured by way of hypothecation over all present and future moveable assets (including all currentassets) and present and future current / fixed assets (movable and immoveable), pledge over fully paid ordinaryshares (entire present and future) owned by the Company in WWL and owned by WTI in the capital of theCompany, a corporate guarantee from WTI and undertaking from shareholders from WTI for retaining theshareholding and control of WTI.

In terms of provisions of International Accounting Standard 1 - 'Presentation of Financial Statements', since theCompany does not have an unconditional right to defer settlement of liabilities for at least twelve months after thebalance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities.Based on above, loan installments for an amount of Rs. 10,029 million and markup amount of Rs. 5,140 million dueafter June 30, 2018 have been shown as current liability.


The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari passu withunsecured and unsubordinated creditors.

As explained in note 2 (iv), Subsequent to year end, on August, 2017, Deutsche Bank AG facility has been novated from the company to WTI. Accordingly, the amount is now payable by the company to WTI on same terms.


Note 2017 2016

10.1 Syndicate of banks

Wateen Telecom Limited (Parent) 10.1.1 4,765,768 3,831,455

Wateen Wimax (Private) Limited 10.1.2 209,227 126,414

4,974,995

3,957,869

10.1.1

i)

ii)

iii)

iv)

10.1.2

Note 2017 2016

10.2

10.2.1 133,625

93,416

10.2.2 9,001

5,438

142,626

98,854

10.2.1

i)

ii)

10.2.2

10.3

10.4 As explained in note 9.5, the entire amount has been shown as current liability.

Markup at 7% per annum shall be paid as a bullet payment in the year 2030 subject to availability of theexcess cash generated by the Company.

This amount is payable in six-monthly installments commencing from March 1, 2018. As the loan associated withmarkup is classified as current liability as referred to in note 8, the entire amount has been classified as currentliability.

Under the terms of agreement, the amount accrued at 6% from October 1,204 till October 1, 2018 shall be paid as a bullet payment in the year 2019.

As explained in note 9.1.1, the markup (deferred payments) has been restructured under the second amendatory

agreement. The deferred payments are payable in following order of priority and sequence:

Deferred payment of Rs 1,023 million pertaining to the period of January 1, 2011 till June 30, 2013 shall bepaid in seven unequal six-monthly installments starting from April 1, 2025 and ending on April 1, 2028;

Deferred payment at 8% per annum for the period from July 1, 2013 till March 31, 2014 shall be paid in fourunequal six-monthly installments starting from April 1, 2028 and ending on October 1, 2029;

Deferred payment at 5% per annum for the period from April 1, 2014 upto final due date under secondamendatory agreement shall be paid in two unequal installments due on October 1, 2029 and April 1, 2030;and

After payments of all amounts above, the deferred payment at 4% per annum for the period of July 1, 2013till March 31, 2014 and at 7% per annum for the period from April 1, 2014 upto final date under secondamendatory agreement shall be payable as a bullet payment in the year 2030 subject to availability of theexcess cash generated by the Company.

Markup calculated at 5% per annum for the period from commencement date till October 1, 2024 shall bepaid in eleven six-monthly installments starting from April 1, 2025 and ending on April 1, 2030; and

As explained in note 9.3.1, the markup (deferred payments) has been restructured. The markup is payable in thefollowing sequence:

Under the terms of Syndicate Term Finance Facility signed on October 31, 2014 between Syndicate of banks andWateen Wimax (Private) Limited, markup on long term loan from syndicate of banks is payable by the company infull on April 1, 2019.

Dubai Islamic Bank (DIB)

Wateen Telecom Limited (Parent)


Wateen Wimax (Private) Limited


11. Long term finance from shareholders - unsecuredNote 2017 2016

Facility 1 11.1 2,522,625 2,515,418

Facility 2 11.2 11,811,815 11,526,039

14,334,440

14,041,457



11.1

11.2

12. Medium term finance from an associated company - unsecured Note 2017 2016

Medium term finance from an associated company - unsecured 600,000

600,000

Less: Amount shown as current liability 12.1 (600,000) (600,000)

- -

12.1

The rights of the lender in respect of the loan are subordinated to any indebtedness of the Holding Company to anysecured lending by any financial institution in any way, both present and future notwithstanding whether suchindebtedness is recoverable by process of law or is conditional or unconditional. However, the loan together with theinterest shall have priority over all other unsecured debts of the Holding Company. Further, after the execution of thisagreement, the Holding Company shall not avail any other loan or funding facility from any other source without priorwritten consent of the lender. The Holding Company undertakes that it shall not declare dividends, make anydistributions or pay any other amount to its shareholders unless the repayment of the loan and the interest in full to thelender. As the loan is subordinated to all secured finance facilities availed by the Holding Company, the entire amount ofloan has been classified as non current liability.


The Holding Company obtained an aggregate medium term finance facility of Rs 600 million (June 30, 2016: Rs. 600million) from an associated company, Taavun (Pvt) Limited. The principal was repayable within 30 days of the expiry oftwenty four months from the effective date i.e. September 30, 2010, which was further extendable to twelve months. Therate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As the loan is overdue andpayable on demand, the entire amount is classified as current liability.

The Holding Company obtained long term finance from a shareholder amounting to USD 24 million (June 30, 2016: USD24 million). This loan is subordinated to all secured finance facilities availed by the Holding Company. This loan wasrepayable within 30 days of the expiry of a period of five years from the last date the lender had disbursed the loans,which was due by the end of January 2015. The rate of mark-up is 6 months LIBOR + 1.5% with 24 months grace periodpayable half yearly. Alternatively loans may be converted into equity by way of issuance of the Holding Company'sordinary shares at the option of the lender at any time prior to, at or after the repayment date on the best possible termsbut subject to fulfillment of all legal requirements at the cost of the Holding Company. The said conversion of loan shallbe affected at such price per ordinary share of the Holding Company as shall be calculated after taking into account theaverage share price of the last 30 calendar days, counted backwards from the conversion request date, provided thatsuch conversion is permissible under the applicable laws of Pakistan.

This loan together with accrued interest will have at all times priority over all unsecured debts of the Holding Companyexcept as provided under Law. In the event the Holding Company defaults on its financial loans or in case WaridTelecom International LLC, Abu Dhabi, UAE, no longer remains the Holding Company of the Holding Company and sellsits 100% shares to any other person or party or relinquishes the control of its management then, unless otherwise agreedin writing by the lender, the entire loan together with the accrued interest will become due and payable forthwith and shallbe paid within 15 working days of the event of default or decision of the Board of Directors of the Holding Companyaccepting such a change in the shareholding as the case may be, and until repaid in full, the loan shall immediatelybecome part of financial loans, ranking pari passu therewith subject to the consent of the Holding Company's existingfinancial loan providers. As the loan is subordinated to all secured finance facilities availed by the Holding Company, theentire amount of loan has been classified as non current liability.

The Holding Company obtained long term finance facility from a shareholder amounting to USD 185 million (June 30,2016: USD 185 million) of which USD 112.4 million (June 30, 2016: USD 110 million) has been availed at June 30, 2017.The rate of mark-up is 6 months LIBOR + 1.5% payable half yearly. As per the agreement, the Holding Company isrequired to repay the full amount of loan in five equal annual installments from June 30, 2014 with final maturity date ofJune 30, 2018. However, no such installment has been paid by the Holding Company, as the loan is sub-ordinated to thefinancial loans. The lender has an option to instruct the Holding Company any time during the term of this agreement toconvert the remaining unpaid amount of the loan and the interest in part, or in its entirety into equity by way of issuanceof ordinary shares of the Holding Company in favour of the lender in compliance with all applicable laws of Pakistan.

Upon the request of the Holding Company for conversion of the loan and the interest into equity, the lender and theHolding Company shall, with mutual consent, appoint an independent auditor to determine the fair market value pershare of the borrower prevailing at the time of such request. lf the lender agrees to the price per share as determined bythe independent auditor then the loan and the interest shall be converted into equity at the rate per share decided by theindependent auditor. In case the lender, in its sole discretion, disagrees with the price per share as determined by theindependent auditor then the request for conversion shall stand revoked and the loan shall subsist.

Annual Report 201777Wateen Telecom Ltd and its Subsidiary Companies


13. Deferred government grants

Movement during the year is as follows:

Note 2017 2016

Balance at beginning of the year - excluding amount receivable 2,567,744

2,599,101

Amount received during the year -

112,204

Amount recognised as income during the year 34 (148,220)

(143,561)

Balance at end of the year 2,419,524

2,567,744

14. Short term running finance - secured

Facility - II - secured 14.1 687,664

765,512

14.1

Note 2017 2016

15.

15.1 100,000 -

15.2 315,000 314,100 415,000 314,100

15.1

15.2

Note 2017 2016

16. Trade and other payables

Creditors 728,389

647,185

Due to associated companies 16.1 17,083

18,164

Due to international carriers 371,831

403,082

Payable to Pakistan Telecommunication Authority 600,690

619,265

Accrued liabilities 2,356,266

2,827,055

Payable to provident fund 83,079

76,272

Payable to gratuity fund 173,847

-

Unearned revenue 32,452

35,435

Advance from customers 350,914

194,099

Security deposits from customers 58,035

50,356

Workers' Welfare Fund 569 569Sales tax payable 131,355 98,045Income tax deducted at source 415,423 210,710

5,319,933 5,180,237

The Holding Company obtained a short term finance facility of Rs. 100 million (June 30, 2016: Nil) from anassociated Company, Wincom (Pvt) Limited. The loan is repayable within 30 days of the expiry of one year from theeffective date of the agreement. The rate of markup is six months KIBOR per annum.


This facility is secured by lien marked on an amount of USD 8.44 million held under the name "Dhabi OneInvestment Services LLC" maintained at Bank Alfalah.


This represents amount received from Universal Service Fund (USF) as subsidy to assist in meeting the cost ofdeployment of USF Fiber Optic Network for providing USF Fiber Optic Communication Services in Sindh,Baluchistan, Punjab and broad band services in Faisalabad Telecom Region, Hazara Telecom Region andGujranwala Telecom Region. USF Fiber Optic Network and broad band network will be owned and operated by theHolding Company.


The Holding Company has a cash finance facility of Rs. 790 million (2016: Rs 790 million) of which Rs. 102.336million (June 30, 2016: Rs. 24.488 million) was unutilised as at June 30, 2017. The facility has an expiry till June 30,2017 but has been subsequently renewed till August 31, 2017. Markup on the facility is to be serviced on quarterlybasis. The rate of mark-up is 3 months KIBOR + 1% per annum.

