for the period ended March 31, 2012 - Wateen · PDF fileAs of March 31, 2012 ... major...

Quarterly Reportfor the period ended March 31, 2012

Contents

02 Corporate Information03 Directors’ Report

Condensed Financial Information

04 Condensed Interim Statement of Financial Position06 Condensed Interim Income Statement07 Condensed Interim Statement of Comprehensive Income08 Condensed Interim Statement of Cash Flows10 Condensed Interim Statement of Changes in Equity11 Notes to and Forming Part of the Condensed Interim Financial Information

Condensed Consolidated Financial Information

28 Condensed Interim Consolidated Statement of Financial Position30 Condensed Interim Consolidated Income Statement31 Condensed Interim Consolidated Statement of Comprehensive Income32 Condensed Interim Consolidated Statement of Cash Flows34 Condensed Interim Consolidated Statement of Changes in Equity35 Notes to and Forming Part of the Condensed Interim Consolidated Financial Information

01Wateen Telecom Limited Quarterly Report Mar ‘12

Corporate Information

Board of DirectorsAs of March 31, 2012

H.H. Nahayan Mabarak Al NahayanH.E. Sultan Khalfan Sultan Hudairem Al KtebiAbdulla Khalil Muhammad Samea Al MutawaZouhair Abdul KhaliqAtif Aslam BajwaAdeel Khalid BajwaNaeem Zamindar

Board of DirectorsAs Presently Constituted

H.H. Nahayan Mabarak Al NahayanZouhair Abdul KhaliqJinah HajaliAdeel Khalid BajwaNaeem ZamindarAbid HasanIndependent DirectorKhwaja Ahmad HosainIndependent Director

Management TeamNaeem Zamindar Chief Executive OfficerMurtaza Raza Chief Financial OfficerSajid Farooq Hashmi Company Secretary & Head of LegalFaisal Sattar Chief Technology OfficerAsad Rezzvi Chief Transformation OfficerJunaid Sheikh General Manager LDI Business UnitHamid Mohyuddin General Manager Enterprise Business UnitAnwar Khan General Manager Consumer Business UnitNaila Bhatti General Manager MediaSaleem Akhtar General Manager Business DevelopmentBrig® Mazhar Qayyum Butt General Manager Corporate AffairsZafar Iqbal General Manager HR, Admin & InfrastructureSohaib Sheikh Head of MarketingOmar Zia Head of Audit, Risk & Governance

AuditorsA.F. Ferguson & Co.Chartered AccountantsPIA Building, 3rd Floor,49 – Blue Area, P.O. Box 3021,Islamabad.

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

Present Place of Business2-E-II, Oberoi House, Gulberg III,Lahore

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

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

Legal AdvisorsIjaz Ahmed & Associates(Advocates & Legal Consultants)Suite No. 425, 4th Floor,Siddique Trade Centre,72 Main Boulevard,Gulberg, Lahore, Pakistan.Tel: [email protected]

02 Wateen Telecom Limited Quarterly Report Mar ‘12

The Directors of the Company hereby present the report for the third quarter along with condensed interim un–audited financial statements of the Company for the nine months ended March 31, 2012.

On 10th February 2012, three months after our re–launch, we had a fire incident that significantly burned down our head office which seated over six hundred staff members and hosted our call center and network operations hub. The Company managed the situation with no loss of human life and minimum disruption to overall business. Certain critical financial records for the period FY12, damaged/ destroyed in the incident have also been reconstructed with the help of external consultants. The fire significantly affected our growth momentum and has taken us over 12 months to recover from the situation.

The Company posted revenues of PKR 1,953 million for the quarter ended March 31, 2012 4% higher compared to PKR 1,880 million for the period ended March 31, 2011. Although EBITDA for the period improved by around 26% from PKR (298 million) in 3QFY11 PKR (221 million) in 3QFY2012, the fire considerably affected our growth momentum and it took a significant time to recover from the situation.

The Company’s WiMAX business has been the major contributor to losses, which, due to a lack of scale, aggressive competition, and high churn has not been able to produce expected results. In addition, plan to scale up our triple play fiber to the business and home segment was deferred due to a non–conducive, competitive landscape and suppressed economic environment.

The LDI line of business continued to make substantial progress due to steps taken in the previous quarters. Efforts towards positioning the Company paid off as Telenor Pakistan started routing its international Outgoing traffic through Wateen in March 2012 increasing Wateen’s international outbound traffic customer base to 4 GSM operators in Pakistan. The period also

saw Wateen successfully roll out WiFi hotspots covering all major airports, restaurants & hospitals nationwide.

Pakistan’s connectivity with Afghanistan is now in place through Torkhum and Chaman during the period, offering new opportunities for growth. Owing to loss mainly on account of WiMAX operations, and the associated impairment of the Company’s assets, the Board of Directors carefully assessed the number of factors covering the trading performance of the business, the ability to implement the significant debt restructuring of the Company’s existing debts, and the appetite of majority shareholders to continue their financial support of the Company. Based on the analysis of these factors, we are comfortable that the Company will be able to continue as a going concern in the foreseeable future.

Due to data loss caused by fire incident at the Company’s head office at New Auriga Complex, Lahore, the Company was unable to prepare and submit the financial statements for the period ended March 31, 2012 in the stipulated time. As a result of this fire, certain critical financial and accounting records and data pertaining to the period July 1, 2008 to February 10, 2012 were damaged and destroyed. The management of the Company commenced a comprehensive exercise to reconstruct necessary accounting records, documentation, agreements and other information. As of the date of this report, we have managed to reconstruct records for the period July 1, 2011 to February 10, 2012 enabling us to present Q3FY12 financial statements. Work related to the period July 1, 2008 to June 30, 2011 is currently in progress with the support of external consultants.

On behalf of the Board,

Naeem ZamindarChief Executive Officer

Date: June 13, 2013

Directors’ Report


Condensed Interim Statement of Financial Position (Un–Audited)As at March 31, 2012

(Audited) March 31, June 30, Note 2012 2011 (Rupees in thousand)

SHARE CAPITAL AND RESERVESAuthorised capital 1,000,000,000(June 30, 2011: 1,000,000,000)ordinary shares of Rs 10 each 10,000,000 10,000,000

Issued, subscribed and paid–up capital 6,174,746 6,174,746617,474,620 (June 30, 2011: 617,474,620)ordinary shares of Rs 10 eachGeneral reserve 134,681 134,681Accumulated loss (23,498,661) (7,081,625) (17,189,234) (772,198)NON–CURRENT LIABILITIESLong term finance– secured 5 – – Medium term finance from an associated company – unsecured 6 600,000 – Long term finance from a shareholder – unsecured 7 8,623,830 4,918,227 Obligations under finance leases 3,762 4,406 Long term deposits 66,006 61,588 9,293,598 4,984,221 DEFERRED LIABILITIESDeferred income tax liability 8 – – Deferred USF grant 9 1,525,327 1,136,310 1,525,327 1,136,310 CURRENT LIABILITIESCurrent portion of long term finance – secured 5 15,089,832 12,347,893 Current portion of medium term finance from an associated company – unsecured 6 – 600,000 Current portion of obligations under finance leases 3,077 3,607 Finance from supplier – unsecured 40,542 59,112 Short term borrowings – secured 10 1,714,790 4,107,540 Trade and other payables 11 6,721,647 5,006,345 Interest / markup accrued 1,293,529 799,568 24,863,417 22,924,065 CONTINGENCIES AND COMMITMENTS 12 – – 18,493,108 28,272,398

The annexed notes 1 to 24 form an integral part of this condensed interim financial information.


Condensed Interim Statement of Financial Position (Un–Audited)As at March 31, 2012

(Audited) March 31, June 30, Note 2012 2011 (Rupees in thousand)

NON–CURRENT ASSETSProperty, plant and equipment Operating assets 13 8,316,746 18,750,491 Capital work in progress 14 3,151,823 2,304,106 Intangible assets 194,591 203,424 11,663,160 21,258,021

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

DEFERRED INCOME TAX ASSET 8 – 1,718,574

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 295,654 293,043 Long term prepayments 84,484 64,094 380,138 357,137

CURRENT ASSETSTrade debts 16 2,175,108 1,768,046 Contract work in progress 15,876 15,178 Stores, spares and loose tools 17 574,186 531,431 Advances, deposits, prepayments and other receivables 18 2,871,163 1,615,479 Income tax refundable 334,009 248,826 Cash and bank balances 341,806 622,045 6,312,149 4,801,005

18,493,108 28,272,398

______________Chief Executive

______________Director


3 months to 9 months to March 31, March 31, March 31, March 31, Note 2012 2011 2012 2011 (Rupees in thousand)

Revenue 1,953,059 1,880,139 5,330,007 5,137,329

Cost of sales (excluding depreciation and amortisation) 1,577,903 1,636,546 4,605,827 4,075,617 General and administration expenses 381,318 401,278 1,588,475 1,256,242 Advertisement and marketing expenses 53,144 30,421 249,180 105,692 Selling and distribution expenses 8,605 3,757 34,469 12,587 Provisions and write off 19 169,535 114,493 284,519 1,631,296 Other income (16,928) (8,122) (66,370) (184,912) 2,173,578 2,178,373 6,696,100 6,896,522

Loss before interest, taxation,depreciation and amortisation (220,519) (298,234) (1,366,093) (1,759,193)Less: Depreciation and amortisation 528,114 514,418 1,590,597 1,501,745 Provision for impairment of WiMAX assets 13.2 – – 9,622,973 – Finance cost 352,272 436,127 2,224,615 1,718,684 Finance income (33,571) (31,069) (105,836) (112,828)Loss before taxation (1,067,334) (1,217,711) (14,698,442) (4,866,794)Deferred income tax (expense) / credit (6,387) 223,257 (1,718,594) 1,071,245 Loss for the period (1,073,721) (994,453) (16,417,036) (3,795,549)

Loss per share – (Rs) (1.74) (1.61) (26.59) (6.15)


Condensed Interim Income Statement (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


3 months to 9 months to March 31, March 31, March 31, March 31, 2012 2011 2012 2011 (Rupees in thousand)

