for the period ended december 31, 2011...restructuring term sheets were signed with some lenders...

Half Yearly Reportfor the period ended December 31, 2011

Contents

02 Corporate Information03 Directors’ Report

Condensed Financial Information

05 Auditors’ Review Report to the Members06 Condensed Interim Statement of Financial Position08 Condensed Interim Income Statement09 Condensed Interim Statement of Comprehensive Income10 Condensed Interim Statement of Cash Flows12 Condensed Interim Statement of Changes in Equity13 Notes to and Forming Part of the Condensed Interim Financial Information

Condensed Consolidated Financial Information

32 Condensed Interim Consolidated Statement of Financial Position34 Condensed Interim Consolidated Income Statement35 Condensed Interim Consolidated Statement of Comprehensive Income36 Condensed Interim Consolidated Statement of Cash Flows38 Condensed Interim Consolidated Statement of Changes in Equity39 Notes to and Forming Part of the Condensed Interim Consolidated Financial Information

01Wateen Telecom Limited Half Yearly Report Dec ‘11

Corporate Information

Board of DirectorsAs of December 31, 2011

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 OfficerSajjeed Aslam Chief Financial Officer (as of December 31, 2011)Murtaza Raza Chief Financial Officer (at present)Sajid 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 Half Yearly Report Dec ‘11

The Directors of the Company hereby present the half yearly report along with condensed interim un-audited financial statements of the Company for the half year ended December 31, 2011. These financial statements have been reviewed by the statutory auditors.

The global recessionary trend has continued to impact Pakistan’s economy as numerous challenges in terms of rising oil and fuel prices, energy crisis, floods in the country and aggressive price competition in the industry culminating into a high customer churn and the resulting impact on the business.

The Company posted revenues of PKR 1,756 million for the second quarter ended December 31, 2011 and cumulative revenues of PKR 3,377 million for the six months ended December 31, 2011, an increase of 23% and 4% respectively for the corresponding periods in the previous year. EBIDTA during the period improved from PKR (2,036 million) in second quarter of FY2011 to PKR (763 million) showing a 63% improvement against the corresponding period in last year. However, loss for the period increased to PKR (13,993

million) primarily due to the impairment loss of WiMAX equipment amounting to PKR 9,623 million (difference between carrying value and fair value). Additionally in December 2011, net deferred tax asset of PKR 1,719 million was reversed.

The Company’s debt amortization profile, higher interest costs and associated liquidity problems have forced the Company to consider restructuring of its debt obligations to ensure continued timely discharge of its commitments to its lenders. Debt restructuring term sheets were signed with some lenders before December 2011 and subsequent to the period debt restructuring agreements have also been signed. Due to non-compliance of certain conditions precedent, particularly maintenance of debt equity covenant, all outstanding amounts due after December 31, 2012 have been classified as current liabilities to comply with the requirements of International Accounting Standards. The Company is in the process of completing the remaining conditions precedent.

The management took tangible steps in evolving a new strategy and completed a review of existing business. In FY12 Wateen’s initial strategy was

Directors’ Report


to turn around the Company by re-launching its brand after upgrading the network and realigning the organization to deliver innovative products/ services, bringing in class network performance and responsive customer service. Wateen successfully re-launched in November 2011, winning Pakistan Advertising Society Award for best new launch in the internet category. Network availability improved to 99.5% enabling the Company to subsequently win the Best Wireless Broadband Operator Award from Pakistan Telecommunication Authority. Wateen made our customer service responsive thereby enabling us to win the Consumer Choice Award as well. The Company won USF-Balochistan Package-4 fiber deployment project worth PKR 1,975 million subsidy connecting Quetta to northern Baluchistan. However, cash inflows pertaining to USF subsidies for our other fiber optic projects were delayed due to adverse law and order situation in Balochistan and floods in other parts of the country. These projects are now moving forward and are on track for completion.

The Company’s Long Distance & International (LDI) line of business made substantial progress due to steps taken in the previous quarters thereby acquiring a leading position in the category, rising from being the number eight player to become the second largest operator. The Company recorded 203 million minutes on the network in December 2011. For Broadband business, the Company signed major contracts with the Higher Education Commission to provide dark optic fiber connectivity to connect 73 universities of Pakistan and signed up major new customers like Allied Bank, Bank of Sindh, Telenor Pakistan for enterprise fiber and LDI connectivity.

While the Company has continuously faced challenging situations due to the natural calamities, unfavorable economic environment, and the security situation, coupled with sub-optimal GDP growth and competitive pressures in the telecom sector, it remains cautiously optimistic about the easing of these challenges and pressures, and about improvement in performance in the years to come.

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 half year ended December 31, 2011 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 half year 2012 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


Auditors’ Report to the Memberson Review of Interim Financial Information

Introduction

We have reviewed the accompanying condensed interim statement of financial position of Wateen Telecom Limited as at December 31, 2011 and the related condensed interim income statement, condensed interim statement of comprehensive income, condensed interim statement of cash flows and condensed interim statement of changes in equity and notes to the interim financial information for the six months period ended (here–in–after referred to as the “interim financial information”). Management is responsible for the preparation and presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim income statement for quarters ended December 31, 2011 and 2010 have not been reviewed, as we are required to review only the cumulative figures for the six months period ended December 31, 2011.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As explained in note 12.1 to the condensed interim financial information, the Company has recognised an impairment loss of Rs 9,623 million representing excess of carrying amount of operating assets related to its WiMAX operations over the recoverable amount. The value in use of these assets based on a business plan prepared by the Company on containment

strategy basis is negative Rs 1,036 million. The Board of Directors is currently considering other options for WiMAX operations and there are certain discussions taking place with third parties to merge the WiMAX business. The management estimates that in case of any possible business consolidation, the fair value less costs to sell of these assets would amount to Rs 2,049 million, which has been used as the recoverable amount. The conclusive selling price of these assets will be confirmed on the possible consolidation of WiMAX business, if successful, and any consequential difference from the recoverable amount estimated above will be recognised in the financial statements of the subsequent period. In the absence of a binding agreement or active market for these assets to assess the recoverable amount estimated by management, we were unable to form our opinion on the recoverable amount of these assets.

Qualified Conclusion

Based on our review, with the exception of the possible effect of the matter described in the preceding paragraph, nothing has come to our attention that causes us to believe that the accompanying interim financial information as of and for the six months period ended December 31, 2011 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan.

Emphasis of Matter

We draw attention to note 4 to the condensed interim financial information related to management’s assessment of going concern. Our conclusion is not qualified in respect of this matter.

A.F. Ferguson & Co.Chartered AccountantsIslamabad

Engagement partner: JehanZeb Amin

Date: June 13, 2013


Condensed Interim Statement of Financial Position (Un–Audited)As at December 31, 2011

December 31, June 30, Note 2011 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 (22,431,307) (7,081,625) (16,121,880) (772,198)NON–CURRENT LIABILITIESLong term finance – secured 5 – –Long term finance from shareholders’ – unsecured 6 7,779,864 4,918,227 Medium term finance from an associated company – unsecured 7 600,000 –Obligations under finance leases 3,713 4,406 Long term deposits 65,667 61,588 8,449,244 4,984,221 DEFERRED LIABILITIESDeferred USF grant 8 1,542,254 1,136,310

CURRENT LIABILITIESCurrent portion of long term finance – secured 5 12,636,042 12,347,893Current portion of medium term finance from an associated company – unsecured 7 – 600,000Current portion of obligations under finance leases 3,127 3,607Finance from supplier – unsecured 40,542 59,112Short term borrowings – secured 9 4,158,519 4,107,540Trade and other payables 10 6,224,698 5,006,345Interest / markup accrued 1,411,160 799,568 24,474,088 22,924,065

CONTINGENCIES AND COMMITMENTS 11 18,343,706 28,272,398

The annexed notes 1 to 28 form an integral part of this condensed interim financial information.