Short term finance from associated company - unsecured

This represents long term finance provided by Dhabi One Investment Services LLC to fulfil requirements of MTAand is a subordinated loan to be repaid in twelve equal semi annual installments commencing from March 1, 2018.The rate of mark-up is 6 months LIBOR + 1% payable on six monthly basis. The interest shall be payable in arrearsand no interest shall be payable until March 1, 2018, and till that date, interest shall be accumulated and thereafterbe payable in cash accordingly. Although the loan is subordinated to all secured finance facilities availed by WateenWimax (Private) Limited, yet the entire amount has been classified as current liability as the financial statements ofWateen Wimax (Private) Limited are being prepared on the management estimate that entity is a non- goingconcern.

Holding Company (Wateen Telecom limited)Subsidiary Company (Wateen Wimax (Pvt) Limited)



Note 2017 2016

16.1 Due to associated companies


16,932

119

1,232

17,083

18,164

17. Interest / markup accrued

Long term finance from shareholders/ sponsors 1,771,125 1,357,967

Long term finance - secured 578,188 585,390

Long term finance from associate 3,720 -

Medium term finance - unsecured 17.1 500,115 448,577

Short term running finance - secured 17.2 32,648 33,784

280,264 24,563

3,166,060 2,450,281

17.1

17.2

18. Contingencies and Commitments

2017 2016

18.1 Claims against the Company not acknowledged as debt 525,343 478,665

18.2 Performance guarantees issued by banks on behalf

of the Company 1,509,718 1,410,309

Holding Company (Wateen Telecom Limited)

18.3

18.4

18.5

Under the Access Promotion Regulations, 2005, Wateen Telecom Limited (the “Company”) was required to makepayments of Access Promotion Charges (hereinafter referred to as “APC”) for the purpose of Universal ServiceFund (hereinafter referred to as “USF”) within 90 days from the close of the month to which such payment relates.The Company however, challenged APC Regulations, 2005 in Islamabad High Court and the same is still a pendingadjudication whereby interim injunction granted in favor of the Company is intact till date. Furthermore, the showcause notice dated November 17, 2016 issued by Pakistan Telecommunication Authority (PTA) demanding Rs.3,681 million in lieu of APC and delayed payment surcharge was duly challenged by the Company before the SindhHigh Court, whereby Honorable Court was pleased to grant interim injunction in favor of the Company restrainingPTA to take any coercive action against the Company till the disposal of the suit. The legal counsels of theCompany are of the view that the Company has a strong case to contest and the matter would most likely bedecided in favour of the Company.

WWL under the terms of the MTA served the communication notice to Augere Holdings and claimed certainexpenditures as reimbursable to WWL on account of business consolidation not successful as per MTA. In responseto Company’s communication notice, Augere Pakistan (Pvt) Limited served notice to the Company asacknowledgement of communication of MTA and claimed certain charges. WWL and the Company, being a party toMTA, are in process of negotiating a settlement in respect of the claims raised by the parties in their respectivenotices. The management believes that no amount shall be payable by the Company, accordingly, no provision iscarried in these financial statements in this respect.

The Deputy Commissioner Inland Revenue (DCIR), Enforcement Unit IV, Large Taxpayers Unit (LTU), Islamabadissued Order-in-Original based on the observations of Director General Intelligence and Investigation and raised ademand of Rs. 31.830 million to be paid along with penalty and default surcharge and also issued recovery notice.The Commissioner Inland Revenue - Appeals [CIR (A)] and Appellate Tribunal Inland Revenue (ATIR) upheld theorder of the DCIR. The Company filed reference before the Honorable High Court whereby the case has beenremanded to ATIR. The appeal is pending for adjudication with ATIR and company foresees a favorable decision.


Pakistan Mobile Communication (Pvt) Ltd (PMCL) (Alsoincludes Warid Telecom (Private) Limited (WTL))

This represents markup payable to an associated company Taavun (Private) Limited.

This includes markup payable to an associated company Bank Alfalah Limited amounting to Rs 12.062 million(2016: Rs 13.197 million).

Due to Parent Company- Warid Telecom International LLC, UAE




18.6

18.7

18.8

18.9

18.10

18.11

18.12

DCIR raised tax demand for Rs. 133 million in respect of tax year 2014 on account of non-deduction of tax undersection 152 of the Ordinance while making payments to foreign telecom operators. The Company preferred appealbefore the CIR (A) against the order of the DCIR. The CIR (A) remanded the case to the DCIR with the direction tocharge the withholding on the actual payment and not on the amount of expense but has confirmed the levy ofwithholding tax. No appeal effect notice has been issued as yet. The Company also preferred appeal against theorder of the CIR (A) in ATIR and the same is pending. The payments made to foreign operators falls under theambit of business income and is exempt from withholding tax. Based on this company foresees a favorabledecision.

The Assistant Commissioner Inland Revenue (ACIR), Enforcement Unit IV, LTU, Islamabad, issued show causenotices based on the observation that Company has not furnished sales tax and federal excise returns for theperiods from August 2009 to March 2010, November 2010 and December 2010. In this respect, ACIR issued Order-in-Original and assessed demand of Rs. 249.471 million (calculated on the basis of alleged minimum liability)payable along with penalty and default surcharge and also issued recovery notice. The Company deposited principalamount of Rs. 138.709 million and default surcharge of Rs. 26.231 million based on actual liability as per ownworking of the Company. The ATIR, Islamabad remanded the case to the assessing officer with certain directions.The Company submitted information in response to the related proceedings initiated by ACIR, Enforcement-IV,LTU, Islamabad and proceedings are not yet concluded by the ACIR. As of now, no tax demand is in field andcompany foresees a favorable decision in reassessment proceedings.

The Additional Commissioner Inland Revenue, Audit - II, Large Taxpayers Unit, Islamabad (Add. CIR) issued showcause notice dated June 6, 2014 whereby Add. CIR alleged the Company is claiming inadmissible input tax,suppression of sale, non-payment of sales tax on fixed asset, non-compliance of sales tax special procedurewithholding rules, penalty on late filing of sales tax and federal excise returns and non-withholding of federal exciseduty on advertisement services. The Company could not furnish the requisite information to the Add. CIR becauseof fire effected records further; the assessment was barred by time. The Add. CIR passed ex-parte orders andraised the demand of Rs. 518 million along with penalty and default surcharge. The Company filed appeal beforeCIR (A) and same was rejected. Being aggrieved with the order, appeal was filed before ATIR and ATIR confirmedthe order passed by CIR (A). Resultantly, the Company filed reference application before High Court which ispending and company foresees a favorable decision.

The ACIR issued notice to the Company for the period of July 2010 to June 2011 and confronted to charge sales taxon the difference of sales reported in audited accounts and sales reported in monthly sales tax returns and passedex-parte order with tax demand of Rs. 1,048 million. Being aggrieved, the Company filed appeal before CIR (A) andsame was rejected. An appeal was filed by the Company before ATIR which is pending and company foresees afavorable decision.

The ACIR alleged that Company has not withheld tax from payments made to foreign telecom operators during thetax years 2008, 2009, 2010 and 2011. Further the ACIR ordered the Company to pay alleged demand of Rs.477.767 million representing principal amount and default surcharge for the aforesaid tax years. The CIR (A) upheldthe contentions of the assessing officer and directed the assessing officer to recalculate the withholding tax byapplying the rates as given in the Division II of Part III of the First Schedule to the Income Tax Ordinance, 2001.The Company filed appeal before ATIR, and same was rejected. The Company filed references before the HighCourt and case was remanded back for fresh proceedings. The proceedings were finalized by the assessing officerand a tax demand of Rs. 1,911 million was created. The Company preferred an appeal before CIR (A) and CIR (A)remanded the case to DCIR. The DCIR raised demand of Rs. 1,131 million against which the Company preferredappeal before CIR (A) who upheld the orders of DCIR. The Company preferred appeal against the aforesaidappellate orders before ATIR, whereby ATIR up-held the decision of CIR (A) regarding tax withholding on paymentsand has remanded the case to the officer for levy of withholding tax on lower of treaty rates or the Ordinance rates.The Company filed references before High Court, on the premise that the payments made to foreign operators fallsunder the ambit of business income and is exempt from withholding tax, which is pending and company foresees afavorable decision.

DCIR raised tax demand of Rs. 55 million for tax year 2013 on account of non-deduction of tax under section 152 ofthe Ordinance while making payments to foreign telecom operators. The Company filed appeals against the order.The CIR (A) and ATIR both upheld the action of DCIR. The Company also filed misclleneous application in the ATIRagainst the Orders of the ATIR. The Company filed references before High Court on the premise that the paymentsmade to foreign operators falls under the ambit of business income and is exempt from withholding tax. High Courtremanded the case back to ATIR and same is pending. Company foresees a favorable decision.

The Assistant Commissioner - I, Sindh Revenue Board, disallowed input tax claim of the Company for the months of March 2014 to June 2014 and raised a demand of Rs. 66 million. The Company filed appeal before CommissionerAppeals however, no appellate order is received to-date. Certain related evidence has been provided by thecompany in support of its contention and company foresees a favorable decision at appellate forums.



18.13

18.14

18.15

18.16

18.17

18.18

18.19

18.20

Additional Commissioner Inland Revenue (Add. CIR) raised a tax demand of Rs. 74.5 million for tax year 2009under section 122(5A) by disallowing certain expenses. Being aggrieved, company filed appeal before CIR(A).CIR(A) confirmed the disallowance of exchange loss and depreciation however, remanded the other points to Add.CIR for fresh proceedings. Company filed appeal before ATIR which is pending. Add. CIR has not initiatedreassessment proceedings till date. As of now no tax demand is in field and case is likely to be concluded in favor ofCompany. Add. CIR disallowed expenses under various heads and raised a tax demand of Rs. 5,697 million for tax year 2010.The Company preferred an appeal before CIR (A) on the grounds that the order passed by Add. CIR was barred bytime in the terms of section 122 (2). CIR (A) disposed of the appeal by remanding the case back to Add. CIR to re-examine the issues. Company has filed appeal before ATIR on ground of time barred and has obtained stay forabeyance of re-assessment proceedings initiated by Add. CIR. Based on this company foresees a favorabledecision.

Add. Commissioner PRA raised a tax demand of Rs. 59 million and charged a penalty of Rs. 2.9 million in respectof input tax claimed by the Company during the period from August 2012 to June 2015. Being aggrieved, theCompany preferred an appeal before CIR (A) on the ground that the Add. Commissioner PRA has erred in passingthe aforesaid order without considering the facts. CIR (A) remanded the case back to Add. Commissioner PRA fordenovo proceedings. As of now no tax demand is in field and case is likely to be concluded in favor of Company.