Loss for the period (1,073,721) (994,453) (16,417,036) (3,795,549)Other comprehensive income – – – –

Total comprehensive loss for the period (1,073,721) (994,453) (16,417,036) (3,795,549)


Condensed Interim Statement of Comprehensive Income (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


9 months to March 31, March 31, 2012 2011 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (14,698,442) (4,866,795)Adjustment of non cash items:Depreciation and Amortisation 1,590,597 1,501,745 Loss on sale of operating assets – 11,252 Finance cost 2,224,615 1,718,684 Cost associated with IRU of Optic Fiber Cable – 27,477 Deferred grant recognised during the period (65,917) (118,053)Dividend income from subsidiary company – (156,060)Provisions and write off (note 19) 284,519 1,631,296 Provision for Impairment of WiMAX assets (note 13.2) 9,622,973 – Provision for employees’ accumulated absences – 6,096 13,656,788 4,622,437 (1,041,654) (244,358)Changes in working capital: (Increase)/Decrease in trade debts (691,581) 1,223,763 (Increase) in contract work in progress (698) (3,744)(Increase)/Decrease in stores, spares and loose tools (42,755) 102,714 (Increase) in advances, deposits, prepayments and other receivables (1,255,684) (176,276)Increase in cross currency and interest rate swap liability – 133,548 Increase/ (Decrease) in trade and other payables 1,715,302 (931,054) (275,417) 348,952 Employees’ accumulated absences paid – (16,368)Taxes (paid)/refunded (85,203) 34,448 Cash flows from operating activities (1,402,274) 122,673 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,609,212) (2,154,561)Intangible assets additions (9,498) (4,300)Sale of property, plant and equipment – 16,655 Long term deposits receivable – (paid) (2,611) (34,263)Long term prepayments (20,390) 12,316 Advance against purchase of shares – (85,000)Dividend income received – 156,060 Cash flows from investing activities (1,641,710) (2,093,093)

Condensed Interim Statement of Cash Flow (Un–Audited)For the nine months’ period ended March 31, 2012



______________Director

9 months to March 31, March 31, 2012 2011 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Long term finance conversion from short term borrowing/received 2,360,305 508,830 Effect of exchange rate changes and other cost of loans 408,634 – Long term finance repaid (27,000) (1,153,778)Long term finance received from associated company – 600,000 Long term finance received from sponsor 3,705,603 2,779,615 Payable to supplier to be settled through long term finance repaid – (433,798)Long term payable to supplier (repaid)/received (18,570) 273 Deferred USF grant received 454,934 335,134 Obligations under finance leases repaid (1,174) 2,952 Long term deposits payable received/ (repaid) 4,418 (48,385)Short term borrowings repaid (134,750) (1,545,415)Finance cost paid (1,730,654) (1,784,900)Cash flows from financing activities 5,021,745 (739,472) (DECREASE) IN CASH AND CASH EQUIVALENTS 1,977,761 (2,709,891)Cash and cash equivalents at beginning of the period (3,350,745) (927,266)CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (1,372,984) (3,637,157) CASH AND CASH EQUIVALENTS COMPRISE:Cash and bank balances 341,806 398,964 Short term running finance (1,714,790) (4,036,121) (1,372,984) (3,637,157)


Condensed Interim Statement of Cash Flow (Un–Audited)For the nine months’ period ended March 31, 2012


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

Balance at July 1, 2010 6,174,746 134,681 (2,099,760) 4,209,667 Total comprehensive loss for the period – – (3,795,549) (3,795,549)

Balance at March 31, 2011 6,174,746 134,681 (5,895,309) 414,118 Balance at April 1, 2011 6,174,746 134,681 (5,895,309) 414,118 Total comprehensive loss for the period – – (1,186,316) (1,186,316) Balance at Jun 30, 2011 6,174,746 134,681 (7,081,625) (772,198) Balance at July 1, 2011 6,174,746 134,681 (7,081,625) (772,198)Total comprehensive loss for the period – – (16,417,036) (16,417,036) Balance at March 31, 2012 6,174,746 134,681 (23,498,661) (17,189,234)


Condensed Interim Statement of Changes in Equity (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


1. Legal status and operations The Company was incorporated in Pakistan as a Private Limited Company under Companies

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

2. Statement of compliance This condensed interim financial information of the Company for the nine months period ended March

31, 2012 has been prepared in accordance with the requirements of the International Accounting Standard 34 – Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed.

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

interim financial information are the same as those applied in preparation of the financial statements for the year ended June 30, 2011.

4. Management’s assessment of going concern In assessing the Going Concern status of the Company, Management have carefully assessed a

number of factors covering the trading performance of the business, the ability to implement a significant debt restructuring of the Company’s existing debt’s, and the appetite of our majority shareholder to continue financial support. Based on the analysis of these, Management are comfortable that the Company will be able to continue as a going concern in the foreseeable future. Set out below are the key areas of evidence that Management have considered.

Operational performance During 2012, the Company incurred trading losses of Rs 16,417 million, and had net Current Liabilities

as at 31 March 2012 of Rs 18,586 million, of which Rs 12,028 million relates to loan installments classified as current liabilities as mentioned in note 5.6, and that is due for repayment after March 31, 2013. It is important to note that during this period of losses the Majority Shareholders of the Company have continued to provide financial support in the form of long term finance amounting to Rs 8,624 million to meet the requirements of the Company.

Notes to and Forming Part of the Condensed Interim Financial Information (Un–Audited)For the nine months’ period ended March 31, 2012


Following continuing losses during the financial year 2012 the Board directed management to implement a ‘Containment plan’ that would stem the losses of the Company and provide stability. This containment plan included a cost cutting exercise, assessment of options for the WiMAX business, and continued support of the other business lines. With regards to the WiMAX business there are discussions underway with third parties to consolidate the WiMAX business which if successful, would benefit the Company and it’s stakeholders

The Company has incurred capital expenditures on different Universal Service Fund (USF) Projects awarded by USF Company, (total contract values Rs 4,800 million contracts awarded to date) of which Rs 1.652 million have been received by the Company to date. Furthermore milestones have been achieved and the Company is in the process of offering the project milestone notice(s) for audit to the USF Company during the ensuing year. Upon successful completion of audit the Company will be entitled to claim the balance from USF Company related to completed milestones, and collect further material receipts from the USF Company which will benefit the cash flow.

Debt Restructuring Discussions have commenced with the Local Syndicate Lenders, our Foreign Debt Lenders, and our

Majority Shareholders. Constructive discussions are taking place and there is a willingness on all sides to find a solution, including a willingness from our Majority Shareholder to provide further financial support. Given this Management are of the view that based on these constructive discussions, and information that is currently available; there is a high likelihood of a successful outcome.

Ongoing Shareholder Support Our majority shareholder WTI LLC continues to provide Management with comfort with regards to

it’s ongoing support, key requirements of which are the delisting of the Company from all Stock Exchanges of Pakistan where the Company is listed, and the successful restructuring of the debt. Both of these initiatives are progressing well.

This message was also reiterated in the letter WTI LLC provided to The Board of Directors with regards to the Buy–Back and De–Listing of Shares as disclosed in note 21 , which was subsequently made available to the Public by the Exchanges. In this WTI LLC stated ‘WTI’s buy–back of the shares reflects its strong commitment to Wateen and its local operations and enables a restructuring to take place that provides Wateen with the best possible chance to repay the current debts that are outstanding’.

In addition to this WTI LLC guarantees the Local Syndicate Finance Facility, and certain Personal Guarantees are provided to the Foreign Debt Holders. Based on the provision of these Guarantees WTI LLC are providing strong support to the Management through the restructuring discussions.



March 31, June 30, Note 2012 2011 (Rupees in thousand)

5. Long term finance – secured Syndicate of banks 5.1 8,142,335 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,325,768 2,202,888 Dubai Islamic Bank (DIB) 5.3 424,000 424,000 Motorola Credit Corporation (MCC) 5.4 4,359,670 4,129,330 Standard Chartered Bank (SCB) 5.5 – 1,043,030 Total 15,251,772 12,565,248 Unamortized transaction and other ancillary cost Opening balance 217,355 299,464 Additions during the period/year – – Amortisation for the period/year (55,415) (82,109) (161,940) (217,355) 15,089,832 12,347,893 Less: Amount shown as current liability Amount payable within next twelve months (3,062,167) (3,225,026) Amount due after March 31st, 2013 5.7 (12,027,665) (9,122,867) (15,089,832) (12,347,893) – –

5.1 The company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank AI–Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company. On February 24, 2012, the Company and the Syndicate of Banks signed an agreement to restructure Syndicate term finance facility and the short term running finance from SCB of Rs 1,497 million, term finance facility from SCB of Rs 1,016 million, running finance facility of Rs 529 million from BAHL, running finance facility of Rs 200 million from Soneri Bank Limited and finance facility of Rs 135 million from Summit Bank Limited effective from January 1, 2011. All the finance facilities have been fully availed by the Company till March 31, 2012. The principal is repayable in ten unequal semi annual instalments . The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and 6 months KIBOR + 2.5% per annum for the remaining period. The Company shall pay the mark up at 8% per annum from January 1, 2011 to December 31, 2013 (deferment period). The remaining amount of all instalments falling due in the deferment period shall be paid in ten equal six–monthly instalments on each January 1 and July 1 commencing from July 1, 2014 and ending January 1, 2019. Initially the tenor of the facility was 5 years commencing from November 4, 2009 and it carried a mark up of 6 months KIBOR + 2.75% per annum for 1–2 years and KIBOR + 2.5% per annum for next 3–5 years.

Certain conditions precedent to the restructured agreements are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to resructured



agreements are fulfilled bank will formally issue letter to the Company which will complete the restructuring process.