Condensed Interim Statement of Financial Position (Un–Audited)As at December 31, 2011


NON–CURRENT ASSETSProperty, plant and equipment Operating assets 12 8,853,287 18,750,491 Capital work in progress 13 2,961,787 2,304,106 Intangible assets 200,438 203,424 12,015,512 21,258,021

LONG TERM INVESTMENT IN SUBSIDIARY COMPANIES 14 137,661 137,661

DEFERRED INCOME TAX ASSET 15 – 1,718,574

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 293,058 293,043 Long term prepayments 66,849 64,094 359,907 357,137

CURRENT ASSETSTrade debts 16 2,086,830 1,768,046 Contract work in progress 15,817 15,178 Stores, spares and loose tools 17 798,448 531,431 Advances, deposits, prepayments and other receivables 18 2,115,727 1,615,479 Income tax refundable 325,707 248,826 Cash and bank balances 19 488,097 622,045 5,830,626 4,801,005

18,343,706 28,272,398

______________Chief Executive

______________Director


3 months to 6 months to December 31, December 31, December 31, December 31, Note 2011 2010 2011 2010 (Rupees in thousand)

Revenue 20 1,756,465 1,431,663 3,376,948 3,257,190

Cost of sales (excludingdepreciation and amortisation) 21 1,694,499 1,208,553 3,233,414 2,439,071 General and administration expenses 624,903 567,792 1,001,657 854,964 Advertisement and marketing expenses 180,991 44,664 196,036 75,271 Selling and distribution expenses 24,450 1,478 25,864 8,830 Provisions and write off 22 30,176 1,516,803 114,984 1,516,803 Other (income) / expenses 23 (36,023) 128,652 (49,442) (176,790) 2,518,996 3,467,942 4,522,513 4,718,149

Loss before interest, taxation, impairmentdepreciation and amortisation (762,531) (2,036,279) (1,145,565) (1,460,959)Less: Depreciation and amortisation 540,656 518,211 1,062,483 987,327 Finance cost 24 1,023,987 799,334 1,872,351 1,282,557 Provision for impairment of WIMAX assets 12.1 9,622,973 – 9,622,973 – Finance income (42,984) (78,349) (72,264) (81,759)Loss before taxation (11,907,163) (3,275,475) (13,631,108) (3,649,084)Deferred income tax (expense) / credit (2,086,316) 791,649 (1,718,574) 847,988Loss for the period (13,993,479) (2,483,826) (15,349,682) (2,801,096)

Loss per share Rs (22.66) Rs (4.03) Rs (24.86) Rs (4.54)


Condensed Interim Income Statement (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)

Loss for the period (13,993,479) (2,483,826) (15,349,682) (2,801,096)Other comprehensive income – – – –

Total comprehensive loss for the period (13,993,479) (2,483,826) (15,349,682) (2,801,096)


Condensed Interim Statement of Comprehensive Income (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


6 months to December 31, December 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (13,631,108) (3,649,084) Adjustment of non cash items: Depreciation and amortisation 1,062,483 987,327 Provision for impairment of WiMAX assets 9,622,973 - Loss on sale of operating assets - 6,798 Finance cost 1,872,351 1,282,557 Deferred USF grant recognised during the period (48,989) (25,939)Dividend income from subsidiary company - (156,060)Provisions and write off 114,984 1,516,803 12,623,802 3,611,486 (1,007,306) (37,598)Changes in working capital: (Increase)/ decrease in trade debts (433,768) 1,399,405 (Increase) in contract work in progress (639) (23)(Increase)/ decrease in stores, spares and loose tools (267,017) 17,434 (Increase)/ decrease in advances, deposits, prepayments and other receivables (440,314) (140,297)Increase/ (decrease) in cross currency and interest rate swap liability – 160,550 Increase/ (decrease) in trade and other payables 1,265,385 (1,062,810) 123,647 374,259 Employees’ accumulated absences paid (47,032) (4,987)Income taxes (paid)/refunded (76,881) 46,429 Cash flow from operating activities (1,007,572) 378,103 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,433,978) (1,920,356)Intangible assets additions (8,969) (4,300)Proceeds from sale of property, plant and equipment – 10,000 Long term deposits receivable – paid (15) (35,302)Long term prepayments (2,755) 7,811 Advance against purchase of shares – (85,000)Dividend income received – 156,060 Cash flow from investing activities (1,445,717) (1,871,087)

Condensed Interim Statement of Cash Flow (Un–Audited)For the six months’ period ended December 31, 2011


6 months to December 31, December 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIES Long term finance from shareholders – unsecured 2,861,637 2,063,379 Long term finance received 315,149 579,240 Long term finance repaid (27,000) (1,132,158)Medium term finance received from an associated company – unsecured – 600,000 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 394,999 – Obligations under finance leases repaid (1,173) (312)Long term deposits payable – (repaid)/received 4,079 (45,696)Short term borrowings paid – (1,545,415)Finance cost paid (1,260,759) (1,252,433)Cash flow from financing activities 2,268,362 (1,166,920)(DECREASE) IN CASH AND CASH EQUIVALENTS (184,927) (2,659,903)Cash and cash equivalents at beginning of the period (3,350,745) (927,266)CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,535,672) (3,587,169) CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 488,097 370,565 Short term running finance (4,023,769) (3,957,734) (3,535,672) (3,587,169)


Condensed Interim Statement of Cash Flow (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


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 Loss for the period – – (2,801,096) (2,801,096) Other comprehensive income – – – – – – (2,801,096) (2,801,096)

Balance at December 31, 2010 6,174,746 134,681 (4,900,856) 1,408,571Total comprehensive loss for the period Loss for the period – – (2,180,769) (2,180,769) Other comprehensive income – – – – – – (2,180,769) (2,180,769)

Balance at June 30, 2011 6,174,746 134,681 (7,081,625) (772,198)Total comprehensive loss for the period Loss for the period – – (15,349,682) (15,349,682) Other comprehensive income – – – – – – (15,349,682) (15,349,682)

Balance at December 31, 2011 6,174,746 134,681 (22,431,307) (16,121,880)


Condensed Interim Statement of Changes in Equity (Un–Audited)For the six months’ period ended December 31, 2011


______________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 six months period ended

December 31, 2011 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 has 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 is 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 the period ended December 31, 2011, the Company incurred losses of Rs 15,350 million and

had net current liabilities as at December 31, 2011 of Rs 18,643 million, of which Rs 7,896 million relates to loan installments classified as current liabilities as mentioned in note 5.6, and that is due for repayment after December 31, 2012. 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 7,780 million to meet the requirements of the Company.