The Company is in dispute with Spacecom International LLC (Spacecom) regarding alleged liabilities arising undera Master Service Agreement (MSA) dated 15 August 2014 (MSA).The Company engaged SpaceCom InternationalLLC (‘SpaceCom’) to provide certain satellite services; which arrangement was subsequently terminated by theCompany, through notice dated 17th April 2015, on account of SpaceCom’s material breach of MSA, caused bysignificant and chronic service outages. In response, SpaceCom has commenced arbitration proceedings againstthe Company, before the DIFC-LCIA Arbitration Centre in DIFC, wherein SpaceCom claims US$4.52m in respect ofallegedly due and outstanding invoices plus costs of US $ 0.17 million and interest on these. The managementbeleives that the Company has a good defence in respect to entire claim on the grounds that Company was entitledto terminate the MSA and did so lawfully and Spacecom has initiated the proceedings at wrong forum. On thesebasis, no provision has been recorded in financial statements.

The Officer Inland Revenue, Audit - V, Large Taxpayers Unit, Islamabad (OIR) issued orders and raised taxdemand of Rs. 163 million relating to tax years 2008, 2009, 2011, 2012 and 2013 by holding that the taxes paidunder section 148 (7) on imports of the Company are not adjustable against the income tax liability as the Companyis not covered under the definition of industrial undertaking. The Company preferred appeal before CIR (A) whoupheld the order of OIR, consequently the Company filed appeal before ATIR. The ATIR has rejected Company'sappeal for tax years mentioned above. The Company filed the references before High Court which are pending andcompany foresees a favorable decision.

The OIR also levied minimum tax under section 113 of the Income Ordinance, 2001 for tax years 2010, 2011, 2012& 2013 by rejecting the stance of Company of gross loss. The Company preferred appeals against the aforesaidorders before CIR (A) and same were rejected. The Company preferred appeal before the ATIR and ATIR rejectedthe company’s appeal for tax year 2010 and 2012. As per Income Tax Ordinance 2001 the above mentionedsection is not applicable in case of gross loss of that particular year by the company. Company has filed referenceapplications before High Court and is likely to be decided in the favor of Company. However, company’s appeal fortax year 2011 and 2013 is pending before ATIR.

DCIR issued notice to the Company and required to provide the details of tax deduction while making payment offinance cost for tax year 2012. Subsequently, the DCIR raised a demand of Rs. 253 million on gross amount offinance cost paid. The Company contended that DCIR did not consider the impact of exchange loss and bankcharges. Appeal was filed before CIR (A) and rectification application before DCIR. The CIR (A) remanded the caseto DCIR for fresh proceedings. As of now no tax demand is in field and likely to be concluded in favor of Company.

Additional Commissioner Inland Revenue (Add. CIR) raised a tax demand of Rs. 2,406 million for tax year 2008under section 122 (5A) by disallowing certain expenses on arbitrary basis. Being aggrieved, company filed appealbefore CIR(A) on the ground that assessment is barred by time. CIR (A) remanded the case back to Add. CIR to re-examine the case in light of order passed by Supreme Court of Pakistan in a similar case of a third party. Add.CIR again issued the order of same tax demand without considering the judgement of Supreme Court of Pakistan as referred above. Resultantly, company has filed appeal before CIR (A) which is pending. Based on this companyforesees a favorable decision.



18.21

18.22

18.23

18.24

18.25

18.26

18.27

Wateen Solution (Private) Limited

The Company's case for tax year 2013 was selected for tax audit under section 214C of the Income Tax Ordinance,2001. The DCIR raised a income tax demand of Rs 6,627,494. The Company filed the rectification applicationagainst the related order by contending that the adjustment of tax losses has not been allowed. The DCIR whiledisposing off the rectification application restricted the income tax demand to Rs 3,536,000 after adjusting the taxlosses. The Company preferred an appeal before the CIR (Appeals) wherein the contention of DCIR was upheld.The Company has preferred an appeal before Appellate Tribunal Inland Revenue which is pending for adjudication.

The Deputy Commissioner Inland Revenue (DCIR), Large Taxpayers Unit (LTU), Lahore issued notice undersection 161/205 of the Income Tax Ordinance, 2001 (the Ordinance) and required the Company to provide therelated proof of withholding taxes. The Company contended that the jurisdiction of the Company rests with RegionalTax Office (RTO) and not with the Large Taxpayers Unit (LTU) Lahore. The DCIR proceeded ex-parte and leviedthe tax of Rs 57 million. The Company preferred appeal before the CIR (Appeals) and after due hearings, the CIR(Appeals), remanded the case back to the DCIR. The DCIR initiated the proceeding under section 124 of theOrdinance on June 12, 2015 and fixed the compliance for June 19, 2015. The Company filed request for extensionin time for 15 days. The DCIR did not concur to the Company's request and proceeded to pass an ex-parte orderand again levied the demand of Rs 57 million. The Company preferred appeal before the Commissioner Appealsand in the meanwhile, the jurisdiction of the company was transferred from LTU Lahore. Thereafter, no notice ofhearing has been issued to the company by the Commissioner (appeals).

Wateen Satellite Services (Private) Limited

In relation to financial years 2008 and 2009, FBR contended sales tax and federal excise duty of Rs. 113.30 million.The Company paid Rs. 10.98 million under amnesty scheme against such order. An appeal had been filed beforeCommissioner Inland Revenue Appeals which upheld the demand raised by the Department. The Companypreferred appeal before Appellate Tribunal Inland Revenue (ATIR) and the ATIR vide its order vacated the demandand remanded back the issue to the assessing officer with certain directions. Based on the tax advisors' opinion, themanagement believes that the case will be decided in favor of the Company. Hence, no provision has been made inthe accounts.

The Deputy Commissioner Inland Revenue issued an order raising demand of Rs. 1.2 million by contending that thesame has been inadmissible as vendors have not deposited the sales tax. The company has filed an appeal beforeCommissioner Inland Revenue which is pending for adjudication. Based on the tax advisors' opinion, themanagement believes that the case will be decided in favor of the Company. Hence, no provision has been made inthe accounts.

In relation to financial year 2008 the Additional Commissioner Inland Revenue raised demand of Rs. 173.8 millionby contending that exports of company shall be taxed at the rate of 35% and also disallowed certain provisionsamounting Rs. 21.35 million. The Company filed its reply and took the plea that the notice dated 19 June 2014 isbarred by time and also furnished the related information. The company obtained stay from the Honorable HighCourt against the aforesaid demand and preferred an appeal before Commissioner Inland Revenue Appeals. Theappeal has been decided in the favor of the Company and Commissioner Inland Revenue has ordered OIR forcalculation of time limitation in accordance with the provision of section 122(2) from the date of filing of return. Nofurther proceedings were initiated by the OIR as yet. The management believes that the case will be decided infavor of the Company. Hence, no provision has been made in the accounts.

The Officer Inland Revenue, Audit - V, Large Taxpayers Unit, Islamabad issued show cause under the provisions ofsection 122 (5) of the Ordinance for the amendment of assessment for tax year 2009 on account of non-withholdingof taxes on salaries, services purchased and incorrect apportionment of expenses. The Company furnished therelated information/details in response to show cause notice. The OIR did not acceded to Company's submissionsand raised the income tax demand of Rs 43.3 million. The Company preferred appeal before the CIR Appeals. TheCompany also filed rectification application under section 221 of the Ordinance on account of incorrectapportionment and restriction of credit of taxes paid. The Commissioner Inland Revenue vide appellate order No.520/2016 dated January 20, 2016 held that the instant proceedings are not barred by time, however, OIR did notprovide due opportunity of being heard to the Company and did not provide ample time to the Company to put forththeir instance. Further, CIR remanded the case to OIR for de novo considerations. No further proceedings wereinitiated by the OIR as yet. The management believes that the case will be decided in favor of the Company.Hence, no provision has been made in the accounts.

The Assistant Commissioner Inland Revenue, Regional Tax Office - I, Lahore passed an order under section 122Cof the Ordinance and raised the demand of Rs 113,840 in relation to tax year 2012. The Company preferred anappeal before the CIR Appeals, Lahore against the aforesaid orders. The management believes that the aboveappeal is likely to be decided in the Company's favor.



18.28

18.29

18.30

18.31

2017 2016


18.32 Outstanding commitments for capital expenditure 557,523

735,344

No provision on account of contingencies disclosed in note 18.3 - 18.30 above has been made in these financialstatements as the management and its advisors are of the view, that these matters will eventually be settled in favorof the Company.

The Deputy Commissioner Inland Revenue issued show cause notice dated 17 March 2016 under section 161/205of the Ordinance on the account of short withholding of tax for the tax year 2014. Deputy Commissioner InlandRevenue has demanded an amount of Rs. 23.7 million on account of short deduction of withholding tax. TheCompany furnished the requisite information along with the copies of CPR's as required in show cause notice. TheDeputy Commissioner Inland Revenue did not pass any order in this respect so far. The management believes thatthe case will be decided in favor of the Company, therefore, no provision has been made in the accounts.

The Officer Inland Revenue (OIR), Islamabad issued show cause notice dated 28 May 2016 under section 122(5) ofthe Income Tax Ordiannce, 2001, whereby the OIR required the Company to furnish certain information pertainingto tax year 2010. The Company filed its response and filed the requisite information. The OIR passed an orderdated 28 June 2016 and created income tax demand of Rs 84 million. The Company preferred an appeal beforeCIR (Appeals), Islamabad. The CIR (Appeals) vide Appellate Order dated 28 April 2017 hold the action of OIR andremanded back the case to the Officer for further relief in respect WWF charging issue. The Company filed anappeal before Appellate Tribunal Inland Revenue (ATIR) against the order dated 28 April 2017 and the appeal isstill pending before ATIR for adjudication. The management believes that the case will be decided in favor of theCompany, therefore, no provision has been made in the Financial Statements.

The Company is selected for audit under sections 214(c) of Income Tax Ordinance, 2001 for the tax year 2014. TheOfficer Inland Revenue (OIR) Islamabad has issued IDR notice dated 17 Decemeber 2015 and the Companyfurnsihed all the related information to the OIR. The Deputy Commissioner Inland Revenue (DCIR) Islamabadpassed a provisional assessment order dated 31 October 2016 thereby decreasing tax refund by Rs. 3.3 million.The Company preferred an appeal before CIR (Appeals), Islamabad and the appeal is still pending adjudication.