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

5.2 The Company has obtained long term finance facility amounting to USD 42 million (June 30, 2011: USD 42 million) from ECGD UK, of which USD 35 million (June 30, 2011: USD 35 million) has been availed till March 31, 2012. Subsequent to the period end on June 30, 2012, the Company and ECGD UK signed an agreement to restructure the terms of loan agreement including repayment schedule. Amount outstanding at March 31, 2012 was USD 25.600 million. The principal is repayable in ten semi annual instalments. The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is six month LIBOR + 1.5% (interest rate) per annum till June 30, 2011 and six month LIBOR + 1.9% (interest rate) for the remaining period. If the amount of instalment payable and/or interest payable is not paid on the due date, the Company shall pay interest on such amount the interest rate + 2% per annum. Initially the loan was repayable in 14 semi annual instalments of USD 3.025 million each started from October 14, 2009 and rate of mark–up was LIBOR + 1.5% per annum.

Subsequent to period end, certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled ECGD will formally issue letter to the Company which will completes the restructuring process.

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

5.3 The Company has obtained Ijarah finance facility of Rs 530 million (June 30, 2011: Rs 530 million) from DIB. On March 30, 2012, the Company and DIB signed an agreement to restructure the terms of the Ijarah finance facility. The principal is repayable in ten unequal semi annual instalments. The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and KIBOR + 2.5% per annum for the remaining period. The Company shall pay the mark up at 8% per annum from January 1, 2011 to December 31, 2013 (deferment period). The remaining amount of all instalments falling due in the deferment period shall be paid in ten equal six–monthly instalments on each January 1 and July 1 commencing from July 1, 2014 and ending January 1, 2019. Initially the principal was repayable in 10 semi annual instalments of Rs 53 million each commencing from February 1, 2010 and rate of mark up was 6 month KIBOR plus 1.5% per annum.

Subsequent to the period end, certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled bank will formally issue letter to the Company which will complete the restructuring process.



The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/ fixed assets (moveable and immoveable) and a corporate guarantee from Warid Telecom International LLC.

5.4 The Company has obtained term finance facility of USD 65 million (June 30, 2011: USD 65 million) from MCC of which USD 64 million (June 30, 2011: USD 64 million) has been availed till March 31, 2012. On August 19, 2011, MCC has transferred all of its rights, title benefits and interests in the original facility agreement to Deutsche Bank AG as lender, effective August 19, 2011. On January 12, 2012, the Company and Deutsche Bank AG signed an agreement to restructure the terms of loan agreement. Amount outstanding at June 30, 2012 was USD 48 million. The principal is repayable in ten semi annual instalments 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. If the Company fails to pay any amount payable on its due date, interest shall accrue on the unpaid sum from the due date up to the date of actual payment at a rate which is 2% higher than the rate of interest in effect thereon at the time of such default until the end of the then 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. Initially the principal amount of outstanding facility was repayable in 12 unequal semi annual instalments commencing from June 30, 2009 until and including the final maturity date which was December 31, 2014 and rate of mark–up was six month LIBOR + 1.7% per annum. Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled bank will formally issue letter to the Company which will completes the restructuring process. The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari passu with unsecured and unsubordinated creditors.


5.5 Standard Chartered Bank (SCB) Medium term finance facility 5.5.1 – 27,000 Term finance facility 5.5.2 – 291,433 Term finance facility 5.5.2 – 217,397 Term finance facility 5.5.2 – 507,200 – 1,043,030

5.5.1 The entire amount of the outstanding facility has been repaid during the period.

5.5.2 On February 24, 2012, the Company and Syndicate of banks signed an agreement to restructure the term finance facilities from SCB of Rs 1,016 million and consolidated these with Syndicate Finance facility as referred to in note 5.1 above.



5.6 The Company is required to maintain Long Term Debt to Equity Ratio of 80:20 as specified in restructured loan agreements .Financial position as at March 31, 2012 depicts an event of default under loan agreements. Accordingly, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the statement of financial position date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments for an amount of Rs 12,027 million due after July 1, 2014 as per loan agreements have been shown as current liability.

6. Medium term finance from an associated company – unsecured The Company has obtained an aggregate medium term finance facility of Rs 600 million from an

associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e. September 30, 2010, which is further extendable to twelve months. The rate of mark–up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As the loan is subordinated to all secured finance facilities availed by the Company, the entire amount of loan has been classified as non current liability. Subsequent to the year end the Company has not repaid the loan.


7. Long term finance from shareholders – unsecured Facility 1 7.1 2,263,155 2,067,351 Facility 2 7.2 6,360,675 2,850,876 8,623,830 4,918,227

7.1 The Company has obtained long term finance from a shareholder amounting to USD 24 million (June 30, 2011: USD 24 million). This loan is subordinated to all secured finance facilities availed by the Company. This loans is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loans, which shall be on or about January 29, 2015. The rate of mark–up is 6 months LIBOR + 1.5% with 24 months payment grace period payable half yearly. Alternatively loans may be converted into equity by way of issuance of the Company’s ordinary shares at the option of the lender at any time prior to, at or after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be affected at such price per ordinary share of the Company as shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the conversion request date, provided that such 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 Company except as provided under Law. In the event the Company defaults on its financial loans or in case Warid Telecom International LLC, Abu Dhabi, UAE, no longer remains the holding company of the Company and sells its 100 % shares to any other person or party or relinquishes the control of its management then, unless otherwise agreed in writing by the lender, the entire loan together with the accrued interest will become due and payable for with and shall be paid within 15 working days of the event of default or decision of the Board of Directors of the Company accepting such a change in the shareholding as the case may be, and until repaid in full, the loan shall immediately become part of financial loans, ranking pari passu therewith subject to the consent of the Company’s existing financial loan providers.

7.2 The Company has obtained long term finance from a shareholder amounting to USD 185 million agreement have been signed subsequent to the period end, (June 30, 2011: USD 52 million) of which USD 70 million (June 30, 2011: USD 33 million) has been availed at March 31, 2012. The rate of mark–up is 6 months LIBOR + 1.5% payable half yearly. The Company shall repay the loan in full in five equal annual instalments beginning on June 30, 2014 with final maturity date of June 30, 2018. Alternatively the lender shall also have the option to instruct the Company any time during the term of this agreement to convert the remaining unpaid amount of the loan and the interest in part or in its entirety into equity by way of issuance of ordinary shares of the Company in favour 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 the Company shall, with mutual consent, appoint an independent auditor to determine the fair market value per share of the borrower prevailing at the time of such request. lf the lender agrees to the price per share as determined by the independent auditor then the loan and the interest shall be converted into equity at the rate per share decided by the independent auditor. In case the lender, in its sole discretion, disagrees with the price per share as determined by the independent auditor then the request for conversion shall stand revoked and the loan shall subsist.

The loan together with the interest shall have priority over all other unsecured debts of the Company. Further, after the execution of this agreement, the Company shall not avail any other loan or funding facility from any other source without prior written consent of the lender. The Company undertakes that it shall not declare dividends, make any distributions or pay any other amount to its shareholders unless the repayment of the loan and the interest in full to the lender. The rights of the lender in respect of the loan are subordinated to any indebtedness of the Company to any secured lending by any financial institution in any way, both present and future notwithstanding whether such indebtedness is recoverable by process of law or is conditional or unconditional. Furthermore, in the event that insolvency proceedings are initiated against the Company or that it is unable to pay its Financial Loans as they fall due or if the Company has proposed any composition, assignment or arrangement with respect to its Financial Loans, the obligation to repay the outstanding amount of the loan shall be subordinated to the Financial Loans but will have priority over all other unsecured debts of the Company.



March 31, June 30, 2012 2011 (Rupees in thousand)

8. Deferred income tax asset Taxable temporary differences between accounting and tax depreciation (445,140) (3,835,305) Unused tax losses – recognised to extent of taxable temporary differences 445,140 4,945,800 Unused tax benefit related to share issue cost – 37,329 Deductible temporary differences on account of provisions – 570,750 – 1,718,574

The gross movement in deferred tax liability during the year is as follows:

Balance at July 1 1,718,574 (74,593) Deferred tax credit / (expense) for the period/year (1,718,574) 1,793,167 Balance at March 31 – 1,718,574

The aggregate tax losses available to the Company for set off against future taxable profits at March 31, 2012 amounted to Rs 19,852 million. Of these, losses aggregating Rs 1,272 million have been recognised in the financial statements against taxable temporary differences at March 31, 2012.

Deferred tax asset, the potential tax benefit of which amounts to Rs 10,551 million has not been recognized on balance representing business losses aggregating to Rs 5,999 million, tax depreciation losses aggregating Rs 12,582 million and deductible temporary differences on account of provisions and share issue cost aggregating Rs 11,566 million as at March 31, 2012. Business losses expire as follows:

Tax Year Rs in million

2016 96 2017 3,340 2018 2,563 During the period, management of the Company has taken a conservative view regarding recognition

of deferred tax asset amounting to Rs 10,551 million during the period, therefore deferred tax asset has been recognised only to the extent of taxable temporary differences.


9. Deferred Universal Service Fund (USF) grant Balance at beginning of the period/year 1,136,310 827,159 Amount received/receivable during the period/year 454,934 359,756 Amount recognised as income during the period/year (65,917) (50,605) Closing balance 1,525,327 1,136,310




10. Short term borrowings – secured Short term borrowings – 134,750 Short term running finance 1,714,790 3,972,790 1,714,790 4,107,540

11. Trade and other payables These include payable to related parties as follows: Wateen Solutions (Pvt) Limited 234,814 210,135 Wateen Satellite Services (Pvt) Limited 146,204 146,204 Advances from Warid Telecom (Pvt) Limited 48,893 48,893 Bank Alfalah Limited 3,950 3,950 Payable to gratuity fund 124,991 120,013 Payable to provident fund 6,611 36,737 565,463 565,932

12. Contingencies and commitments12.1 Claims against the Company not acknowledged as debt 319,338 295,76712.2 Performance guarantees issued by banks in favour of the Company 2,051,487 1,264,217

12.3 Under the Access Promotion Regulations, 2005, the Company is liable to make payments of Access Promotion Charges (APC) for Universal Service Fund (USF) within 90 days of close of the month to which such payment relates. The Company has disputed the APC Regulations, 2005 and the case is currently pending with High Court. The Company has not recorded the penalty on delayed payment of APC for USF amounting to Rs 57 million as required by the Access Promotion Regulations, 2005 as the management and legal advisor of the Company are of the view, that the Company has a strong case and chances of success are very high.