Following continuing losses during the period, 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 4,848 million contracts awarded to date) of which Rs 1,583 million have been received by the Company till period end. 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

Notes to and Forming Part of the Condensed Interim Financial Information (Un–Audited)For the six months’ period ended December 31, 2011


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 Warid Telecom International LLC (WTI) 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 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 stock exchanges. In this WTI 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 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 are providing strong support to the management through the restructuring discussions.


5. Long term finance – secured Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,298,888 2,202,888 Dubai Islamic Bank (DIB) 5.3 424,000 424,000 Deutsche Bank AG 5.4 4,309,283 4,129,330 Standard Chartered Bank (SCB) 5.5 1,016,030 1,043,030 Total 12,814,201 12,565,248 Unamortized transaction and other ancillary cost Opening balance 217,355 299,464 Amortisation for the period/year (39,196) (82,109) (178,159) (217,355) 12,636,042 12,347,893 Less: Amount shown as current liability Amount payable within next twelve months (4,739,785) (3,225,026) Amount due after December 31, 2012 5.6 (7,896,257) (9,122,867) (12,636,042) (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 amounting to Rs 5 billion (2010: Rs 5 billion). The tenor of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped –up– semi annual installments. The first such installment shall be due on May 15, 2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark–up is 6 months KIBOR + 2.75% per annum for 1–2 years and KIBOR + 2.5% per annum for next 3–5 years.

Subsequent to the period end, 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. 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 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 December 31, 2011. Amount outstanding at December 31, 2011 was USD 25.600 million (June 30, 2011: USD 25.600 million). The loan is repayable in 14 semi annual installments of USD 3.025 million each started from October 14, 2009. The rate of mark–up is LIBOR + 1.5% per annum. Additional markup at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company.

Subsequent to the period end, the Company and ECGD UK signed an agreement to restructure the terms of loan agreement including repayment schedule. 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.

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.

5.3 The Company has obtained Ijarah finance facility of Rs 530 million (June 30, 2011: Rs 530 million) from DIB. The principal is repayable in 10 semi annual installments of Rs 53 million each commencing from February 1, 2010. The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries).

Subsequent to period end, 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.

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 December 31, 2011. 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. Amount outstanding at December 31, 2011 was USD 48 million (June 30, 2011: USD 48 million). The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark–up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply and services agreements with Motorola.

Subsequent to period end, the Company and Deutsche Bank AG signed an agreement to restructure the terms of loan agreement. 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. 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 5.5.2 291,433 291,433 Term finance facility 5.5.3 217,397 217,397 Term finance facility 5.5.4 507,200 507,200 1,016,030 1,043,030

5.5.1 The entire amount of the outstanding facility has been repaid during the year.5.5.2 The Company has obtained term finance facility from SCB amounting to Rs 291.433 million against

letter of credit facilities availed till June 30, 2010. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark–up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the Company, however it has not yet been enhanced to first pari passu charge.

5.5.3 The Company has obtained term finance facility from SCB amounting to Rs 217.397 million. The principal is repayable in five installments commencing from June 30, 2011 . The rate of mark–up is six months KIBOR + 2 .5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the Company, however it has not yet been enhanced to first pari passu charge.

5.5.4 The Company has obtained a term finance facility from SCB amounting to Rs 507.200 million. The principal is repayable in thirty six months in eight unequal installments. The first such installment is due on September 30, 2011 and last installment will be due on December 31, 2013. The rate of mark–up is six months KIBOR+2.5% per annum. The facility is secured by way of ranking charge over all current and fixed assets (excluding assets under specific charge of CM Pak, CISCO, Motorola, DIB, assets procured from World call and USF) for a sum of Rs 625 million.

Subsequent to period end, the Company and Syndicate of banks signed an agreement to restructure the term finance facilities from SCB of Rs 1,016 million and to consolidate these with Syndicate Finance facility as referred in note 5.1 above.



5.6 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company was not able to make payment of ECGD loan installments, DIB loan installments, Deutsche AG loan installments and SCB loan installments during the period. Further, certain ratios specified in the loan agreements have not been maintained at December 31, 2011. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan installments due as per loan agreements after December 31, 2012 amounting to Rs 7,896 million have been shown as current liability.


6. Long term finance from shareholders – unsecured Facility 1 6.1 2,157,445 2,067,351 Facility 2 6.2 5,622,419 2,850,876 7,779,864 4,918,227

6.1 The Company has obtained long term finance from a shareholder amounting to USD 24 million (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.

6.2 The Company has obtained long term finance from a shareholder amounting to USD 185 million (2011: USD 52 million) of which USD 75 million (2011: USD 33 million) has been availed at June 30,



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.

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. As per the terms of loan agreement, 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.

December 31, June 30, 2011 2011 (Rupees in thousand)

8. 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 454,933 359,756 Amount recognised as income during the period/year (48,989) (50,605) Closing balance 1,542,254 1,136,310




9. Short term borrowings – secured Short term borrowings 9.1 134,750 134,750 Short term running finance 9.2 4,023,769 3,972,790 4,158,519 4,107,540

9.1 Subsequent to period end, the Company and Syndicate of banks signed an agreement to restructure the short term running finance from Summit Bank and to consolidate this with Syndicate Finance facility as referred in note 8.1 above.

9.2 Subsequent to period end, the Company restructured the short term running finance from SCB of Rs 1,497 million, Soneri Bank Limited of Rs 199 million and Bank Al Habib amounting to Rs 529 million and consolidated these with Syndicate Finance Facility as referred in note 5.1 above.

Subsequent to period end, the Company has also restructured the running finance facility from Bank Alfalah of Rs 1,800 million (June 30, 2011: Rs 1,800 million). The facility is now available till December 31, 2019. The principal is payable on expiry/on demand. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and KIBOR + 1.5% per annum for the remaining period. Mark up at 8% is payable on bi–annual basis and remaining amount is deferred which is payable in 10 bi–annual instalments with the first instalment becoming payable on July 1, 2014. Initially the facility carried mark–up at three months KIBOR + 2.5 % per annum.


10. 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 Wateen Telecom UK Limited 61,436 – Warid Telecom (Pvt) Limited 335,980 – Advances from Warid Telecom (Pvt) Limited 48,983 48,983 Bank Alfalah Limited 3,950 3,950 Warid Telecom Uganda Limited 154 – Payable to gratuity fund 114,871 120,013 Payable to provident fund 5,428 35,926 951,820 565,211

11. Contingencies and commitments11.1 Claims against the Company not acknowledged as debt 306,843 295,76711.2 Performance guarantees issued by banks in favour of the Company 2,115,887 1,264,217



11.3 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 60 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.

11.4 The Deputy Commissioner Inland Revenue (DCIR) had issued Order in Original based on the observations that Company had not paid Federal Excise Duty (FED) on fee paid to WTI and created demand of Rs 31.830 million payable along with the penalty and default surcharge and had also issued recovery notices. The Commissioner Inland Revenue – Appeals and the Appellate Tribunal Inland Revenue upheld the order of the DCIR. The Company and its advisor are of the view that by considering judicial precedence and the technical grounds encompassing Company’s case, the Company has a strong chance of success and they intend to contest the case at superior appellate forum.