19

.O

pe

rati

ng

as

se

ts

Fre

eh

old

Bu

ild

ing

s

Le

as

e h

old

Lin

e a

nd

N

etw

ork

B

as

eTo

ols

an

dO

ffic

eF

urn

itu

re a

nd

To

tal

La

nd

fre

eh

old

im

pro

ve

me

nts

wir

ee

qu

ipm

en

tS

tati

on

ge

ars

eq

uip

me

nt

ac

ce

ss

ori

es

fix

ture

so

wn

ed

lea

se

d

Ye

ar

en

de

d J

un

e 3

0, 2

01

6O

pe

nin

g n

et b

oo

k a

mo

un

t7

0,5

43

75

5,1

68

10

7,3

14

4,4

16

,47

92

,88

7,4

64

-2

9,9

33

90

,06

52

9,7

58

12

2,0

98

11,6

96

3,1

36

8,5

23

,65

4A

dd

itio

ns

-3

,08

04

7,8

89

1,3

43

,36

33

56

,00

5-

32

,05

011

,51

22

3,7

04

7,5

41

34

,00

6-

1,8

59

,15

0D

isp

osa

ls/ tr

an

sfe

r -

Co

st-

-

-

(27

8,2

00

)

(35

2,4

31

)

-

-

(2,2

74

)

(51

,09

9)

-

-(1

3,4

08

)(6

97

,41

2)

- A

ccu

mu

late

d d

ep

reci

atio

n-

-

-

5,1

93

211

,16

2

-

-

1,3

68

51

,09

9

-

-1

0,2

72

27

9,0

94

- N

et b

oo

k va

lue

--

-

(27

3,0

07

)

(14

1,2

69

)

-

-

(90

6)

-

-

-(3

,13

6)

(41

8,3

18

)

De

pre

cia

tion

ch

arg

e-

(23

,33

9)

(19

,44

9)

(23

1,3

59

)

(33

0,4

31

)

-

(19

,98

3)

(15

,42

2)

(20

,50

6)

(23

,88

3)

(8,5

92

)-

(69

2,9

64

)Im

pa

irm

en

t d

urin

g th

e y

ea

r-

-

-

-

(10

0,0

75

)

-

-

-

-

-

--

(10

0,0

75

)C

urr

en

cy tra

nsl

atio

n d

iffe

ren

ces

--

-

-

(34

9)

-

-

-

-

-

--

(34

9)

Co

st7

0,5

43

93

7,2

18

21

3,3

31

6,3

23

,12

1

21

,41

3,6

51

-

18

7,4

37

1

63

,20

4

80

9,8

48

24

5,7

53

17

1,0

59

-3

0,5

35

,16

5A

ccu

mu

late

d d

ep

reci

atio

n-

(20

2,3

09

)

(77

,57

7)

(1,0

67

,64

5)

(7,5

03

,78

5)

-

(14

5,4

37

)

(77

,82

2)

(76

4,0

38

)

(13

9,7

95

)

(13

0,9

99

)-

(10

,10

9,4

07

)A

ccu

mu

late

d im

pa

irm

en

t -

-

-

-

(11

,23

8,4

30

)

-

-

(13

3)

(12

,85

4)

(20

2)

(2,9

50

)-

(11

,25

4,5

69

)N

et b

oo

k va

lue

70

,54

37

34

,90

9

13

5,7

54

5,2

55

,47

6

2,6

71

,43

6

-

42

,00

0 85

,24

9

32

,95

6

10

5,7

56

37

,11

0-

9,1

71

,18

9

Cu

rre

ncy

tra

nsl

atio

n d

iffe

ren

ces

--

-

-

(9

1)

-

-

-

-

-

--

(91

)C

losi

ng

ne

t b

oo

k a

mo

un

t7

0,5

43

73

4,9

09

13

5,7

54

5,2

55

,47

6

2

,67

1,2

54

-

4

2,0

00

85

,24

9

32

,95

6

10

5,7

56

37

,11

0-

9,1

71

,00

8

Ye

ar

en

de

d J

un

e 3

0, 2

01

7O

pe

nin

g n

et

bo

ok

am

ou

nt

70

,54

37

34

,90

9

13

5,7

54

5,2

55

,47

6

2,6

71

,25

4

-

42

,00

0 85

,24

9

32

,95

6

10

5,7

56

37

,11

0-

9,1

71

,00

8A

dd

itio

ns

3,9

96

18

,78

2

4,1

30

1,2

08

,52

8

33

2,9

82

-

42

,71

4 6

,91

9

13

,74

9

28

8

54

,70

8-

1,6

86

,79

6C

os

t A

dju

stm

en

t1

0,2

72

10

,27

2D

isp

os

als

/ tr

an

sfe

r -

Co

st

--

-

(26

4,6

39

)

(40

4,2

42

)

-

-

(4,4

07

)

(24

,26

8)

(63

8)

(50

4)

-(6

98

,69

8)

- A

cc

um

ula

ted

de

pre

cia

tio

n-

-

-

15

,85

6

26

4,8

11

-

-

4,3

44

24

,26

8

611

50

4-

31

0,3

94

- N

et

bo

ok

va

lue

--

-

(24

8,7

83

)

(13

9,4

31

)

-

-

(63

)

-

(27

)

--

(38

8,3

04

)

Ac

cu

mu

late

d d

ep

rec

iati

on

a

dju

stm

en

t-

-

-

-

(10

,69

7)

-

-

87

1

9,8

26

-

(10

,27

2)

-(1

0,2

72

)D

ep

rec

iati

on

ch

arg

e-

(23

,52

1)

(21

,40

8)

(25

4,5

32

)

(33

8,8

61

)

-

(28

,12

2)

(15

,22

9)

(16

,50

9)

(23

,70

6)

(15

,95

1)

-(7

37

,83

9)

Imp

air

me

nt

du

rin

g t

he

ye

ar

--

-

-

(3,1

23

)

-

-

-

-

-

--

(3,1

23

)C

urr

en

cy

tra

ns

lati

on

dif

fere

nc

es

--

--

--

--

--

--

-

Co

st

74

,53

99

56

,00

02

17

,46

17

,26

7,0

10

21

,34

2,3

91

-2

30

,15

11

65

,71

67

99

,32

92

45

,40

32

35

,53

5-

31

,53

3,5

35

Ac

cu

mu

late

d d

ep

rec

iati

on

-(2

25

,83

0)

(98

,98

5)

(1,3

06

,32

1)

(7,5

88

,53

2)

-(1

73

,55

9)

(87

,83

6)

(74

6,4

53

)(1

62

,89

0)

(15

6,7

18

)-

(10

,54

7,1

24

)A

cc

um

ula

ted

im

pa

irm

en

t -

--

-(1

1,2

41

,55

3)

--

(13

3)

(12

,85

4)

(20

2)

(2,9

50

)-

(11

,25

7,6

92

)N

et

bo

ok

va

lue

74

,53

97

30

,17

011

8,4

76

5,9

60

,68

92

,51

2,3

06

-5

6,5

92

77

,74

74

0,0

22

82

,311

75

,86

7-

9,7

28

,71

9

Cu

rre

nc

y t

ran

sla

tio

n d

iffe

ren

ce

s-

--

-(1

06

)-

--

--

--

(10

6)

Clo

sin

g n

et

bo

ok

am

ou

nt

74

,53

97

30

,17

011

8,4

76

5,9

60

,68

92

,51

2,0

18

-5

6,5

92

77

,74

74

0,0

22

82

,311

75

,86

7-

9,7

28

,43

2

An

nu

al ra

te o

f d

ep

rec

iati

on

%-

2.5

10

46

.67

-20

33

.33

33

.33

10

33

.33

10

20

20

Mo

tor

Ve

hic

les

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

---

Rs

'0

00

---

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

---

Co

mp

ute

rs

an

d

19

.1

19

.2T

his

incl

ud

es

ass

ets

am

ou

ntin

g to R

s 2

84

mill

ion

(2

01

6: R

s. 2

84

mill

ion

) w

hic

h a

re u

nd

er

the

use

of th

ird

pa

rty.

Th

eco

sto

ffu

llyd

epre

ciate

da

ssets

wh

ich

are

still

inu

sea

sa

tJu

ne

30

,2

017

isR

s1

,01

4m

illio

n(2

01

6:

Rs.

98

5m

illio

n).



Note 2017 201620. Capital work in progress

Lease hold improvements 2,142

2,509

Line and wire 435,169

917,838

Network equipment-net of impairment of DSL assetsRs 384.908 million (2016: Rs 384.908 million). 88,122

108,468

525,433

1,028,815

20.1 Movement during the year

Balance as at July 1 1,028,815

1,506,592

Additions during the year 766,297

925,361

Capitalised during the year (1,269,679)

(1,403,138)

525,433

1,028,815

21. Intangible assets

LDI license fee 21.1 10,245

11,692

WLL license fee 21.2 -

-

Software licenses 21.3 982

3,520

Goodwill 21.4 94,351

94,351

105,578

109,563

21.1 LDI license fee

Cost 28,934 28,934 Less: Amortisation


15,795

Amortisation for the year 1,447

1,447 18,689

(17,242)

Net book value 10,245

11,692

21.1.1

Note 2017 2016

21.2 WLL license fee 21.2

CostOpening Balance 193,366 193,366

Additions during the year -

-

Closing Balance 193,366

193,366

Less: AmortisationOpening balance 83,295

83,295

Amortisation for the year -

-

(83,295)

(83,295)

Net book value 110,071

110,071

Less: Provision for impairment of WLL License (110,071) (110,071)-

-

21.2.1



Pakistan Telecommunication Authority (PTA) granted Long Distance International (LDI) license for a period of 20years from July 26, 2004.

PTA granted Wireless Local Loop (WLL) License for a period of 20 years from December 1, 2004 covering fourteentelecom regions. During the year ended June 30, 2017, the Company entered into certain arrangements with otherparties for providing telecommunication services on a shared basis, and the related approvals are yet to be obtained.



2017 2016

21.3 Software licenses

CostOpening Balance 151,671

151,671

Additions during the year - -

Closing Balance 151,671 151,671

AmortisationOpening balance 88,743 82,914 Amortisation for the year 2,538 5,829

(91,281) (88,743)

NBV - Software license 60,390 62,928

Less: Provision for impairment (59,408) (59,408)Net book value 982

3,520

21.3.1 Software license is amortised over a period of 5 years.21.3.2

Note 2017 201621.4 Goodwill

Goodwill arising on acquisition of Netsonline Services (Pvt) Limited 21.4.1 5,766

5,766

Less: Provision for impairment of goodwill (5,766)

(5,766)

-

-

Goodwill arising on acquisition of Wateen Solutions (Pvt) Limited 21.4.2 11,333 11,333

Goodwill arising on business acquisition by the subsidiary company 21.4.3 83,018 83,018

21.4.4 94,351 94,351

Total net book value 105,578 109,563

21.4.1

21.4.2

21.4.3

21.4.4

These assumptions are important, as well as using industry data for growth rates, management assesses how theposition might change over the projected period and ready to trade off amongst various revenue options to meet thedesired results.

Sensitivity to changes in assumptionsManagement believes that reasonable possible changes in other assumptions used to determine the recoverableamounts will not result in an impairment of goodwill.

Growth in revenues have been projected after taking into account order backlogs and follow on orders and bestestimates. The management believes that these assumptions are reasonable considering the current marketdynamics and their expectation of market conditions going forward.

Discount ratesThe discount rate reflects management estimates of the rate of return required by the Holding company.