12.4 The Deputy Commissioner Inland Revenue had issued Order in Original based on the observations that Company had not paid FED on fee paid to WTI and created demand of Rs 31.830 million along with the penalty and default surcharge has been created and also issued recovery notices. The Commissioner Inland Revenue – Appeals and the Appellate Tribunal Inland revenue upheld the orders of the DCIR. The Company intends to contest the case at superior appellate forum.

12.5 The Assistant Commissioner Inland Revenue, Enforcement Unit IV, Large Tax Unit, Islamabad (AC) had issued show cause notices based on the observation that Company has not furnished Sales Tax and Federal Excise returns for the period from August 2009 to March 2010, November 2010 and December 2011. In this respect, AC issued Order–in–Original and assessed demand of Rs 249.471 million (calculated on the based is of minimum liability assessed) along with penalty and default surcharge and also issued receiver note. The Company deposited principal amount of Rs 138.709 million and default surcharge of Rs 26.231 million based on the actual liability as per own working of the Company. The Appellate Tribunal Inland Revenue, Islamabad, has remanded back the



case to the assessing officer with certain directions. The assessing officer has required the related documents from the Company which has been provided by the Company and no order has been passed as yet.

12.6 The Assistant commissioner Inland Revenue, Enforcement –IV issued show cause notices under section 161/205 for the tax year 2008, 2009, 2010 and 2011 on account of non–withholding of taxes on payments made to foreign telecom operators. Further the ACIR issued demand note for Rs. 477,767 thousand including default surcharge for the aforesaid tax years. Appeal has been filed against the said orders with the commissioner Appeals.

12.7 The Assistant commissioner Inland Revenue, Enforcement –IV issued show cause notices under section 161/205 for the tax year 2008, 2009, 2010 and 2011 on account of non withholding tax of taxes on payment made to foreign telecom operators and has bifurcated Interconnect expenses of Rs 5,800 million in the ratio of 60:40 relating to local and foreign operators respectively for the aforesaid tax years.

No provision on account of contingencies disclosed in note 12.4-12.7 above has been made in these financial statements as the management and the tax advisors of the Company are of the view, that these matters will eventually be settled in favour of the Company.


12.8 Outstanding commitments for capital expenditure 639,343 938,734

12.9 Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited The Board of Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009

approved the acquisition of 49% shareholding of Wateen Solutions (Private) Limited from Mr. Jahangir Ahmed for a total sale consideration of Rs 490 million. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions (Private) Limited.

However, in light of the dividend payment of Rs 149.94 million by Wateen Solutions (Private) Limited to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490 million to Rs 340 million. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, 2010.

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

Same have been approved by shareholders in Extra Ordinary General Meeting dated December 31, 2011.



Nine months to Year ended March 31, June 30, 2012 2011 (Rupees in thousand)

13. Operating assets Opening net book value 18,750,491 17,045,929 Additions – owned 1,061,420 3,852,188 – leased – 3,504 Disposals at net book value – note 13.1 (299,925) (107,062) Impairment – note 13.2 (9,622,973) – Depreciation charge (1,572,267) (2,044,068) 8,316,746 18,750,491

13.1 This represents disposal of assets due to fire incidence as disclosed in note 22 to these condensed financial information.

13.2 Impairment Management has reviewed the business performance of WiMAX operations during the year and an

assessment has been made in respect of triggering events as specified by IAS 36 applicable to the non–current assets relating to WiMAX operations. Based on the following indicators applicable to WiMAX, an impairment test has been carried out by a consultant to determine the impairment of non–current assets relating to WiMAX operations:

– Decline in the market value of WiMAX business’s asset – Significant change in the technological and economic requirements – Decrease in the economic performance of WiMAX business – Indications suggest that WiMAX business would become idle and management plans to restructure

the Wimax operations For the purpose of determining the value in use, the WiMAX operations has been considered as

separate Cash Generating Unit (CGU), the value in use has been determined using discounted cash flow method. The financial projections of the CGU for five years have been derived from a latest business plan which is approved by the Board of Directors (BOD) of the Company based on containment strategy. The value in use of WiMAX assets determined by a consultant is negative Rs 1,036.391 million using discount rate of 20%.

The Board of Directors is currently considering other options for the WiMAX business and there are certain discussions taking place with third parties to merge the WiMAX business. Based on the information available management estimates that in case of any possible business consolidation, the fair value of these assets, (positive net present value of future cash flows of consolidated business) using discount rate of 20% amounts to Rs 2,049 million. The fair value estimate has been used as recoverable amount to determine impairment. The management has recognized an impairment loss of Rs 9,623 million (difference between carrying value and fair value as determined above).

The conclusive carrying value of these assets can only be determined on the possible merger of WiMAX business, if successful, and any consequential difference from fair value estimate as determined by the management above will be recognized in the financial statements of ensuing periods.



Nine months to Year ended March 31, June 30, 2012 2011 (Rupees in thousand)

14. Capital work in progress Leasehold improvements 16,235 21,233 Line and wire 1,720,821 1,288,678 Network equipment – note 14.1 1,414,767 994,195 3,151,823 2,304,106

14.1 Network equipment is net of provision for impairment of Rs 354 million (June 30, 2011: Rs 354 million).

14.2 Finance cost of Rs Nil million was capitalised during the nine months period ended March 31, 2012 (Year ended June 30, 2011: Rs 234 million).

Nine months to Year ended March 31, 2012 June 30, 2011 %age (Rupees in %age (Rupees in Holding thousand) Holding thousand)

15. Long term investment in subsidiary companies – at cost

Unquoted Wateen Solutions (Pvt) Limited 413,212 fully paid ordinary shares of Rs 100 each 51 52,656 51 52,656 Advance against purchase of shares 85,000 85,000 137,656 137,656 Wateen Satellite Services (Pvt) Limited 500 fully paid ordinary shares of Rs 10 each 100 5 100 5 Netsonline Services (Pvt) Limited 4,000 fully paid ordinary shares of Rs 100 each 100 4,400 100 4,400 Wateen Telecom UK Limited (note 15.2) 10,000 fully paid ordinary shares of GBP 1 each 100 1,390 – 1,390 143,451 143,451 Provision for impairment of investment in Netsonline Services (Pvt) Limited (4,400) (4,400) Wateen Telecom UK Limited (1,390) (1,390) (5,790) (5,790) 137,661 137,661

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

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




16. Trade debts Trade debts – related parties (note 16.1) 1,256,376 627,874 – other parties 1,700,749 1,682,392 2,957,125 2,310,266 Less: Provision for doubtful debts – other parties (note 16.2) (782,017) (542,220) 2,175,108 1,768,046

16.1 Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 927,888 543,051 Warid International LLC, UAE – Parent company 80,200 41,298 Wateen Telecom UK Limited 129,228 24,284 Bank Alfalah Limited 119,060 19,241 1,256,376 627,874

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


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

16.2 Provision for doubtful debts – other parties Opening balance 542,220 132,586 Provision during the period 284,519 409,634 Write off against provisions (44,722) – Closing balance 782,017 542,220

Provision during the period includes Rs 284,519 thousand based on age analysis of debts as follows: Balances 181 – 360 days past due – 50 % Balances over 360 days past due – 100 %




17. Stores, spares and loose tools Cost 786,452 743,697 Less: Provision for obsolete stores 212,266 212,266 574,186 531,431

18. Advances, deposits, prepayments and other receivables

18.1 These include receivable from related parties as follows: Wateen Solutions (Pvt) Limited 679,323 543,340 Wateen Telecom UK Limited 288,889 288,889 Wateen Multimedia (Pvt) Limited 127,893 96,162 Advance for construction of Warid Tower 68,916 68,916 Warid International LLC, UAE – Parent company 42,019 42,019 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 18,482 18,482 Warid Telecom Georgia Limited 15,403 15,403 Netsonline Services (Pvt) Limited 8,311 8,311 Warid Telecom International – Bangladesh 5,587 5,587 1,282,783 1,115,069 Provision for doubtful receivables from related parties (note 18.2) 475,567 475,567 807,216 639,502

18.2 Provision for doubtful receivables from related parties: Wateen Telecom UK Limited 288,889 288,889 Advance for construction of Warid Tower 68,916 68,916 Warid International LLC, UAE 42,019 42,019 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technologies (Pvt) Limited 18,482 18,482 Warid Telecom Georgia Limited 15,403 15,403 Netsonline Services (Pvt) Limited 8,311 8,311 Warid Telecom International Bangladesh 5,587 5,587 475,567 475,567

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

18.3 Provision for doubtful advances and other receivables from other parties is Rs 41,675 thousand (June 30, 2011: Rs 41,675).




19. Provisions and write off Trade debts written off – related parties – – – 206,227 Provision for doubtful trade debts – other parties 169,535 114,493 284,519 331,970 Provision for doubtful advances and other receivables – related parties – – – 447,587 – other parties – – – 15,599 Provision for impairment of capital work in progress – – – 353,515 Provision for impairment of long term investment in subsidiary company – – – 4,400 Provision for obsolete stores and spares – – – 271,998 Impairment of fixed assets – – – – 169,535 114,493 284,519 1,631,296

20. Related party transactions Aggregate transactions with related parties during the period were as follows: Subsidiary Companies Cost and expenses charged by subsidiary companies – – 24,670 439 Purchase of intangibles assets – 4,300 – 4,300 Dividend income – – – 156,060 Markup charged to subsidiary companies 30,678 12,565 82,360 69,787 Payments made by subsidiary companies – 12,218 – 275,365 Associated Companies/shareholder Revenue from associated companies 316,274 488,924 992,729 1,483,086 Cost and expenses charged by associated companies 230,044 229,609 641,369 653,427 Trade debts written off from – – associated companies (note 16) – – – 206,227 Provisions for doubtful advances – – associated companies (note 18.2) – – – 447,587 Provision for impairment of long term investment in subsidiary companies – – – 5,790 Markup charged to associated companies 2,507 16,606 7,521 30,232 Markup on short term running finance from an associated company 50,041 70,992 150,122 203,563 Markup on medium term finance from an associated company 23,186 23,789 69,557 47,667 Markup on long term finance from a shareholder 42,158 20,314 126,475 29,007 Interest on late payment to provident fund – 1,142 – 535 Medium term finance received from an associated company – – – 600,000 Long term finance received from sponsor 844,966 716,236 3,705,603 2,779,615 Payments made on behalf of associated companies – 9,338 – 194,798




Other related parties Contribution to employees’ retirement funds 18,096 21,021 52,313 68,347

21. Subsequent events after the reporting period On March 28, 2013, the majority shareholder of the Company, Warid Telecom International LLC, U.A.E,

which presently holds 54% of the total ordinary share capital of the Company, has conveyed its intention to acquire all of the issued ordinary shares held by the other shareholders of the Company at a proposed purchase price of Rs 4.5 per ordinary share and to seek delisting of the shares of the Company from Karachi, Lahore and Islamabad Stock Exchanges in accordance with the voluntary de–listing provisions of their respective Listing Regulations. The Board approved the delisting in their meeting held on April 22, 2013, and formal application for delisting has been applied to all stock exchanges where the Company is listed. The Karachi Stock exchange has requested the Company to submit intrinsic value per share determined on the basis of revaluation of assets, copy of latest revaluation report of assets carried out by evaluator as required under listing regulation and some other information.