11.5 The Assistant Commissioner Inland Revenue (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 basis of alleged minimum liability) payable along with penalty and default surcharge and also issued recovery note. The Company deposited principal amount of Rs 138.709 million and default surcharge of Rs 26.231 million based on the FED liability due as per own working of the Company. The Appellate Tribunal Inland Revenue, has remanded back the case to the assessing officer. The related proceedings are not yet finalized by the assessing officer. The management and the Company’s advisors believe that Company has high chances to amicably settle the issue of disputed amount.

11.6 The Assistant Commissioner Inland Revenue has alleged that Company has not withheld tax on payments made to foreign telecom operators during the tax years 2008, 2009, 2010 and 2011. Further the ACIR has ordered the Company to pay alleged demand of Rs 477.767 million representing principal amount and default surcharge for the aforesaid tax years. The Company and its advisors are of the view that Company has fair chance to succeed in appeal and accordingly Company intends to contest the related orders before appellate authorities.

No provision on account of contingencies disclosed in note 11.4–11.6 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.

2012 2011 (Rupees in thousand)

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

11.8 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 has been approved by shareholders in Extra Ordinary General Meeting dated December 31, 2011.

Six months to Year ended December 31, June 30, Note 2011 2011 (Rupees in thousand)

12. Operating assets Opening net book value 18,750,491 17,045,929 Additions – owned 776,297 3,852,188 – leased – 3,504 Disposals at net book value – (107,062) Depreciation charge (1,050,528) (2,044,068) Impairment charge 12.1 (9,622,973) – 8,853,287 18,750,491

12.1 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



Six months to Year ended December 31, 2011 June 30, 2011 %age (Rupees in %age (Rupees in Holding thousand) Holding thousand)

14. Long term investment in subsidiary companies

Unquoted Wateen Solutions (Pvt) Limited 413,212 fully paid ordinary shares of Rs 100 each 51 52,656 51 52,656 Advance against purchase of shares 85,000 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 Limited – UK (note 14.2) 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 Limited – UK (1,390) (1,390) (5,790) (5,790) 137,661 137,661

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 above will be recognized in the financial statements of ensuing periods.


13. Capital work in progress Leasehold improvements 30,593 21,233 Line and wire 1,629,561 1,288,678 Network equipment (net of impairment of Rs 353.515 million) 1,301,633 994,195 2,961,787 2,304,106

13.1 Finance cost of Rs nil was capitalised during the six months period ended December 31, 2011 (Year ended June 30, 2011: Rs 234.392 million).



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

14.2 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.


15. Deferred income tax asset Taxable temporary differences between accounting and tax depreciation (507,687) (3,835,305) Unused tax losses – 4,945,800 Unused tax benefit related to share issue cost 507,687 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 (expense) / credit for the period/year (1,718,574) 1,793,167 Balance at December 31 – 1,718,574

The aggregate tax losses available to the Company for set off against future taxable profits at December 31, 2011 amounted to Rs 19,086 million. Of these, losses aggregating Rs 1,451 million have been recognised in the financial statements against taxable temporary differences at December 31, 2011.

Deferred tax asset, the potential tax benefit of which amounts to Rs 10,171 million has not been recognized on balance representing business losses aggregating to Rs 5,496 million, tax depreciation losses aggregating Rs 12,140 million and deductible temporary differences on account of provisions and share issue cost aggregating Rs 11,425 million as at December 31, 2011. Business losses expire as follows:

Tax Year Rs in million

2017 3,257 2018 2,239 During the year, the management of the Company has prepared business plan based on containment

strategy duly approved by the Board of Directors of the Company as compared to last year’s approved business plan which was based on growth model. Management of the Company has taken a consertive view regarding recognition of deferred tax asset amounting to Rs 10,171 million during the year, therefore deferred tax asset has been recognised only to the extent of taxable temporary differences.




16. Trade debts Trade debts – related parties 16.1 793,918 627,874 – other parties 1,905,393 1,682,392 2,699,311 2,310,266 Provision for doubtful debts – other parties 16.2 (612,481) (542,220) 2,086,830 1,768,046

16.1 Trade debts include following balances due from associated companies: Warid Telecom (Pvt) Limited 688,040 543,051 Warid International LLC, UAE – Parent company 89,370 41,298 Wateen Telecom UK Limited – 24,284 Bank Alfalah Limited 16,508 19,241 793,918 627,874

16.2 Provision for doubtful debts – other parties Opening balance 542,220 132,586 Provision during the period /year – other than related parties 114,984 409,634 Write off against provisions (44,723) – Closing balance 16.2.1 612,481 542,220

16.2.1 These include Rs 560 million (year ended June 30, 2011: Rs 489 million) based on age analysis of the debts as follows:

Balances 181 – 360 days past due – 50 % Balances over 360 days past due – 100 % December 31, June 30, 2011 2011 (Rupees in thousand)

17. Stores, spares and loose tools Cost 1,010,714 743,697 Less: Provision for obsolete stores 212,266 212,266 798,448 531,431




18. Advances, deposits, prepayments and other receivables

18.1 These include receivable from related parties as follows: Wateen Solutions (Pvt) Limited 607,738 543,340 Wateen Telecom UK Limited 288,889 288,889 Wateen Multi Media (Pvt) Limited 183,137 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 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 1,266,442 1,115,069 Less: Provision for doubtful receivables from related parties 18.2 475,567 475,567 790,875 639,502

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


Wateen Telecom Limited – UK 288,889 288,889 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 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

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

18.4 Provision for doubtful advances and other receivables from other parties is Rs 41,615 thousand (June 30, 2011: Rs 41,357 thousand).

19. Cash and bank balances Bank balances amounting to Rs 256.564 million were under lien with banks (June 30, 2011: Rs

46.938 million).




20. Revenue Long Distance and International (LDI) 831,460 675,810 1,636,310 1,237,677 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) – (232,045) – – Operation and Maintenance 117,347 155,147 232,387 298,690 Managed capacity 17,276 21,991 33,597 34,734 Broadband and voice 545,783 455,723 1,022,518 903,267 Hybrid Fiber Cable Services (HFC) 4,878 8,535 21,027 17,395 Very Small Aperture Terminal services (VSAT) 206,390 218,387 375,033 470,895 ADM sites rentals 13,769 43,174 26,558 74,172 Others 19,562 84,941 29,518 220,360 1,756,465 1,431,663 3,376,948 3,257,190

21. Cost of sales LDI Interconnect cost 679,935 616,022 1,228,746 1,069,463 Leased circuit charges 105,992 84,230 206,968 181,471 Contribution to PTA Funds 61,918 49,006 374,155 123,384 PTA regulatory and spectrum fee 6,963 5,926 11,673 13,138 Operational cost 655,016 247,880 993,285 588,260 Bandwidth cost of VSAT services 160,957 196,248 337,431 398,726 Others 23,718 9,241 81,156 64,629 1,694,499 1,208,553 3,233,414 2,439,071

22. Provisions and write off Trade debts written off – related parties – 206,227 – 206,227 Provision for doubtful trade debts – other parties 30,176 217,477 114,984 217,477 Provision for doubtful advances and other receivables – related parties – 447,587 – 447,587 – other parties – 15,599 – 15,599 Provision for impairment of capital work in progress – 353,515 – 353,515 Provision for impairment of long term investment in subsidiary company – 4,400 – 4,400 Provision for obsolete stores and spares – 271,998 – 271,998 30,176 1,516,803 114,984 1,516,803