Key business assumptions

Impairment testing of goodwill

Goodwill acquired through business combination has been tested for impairment. The recoverable amount has beendetermined based on a value in use calculation using cash flow projections from the financial budgets approved bythe Board covering a five-year period. The discount rate applied to cash flow projections is 8% (2016: 12%) perannum, which is the expected rate of return required by the Company.

Key assumptions used in value-in-use calculations

Revenue growth

The goodwill resulting from acquisition of Netsonline Services (Pvt) Limited by Wateen Telecom Limited effectiveJuly 1, 2008. The amount represents the excess of cost of acquisition over the fair value of identifiable assets andliabilities of Netsonline services (Pvt) Limited as at the date of acquisition, which was impaired in 2011.

The goodwill resulting from acquisition of WSS by the Company effective August 2, 2006. The amount represents theexcess of cost of acquisition over the fair value of identifiable assets and liabilities of WSPL as at the date ofacquisition.

The goodwill resulting from acquisition of National Engineers (AOP) by WSPL as on January 1, 2007. The amountrepresents the excess of cost of acquisition over the fair value of identifiable assets and liabilities of NationalEngineers (AOP) as at the date of acquisition.

The calculation of value-in-use is most sensitive to the following assumptions:


The cost of fully amortized computer softwares which are still in use as at June 30, 2017 is Rs. 80.452 million (June30, 2016: Rs. 71.739 million).




2017 2016

22. Deferred tax asset

Deferred tax asset-WSPL 24,283

22,947

Deferred tax asset-WTL -

-

Deferred tax asset-WWPL -

24,283

22,947

22.1 Deferred tax asset-WSPL

Deferred tax assets on deductible temporary differences

Property and equipment 36

-

Provision on trade debts 18,239

17,117

Provision on advances to suppliers 6,008

5,830

24,283 22,947

22.2 Deferred tax asset-WTL

Expiry of business and depreciation losses are as follows:

2017 2016

-

3,340,083

3,717,062

3,717,062

508,268

508,268

1,030,395

1,030,395

808,214

808,214

322,622

322,622

459,674

-

6,846,235

6,389,901

7,269,775

6,664,251

67,087

67,087

Note

22.1

22.2

No Expiry Depreciation and amortization

2020

2021

2022

2023

Business loss

Business loss

Business loss

Business loss

2019 Minimum Tax

The aggregate deferred tax asset available to the Company for set off against future taxable profits at June30, 2017 amounted to Rs. 6,072 million (June 30, 2016: Rs. 7,332 million). Of these, deferred tax assetaggregating Rs. 1,659 million (June 30, 2016: Rs 1,592 million) have been recognized in the financialstatements against deferred tax liability as at June 30, 2017.

Nature

Business loss

Business loss

Business loss

(Rupees in thousand)Tax Year

2017

2018

2019


22.3



22.3

Business losses and minimun losses expire as follows:

2017 2016

410 410

3,090 3,090

5,030 5,030

122,840

133,220

-

-

800 800

6,830 -

23

24 Long term prepayments

These mainly represent long term portion of right of way charges paid to local governments and various landowners for access of land.

Long term deposits

These mainly represent the security deposits paid to domestic interconnect operators and governmentauthorities on account of utilities and suppliers on account of rent, DPLC and satellite bandwidth.

Business loss

2021 Minimum Tax

2022 Minimum Tax

2023

Business loss

Deferred tax asset-WWPL

Tax Year Nature

The aggregate tax losses available to the Company for set off against future taxable profits at June 30, 2017amounted to Rs 14,648 million (June 30, 2016: Rs. 14,190 million). The tax depreciation and amortizationlosses pertaining to WIMAX operations as at June 30, 2017 are estimated at Rs 14,492 million (June 30,2016: Rs. 14,048 million) including the tax depreciation and amortization losses pertaining to the WIMAXassets transferred from the parent company amounting to Rs 12,850 million as at June 30, 2017 (June 30,2016: Rs. 12,850 million).

Deferred tax asset, the potential tax benefit of which amounts to Rs. 5,221 million (June 30, 2016: Rs 6,146million) has not been recognized on balance representing business losses aggregating to Rs. 156 million(June 30, 2016: Rs. 142 million), tax depreciation and amortization losses aggregating Rs. 14,648 million(June 30, 2016: Rs. 14,048 million), decelerated tax depreciation and amortization on operating assets andintangible assets of Rs. 2,374 million (June 30, 2016: Rs. 2,813 million) , deductible temporary differenceson account of provisions and impairment aggregating Rs. 201 million (June 30, 2016: Rs 3,480 million) andtax credits on account of minimum tax amounting to Rs. 7.6 million as at June 30, 2017 (June 30, 2016: Rs.0.8 million).

2019

2020

2021

2022

(Rupees in thousand)Business loss

Business loss

Business loss

Note 2017 2016

25. Trade debts - unsecured

Considered good 25.1 3,286,763 2,773,208

Considered doubtful 1,597,050 1,578,8744,883,813 4,352,082

Provision for doubtful debts 25.4 (1,597,050)

(1,578,874)

Long term trade debts (593,501)

(634,447)2,693,262

2,138,761




25.1 Trade debts include following balances due from associated companies:

683,757

374,468Bank Alfalah Limited 126,932

125,030Alfalah Insurance Company 7,571

17,795Innov8 Limited 75,968

5,231894,228

522,524

25.2 Age analysis of trade debts from associated companies, past due but not impaired is as follows.

0 to 6 months 92,596

88,3136 to 12 months 89,587 198,382Above 12 months 712,045 235,829

894,228 522,524

25.3

Total future

payments Present value2017

Current portionNot later than one year 135,885

94,527

41,358

Long term portion 422,360

252,593

169,767

809,985

386,251

423,733Later than five years 1,232,345

638,844

593,5001,368,230

733,371

634,858

Total future payments Present value

2016

Current portionNot later than one year 135,815 100,164 35,650

Long term portionBetween one and five years 543,260 333,743 209,517Later than five years 823,639 398,710 424,929

1,366,899 732,453 634,447

1,502,714 832,617 670,097

Trade debts include receivable under finance lease of optic fiber cable and telecom equipment as follows:


Unearned

Interest

Income(Rupees in thousand)

Between one and five years

Unearned Interest Income


2017 2016(Rupees in thousand)

Note 2017 2016

25.4 Provision for doubtful debts

Related parties


-

Provision made during the year - related parties


101,500

Closing balance -

101,500

Other parties

Opening balance 1,477,374

1,193,272

Provision made during the year - other parties 119,676

335,618

Reversal of provision made during the year - other parties -

(51,516)

Closing balance 25.4.1 1,597,050

1,477,374

1,597,050

1,578,874




25.4.1

Note 2017 2016

26. Stores, spares and loose tools

668,996 736,978 Less: Provision for obsolete stores 26.1 (216,507) (341,842)

Store & spares written off - (16,599)

452,489 378,537

26.1 Provision for obsolete stores


Provision for the year - 85,231

Reversal of provision (125,335) (100,075)

Closing balance 216,507 341,842

27. Stocks

25,161

23,208

Less: Provision for obsolete stocks 27.1 (82) (14,495)

25,079 8,713

27.1 Provision for obsolete stocks


13,513

Provision made during the year - 4,725

(Reversal)/ (Write-off) during the year (14,413) (3,743)

Closing balance 82 14,495

- Balances 181 - 360 days past due - 50 %


- Balances over 360 days past due - 100 %

Cost

Cost

These include Rs 1,581 million (2016: Rs 1,569 million) based on age analysis of the debts as follows:

28. Advances, deposits, prepayments and other receivables

Advances to suppliers and contractors - considered good 798,784 823,393

Advances to employees - considered good 28.1 31,220

10,745

Security deposits and earnest money 198,823

198,160

250,851

194,424

Prepayments 28.2 127,013

88,910

Sales tax refundable 69,514

71,765

Due from associated companies 28.3 537,793

614,869

Receivable from gratuity fund -

10,086

Others 157,027

152,304

2,171,025

2,164,656

Less:

Provision for doubtful receivables - related parties 28.4


194,534

Provision for the year - charged against finance income -

17,208


-

Closing balance -

211,742


668,230

Provision for the year 37,136

76,560

Reversal of provision (49,092)

-

Closing balance 732,834

744,790

732,834 956,532

1,438,191 1,208,124

Less: Provision for doubtful receivables - other parties

Margin held by bank against letters of guarantee



28.1

28.2

2017 2016

28.3 Due from associated companies

Wateen Multi Media (Pvt) Limited 199,852

228,263


83,019

Raseen Technologies (Pvt) Limited -

27,844

Warid Telecom Georgia Limited -

23,459

Warid Telecom International - Bangladesh -

8,504


68,916

INOV8 Limited 337,196

174,198

Wateen Malaysia 745

666

537,793

614,869

28.4

- -

Advance for construction of Warid Tower - 68,916

Warid International LLC, UAE - Parent company - 83,019

- 27,844

- 23,459

- 8,504

- 211,742

Provision for doubtful receivables includes provision for doubtful receivables from following related parties:


Warid Telecom - International

Wateen Telecom Limited - UK

Raseen Technologies (Pvt) Limited

Warid Telecom - Georgia Limited

These include current portion of right of way charges of Rs 13.341 million (2016: Rs 17.773 million).

This includes advances to employees on account of expenses amounting to Rs 19.405 million (June 30, 2016: Rs33.210 million).

29. Cash and bank balances

Balance with banks on

- current accounts 334,543 242,742

- collection accounts 9,415

27,728

- deposit accounts 125,366

113,753

Cash in hand 520

354

469,844

384,577

29.1

29.2

29.3

29.4

Bank balances amounting to Rs 26.558 million were under lien with banks (2016: Rs 32.624million).

Cash and bank balances include foreign currency balances aggregating USD 2.465 million (June 30, 2016: USD1.728 million).

Balance with banks include Rs. 381.641 million (June 30, 2016: Rs. 196.651 million) maintained with BankAlfallah Limited - related party.

Bank balances on deposit accounts carried interest at an average rate of 1.03%-5% per annum (2016: 5%-8%per annum).