22. Reconstruction of accounting records destroyed in fire incident during the period On February 10, 2012, a fire broke out at the New Auriga Complex, Lahore where the Head Office of

the Company is situated. Besides the loss of furniture and fixtures, computers, telecom and other office equipment, the fire incident also resulted in the destruction of documents, records and other historical information of the Company.

Financial and accounting records and data (including computerized soft data) were lost pertaining to the period July 1, 2008 to February 10, 2012. The management of the Company commenced a comprehensive exercise to recreate necessary accounting records, documents, supports, agreements and other information. Subsequent to the period end the Company has managed to rearrange records for the period July 1, 2011 to February 10, 2012 till the date of issuance of these interim financial information. The exercise related to the period July 1, 2008 to June 30, 2011 is in progress.

23. Corresponding figures Comparative figures related to Wateen Telecom UK Limited representing cost of investment of Rs 1.390

million and provision for impairment of Rs 1.390 million have been reclassified from advances, deposits, prepayments and other receivables to long term investment in subsidiary companies as Wateen Telecom UK Limited has been treated as subsidiary company of Wateen Telecom Limited in the current year on the basis of ownership and common directorship.

24. Date of authorisation for issue This condensed interim financial information has been authorised for circulation to the shareholders by

the Board of Directors of the Company on June 13, 2013.


______________Director



Condensed Interim Consolidated Financial Information For the nine months’ period ended March 31, 2012

27Wateen Telecom Limited Quarterly Report Mar ‘12 27

Condensed Interim ConsolidatedStatement of Financial Position (Un–Audited)As at March 31, 2012 (Restated) (Audited) March 31, June 30, Note 2012 2011 (Rupees in thousand)

SHARE CAPITAL AND RESERVESAuthorised capital 1,000,000,000(June 30, 2011: 1,000,000,000)ordinary shares of Rs 10 each 10,000,000 10,000,000

Issued, subscribed and paid–up capital 6,174,746 6,174,746617,474,620 (June 30, 2011: 617,474,620)ordinary shares of Rs 10 eachGeneral reserve 134,681 134,681Currency translation differences (25,147) (11,652)Accumulated loss (23,470,697) (7,004,834) (17,186,417) (707,059)Non– controlling interests (71,429) (26,567) (17,257,846) (733,626)NON–CURRENT LIABILITIESLong term finance– secured 6 – – Medium term finance from an associated company – unsecured 7 600,000 – Long term finance from sponsor – unsecured 8 8,623,830 4,918,227 Obligations under finance leases 3,762 4,406 Long term deposits 66,006 61,588 9,293,598 4,984,221 DEFERRED LIABILITIESEmployees’ retirement benefits 10,441 10,752 Deferred income tax liability 9 – – Deferred USF grant 10 1,525,327 1,136,310 1,535,768 1,147,062 CURRENT LIABILITIESCurrent portion of long term finance – secured 6 15,089,832 12,347,893 Current portion of medium term finance from an associated company – unsecured 7 – 600,000 Current portion of obligations under finance leases 3,077 3,607 Finance from supplier – unsecured 40,542 59,112 Short term borrowings – secured 11 1,714,790 4,107,540 Trade and other payables 12 6,670,018 4,896,400 Interest / markup accrued 1,292,945 799,568 24,811,204 22,814,120 CONTINGENCIES AND COMMITMENTS 13 18,382,724 28,211,777

The annexed notes 1 to 24 form an integral part of this condensed interim consolidated financial information.


Condensed Interim ConsolidatedStatement of Financial Position (Un–Audited)As at March 31, 2012 (Restated) (Audited) March 31, June 30, Note 2012 2011 (Rupees in thousand)

NON–CURRENT ASSETSProperty, plant and equipment Operating assets 14 8,326,527 18,766,578 Capital work in progress 15 3,154,449 2,304,106 Intangible assets 288,943 299,775 11,769,919 21,370,459

ADVANCE AGAINST PURCHASE OF SHARES 16 85,000 85,000

DEFERRED INCOME TAX ASSET 9 – 1,718,574

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 295,654 293,043 Long term prepayments 84,484 64,094 380,138 357,137

CURRENT ASSETSTrade debts 17 2,365,628 2,069,795 Contract work in progress 148,735 30,219 Stores, spares and loose tools 18 589,274 538,772 Advances, deposits, prepayments and other receivables 19 2,328,536 1,140,342 Income tax refundable 353,530 262,285 Cash and bank balances 361,963 639,194 6,147,667 4,680,607

18,382,724 28,211,777


______________Director


(Restated) (Restated) 3 months to 9 months to March 31, March 31, March 31, March 31, Note 2012 2011 2012 2011 (Rupees in thousand)

Revenue 1,842,626 2,020,184 5,472,290 5,327,578

Cost of sales (excluding depreciation and amortisation) 1,436,021 1,774,210 4,637,976 4,236,152 General and administration expenses 383,686 401,979 1,637,262 1,298,519 Provisions and write off 20 229,359 114,493 344,343 1,657,030 Advertisement and marketing expenses 53,144 30,421 249,180 105,692 Selling and distribution expenses 8,605 3,757 33,205 12,587 Other income (16,952) (8,757) (67,389) (32,145) 2,093,863 2,316,103 6,834,575 7,277,834 Loss before interest, taxation taxation, depreciation and amortisation (251,237) (295,919) (1,362,285) (1,950,256) Less: Depreciation and amortisation 528,556 519,165 1,600,407 1,515,989 Provision for impairment Wimax of assets 14.2 – 156,928 9,622,973 156,928 Finance cost 351,420 443,122 2,235,873 1,727,622 Finance income (8,172) (17,339) (29,387) (41,255)Loss before taxation (1,123,041) (1,083,938) (14,792,150) (5,152,612)Income tax credit – 222,891 (1,718,574) 1,065,651 Loss before Non controlling interest (1,123,041) (861,047) (16,510,725) (4,086,960)

Non controlling interest in (profit)/loss of consolidated subsidiary company 28,758 88,420 44,862 146,006 Loss for the period (1,094,283) (772,627) (16,465,863) (3,940,954)

Loss per share – (Rs) (1.77) (1.25) (26.67) (6.38)


Condensed Interim Consolidated Income Statement (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director



______________Director

(Restated) (Restated) 3 months to 9 months to March 31, March 31, March 31, March 31, Note 2012 2011 2012 2011 (Rupees in thousand)

Loss for the period (1,094,283) (772,627) (16,465,863) (3,940,954)Other comprehensive income (11,325) (5,698) (13,495) (6,024)

Total comprehensive loss for the period (1,105,608) (778,325) (16,479,358) (3,946,978)


Condensed Interim Consolidated Statement of Comprehensive Income (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


(Restated) 9 months to March 31, March 31, Note 2012 2011 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (14,792,150) (5,152,612) Adjustment of non cash items: Depreciation and amortisation 1,600,407 1,515,989 Finance cost 2,235,873 1,721,064 Loss on sale of operating assets – 11,252 Cost associated with IRU of Optic Fiber Cable – 27,477 Deferred grant recognised during the period (65,917) (38,907)Movement in translation loss of foreign subsidiary (13,495) (6,024)Provisions and write off (note 20) 344,343 1,657,030 Provision for impairment of Wimax assets 14.2 9,622,973 – Provision for employees’ accumulated absences – 10,955 13,724,183 4,898,835 (1,067,968) (253,776)Changes in working capital: (Increase)/Decrease in trade debts (640,176) 1,800,004 (Increase)/Decrease in contract work in progress (118,516) 1,852 (Increase)/Decrease in stores, spares and loose tools (50,502) 103,466 (Increase) in advances, deposits, prepayments and other receivables (1,188,194) (287,729)Increase in cross currency and interest rate swap liability – 133,547 Increase/(Decrease) in trade and other payables 1,773,618 (942,377) (223,770) 808,763 Employees’ accumulated absences paid (311) (18,849)Taxes (paid)/refunded (91,245) 23,057 Cash flows from operating activities (1,383,294) 559,194 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,622,839) (2,164,280)Intangible assets additions – (4,300)Sale of property, plant and equipment – 16,655 Long term deposits receivable– (paid)/received (2,611) (33,373)Long term prepayments (20,390) 12,316 Advance against purchase of shares – (85,000)Dividend paid to minority shareholders – (149,940)Cash flows from investing activities (1,645,840) (2,407,923)

Condensed Interim Consolidated Statement of Cash Flow (Un–Audited)For the nine months’ period ended March 31, 2012