23. Other (income)/ expense Dividend income from subsidiary company – – – (156,060) USF grant recognised as income (35,122) 121,608 (48,989) (25,939) (Profit) / loss on sale of fixed assets – 6,709 – 6,798 Other (income) / expenses (901) 335 (453) (1,589) (36,023) 128,652 (49,442) (176,790)



3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)24. Finance cost Interest/markup 533,077 500,971 1,048,788 1,012,486 Cross currency and interest rate swap contracts cost – 377,947 – 377,947 Amortization of ancillary cost of long term finance 18,247 22,301 39,196 44,602 Finance cost of leased assets 216 596 451 852 Bank charges, commission and fees 29,795 26,615 144,354 39,638 Exchange (gain)/ loss 442,652 (11,900) 639,562 41,424 1,023,987 916,530 1,872,351 1,516,949 Interest/mark up capitalised under property, plant and equipment – (117,196) – (234,392) 1,023,987 799,334 1,872,351 1,282,557

25. Related party transactions Aggregate transactions with related parties during the period were as follows: Parent Company Warid Telecom International LLC, UAE (WTI) Markup charged to WTI – 1,549 – 3,045 Provision for doubtful advances – 35,911 – 35,911 Payments made by the Company on behalf of WTI – – – 56 Shareholders Long term finance received from shareholders 1,203,742 856,579 2,861,637 2,063,379 Markup on long term finance from shareholders 34,859 8,693 67,385 8,693 Subsidiary Companies Wateen Solutions (Private) Limited (WSPL) Cost and expenses charged by WSPL 12,487 30,191 24,680 30,630 Markup charged to WSPL 27,370 25,951 52,206 – Purchase of intangible assets – 4,300 – 4,300 Dividend income – – – 156,060 Payments made by WSPL on behalf of the Company 128,672 65,357 – 176,952 Payments made on behalf of WSPL – – 140,199 – Netsonline Services (Pvt) Limited Provision for doubtful advances – 7,728 – 7,728 Provision for impairment in investment – 4,400 – 4,400 Wateen Telecom UK Limited (Wateen UK) Sale of services 44,934 33,635 89,538 67,313 Markup charged to Wateen UK – 7,480 – 11,820 Cost and expenses charged by Wateen UK 22,276 153,561 87,895 218,766 Provision for doubtful advances – 266,708 – 266,708 Payments made by the Company on behalf of Wateen UK – – – 173,458




Associated Companies: Warid Telecom (Private) Limited (WTL) Sale of services to WTL 299,609 500,478 629,751 891,537 Cost and expenses charged by WTL 229,280 86,601 401,193 231,804 Trade debts written off – 76,834 – 76,834 Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by WMM 4,141 13,674 10,132 22,791 Payments made by the Company on behalf of WMM 14,704 3,683 35,506 11,945 Bank Alfalah Limited (BAL) Sale of services to BAL 23,197 1,652 46,394 35,312 Markup charged by BAL on short term borrowings 28,796 68,399 103,353 132,571 Markup charged to BAL – – 117 – Taavun (Pvt) Limited Long term finance received – 50,000 – 600,000 Markup on long term finance 24,651 23,789 49,302 23,789 Warid Congo S.A (Warid Congo) Trade debts written off – 125,127 – 125,127 Payments made on behalf of Warid Congo – – – 5,384 Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda – – – 47,474 Trade debts written off – 4,266 – 4,266 Warid Telecom Georgia Limited Provision for doubtful advances – 15,403 – 15,403 Warid Telecom International – Bangladesh Provision for doubtful advances – 5,587 – 5,587 Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen – – – 1,159 Provision for doubtful advances – 16,329 – 16,329 Amoon Media Group (Private) Limited Provision for doubtful advances – 27,960 – 27,960 Advance for construction of Warid Tower Advance paid during the period – – – 3,200 Provision for doubtful advances – 68,916 – 68,916 Gratuity Fund Employer contribution to fund 9,740 8,905 19,859 27,686 Provident Fund Trust Employer contribution to trust 6,995 4,649 14,358 14,052 Surcharge payable to trust on late payments – 1,142 – 1,142 Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 125,883 110,926 250,036 228,600



26. Subsequent events after the reporting period26.1 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. The Company has managed to rearrange records for the period July 1, 2011 to February 10, 2012 till the date of issuance of these financial statements. The exercise related to the period July 1, 2008 to June 30, 2011 is in progress.

26.2 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.

27. 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.

28. 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 six months’ period ended December 31, 2011

31Wateen Telecom Limited Half Yearly Report Dec ‘11 31Half Yearly Report Dec ‘11

(Restated) December 31, June 30, Note 2011 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 (14,272) (11,652)Accumulated loss (22,376,284) (7,004,834) (16,081,129) (707,059)Non– controlling interests (42,553) (26,567) (16,123,682) (733,626)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 7,779,864 4,918,227 Obligations under finance leases 3,713 4,406 Long term deposits 65,667 61,588 8,449,244 4,984,221 DEFERRED LIABILITIES Employees’ retirement benefits 10,441 10,752 Deferred USF grant 9 1,542,255 1,136,310 1,552,696 1,147,062 CURRENT LIABILITIES Current portion of long term finance – secured 5 12,636,042 12,347,893 Current portion of medium term finance from an associated company – unsecured 6 – 600,000 Current portion of obligations under finance leases 3,127 3,607 Finance from supplier – unsecured 40,542 59,112 Short term borrowings – secured 10 4,158,519 4,107,540 Trade and other payables 11 6,182,675 4,897,790 Interest / markup accrued 1,411,746 799,568 24,432,651 22,815,510 CONTINGENCIES AND COMMITMENTS 12 18,310,908 28,213,167

The annexed notes 1 to 28 form an integral part of this condensed interim consolidated financial information.

Condensed Interim Consolidated Statement of Financial Position (Un–Audited)As at December 31, 2011


(Restated) December 31, June 30, Note 2011 2011 (Rupees in thousand)

NON–CURRENT ASSETSProperty, plant and equipment Operating assets 13 8,861,936 18,766,578 Capital work in progress 14 2,964,413 2,304,106 Intangible assets 294,789 299,775 12,121,138 21,370,459

ADVANCE AGAINST PURCHASE OF SHARES 15 85,000 85,000

DEFERRED INCOME TAX ASSET 8 – 1,718,574

LONG TERM DEPOSITS AND PREPAYMENTSLong term deposits 293,058 293,043 Long term prepayments 66,849 64,094 359,907 357,137

CURRENT ASSETSTrade debts 16 2,362,951 2,069,795 Contract work in progress 126,983 30,219 Stores, spares and loose tools 17 818,899 538,772 Advances, deposits, prepayments and other receivables 18 1,572,966 1,141,732 Income tax refundable 344,369 262,285 Cash and bank balances 19 518,695 639,194 5,744,863 4,681,997

18,310,908 28,213,167

Condensed Interim Consolidated Statement of Financial Position (Un–Audited)As at December 31, 2011


______________Director


(Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, Note 2011 2010 2011 2010 (Rupees in thousand)