Note 2017 2016

30. Revenue

Gross revenue30.1

8,494,344

8,065,448

Less: Sales tax / Federal excise duty (711,418)

497,630

7,782,926

7,567,818

30.1 Gross revenue

Sale of equipment 709,057

455,188

Services rendered 7,785,287 7,610,260

8,494,344 8,065,448

31. Cost of sales

LDI Interconnect cost 1,617,893

1,888,883

Leased circuit charges 180,084

146,007

Contribution to PTA Funds 85,802

91,256

PTA regulatory and spectrum fee 39,880

46,930

Cost associated with IRU of Optic Fibre Cable 248,783

273,007

Operational cost 1,617,681

1,242,735

Repair and maintenance 442,532

361,311

Bandwidth cost of VSAT services 193,938

221,187

Others 289,522

309,217

4,716,115 4,580,533

32. General and administration expenses

Salaries, wages and benefits 32.1 1,513,920

1,104,553

Rent 80,381

82,845

Repairs and maintenance 9,026

6,481

Vehicle repairs and maintenance 4,371

6,087

Travel and conveyance 22,004

15,011

Postage and stationery 7,451

7,963

Auditor's remuneration 32.2 4,649

7,366

Legal and professional charges 75,509

49,466

Communication expenses 18,317

18,127

Employee training 2,711

3,276

Customer services charges 19,323

37,399

Fees and subscription 149

4,012

Insurance 29,988

36,898

Entertainment 13,335

10,264

Advertisement 3,176

-

General office expenses 51,435

44,793

Others - 2,6101,855,745 1,437,151

32.1


These include charges against employee's retirement benefits as referred to in note 41.



Note 2017 201632.2 Auditor's remuneration

Annual audit 3,464

3,373

Audit of consolidated accounts and review of half yearly accountsOther Certifications 963 -

Tax services - 3,898 Out of pocket expenses 222 95

4,649 7,366

33. Provisions

Provision for doubtful trade debts 25.4 119,676

437,118 Provision for doubtful advances and other receivables 28 37,136

76,560

(Reversal) /Provision for obsolete stocks 27.1 -

4,725 (Reversal) /Provision for obsolete stores - -

156,812

518,403

EY FORD

RHODESA. F.

FERGUSON


35.3 This includes markup related to a running finance facility obtained from an associated company of Rs. 48.701million (June 30, 2016: Rs. 55.127 million).

35.2 This includes markup related to long term finance from Bank Alfalah Limited of Rs. 14.475 million (2016: Rs.11.158 million) and from Dhabi One Investment LLC of Rs. 9.165 million (2016: Rs. 6.719 million).

34. Other income / (expenses)

Income from financial assets:Write back of liability 563,810

516,690

Other income 116,135

34,516

Reversal of provision for doubtful advances and other receivables 49,092

-

Other Expenses (1,848)

(1,818)

Income from non financial assets:Government grant recognised 13 148,220

143,561

Loss on sale of operating assets (221,913)

(101,662)

Reversal of provision for obsolete stores 125,335

-

Reversal of provision for obsolete stock 14,413

14,844

Workers' Welfare Fund charge for the prior year -

(569)

Stores and spares write off -

(16,599)

793,244

588,963

35. Finance cost

Markup on long term and medium term finance 35.1 & 35.2 1,698,748 1,670,032

Amortization of ancillary cost of long term finance 23,875

29,540

Mark up on short term borrowings 35.3 48,701

55,127

Bank charges, commission, fees and other charges 14,403

38,019

Late payment charges on other payables 27,266

70,937

Exchange loss 75,980

660,119

Others 754

-

1,889,727

2,523,774

This includes markup related to long term finance from shareholders of Rs. 406.990 million (June 30, 2016: Rs.303.257 million), medium term finance from an associated company of Rs 55.257 million (June 30, 2016: Rs.56.649 million) and markup related to associated company of Rs. 162.969 million (June 30, 2016: Rs. 163.274million)

35.1


38 Financial instruments by category

38.1 Financial assets and liabilities

2017

Financial assets

Maturity up to one yearTrade debts-net of provisionAdvances, deposits and other receivablesCash and Bank balances

Maturity after one yearLong term depositsLong term trade debts


Maturity up to one yearLong term finance - securedMedium term finance from an associated company - unsecuredShort term running finance - securedTrade and other payablesInterest/mark-up accruedShort term finance from associated company - unsecured

Maturity after one yearLong term finance - securedLong term portion of deferred mark upLong term finance from shareholders-unsecuredMedium term finance from an associated

company - unsecured

2,693,262

2,693,262

1,175,714

1,175,714469,324

469,3244,338,300

4,338,300

419,515 419,515593,501 593,501

1,013,016 1,013,016

6,867,832

6,867,832600,000

600,000687,664

687,6644,936,567

4,936,5673,166,060

3,166,060415,000

415,00016,673,123

16,673,123

10,028,503 10,028,5035,140,075 5,140,075

14,334,440 14,334,440

- -29,503,018 29,503,018

Loans and


Other financial

liabilities Total (Rupees in thousand)


Note 2017 2016

36.

Finance income on lease 100,110

103,063

Markup on advance to associated companies 39,834

30,540

Provision of markup on advances to associated companies 28 -

(17,208)

39,834

13,332

Income on bank deposit accounts 2,766

1,922

142,710

118,317

37. Income tax expense

Current

- prior year 10,573

(4,394)

- for the year 495,068

468,244

Deferred tax

- prior year credit (1,336)

(14,694)

504,305

449,156

37.1 Numerical reconciliation between tax expense and accounting profit has not been presented as the Group issubject to minimum tax.


Finance income



38.2 Credit quality of financial assets

Rating 2017 2016

Trade debts

Counterparties with external credit rating A1+ - 154,098A1 7,946 109A2 408 290A-1 12,158

3,320A-1+ -

13,330A-2 420

247P-2 7,314

140

Counterparties without external credit ratingDue from related parties 894,228

522,524

Others 2,386,181

2,079,1503,308,655

2,773,208


Counterparties with external credit ratingA1+ 29,348

41,565A-1+ 55,438

2,551A1 -

125,000A3 -

-A-1 125,000


Due from related parties 537,793

420,335

Others 553,135

462,2671,175,714

1,051,718

Long term deposits

Others 419,515

479,760

Bank balancesA1+ 393,646 330,744

A-1+ 10,051 36,975

A-1 62,869

16,530

P-1 75

1A3 2,683

-469,324 384,249

The credit quality of group's financial assets assessed by reference to external credit ratings of counterparties determined by The Pakistan CreditRating Agency Limited (PACRA), JCR - VIS Credit Rating Company Limited (JCR-VIS), Standard and Poor's and Moody's and other internationalcredit rating agencies are as follows:


2,138,761

2,138,7611,051,718

1,051,718384,223

384,2233,574,702

3,574,702

479,760

479,760634,447

634,4471,114,207

1,114,207

4,653,075

4,653,075600,000

600,000765,512

765,5124,950,703 4,950,7032,450,281 2,450,281

13,419,571 13,419,571

12,212,309 12,212,3094,069,768 4,069,768

14,041,457 14,041,457

- -30,323,534 30,323,534


Loans and


Other financial

liabilities Total

2016

Financial assets

Maturity up to one yearTrade debts-net of provisionAdvances, deposits and other receivablesBank balances

Maturity after one yearLong term deposits Long term trade debts


Maturity up to one yearLong term finance - securedMedium term finance from an associated company - unsecuredShort term running finance - securedTrade and other payablesInterest/mark-up accrued

Maturity after one yearLong term finance - securedLong term portion of deferred mark upLong term finance from shareholders - unsecuredMedium term finance from an associated company - unsecured



39. FINANCIAL RISK MANAGEMENT

- Credit risk;

- Liquidity risk; and

- Market risk

39.1 Credit risk

The Board of Directors has overall responsibility for the establishment and oversight of the Group risk management framework. The Board is alsoresponsible for developing and monitoring the Group's risk management policies.

The Group's policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitorrisks. Management's policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group,through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which allemployees understand their roles and obligations.

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuringand managing risk, and the Group's management of capital. Further, quantitative disclosures are included throughout these financial statements.

The Board of directors oversees how management monitors compliance with the Group's policies and procedures, and reviews the adequacy of therisk management framework in relation to the risks faced by the Group. The directors are assisted in their oversight role by Internal Audit. InternalAudit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board ofDirectors.

Credit risk is the risk of financial loss to the Group if a counter party to financial instruments fails to meet its contractual obligations, and arisesprincipally from the Group's receivable from customers, deposits, contract work in progress, advances, deposits and other receivables and bankbalances. The Group assesses the credit quality of counterparties as satisfactory. The Group does not hold any collateral as security against any ofits financial assets. The Group limits its exposure to credit risk by investing only in liquid securities.

The Group has exposure to the following risks from its use of financial instruments:

Group's exposure to credit risk is influenced mainly by the individual characteristics of each operator including the default risk of the industry andcountry in which the operator works. Significant portion of the Group’s receivables is attributable to operators. Group regularly monitors the status ofreceivables.

2017 2016

Trade debts-net of provision 3,286,763 2,773,208

Advances, deposits and other receivables 1,241,664 1,051,718


Long term deposits 419,515 479,760

Gross Impairment Gross Impairment

Up to 3 months 925,257

-

1,050,395

-

3 to 6 months 578,750

-

385,560

-

6 to 9 months 413,402

206,701

859,826

235,927

Above 9 months 2,966,404

1,390,349

2,056,300

1,342,946

4,883,813

1,597,050

4,352,081

1,578,873

39.2 Liquidity risk

As June 30, 2017, the Group has financial assets of Rs. 5,351 million (June 30, 2016: Rs. 4,865 million) and Rs. 7,731 million (June30, 2016: Rs.7,981 million) unavailed borrowing facilities from financial institution.

20162017

The aging of these trade debts at the reporting date is as follows:

The Group has recorded an allowance for impairment in respect of advances, deposits and other receivables of Rs. 733 million (2016: Rs 957million).

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the statement offinancial position date to the maturity date. The amounts disclosed in the table are contractual undiscounted cash flows except for employee'sretirement benefit obligations.

Group ensures that it has sufficient cash on demand to meet expected cash outflows during its operating cycle. This excludes the potential impactof extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Group's treasury aims at maintaining flexibility infunding by keeping committed credit lines. Further shareholders of the Group has provided financial support in the form of long term finance to meetcapital requirements of the Group. Management believes the same support will continue in future. Further, the Group has restructured the long termfinance facilities and short term borrowings which will facilitate the Group to greater extent to meet its obligations/ covenants under loanagreements.

Liquidity risk is the risk that Group will not be able to meet its financial obligations as they fall due. Group's approach to managing liquidity is toensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,without incurring unacceptable losses or risking damage to Group’s reputation.