(Restated) 9 months to March 31, March 31, 2012 2011 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Long term finance received – 508,826 Increase in long term finance 2,768,939 – Long term finance repaid (27,000) (1,153,778)Long term finance received from associated company – 600,000 Long term finance received from sponsor 3,705,603 2,779,615 Payable to supplier to be settled through long term finance repaid – (433,798)Long term payable to supplier received/(repaid) (18,570) 273 Deferred USF grant received 454,934 255,988 Obligations under finance leases repaid (1,174) 2,952 Long term deposits payable repaid 4,418 (48,385)Short term borrowings repaid (134,750) (1,545,415)Finance cost paid (1,742,496) (1,787,136)Cash flows from financing activities 5,009,903 (820,858) (DECREASE) IN CASH AND CASH EQUIVALENTS 1,980,769 (2,669,585)Cash and cash equivalents at beginning of the period (3,333,596) (907,690)CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (1,352,827) (3,577,276) CASH AND CASH EQUIVALENTS COMPRISE:Cash and bank balances 361,963 458,846 Short term running finance (1,714,790) (4,036,121) (1,352,827) (3,577,276)


Condensed Interim Consolidated Statement of Cash Flow (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


Attributable to owners of Wateen Telecom Limited Currency Non controlling Share General Accumulated translation interest in equity capital reserve loss differences Total of subsidiary Total (Rupees in thousand)

Balance at July 1, 2010 – as originally stated 6,174,746 134,681 (1,794,123) – 4,515,304 206,999 4,722,303 Effect of retrospective restatement due to consolidation of Wateen Telecom UK Limited – – (52,556) (326) (52,882) (50,251) (103,133)Balance at July 1, 2010 – restated 6,174,746 134,681 (1,846,679) (326) 4,462,422 156,748 4,619,170 Dividend paid to non–controlling shareholders – – – – – (149,940) (149,940)Total comprehensive loss for the period Loss for the year – as restated – – (3,940,954) – (3,940,954) (146,006) (4,086,960) Other comprehensive income – as restated – – – (3,071) (3,071) (2,953) (6,024)Acquisition of Non Controlloing Interest (49%) of Wateen Telecom Limited UK on March 31, 2011 – – (135,919) (2,648) (138,567) 137,885 (682)Balance at March 31, 2011 – restated 6,174,746 134,681 (5,923,552) (6,045) 379,830 (4,266) 375,563

Balance at March 31, 2011 6,174,746 134,681 (5,923,552) (6,045) 379,830 (4,266) 375,563 Total comprehensive loss for the period Loss for the year – as restated – – (1,081,282) – (1,081,282) (22,301) (1,103,583) Other comprehensive income – as restated – – – (5,607) (5,607) – (5,607)

Balance at June 30, 2011 – restated 6,174,746 134,681 (7,004,834) (11,652) (707,059) (26,567) (733,626) Balance at July 1, 2011 6,174,746 134,681 (7,004,834) (11,652) (707,059) (26,567) (733,626)Total comprehensive loss for the period Loss for the year – as restated – – (16,465,863) – (16,465,863) (44,862) (16,510,725) Other comprehensive income – as restated – – – (13,495) (13,495) – (13,495)

Balance at March 31, 2012 6,174,746 134,681 (23,470,697) (25,147) (17,186,417) (71,429) (17,257,846)


Condensed Interim Consolidated Statement of Changes of in Equity (Un–Audited)For the nine months’ period ended March 31, 2012


______________Director


1. Legal status and operations These condensed consolidated interim financial information include the financial information of Wateen

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

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

2. Reconstruction of accounting records destroyed in fire incident during the period On February 10, 2012, a fire broke out at the New Auriga Complex, Lahore where the Head Office

of the Company is situated. Besides the loss of furniture and fixtures, computers, telecom and other office equipment, the fire incident also resulted in the destruction of documents, records and other historical information of the Company.

Financial and accounting records and data (including computerized soft data) were lost pertaining to the period July 1, 2008 to February 10, 2012. The management of the Company commenced a comprehensive exercise to recreate necessary accounting records, documents, supports, agreements and other information. Subsequent to the period end the Company has managed to rearrange records for the period July 1, 2011 to February 10, 2012 till the date of issuance of these interim financial information. The exercise related to the period July 1, 2008 to June 30, 2011 is in progress.

3. Statement of compliance These condensed consolidated interim financial information of the Company for the nine months period

ended March 31, 2012 has been prepared in accordance with the requirements of the International Accounting Standard 34 – Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. These condensed consolidated interim financial information do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the published financial statements of the Company for the year ended June 30, 2011.

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

consolidated interim financial information are the same as those applied in preparation of the annual financial statements for the year ended June 30, 2011.

Notes to and Forming Part of the Condensed Interim Consolidated Financial Information (Un–Audited)For the nine months’ period ended March 31, 2012


5. Management’s assessment of going concern In assessing the Going Concern status of the Company, Management have carefully assessed a

number of factors covering the trading performance of the business, the ability to implement a significant debt restructuring of the Company’s existing debt’s, and the appetite of our majority shareholder to continue financial support. Based on the analysis of these, Management are comfortable that the Company will be able to continue as a going concern in the foreseeable future. Set out below are the key areas of evidence that Management have considered.

Operational Performance During 2012, the Company incurred losses of Rs 16,466 million, and had net Current Liabilities as at

31 March 2012 of Rs 19,263 million, of which Rs 12,028 million relates to loan installments classified as current liabilities as mentioned in note 5.6, and that is due for repayment after March 31, 2013. It is important to note that during this period of losses the Majority Shareholders of the Company have continued to provide financial support in the form of long term finance amounting to Rs 8,624 million to meet the requirements of the Company.

Following continuing losses during the financial year 2012 the Board directed management to implement a ‘Containment plan’ that would stem the losses of the Company and provide stability. This containment plan included a cost cutting exercise, assessment of options for the WiMAX business, and continued support of the other business lines. With regards to the WiMAX business there are discussions underway with third parties to consolidate the WiMAX business which if successful, would benefit the Company and it’s stakeholders

The Company has incurred capital expenditures on different Universal Service Fund (USF) Projects awarded by USF Company, (total contract values Rs 4,800 million contracts awarded to date) of which Rs 1.652 million have been received by the Company to date. Furthermore milestones have been achieved and the Company is in the process of offering the project milestone notice(s) for audit to the USF Company during the ensuing year. Upon successful completion of audit the Company will be entitled to claim the balance from USF Company related to completed milestones, and collect further material receipts from the USF Company which will benefit the cash flow.

Debt Restructuring Discussions have commenced with the Local Syndicate Lenders, our Foreign Debt Lenders, and our

Majority Shareholders. Constructive discussions are taking place and there is a willingness on all sides to find a solution, including a willingness from our Majority Shareholder to provide further financial support. Given this Management are of the view that based on these constructive discussions, and information that is currently available; there is a high likelihood of a successful outcome.

Ongoing Shareholder Support Our majority shareholder WTI LLC continues to provide Management with comfort with regards to

it’s ongoing support, key requirements of which are the delisting of the Company from all Stock Exchanges of Pakistan where the Company is listed, and the successful restructuring of the debt. Both of these initiatives are progressing well.

This message was also reiterated in the letter WTI LLC provided to The Board of Directors with regards to the Buy–Back and De–Listing of Shares, which was subsequently made available to the Public by



the Exchanges. In this WTI LLC stated ‘WTI’s buy–back of the shares reflects its strong commitment to Wateen and its local operations and enables a restructuring to take place that provides Wateen with the best possible chance to repay the current debts that are outstanding’.

In addition to this WTI LLC guarantees the Local Syndicate Finance Facility, and certain Personal Guarantees are provided to the Foreign Debt Holders. Based on the provision of these Guarantees WTI LLC are providing strong support to the Management through the Restructuring discussions

March 31, June 30, 2012 2011 Note (Rupees in thousand)

6. Long term finance – secured Syndicate of banks 6.1 8,142,335 4,766,000 Export Credit Guarantee Department – (ECGD) 6.2 2,325,768 2,202,888 Dubai Islamic Bank (DIB) 6.3 424,000 424,000 Motorola Credit Corporation (MCC) 6.4 4,359,670 4,129,330 Standard Chartered Bank (SCB) 6.5 – 1,043,030 Total 15,251,772 12,565,248 Unamortized transaction and other ancillary cost Opening balance 217,355 299,464 Additions during the period/year – – Amortisation for the period/year (55,415) (82,109) (161,940) (217,355) 15,089,832 12,347,893 Less: Amount shown as current liability Amount payable within next twelve months (3,062,167) (3,225,026) Amount due after March 31, 2013 (12,027,665) (9,122,867) (15,089,832) (12,347,893) – –

6.1 The company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank AI–Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company. On February 24, 2012, the Company and the Syndicate of Banks signed an agreement to restructure Syndicate term finance facility and the short term running finance from SCB of Rs 1,497 million, term finance facility from SCB of Rs 1,016 million, running finance facility of Rs 529 million from BAHL, running finance facility of Rs 200 million from Soneri Bank Limited and finance facility of Rs 135 million from Summit Bank Limited effective from January 1, 2011. All the finance facilities have been fully availed by the Company till March 31, 2012. The principal is repayable in ten unequal semi annual instalments . The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and 6 months KIBOR + 2.5% per annum for the remaining period. The Company shall pay the mark up at 8% per annum from January 1, 2011 to December 31, 2013 (deferment



period). The remaining amount of all instalments falling due in the deferment period shall be paid in ten equal six–monthly instalments on each January 1 and July 1 commencing from July 1, 2014 and ending January 1, 2019. Initially the tenor of the facility was 5 years commencing from November 4, 2009 and it carried a mark up of 6 months KIBOR + 2.75% per annum for 1–2 years and KIBOR + 2.5% per annum for next 3–5 years.

Certain conditions precedent to the restructured agreements are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreements are fulfilled bank will formally issue letter to the Company which will complete the restructuring process.

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

6.2 The Company has obtained long term finance facility amounting to USD 42 million (June 30, 2011: USD 42 million) from ECGD UK, of which USD 35 million (June 30, 2011: USD 35 million) has been availed till March 31, 2012. Subsequent to the period end on June 30, 2012, the Company and ECGD UK signed an agreement to restructure the terms of loan agreement including repayment schedule. Amount outstanding at March 31, 2012 was USD 25.600 million. The principal is repayable in ten semi annual instalments. The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is six month LIBOR + 1.5% (interest rate) per annum till June 30, 2011 and six month LIBOR + 1.9% (interest rate) for the remaining period. If the amount of instalment payable and/or interest payable is not paid on the due date, the Company shall pay interest on such amount the interest rate + 2% per annum. Initially the loan was repayable in 14 semi annual instalments of USD 3.025 million each started from October 14, 2009 and rate of mark–up was LIBOR + 1.5% per annum.