Revenue 20 1,788,767 1,526,168 3,547,499 3,410,828

Cost of sales (excludingdepreciation and amortisation) 21 1,486,888 1,279,222 3,119,790 2,565,376 General and administration expenses 1,035,814 598,774 1,252,211 896,045 Provisions and write off 22 30,176 1,275,829 114,984 1,275,829 Advertisement and marketing expenses 180,990 44,664 196,035 75,271 Selling and distribution expenses 24,449 1,478 25,864 8,830 Other (income)/expenses 23 (35,997) 95,135 (50,438) (23,388) 2,722,320 3,295,102 4,658,446 4,797,963 Loss before interest, taxation, depreciation and amortisation (933,553) (1,768,934) (1,110,947) (1,387,135) Less: Depreciation and amortisation 548,601 519,782 1,071,795 996,828 Provision for impairment Wimax of assets 13.1 9,622,973 – 9,622,973 – Finance cost 24 1,003,031 808,172 1,884,362 1,284,967 Finance income (16,643) (20,503) (21,215) (23,917)Loss before taxation (12,091,515) (3,076,385) (13,668,862) (3,645,013)Deferred income tax (expense)/ credit 25 (2,097,132) 785,965 (1,718,574) 842,760 Loss for the period (14,188,647) (2,290,420) (15,387,436) (2,802,253)

Non controlling interest in loss of consolidated subsidiary company 7,303 36,197 15,986 59,129 Loss for the period (14,181,344) (2,254,223) (15,371,450) (2,743,124)

Loss per share - Basic and diluted Rs (22.97) Rs (3.65) Rs (24.89) Rs (4.44)


Condensed Interim Consolidated Income Statement (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


(Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)

Loss for the period (14,181,344) (2,254,223) (15,371,450) (2,743,124)Other comprehensive income (1,179) (1,472) (2,620) (3,172)

Total comprehensive loss for the period (14,182,523) (2,255,695) (15,374,070) (2,746,296)


Condensed Interim Consolidated Statement of Comprehensive Income (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


(Restated) 6 months to December 31, December 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (13,668,862) (3,911,720) Adjustment of non cash items: Depreciation and amortisation 1,071,795 996,828 Finance cost 1,884,362 1,284,594 Loss on sale of operating assets – 6,798 Deferred USF grant recognised during the period (48,989) (25,939)Provisions and write off (note 22) 114,984 1,542,537 Provision for impairment of goodwill – 5,765 Provision for impairment of Wimax assets 9,622,973 – Movement of translational loss of foreign subsidiary (2,620) (3,172)Provision for employees’ retirement benefits – 4,052 12,642,505 3,805,042 (1,026,357) (106,678)Changes in working capital: (Increase)/ Decrease in trade debts (408,140) 2,008,117 (Increase)/ Decrease in contract work in progress (96,764) 8,004 (Increase)/Decrease in stores, spares and loose tools (280,127) 19,203 (Increase) in advances, deposits, prepayments and other receivables (431,234) (285,259)Increase in cross currency and interest rate swap liability – 160,550 Increase/ (Decrease) in trade and other payables 1,284,885 (1,133,252) 68,620 777,363 Employees’ retirement benefits paid (311) (6,661)Taxes (paid)/ refund (82,084) 36,590 Cash flow from operating activities (1,040,132) 700,614 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,445,447) (1,925,854)Intangible assets additions – (4,300)Proceeds from sale of property, plant and equipment – 10,000 Long term deposits receivable– (paid) (15) (34,412)Long term prepayments (2,755) 7,811 Advance against purchase of shares – (85,000)Cash flow from investing activities (1,448,217) (2,031,755)

Condensed Interim Consolidated Statement of Cash Flow (Un–Audited)For the six months’ period ended December 31, 2011


(Restated) 6 months to December 31, December 31, 2011 2010 (Rupees in thousand)

CASH FLOW FROM FINANCING ACTIVITIESLong term finance exchange variations / received 315,149 579,241 Long term finance repaid (27,000) (1,132,158)Medium term finance received from an associated company – unsecured – 600,000 Long term finance from a shareholder – unsecured 2,861,637 2,063,379 Payable to supplier to be settled through long term finance repaid – (433,798)Long term payable to supplier (18,570) 273 Deferred USF grant received 454,934 – Obligations under finance leases repaid (1,173) (311)Long term deposits payable– (repaid)/received 4,079 (45,696)Dividend paid to non controlling shareholders – (149,940)Short term borrowings (paid) – (1,545,415)Finance cost paid (1,272,183) (1,254,470)Cash flow from financing activities 2,316,872 (1,318,895)(DECREASE) IN CASH AND CASH EQUIVALENTS (171,477) (2,650,036)Cash and cash equivalents at beginning of the period (3,333,596) (907,691)CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,505,074) (3,557,726) CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 518,695 400,008 Short term running finance (4,023,769) (3,957,734) (3,505,074) (3,557,726)


Condensed Interim Consolidated Statement of Cash Flow (Un–Audited)For the six months’ period ended December 31, 2011


______________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 income for period Loss for the year – as restated – – (2,743,124) – (2,743,124) (59,129) (2,802,253) Other comprehensive income – as restated – – – (3,172) (3,172) (3,172) (3,172)

Balance at December 31, 2010 6,174,746 134,681 (4,589,803) (3,498) 1,716,126 (52,321) 1,663,805

Balance at January 1, 2011 6,174,746 134,681 (4,589,803) (3,498) 1,716,126 (52,321) 1,663,805 Total comprehensive loss for the period Loss for the year – as restated – – (2,279,112) – (2,279,112) (112,131) (2,391,243) Other comprehensive income – as restated – – – (2,554) (2,554) (2,952) (5,506)Acquisition of Non Controlloing Interest (49%) ofWateen Telecom Limited UK on March 31, 2011 – – (135,919) (2,648) (138,567) 137,885 (682)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 – – (15,371,450) – (15,371,450) (15,986) (15,387,436) Other comprehensive income – as restated – – – (2,620) (2,620) – (2,620)

Balance at December 31, 2011 6,174,746 134,681 (22,376,284) (14,272) (16,081,129) (42,553) (16,123,682)


Condensed Interim Consolidated Statement of Changes of in Equity (Un–Audited)For the six months’ period ended December 31, 2011


______________Director


1. Legal status and operations The condensed consolidated interim financial information includes the financial information of Wateen

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

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

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

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

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

The subsidiary company, Wateen Telecom UK Limited, is incorporated as a private Limited Company under the UK Companies ordinance and is engaged in providing internet and other technology related services in United Kingdom. Wateen acquired 100% shares of the Company effective March 31, 2011.

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

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

Notes to and Forming Part of the Condensed Interim Consolidated Financial Information (Un–Audited)For the six months’ period ended December 31, 2011


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

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the parent share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

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

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

2. Statement of compliance The presentation of this condensed consolidated interim financial information of the Company

for the six months period ended December 31, 2011 has been prepared in accordance with the requirements of the International Accounting Standard 34 – Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed.

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

consolidated interim financial information are the same as those applied in preparation of the published financial statements for the year ended June 30, 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 15,371 million, and had net Current Liabilities

as at 31 December 2011 of Rs 19,263 million, of which Rs 7,896 million relates to loan installments classified as current liabilities as mentioned in note 5.6, and that is due for repayment after December 31, 2012. 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 7,780 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.