2017Long term finance - secured 16,896,335

16,896,335

6,867,832

4,664,398

5,364,105Term Finance from associated company - unsecured 415,000

415,000

-

415,000

-Long term portion of deferred mark up 5,140,075

5,140,075

-

-

5,140,075Long term finance from shareholders - unsecured 14,334,440

14,334,440

-

-

14,334,440Current portion of medium term finance from an associated company - unsecured 600,000

600,000

-

600,000

Short term running finance - secured 687,664

687,664

687,664

-

-Trade and other payables 4,936,567

4,936,567

4,936,567

-

-Long term deposits -

-

-

-

-Interest/mark-up accrued 3,166,060

3,166,060

3,166,060

-

-46,176,141

46,176,141

16,258,123

5,079,398

24,838,620

2016

Long term finance - secured 16,865,384 16,938,771 4,653,075 4,664,398 7,547,911

Term Finance from associated company - unsecured 314,100 314,100 - 314,100 -

Long term portion of deferred mark up 4,069,768 4,069,768 - - 4,069,768

Long term finance from shareholders - unsecured 14,041,457 21,884,998 - - 14,041,457

Current portion of medium term finance from an associated -

company - unsecured 600,000 600,000 -600,000

Long term deposits 35,680 35,680 - 35,680 -

Short term running finance - secured 765,512 765,512 765,512 - -

Trade and other payables 4,939,586 4,939,586 4,939,586 - -

Interest/mark-up accrued 2,425,718 2,425,718 2,425,718 - -44,057,205 51,974,134 13,383,891 5,014,178 25,659,136


Carrying Amount

Above 5

yearsCarrying amount

Contractual

Cashflows

Carrying AmountLess than 1

Year

Between 1 to

5 years

Above 5 years


Carrying amountContractual Cashflows

Less than 1 Year

Between 1 to 5 years

39.3 Market risk

a) Interest rate risk

b) Currency Risk

As the significant financial assets and liabilities carry variable interest rates, Group's operating cash flows are dependent of changes in the marketinterest rates. Financial assets of Rs. 125 million (2016: Rs 326 million) and financial liabilities of Rs 24,873 million (2016: Rs 32,660 million) weresubject to interest rate risk.

At June 30, 2017, had interest rates been 1% higher/lower with all other variables held constant, net loss for the year would have been Rs. 247million (2016: Rs 323 million) higher/lower.

The Group is exposed to currency risk on long term finance, bank balance and receivables / payables which are denominated in currency other thanthe functional currency of the Group. Financial assets include Rs 731 million (2016: Rs 1,618 million) and financial liabilities include Rs 24,743million (2016: Rs 22,847 million) in foreign currency which were exposed to exchange risk.

At June 30, 2017, if the currency had weakened/strengthened by 10% against US dollar with all other variables held constant, net loss for the yearwould have been Rs. 2,401 million (2016: Rs 2,140 million) higher/lower.

Market risk is the risk of changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management isto manage and control market risk exposures within acceptable parameters, while optimizing the return.


-

-

d) Capital risk management

The Group manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order tomaintain or adjust the capital structure, the Group may adjust the amount of dividend to shareholders, issue new shares or sell assets to reducedebts. The Group is required to maintain debt equity ratio as specified in loan agreements and continuation of support from majority shareholder isvital for the Group's operations. Under the terms of loan agreements, the Group can not declare dividends, make any distributions or pay any otheramount to its shareholders until the repayment of loan and the interest in full to the lenders. Further, the Syndicate shall be entitled to designate onenominee to be appointed as director in the Board of directors of the Group as referred in note 9.1.

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern and to maintain a capital base tosupport the sustained development of its businesses.

c) Fair value of financial instruments.

2017 2016

Financial assets - Loans and receivable

Trade debts - net of provision 3,286,763 2,773,208

Advances, deposits and other receivables 1,175,714 306,928


Long term deposits 419,515 479,760

5,351,316 3,944,119

Financial liabilities - Other financial liabilities

Long term finance - secured 16,896,335 16,865,384

Term finance from associated company - unsecured 415,000

314,100

Long term portion of deffered mark up 5,140,075 4,069,768

Finance from supplier - unsecured 14,334,440 14,041,457

Medium term finance from an associated company - unsecured 600,000 600,000

Long term deposits - 35,680

Short term running finance - secured 687,664 765,512

Trade and other payables 4,936,567 4,939,586

Interest / markup accrued 3,166,060 2,425,718

46,176,141 44,057,205

The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values.



40. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

40.1 Financial assets subject to offsetting

As at June 30, 2017

Trade debts

Due from international carriers 1,147,717

334,199

813,518

As at June 30, 2016

Trade debts

Due from international carriers 1,113,738 781,294 332,444

Gross amounts

of recognized

financial assets

Gross amounts of

recognized

financial liabilities

set off in the

balance sheet


Net amounts of

financial assets

presented in the

balance sheet



40.2 Financial liabilities subject to offsetting

As at June 30, 2017


Due to international carriers 706,030 334,199 371,831

Creditors 745,278 16,889

728,389

1,451,308 351,088 1,100,220

As at June 30, 2016


Due to international carriers 1,184,376

781,294

403,082

Creditors 780,611 133,426 647,185

1,964,987 914,720 1,050,267


Net amounts of

financial liabilities

presented in the

balance sheet

Gross amounts of

recognized

financial assets

set off in the

balance sheet

Gross amounts

of recognized

financial

liabilities

2017 201641. Employees' retirement benefits

41.1 Liability for funded staff gratuity 173,847 (10,086)

The amounts recognised in the statement of financial position are as follows:

Present value of defined benefit obligation 299,903 101,724 Benefits due but not paid 4,732 4,835 Fair value of plan assets (130,788) (116,645)Net liability / (asset) 173,847 (10,086)

41.2 The amounts recognised in the statement of financial position are as follows:

Opening liability / (asset) (10,086) (5,582)Expense recognised in income statement 209,917 (1,544)Contributions made during the year (8,500) (14,768)Remeasurement loss/(gain) recognised in statement ofcomprehensive income (17,484) 11,808 Closing liability / (asset) 173,847 (10,086)

41.3 The amounts recognised in income statement are as follows:

211,479 - Interest cost 6,829 9,489 Expected return on plan assets (8,391) (11,033)

209,917

(1,544)

41.4

Remeasurement loss/(gain) on obligations: Experience loss (1,360)

(5,727)

Actuarial loss / (gain) from changes in financial assumptions (3,716)

11,722

(5,076)

5,995

Loss/(gain) due to remeasurement of investment return (12,408) 5,813

(17,484) 11,808


Remeasurements recognised in other comprehensive income (OCI) are as follows:

Past service cost/(credit)



41.5 Changes in the present value of defined benefit obligation are as follows:

Opening defined benefit obligation 101,724

108,187 Current service cost -

-

Past service cost/(credit) 211,479

-

Interest cost 6,829

9,489

Remeasurement loss (5,076)

5,995

Benefits due but not paid (4,732)

(219)


(21,728)

Closing defined benefit obligation 299,902

101,724

41.6 Changes in fair value of plan assets:

Opening fair value of plan assets 116,645

118,385

Remeasurement gain / (loss) 8,391

(5,813)

Contributions by employer 8,500

14,768


(21,728)

Expected return on plan assets 12,408

11,033

Closing fair value of plan assets 130,788

116,645

41.7 Break-up of category of assets in respect of staff gratuity:

Rupees %age Rupees %age('000) ('000)

Bond-Listed 49,869 38.13% - 0.00%Equity-Listed 53,139 40.63% 101,948 87.40%Cash and Deposits 14,491 11.08% 14,697 12.60%Others 13,288 10.16% - 0.00%

130,787 100% 116,645 100%

During the next financial year, the Group expects to contribute Rs. 60 .86 million (2016: Rs. Nil) to the defined benefit plan.

Actual return on plan assets for the year is Rs 8.4 million (2016: 14.3 million).

2017 2016

41.8 Significant actuarial assumptions:

2017 2016

Discount rate used for year end obligation 8.00% 7.25%

Discount rate used for interest cost in profit and loss 7.25% 12.50%

Expected rate of increase in salaries-p.a 8.00% 8.00%Average expected remaining working

Life time of employees 9 years 6 years

41.9 Sensitivity Analysis

Increase (Decrease)

Discount rate 276,315

327,347

Effect of salary 328,001

275,265

42.10

The Projected Unit Credit Method using the following significant assumptions was used for the valuation:

The calculation of the defined benefit obligation is sensitive to assumptions set out above. The following table summarizeshow the defined benefit obligation at the end of reporting period would have increased/ (decreased) as a result of change inrespective assumptions by one percent.

Defined benefit obligation

Effect of 1%


The weighted average number of years of defined benefit obligation is 9 years as at June 30, 2017.



42.11

2017 2016

Provident fund 28,399

28,421

Gratuity fund 209,917

(1,544)

238,316

26,877

42. Defined contribution plan

2017 2016

Details of provident funds are as follows:Staff provident fund

Net assets 264,359

207,377

Cost of investments made 114,091

96,654

Fair value of investments made 145,614

106,007

%age of investments made 55% 51%

Breakup of investment - at cost Rs '000 %age Rs '000 %age

Shares 23,756

21% 23,756

25%

Mutual Funds 72,851

64% 40,000

41%

Bank deposits 17,484 15% 32,898 34%

114,091 100% 96,654 100%

42.1 Investments out of provident funds have been made in accordance with the provisions section 227 of the CompaniesOrdinance, 1984 and the rules formulated for the purpose.


include amounts in respect of the following:

2017 2016

The Company contributes to gratuity fund on the advice of fund’s actuary. The contribution is equal to current service costwith the adjustment for any deficit.

(Rupees in thousand)Salaries, wages and benefits as appearing in note 33



43. General

43.1 Related party transactions

Aggregate transactions with related parties during the year were as follows:

2017 2016

Parent Company

Warid Telecom International LLC, UAE (WTI)

Payments on behalf of WTL 255,701

24,563

Trade debts-write off 101,500

-

Advances-write off 83,019

-

Markup charged to WTI -

13,007

Shareholders/ Sponsors

Long term finance received from shareholders 251,009

315,000

Markup on long term finance from shareholders 408,635

303,257

Associated companies:

Sale of services 1,185,317

1,296,218

Sale of goods -

7,073


398,042

Dhabi One Investment Services LLCMark up on long term finance - unsecured 9,409

6,719

Wateen Multimedia (Pvt) Limited (WMM) Markup charged to WMM 9,921

6,116

General and administrative expenses reimbursable on behalf of WMM 59,017

39,008

Warid Telecom Georgia Limited Markup charged on advance -

1,639

Writeoff during the year 23,459

-

Raseen Technology (Pvt) Limited

Markup charged on advance -

1,967

Write off during the year 27,844

-

Warid Telecom International - Bangladesh Markup charged on advance - 595

Write off during the year 8,504 - Wateen Malaysia Inc. (WM) Payments made by the Company on behalf of WM - 666 Markup charged 79

-

Innov8 Limited Sale of services 14,124

57,816


103,108

Receipt / (payment) by WTL on behalf of Company -

24,424

Markup charged by WTL on advances and debts 47,150

-

Short term loans extended during the year 45,000

-

Bank Alfalah Limited (BAL) Sale of services 99,309

137,996

Sale of goods 48,701 64,717

Markup charged 177,487

174,774

Markup charged on bank deposits with BAL -

465

Wincom (Private) Limited (WPL)Short term finance 100,000

-

Markup charged by WPL on short term finance 3,719

-

Alfalah Insurance LimitedSale of Goods -

2,762

Rendering of services 360 452

Taavun (Pvt) Limited

Markup on long term finance 51,538 56,649

Provident Fund Trust

Employer contribution to trust 28,399 28,421

Gratuity Fund

Employer contribution to fund 209,917 14,768

The Group's related parties comprise its subsidiaries, associated undertakings, employees' retirement benefit plansand key management personnel. Amounts due from / (to) related parties, are shown under receivables and payables.Remuneration of key management personnel is disclosed in note 43.2.