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

6.3 The Company has obtained Ijarah finance facility of Rs 530 million (June 30, 2011: Rs 530 million) from DIB. On March 30, 2012, the Company and DIB signed an agreement to restructure the terms of the Ijarah finance facility. The principal is repayable in ten unequal semi annual instalments. The first such instalment shall be due on July 1, 2014 and subsequently every six months thereafter until January 1, 2019. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and KIBOR + 2.5% per annum for the remaining period. The Company shall pay the mark up at 8% per annum from January 1, 2011 to December 31, 2013 (deferment period). The remaining amount of all instalments falling due in the deferment period shall be paid in ten equal six–monthly instalments on each January 1 and July 1 commencing from July 1, 2014 and ending January 1, 2019. Initially the principal was repayable in 10 semi annual instalments of Rs 53 million each commencing from February 1, 2010 and rate of mark up was 6 month KIBOR plus 1.5% per annum.



Subsequent to the period end, certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled bank will formally issue letter to the Company which will complete the restructuring process.

The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/ fixed assets (moveable and immoveable) and a corporate guarantee from Warid Telecom International LLC.

6.4 The Company has obtained term finance facility of USD 65 million (June 30, 2011: USD 65 million) from MCC of which USD 64 million (June 30, 2011: USD 64 million) has been availed till March 31, 2012. On August 19, 2011, MCC has transferred all of its rights, title benefits and interests in the original facility agreement to Deutsche Bank AG as lender, effective August 19, 2011. On January 12, 2012, the Company and Deutsche Bank AG signed an agreement to restructure the terms of loan agreement. Amount outstanding at June 30, 2012 was USD 48 million. The principal is repayable in ten semi annual instalments 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. If the Company fails to pay any amount payable on its due date, interest shall accrue on the unpaid sum from the due date up to the date of actual payment at a rate which is 2% higher than the rate of interest in effect thereon at the time of such default until the end of the then 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. Initially the principal amount of outstanding facility was repayable in 12 unequal semi annual instalments commencing from June 30, 2009 until and including the final maturity date which was December 31, 2014 and rate of mark–up was six month LIBOR + 1.7% per annum. Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company has taken steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled bank will formally issue letter to the Company which will completes the restructuring process. The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari passu with unsecured and unsubordinated creditors.


6.5 Standard Chartered Bank (SCB) Medium term finance facility 6.5.1 – 27,000 Term finance facility 6.5.2 – 291,433 Term finance facility 6.5.2 – 217,397 Term finance facility 6.5.2 – 507,200 – 1,043,030

6.5.1 The entire amount of the outstanding facility has been repaid during the period.

6.5.2 On February 24, 2012, the Company and Syndicate of banks signed an agreement to restructure the term finance facilities from SCB of Rs 1,016 million and consolidated these with Syndicate Finance facility as referred to in note 6.1 above.



6.6 The Company is required to maintain Long Term Debt to Equity Ratio of 80:20 as specified in loan agreements. Financial position as at March 31, 2012 depicts an event of default under loan agreements. Accordingly, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the statement of financial position date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments for an amount of Rs 12,028 million due after July 1, 2014 as per loan agreements have been shown as current liability.

7. Medium term finance from an associated company – unsecured The Company has obtained an aggregate medium term finance facility of Rs 600 million from an

associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e. September 30, 2010, which is further extendable to twelve months. The rate of mark–up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As the loan is subordinated to all secured finance facilities availed by the Company, the entire amount of loan has been classified as non current liability. Subsequent to the year end the Company has not repaid the loan.


8. Long term finance from shareholders – unsecured

Facility 1 8.1 2,263,155 2,067,351 Facility 2 8.2 6,360,675 2,850,876 8,623,830 4,918,227

8.1 The Company has obtained long term finance from a shareholder amounting to USD 24 million (June 30, 2011: USD 24 million). This loan is subordinated to all secured finance facilities availed by the Company. This loans is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loans, which shall be on or about January 29, 2015. The rate of mark–up is 6 months LIBOR + 1.5% with 24 months payment grace period payable half yearly. Alternatively loans may be converted into equity by way of issuance of the Company’s ordinary shares at the option of the lender at any time prior to, at or after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be affected at such price per ordinary share of the Company as shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the conversion request date, provided that such 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 Company except as provided under Law. In the event the Company defaults on its financial loans or in case Warid Telecom International LLC, Abu Dhabi, UAE, no longer remains the holding company of the Company and sells its 100 % shares to any other person or party or relinquishes the control of its management then, unless otherwise agreed in writing by the lender, the entire loan together with the accrued interest will become due and payable for with and shall be paid within 15 working days of the event of default or decision of the Board of Directors of the Company accepting such a change in the shareholding as the case may be, and until repaid in full, the loan shall immediately become part of financial loans, ranking pari passu therewith subject to the consent of the Company’s existing financial loan providers.

8.2 The Company has obtained long term finance from a shareholder amounting to USD 185 million agreement have been signed subsequent to the period end, (June 30, 2011: USD 52 million) of which USD 70 million (June 30, 2011: USD 33 million) has been availed at March 31, 2012. The rate of mark–up is 6 months LIBOR + 1.5% payable half yearly. The Company shall repay the loan in full in five equal annual instalments beginning on June 30, 2014 with final maturity date of June 30, 2018. Alternatively the lender shall also have the option to instruct the Company any time during the term of this agreement to convert the remaining unpaid amount of the loan and the interest in part or in its entirety into equity by way of issuance of ordinary shares of the Company in favour 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 the Company shall, with mutual consent, appoint an independent auditor to determine the fair market value per share of the borrower prevailing at the time of such request. lf the lender agrees to the price per share as determined by the independent auditor then the loan and the interest shall be converted into equity at the rate per share decided by the independent auditor. In case the lender, in its sole discretion, disagrees with the price per share as determined by the independent auditor then the request for conversion shall stand revoked and the loan shall subsist.

The loan together with the interest shall have priority over all other unsecured debts of the Company. Further, after the execution of this agreement, the Company shall not avail any other loan or funding facility from any other source without prior written consent of the lender. The Company undertakes that it shall not declare dividends, make any distributions or pay any other amount to its shareholders unless the repayment of the loan and the interest in full to the lender. The rights of the lender in respect of the loan are subordinated to any indebtedness of the Company to any secured lending by any financial institution in any way, both present and future notwithstanding whether such indebtedness is recoverable by process of law or is conditional or unconditional. Furthermore, in the event that insolvency proceedings are initiated against the Company or that it is unable to pay its Financial Loans as they fall due or if the Company has proposed any composition, assignment or arrangement with respect to its Financial Loans, the obligation to repay the outstanding amount of the loan shall be subordinated to the Financial Loans but will have priority over all other unsecured debts of the Company.



9. Deferred income tax asset/ (liability) March 31, June 30, 2012 2011 (Rupees in thousand)

Taxable temporary differences between accounting and tax depreciation (445,140) (3,835,305) Unused tax losses – recognised to extent of taxable temporary differences 445,140 4,945,800 Unused tax benefit related to share issue cost – 37,329 Deductible temporary differences on account of provisions – 570,750 – 1,718,574

The gross movement in deferred tax liability during the period is as follows: Balance at July 1 1,718,574 (74,593) Deferred tax credit / (expense) for the year (1,718,574) 1,793,167 Balance at March 31 – 1,718,574

The aggregate tax losses available to the Company for set off against future taxable profits at March 31, 2012 amounted to Rs 19,852 million. Of these, losses aggregating Rs 1,272 million have been recognised in the financial statements against taxable temporary differences at March 31, 2012.

Deferred tax asset, the potential tax benefit of which amounts to Rs 10,551 million has not been recognized on balance representing business losses aggregating to Rs 5,999 million, tax depreciation losses aggregating Rs 12,582 million and deductible temporary differences on account of provisions and share issue cost aggregating Rs 11,566 million as at March 31, 2012. Business losses expire as follows:

Tax Year Rs in million

2016 96 2017 3,340 2018 2,563 During the period, management of the Company has taken a conservative view regarding recognition

of deferred tax asset amounting to Rs 10,551 million during the period, therefore deferred tax asset has been recognised only to the extent of taxable temporary differences.


10. Deferred Universal Service Fund (USF) grant Balance at beginning of the period/year 1,136,310 827,159 Amount received/receivable during the period/year 454,934 359,756 Amount recognised as income during the period/year (65,917) (50,605) Closing balance 1,525,327 1,136,310




11. Short term borrowings – secured Short term borrowings – 134,750 Short term running finance 1,714,790 3,972,790 1,714,790 4,107,540

12. Trade and other payables These include payable to related parties as follows: Advances from Warid Telecom (Pvt) Limited 48,893 48,893 Bank Alfalah Limited 3,950 3,950 Payable to gratuity fund 126,102 120,013 Payable to provident fund 17,398 36,737 196,343 209,593

13. Contingencies and commitments13.1 Claims against the Company not acknowledged as debt 319,338 295,767 13.2 Performance guarantees issued by banks in favour of the Company 2,051,487 1,267,812

13.3 Under the Access Promotion Regulations, 2005, the Company is liable to make payments of Access Promotion Charges (APC) for Universal Service Fund (USF) within 90 days of close of the month to which such payment relates. The Company has disputed the APC Regulations, 2005 and the case is currently pending with High Court. The Company has not recorded the penalty on delayed payment of APC for USF amounting to Rs 57 million as required by the Access Promotion Regulations, 2005 as the management and legal advisor of the Company are of the view, that the Company has a strong case and chances of success are very high.

13.4 The Deputy Commissioner Inland Revenue had issued Order in Original based on the observations that Company had not paid FED on fee paid to WTI and created demand of Rs 31.830 million along with the penalty and default surcharge has been created and also issued recovery notices. The Commissioner Inland Revenue – Appeals and the Appellate Tribunal Inland revenue upheld the orders of the DCIR. The Company intends to contest the case at superior appellate forum.