5. Long term finance – secured Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department – (ECGD) 5.2 2,298,888 2,202,888 Dubai Islamic Bank (DIB) 5.3 424,000 424,000 Motorola Credit Corporation (MCC) 5.4 4,309,283 4,129,330 Standard Chartered Bank (SCB) 5.5 1,016,031 1,043,030 Total 12,814,202 12,565,248 Unamortized transaction and other ancillary cost Opening balance 217,355 299,464 Amortisation for the period/year (39,195) (82,109) (178,160) (217,355) 12,636,042 12,347,893 Less: Amount shown as current liability Amount payable within next twelve months (4,739,785) (3,225,026) Amount due after December 31, 2013 5.7 (7,896,257) (9,122,867) (12,636,042) (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 amounting to Rs 5,000 million (June 30, 2011 Rs 5,000) of which Rs 4,800 million has been availed till December 31, 2011. The tenor of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped - up- instalments the first of such shall be due June 30, 2012 and subsequently after six months thereafter till December 31, 2014. The rate of mark up is 6 months KIBOR + 2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years.

Subsequent to the period end 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 from soneri bank of Rs 200 million, running finance facility of Rs 529 miilion from BAHL and finance facility of Rs 135 million from Summit Bank Limited effective from January 1, 2011. 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. .

Subsequent to the period 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 World call and USF), a mortgage by deposit of title deeds in respect of immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and a corporate guarantee from Warid Telecom International LLC.

5.2 The Company has obtained long term finance facility amounting to USD 42 million (June 30, 2011: USD 42 million) from ECGD UK, which has been availed USD 35 million till December 31, 2011 (June 30, 2011: USD 35 million). Subsequent to the period end on June 30, 2012, the Company restructured the terms of loan agreement including repayment schedule (agreement have been signed). Amount outstanding at December 31, 2011 was USD 25.600 million. The loan is repayable in 14 semi annual instalments of USD 3.025 million each started from October 2009. The rate of mark up is LIBOR + 1.5% per annum. Additional mark up at 2% per annum will be payable on default payment from the date of due date for payment up to the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum which ever is higher.

Subsequent to the period end the Company and ECGD UK signed an agreement to restructure the term of the loan agreement including repayment schedule. 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 LIBOR + 1.5% (interest rate) per annum till June 30, 2011 and 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.

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 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. The principal is repayable in 10 semi annual instalments of Rs 53 million each commencing from February 1, 2010 and rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is repayable on default payment at KIBOR +4% per annum from the due date for payment up to the date of payment.

Subsequent to the period end on March 30, 2012, the Company restructured the terms of the Ijarah finance facility (agreement have been signed). 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.

Subsequent to the period 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 (movable 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 December 31, 2011. 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. Amount outstanding at December 31, 2011 was USD 48 million (June 30, 2011: USD 48 million). The principal amount of outstanding facility is repayable in 12 unequal semi annual instalments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark up is six months LIBOR + 1.7% per annum. Additional interest is payable on default payment at six months LIBOR + 2% per annum from the due date for payment up to the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply and services agreements with Motorola.

Subsequent to the period end, the Company and Deutsche Bank AG signed an agreement to restructure the terms of the loan agreement. 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 interest period. Thereafter, for each successive interest period, 2% above the six-month LIBOR plus margin provided the Company is in breach of its payment obligations hereof. The 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 5.5.2 291,433 291,433 Term finance facility 5.5.3 217,397 217,397 Term finance facility 5.5.4 507,200 507,200 1,016,030 1,043,030

5.5.1 The Company obtained an aggregate medium term finance facility of USD 3 million (2011: USD 3 million) from SCB. The principal was repayable in 8 equal semi annual instalments commencing from October 1, 2007. The rate of interest was six month average KIBOR + 1.25%. The loan was secured



by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million. The entire amount of the outstanding facility has been repaid during the period.

5.5.2 The Company has obtained term finance facility from Standard Chartered Bank amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark–up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge.

Subsequent to the period end on February 24, 2012, the Company restructured the term finance facility from SCB of Rs 291 million as explained in note 5.1

5.5.3 The Company has obtained term finance facility from Standard Chartered Bank amounting to Rs 217 million. The principal is repayable in five installments commencing from June 30, 2011. The rate of mark–up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge.


5.5.4 The Company has obtained term finance facility from Standard Chartered Bank amounting to Rs 507 million. The principal is repayable in thirty six months in eight unequal installments commencing from September 30, 2011 till December 31, 2013. The rate of mark–up is six months KIBOR + 2.5%. The facility is secured by way of ranking charge over all current and fixed assets (excluding assets under specific charge of CM PAK, Cisco, Motorolla, DIB, assets procured from world call and USF) for a sum of Rs 625 million.


5.6 The Company is required to make payment of long term loans on due dates and to maintain certain ratios specified in loan agreements. The Company was not able to pay make payment of ECGD loan installments, DIB loan installments and SCB loan installments during the period. Certain ratios specified in the loan agreement have not been maintained at December 31, 2011. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the statement of financial position date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan installments for an amount of Rs 7,896 million due after December 31, 2011 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 as per the terms of the agreement. 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 period end the Company has not repaid the loan.


7. Long term finance from shareholders – unsecured

Facility 1 7.1 2,157,445 2,067,351 Facility 2 7.2 5,622,419 2,850,876 7,779,864 4,918,227

7.1 The Company has obtained long term finance from a shareholder amounting to USD 24 million (2011: USD 24 million). The loan is subordinated to all secured finance facilities availed by the Company. The loan is repayable after entire amount of the finance facilities and all payments due in respect of the finance facilities have been paid in full by the Company to the lenders and lenders have notified the shareholder in writing of such payments being paid or otherwise give any permission jointly in writing to the Company to make all or part payment under this agreement. 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 30 June 2014. The final repayment instalment and all other amounts due from the Borrower to the Lender must be repaid on the Final Maturity Date i.e June 30, 2018. Alternatively the Company shall also have the option to instruct the Borrower 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 Borrower in favour of the Lender in compliance with all 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 (June 30 , 2011: USD 52 million) of which USD 62.6 million (June 30, 2011: USD 33 million) has been availed at December 31, 2011. 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.

8. Deferred income tax asset/ (liability) December 31, June 30, 2011 2011 (Rupees in thousand)

Taxable temporary differences between accounting and tax depreciation (507,687) (3,835,305) Unused tax losses – recognised to extent of taxable temporary differences 507,687 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 Dec 31 – 1,718,574

The aggregate tax losses available to the Company for set off against future taxable profits at December 31, 2011 amounted to Rs 19,086 million. Of these, losses aggregating Rs 1,451 million have been recognised in the financial information against taxable temporary differences at December 31, 2011.

Deferred tax asset, the potential tax benefit of which amounts to Rs 10,171 million has not been recognized on balance representing business losses aggregating to Rs 5,496 million, tax depreciation losses aggregating Rs 12,140 million and deductible temporary differences on account of provisions



and share issue cost aggregating Rs 11,425 million as at December 31, 2011. Business losses expire as follows:

Tax Year Rs in million

2017 3,257 2018 2,239 During the period, management of the Company has taken a conservative view regarding recognition

of deferred tax asset amounting to Rs 11,991 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 (48,989) (50,605) Closing balance 1,542,255 1,136,310

10. Short term borrowings – secured Short term borrowings 10.1 134,750 134,750 Short term running finance 10.2 4,023,769 3,972,790 4,158,519 4,107,540

10.1 Subsequent to the period end, on February 24th 2012 the company has restructured the short term running finance from Summit Bank as explained in note 5.1 above.