43

.2R

em

un

era

tion

of C

EO

, E

xecu

tive

Dire

cto

rs a

nd

Exe

cutiv

es

20

17

20

16

20

17

20

16

20

17

20

16

20

17

20

16

Ma

na

ge

ria

l re

mu

ne

ratio

n1

7,1

20

15

,75

5

11

,51

8

1

2,5

35

3

14

,41

5

2

87

,86

8

3

43

,05

33

16

,15

8

Ho

usi

ng

an

d u

tiliti

es

9,4

16

8,6

65

-

-

1

72

,92

8

1

58

,32

8

1

82

,34

41

66

,99

3

Co

mp

an

y's

con

trib

utio

n to

pro

vid

en

t a

nd

gra

tuity

fu

nd

s1

,49

5

1,3

12

-

-

2

6,3

28

2

3,9

99

27

,82

32

5,3

11

Co

mm

issi

on

/ B

on

us

-

-

-

-

1

8,0

20

7

,82

8

18

,02

07

,82

8

Le

ave

fa

ir a

ssis

tan

ce1

,49

6

1,3

13

-

-

2

6,2

87

2

3,9

69

27

,78

32

5,2

82

29

,52

7

2

7,0

45

11,5

18

12

,53

5

5

57

,97

8

5

01

,99

2

5

99

,02

35

41

,57

2

Nu

mb

er

of p

ers

on

s1

1

1

1

33

9

28

5

34

12

87

43

.2.1

43

.2.2

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

---(

Ru

pe

es

in th

ou

san

d)-

----

----

----

----

----

----

----

----

----

----

----

----

--

Th

e C

hie

f E

xecu

tive

ha

s b

ee

n p

rovi

de

d w

ith C

om

pa

ny

ma

inta

ine

d tw

o c

ars

with

un

limite

d fu

el f

aci

lity.

Me

etin

g fe

e h

as

be

en

pa

id to

tw

o in

de

pe

nd

en

t d

ire

cto

rs a

mo

un

ting

to

Rs

5,0

35

th

ou

san

d. (J

un

e 2

0, 2

01

6: R

s 2

,50

4 th

ou

san

d).

Th

e a

gg

reg

ate

am

ou

nt ch

arg

ed

in th

e fin

an

cia

l sta

tem

en

ts fo

r re

mu

ne

ratio

n, in

clu

din

g a

ll b

en

efit

s, to

CE

O, E

xecu

tive

Dire

cto

rs a

nd

Exe

cutiv

es

of th

e

com

pa

ny

is a

s fo

llow

s:

Ch

ief

Ex

ec

uti

ve

Dir

ec

tors

Ke

y m

an

ag

em

en

t

pe

rso

nn

el

To

tal



44. Capacity

45. Number of employees 2017 2016

Total number of employees at end of the year 499 474 Average number of employees for the year 469 487

46. Date of authorisation for issue

47. Reclassification

Description From To

Taxation Taxation

Provisions Other Income

Interest accrued on long term loan Trade and other payables Interest / markup accrued

Considering the nature of the Company's business, information regarding capacity has no relevance.

These financial statements have been authorised for issue by the Board of Directors of the Company on November 02, 2017.

Corresponding figures have been re-arranged, wherever necessary, for better presentation. However no significant reclassifications havebeen made during the year except as given below:

Interest / markup accrued Advances, deposits, prepayments and other receivables


Security deposits from customers Long term deposits Trade and other payables

Tax refunds due from the Government

Other Income




The above reclassification does not have any material effect on information presented in the balance sheet and cash flow statement.Therefore, third balance sheet has not been presented.

2017Rs. in thousand

11,015

33,181

27,016

14,844

24,563

600,000


______________ __________


<---------HAVING SHARES--------->

NO. OF SHAREHOLDERS From To SHARES HELD PERCENTAGE

144 1 100 3356 0.0005

2231 101 500 1107840 0.1794

1457 501 1000 1455331 0.2357

986 1001 5000 3912239 0.6336

340 5001 10000 3336101 0.5403

32 10001 15000 453098 0.0734

86 15001 20000 1712252 0.2773

12 20001 25000 296301 0.0480

16 25001 30000 480000 0.0777

4 30001 35000 135804 0.0220

24 45001 50000 1200000 0.1943

2 55001 60000 115055 0.0186

1 70001 75000 75000 0.0121

1 80001 85000 80932 0.0131

11 95001 100000 1100000 0.1781

3 195001 200000 600000 0.0972

1 675001 680000 680000 0.1101

1 100415001 100420000 100415358 16.2623

1 167015001 167020000 167019653 27.0488

1 333295001 333300000 333296300 53.9773

5354 Company Total 617474620 100

PATTERN OF SHAREHOLDING AS ON JUNE 30, 2017


PARTICULARS NO OF FOLIO BALANCE

SHARE PERCENTAGE

DIRECTORS, CEO & CHILDREN 5 1400 0.0002

ASSOCIATED COMPANIES 4 600747211 97.2910

GENERAL PUBLIC (LOCAL) 5327 15842469 2.5657

GENERAL PUBLIC (FOREIGN) 10 780000 0.1263

OTHERS 8 103540 0.0168

COMPANY TOTAL 5354 617474620 100.000

as on June 30, 2017


NOTICE OF THE ANNUAL GENERAL MEETING

thNotice is hereby given that the 8 Annual General Meeting (“AGM”) of Wateen Telecom Limited (the “Company”) will be held on Monday, November 27, 2017 at Registered Office of Wateen Telecom Ltd. Main Walton Road, Opposite Bab-e-Pakistan, Walton Cantt. Lahore, Pakistan at 10:00 AM, to transact the following business:

Ordinary Business

th1. To confirm the minutes of the 7 Annual General Meeting held on January 23, 2017.

2. To receive, consider and adopt the audited accounts of the Company for the year ended June 30, 2017, together with the reports of the Board of Directors and Auditors thereon.

3. To re-appoint M/s EY Ford Rhodes, Chartered Accountants, as the Statutory Auditors of the Company for the financial year 2017-2018 and to fix their remuneration.

4. To transact any other business with the permission of the Chair.

By the Order of the Board

LahoreDate: November 06, 2017 Muhammad Aqib Zulfiqar

Company Secretary & CFONOTES:

A. PARTICIPATION IN ANNUAL GENERAL MEETING(i) A member entitled to attend and vote at this meeting may appoint another person as his/ her

proxy to attend and vote for him/ her. (ii) Duly completed instrument of Proxy, and other authority under which it is signed, thereof, must

be lodged with the company Secretary at the registered office of the Company Wateen Telecom Limited, Main Walton Road, Opp. Bab-e- Pakistan, Walton Road, Walton Cantt, Lahore at least 48 hours before the time of the meeting.

B. CDC ACCOUNTS HOLDERS

(a) For attending the meeting(i) In case of individuals, the account holder or the sub-account holder and/ or the person whose

securities are in group account and their registration details are uploaded as per CDC regulations, shall authenticate their identity by showing their original Computerized National Identity Cards (CNICs) or original passports at the time of attending the meeting.

(ii) In the case of corporate entities, the Board of Directors' resolution/ power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the meeting.

(b) For appointing proxies(i) In case of individuals, the account holder or the sub-account holder and/ or the person whose

securities are in group account and their registration details are uploaded as per CDC



regulations, shall submit the proxy form as per the above requirement.(ii) The proxy form shall be witnessed by two persons whose names, addresses and CNIC

numbers shall be mentioned on the form.(iii) Attested copies for CNICs or the passports of the beneficial owners and of the proxy shall be

furnished with the proxy form.(iv) The proxies shall produce their original CNICs or original passports at the time of the meeting.(v) In case of corporate entities, the Board of Directors' resolution/ power of attorney with the

specimen signature of the person nominated to represent and vote on behalf of the corporate entity shall be submitted (unless it has been provided earlier) along with proxy form to the Company.

C. CLOSURE OF SHARE TRANSFER BOOKSThe share transfer books of the Company will remain closed, and no transaction with respect to the sale/purchase of the Company's shares shall be accepted, from November 21, 2017 to, November 27, 2017, (both days inclusive).

D. CHANGE IN ADDRESSMembers are requested to promptly notify any change in their address to the share registrar of the

stCompany, THK Associates (Private) Limited, 1 Floor, 40-C, Block-6, P.E.C.H.S, Karachi.

E. PROVISION OF COPY OF COMPUTERIZED NATIONAL IDENTITY CARD (CNIC)

In order to comply with the requirement of SECP SRO 381(I)/2012 dated July 05, 2012 those

shareholders who have not yet submitted attested copy of their valid CNICs are once again

reminded to provide the same with their folio numbers to the Company's share registrar, THK

Associates (Private) Limited.


FORM OF PROXYth

8 ANNUAL GENERAL MEETING

th8 ANNUAL GENERAL MEETING

THK Associates (Pvt) Limited(Acting as Share Registrar's Office for Wateen Telecom Limited)

st1 Floor, 40-C, Block-6, P.E.C.H.S, Karachi

I/We ___________________________ of ___________________________ being member(s) of

Wateen Telecom Limited holding ___________________________ ordinary shares hereby appoint

___________________________ of ____________________________ (the “Appointee”) and in

case of failure of the Appointee to act as my/our proxy, I/we hereby appoint

___________________________ of ___________________________ who is/are also member(s)

of Wateen Telecom Limited as my/our proxy in my/our absence to attend and vote for me/ us and on

my/our behalf at the Annual General Meeting of the Company to be held on Monday, November 27,

2017 at Registered Office of Wateen Telecom Ltd. Main Walton Road, Opposite Bab-e-Pakistan,

Walton Cantt. Lahore, Pakistan at 10:00 AM, and / or any adjournment thereof.

As witness my/our hand/seal this ________ day of __________________, 2017.

Witnesses

1.______________________

2.______________________

Shareholder Folio No. ____________

Or

CDC Participant I.D. No. ____________

&

Sub Account No. _____________

Signature on Five Rupees Revenue Stamp.

The signature should match with the

specimen registered with the Company


Annual Report 2017 - · PDF fileWateen continued to improve its revenues in FY17to PKR 7,024...

Documents

Transcript of Annual Report 2017 - · PDF fileWateen continued to improve its revenues in FY17to PKR 7,024...