13.5 The Assistant Commissioner Inland Revenue, Enforcement Unit IV, Large Tax Unit, Islamabad (AC) had issued show cause notices based on the observation that Company has not furnished Sales Tax and Federal Excise returns for the period from August 2009 to March 2010, November 2010 and December 2011. In this respect, AC issued Order-in-Original and assessed demand of Rs 249.471 million (calculated on the based is of minimum liability assessed) along with penalty and default surcharge and also issued receiver note. The Company deposited principal amount of Rs 138.709 million and default surcharge of Rs 26.231 million based on the actual liability as per own working of the Company. The Appellate Tribunal Inland Revenue, Islamabad, has remanded back the case to the assessing officer with certain directions. The assessing officer has required the related documents from the Company which has been provided by the Company and no order has been passed as yet.



13.6 The Assistant commissioner Inland Revenue, Enforcement –IV issued show cause notices under section 161/205 for the tax year 2008, 2009, 2010 and 2011 on account of non–withholding of taxes on payments made to foreign telecom operators. Further the ACIR issued demand note for Rs. 477,767 thousand including default surcharge for the aforesaid tax years. Appeal has been filed against the said orders with the commissioner Appeals.

13.7 The Assistant commissioner Inland Revenue, Enforcement –IV issued show cause notices under section 161/205 for the tax year 2008, 2009, 2010 and 2011 on account of non withholding tax of taxes on payment made to foreign telecom operators and has bifurcated Interconnect expenses of Rs 5,800 million in the ratio of 60:40 relating to local and foreign operators respectively for the aforesaid tax years.

No provision on account of contingencies disclosed in note 13.4–13.7 above has been made in these financial statements as the management and the tax advisors of the Company are of the view, that these matters will eventually be settled in favour of the Company.


13.8 Outstanding commitments for capital expenditure 639,343 938,734

13.9 Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited The Board of Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009

approved the acquisition of 49% shareholding of Wateen Solutions (Private) Limited from Mr. Jahangir Ahmed for a total sale consideration of Rs 490 million. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions (Private) Limited.

However, in light of the dividend payment of Rs 149.94 million by Wateen Solutions (Private) Limited to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490 million to Rs 340 million. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, 2010.

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

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



(Restated) Nine months to Year ended March 31, June 30, 2012 2011 (Rupees in thousand)

14. Operating assets Opening net book value 18,766,578 17,224,136 Additions – owned 1,061,420 3,852,188 – leased – 3,504 Currency translation differences on restatement – 9,804 Disposals at net book value – note 14.1 (299,925) (107,062) Impairment charge – note 14.2 (9,622,973) (156,928) Depreciation charge (1,578,573) (2,059,064)

Closing net book value 8,326,527 18,766,578

14 .1 This represents disposal of assets due to fire incidence as disclosed in note 2 to these condensed financial information.

14 .2 Impairment Management has reviewed the business performance of WiMAX operations during the year and an

assessment has been made in respect of triggering events as specified by IAS 36 applicable to the non–current assets relating to WiMAX operations. Based on the following indicators applicable to WiMAX, an impairment test has been carried out by a consultant to determine the impairment of non–current assets relating to WiMAX operations:

– Decline in the market value of WiMAX operations’s assets – Significant change in the technological and economic conditions – Decrease in the economic performance of WiMAX business – indications suggest that WiMAX business is likely to become idle and management plans to

restructure the WiMAX operations For the purpose of determining the value in use, the WiMAX operations has been considered as

separate Cash Generating Unit (CGU), the value in use has been determined using discounted cash flow method. The financial projections of the CGU for five years have been derived from a latest business plan which is approved by the Board of Directors (BOD) of the Company based on containment strategy. The value in use of WiMAX assets determined by a consultant is negative Rs 1,036 million using discount rate of 20%.

The Board of Directors is currently considering other options for the WiMAX business and there are certain discussions taking place with third parties to merge the WiMAX business. Based on the information available the management estimates that in case of any possible business consolidation, the fair value of these assets, (positive net present value of future cash flows of consolidated business) using discount rate of 20% amounts to Rs 2,049 million. The fair value estimate has been used as recoverable amount to determine impairment. The management has recognized an impairment loss of Rs 9,623 million (difference between carrying value and fair value as determined above). The conclusive recoverable amount of these assets can only be determined on the possible merger of



WiMAX business, if successful, and any consequential difference from recoverable amount estimated as above will be recognized in the financial statements of ensuing periods.


15. Capital work in progress Leasehold improvements 32,736 21,233 Line and wire 1,720,821 1,288,678 Network equipment – note 15.1 1,400,892 994,195 3,154,449 2,304,106

15.1 Network equipment is net of provision for impairment of Rs 354 million (June 30, 2011: 354 million).15.2 Finance cost of Rs Nil was capitalised during the nine months period ended March 31, 2012 (Year

ended June 30, 2011: Rs 234 million). (Restated) March 31, June 30, 2012 2011 (Rupees in thousand)

16. Advance against purchase of shares Advance paid against purchase of shares – Wateen Solutions (Pvt) Limited (note 13.9) 85,000 85,000

17. Trade debts

Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 927,888 550,954 Warid International LLC, UAE – Parent company 80,200 41,298 Bank Alfalah Limited 119,060 19,241 1,127,148 611,493

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


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




17.1 Provision for doubtful debts – other parties Opening balance 618,470 157,035 Provision during the period/year 344,343 461,817 Write off against provisions (44,722) – Recovery during the period/year – (382) Closing balance 918,091 618,470

Provision during the period includes Rs 342,803 thousand based on age analysis of debts as follows:

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

(Restated) March 31, June 30, 2012 2011 (Rupees in thousand)

18. Stores, spares and loose tools Cost 803,127 752,624 Less: Provision for obsolete stores 213,852 213,852 589,275 538,772

19. Advances, deposits, prepayments and other receivables

19.1 These include receivable from related parties as follows: Wateen Multimedia (Pvt) Limited 127,893 96,162 Advance for construction of Warid Tower 68,916 68,916 Warid International LLC, UAE – Parent company 42,019 42,019 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 18,482 18,482 Warid Telecom Georgia Limited 15,403 15,403 Warid Telecom International – Bangladesh 5,587 5,587 306,260 274,529 Less: Provision for doubtful receivables from related parties (note 19.2) 178,367 178,367 127,893 96,162



(Restated) March 31, June 30, 2012 2011 (Rupees in thousand)

19.2 Provision for doubtful receivables from related parties Advance for construction of Warid Tower 68,916 68,916 Warid International LLC, UAE 42,019 42,019 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 18,482 18,482 Warid Telecom Georgia Limited 15,403 15,403 Warid Telecom International – Bangladesh 5,587 5,587 178,367 178,367

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

19.4 Provision for doubtful advances and other receivables from other parties is Rs 41,675 thousand (June

30, 2011: Rs 41,675).


20. Provisions and write off Trade debts written off – related parties – – – 206,227 Provision for doubtful trade debts – other parties 229,359 114,493 344,343 364,067 Provision for doubtful advances and other receivables – related parties – – – 439,859 – other parties – – – 15,599 Provision for impairment of capital work in progress – – – 353,515 Provision for impairment of goodwill on acquisition of subsidiary company – – – 5,765 Provision for obsolete stores and spares – – – 271,998 229,359 114,493 344,343 1,657,030



3 months to 9 months to March 31, March 31, March 31, March 31, 2012 2011 2012 2011 (Rupees in thousand)21. Related party transactions Aggregate transactions with related parties during the period were as follows: Associated Companies/shareholder Revenue from associated companies 316,274 488,924 992,729 1,483,086 Cost and expenses charged by associated companies 230,044 229,609 641,369 653,427 Trade debts written off from – – associated companies (note 16) – – – 206,227 Provisions for doubtful advances – – associated companies (note 18.2) – – – 439,859 Markup charged to associated companies 2,507 16,606 7,521 30,232 Markup on short term running finance from an associated company 50,041 70,992 150,122 203,563 Markup on medium term finance from an associated company 23,186 23,789 69,557 47,667 Markup on long term finance from a shareholder 42,158 20,314 126,475 29,007 Interest on late payment to provident fund – 1,142 – 535 Medium term finance received from an associated company – – – 600,000 Long term finance received from sponsor 844,966 716,236 3,705,603 2,779,615 Payments made on behalf of associated companies – 9,338 – 194,798

Other related parties Contribution to employees’ retirement funds 18,096 20,796 52,313 62,534



22. Subsequent events after the reporting period On March 28, 2013, the majority shareholder of the Company, Warid Telecom International LLC,

U.A.E, which presently holds 54% of the total ordinary share capital of the Company, has conveyed its intention to acquire all of the issued ordinary shares held by the other shareholders of the Company at a proposed purchase price of Rs 4.5 per ordinary share and to seek delisting of the shares of the Company from Karachi, Lahore and Islamabad Stock Exchanges in accordance with the voluntary de–listing provisions of their respective Listing Regulations. The Board approved the delisting in their meeting held on April 22, 2013, and formal application for delisting has been applied to all stock exchanges where the Company is listed. The Karachi Stock exchange has requested the Company to submit intrinsic value per share determined on the basis of revaluation of assets, copy of latest revaluation report of assets carried out by evaluator as required under listing regulation and some other information.

23. Restatement of prior year financial statements The Company made investment in 51% shares of Wateen Telecom UK Limited in 2008. The Company

made a further investment of 49% shares on March 31, 2011. The Company was not treated as subsidiary company and therefore not consolidated as approval from State Bank of Pakistan for investment in foreign equity abroad is in process and shares of Wateen Telecom UK Limited will be issued to the Company after receipt of such approval. From the current period, Wateen Telecom UK Limited has been treated as subsidiary company of Wateen Telecom Limited in the current year on the basis of 100% ownership and common directorship. This has been adjusted retrospectively and the prior period financial information have been restated.

24. Date of authorisation for issue This condensed interim financial information has been authorised for circulation to the shareholders

by the Board of Directors of the Company on June 13, 2013.


______________Director




Notes

for the period ended March 31, 2012 - Wateen · PDF fileAs of March 31, 2012 ... major...

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