10.2 Short term running finance – secured Standard Chartered Bank 10.2.1 1,496,734 1,497,005 Bank Alfalah Limited 10.2.2 1,798,435 1,765,127 Soneri Bank Limited 10.2.3 200,000 199,220 Bank Al Habib Limited 10.2.4 528,600 511,438 4,023,769 3,972,790

10.2.1 Subsequent to the period end on February 24, 2012, the Company and Syndicate of Banks signed an agreement to restructure the short term running finance from SCB and consolidated this with Syndicate Finance Facility as referred in note 5.1 above.

10.2.2 The Company has a running finance facility of Rs 1,800 million (June 30, 2011: Rs 1,800 million), of which Rs 2 million (June 30, 2011: Rs 35 million) was unutilised as at December 31, 2011. Subsequent



to the period end on February 20th 2012 the Company has signed restructured agreement now the facility is available till December 31, 2019. The principal is payable on expiry/on demand. The rate of mark–up is 6 months KIBOR per annum till December 31, 2013 and KIBOR + 1.5% per annum for the remaining period. Mark up at 8% is payable on bi–annual basis and remaining amount is deferred which is payable in 10 bi–annual instalments with the first instalment becoming payable on July 1, 2014. Initially the facility carried mark–up at three months KIBOR + 2.5 % per annum.

This facility is secured by hypothecation of first pari passu charge on all fixed assets(movable and immoveable) plus current assets of the company with a margin of 25 %.

10.2.3 Subsequent to the period, Company and Syndicate of Banks signed an agreement to restructure the short term running finance from Soneri Bank Limited as explained in note 5.1 above.

10.2.4 Subsequent to the period end on February 24, 2012, the Company and Syndicate of Banks signed an agreement to restructure the short term running finance from Bank Al Habib Limited as explained in note 5.1 above.


11. Trade and other payables These include payable to related parties as follows: Advances from Warid Telecom (Pvt) Limited 48,983 48,983 Bank Alfalah Limited 3,950 3,950 Payable to gratuity fund 115,159 120,013 Payable to provident fund 5,304 36,737 173,396 209,683

12. Contingencies and commitments12.1 Claims against the Company not acknowledged as debt 319,338 295,767 12.2 Performance guarantees issued by banks in favour of the Company 1,749,452 1,267,812

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 38 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 EOGM dated December 31, 2011.



(Restated) Six months to Year ended December 31, June 30, 2011 2011 (Rupees in thousand)

13. Operating assets Opening net book value 18,766,578 17,224,136 Additions – owned 776,297 3,852,188 – leased – 3,504 Currency translation differences on restatement – 9,804 Disposals at net book value – (107,062) Impairment charge (note 13.1) (9,622,973) (156,928) Depreciation charge (1,057,966) (2,059,064)

Closing net book value 8,861,936 18,766,578

13 .1 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 Board of Directors 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 above will be recognized in the financial statements of ensuing periods.



Six months to Year ended December 31, June 30, Note 2011 2011 (Rupees in thousand)

14. Capital work in progress Leasehold improvements 30,593 21,233 Line and wire 1,629,562 1,288,678 Network equipment 14.1 1,304,258 994,195 2,964,413 2,304,106

14.1 Network equipment is net of provision for impairment of Rs 354 million (June 30, 2011: 354 million).14.2 Finance cost of Rs Nil was capitalised during the six months period ended December 31, 2011 (Year

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

15. Advance against purchase of shares Advance paid against purchase of shares – Wateen Solutions (Pvt) Limited 12.4 85,000 85,000

16. Trade debts Trade debts – related parties 16.1 1,000,281 611,493 – other parties 2,050,685 2,076,772 3,050,966 2,688,265 Less: Provision for doubtful debts – other parties 16.2 (688,016) (618,470) 2,362,951 2,069,795

16.1 Trade debts include due from related parties as follows:

Warid Telecom (Pvt) Limited 801,021 550,954 Warid International LLC, UAE – Parent company 80,200 41,298 Bank Alfalah Limited 119,060 19,241 1,000,281 611,493

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 – 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 618,470 157,035 Provision during the period 114,984 461,817 Writeoff against provision (45,438) – Recovery during the year – (382) Closing balance 688,016 618,470

Provision during the period includes Rs 114,984 thousand based on age analysis of debts as follows:

Balances 181 – 360 days past due – 50 % Balances over 360 days past due – 100 % (Restated) December 31, June 30, Note 2011 2011 (Rupees in thousand)

17. Stores, spares and loose tools Cost 1,032,751 752,824 Less: Provision for obsolete stores 213,852 213,852 818,899 538,972

18. Advances, deposits, prepayments and other receivables 18.1 These include receivable from related parties as follows: Wateen Multimedia (Pvt) Limited 183,137 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 5,587 361,504 274,529 Less: Provision for doubtful receivables from related parties 18.2 178,367 178,367 183,137 96,162



(Restated) December 31, June 30, 2011 2011 (Rupees in thousand)

18.2 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

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

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

30, 2011: Rs 41,675).

19. Cash and bank balances Bank balances amounting to Rs 190.6 million were under lien with banks (June 30, 2011: Rs 34

million). (Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)

20. Revenue Long Distance and International (LDI) 831,517 723,604 1,631,131 1,239,166 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) 5,308 (232,045) 10,651 – Operation and Maintenance 117,347 155,147 234,115 298,690 Managed capacity 17,276 21,991 33,597 34,734 Broadband and voice 545,783 455,723 1,060,689 903,267 Hybrid Fiber Cable Services (HFC) – 8,535 – 17,395 Very Small Aperture Terminal services (VSAT) 206,391 218,387 373,305 470,895 ADM sites rentals 13,768 43,174 26,558 74,172 Sale of product and services – 33,282 – 149,090 Margin/commission – 13,429 – 3,060 Others 51,376 84,941 177,454 220,360 1,788,767 1,526,168 3,547,499 3,410,828



(Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)

21. Cost of sales LDI Interconnect cost 679,992 663,816 1,223,632 1,070,952 Leased circuit charges 105,992 84,230 206,968 181,471 Contribution to PTA Funds 264,812 49,006 374,154 123,384 PTA regulatory and spectrum fee 5,929 5,926 11,673 13,138 Cost associated with IRU of Optic Fiber Cable – – – – Operational cost 429,034 247,880 797,907 630,116 Bandwidth cost of VSAT services 160,957 196,248 337,430 398,726 Equipment and material consumed 22,875 82,960 Others (159,828) 9,241 168,025 64,629 1,486,888 1,279,222 3,119,790 2,565,376 22. Provisions and write off Trade debts written off – related parties – 206,227 – 206,227 Provision for doubtful trade debts – other parties 30,176 249,574 114,984 249,574 Provision for doubtful advances and other receivables – related parties – 173,151 – 173,151 – other parties – 15,599 – 15,599 Provision for impairment of capital work in progress – 353,515 – 353,515 Provision for impairment of goodwill on acquisition of subsidiary company – 5,765 – 5,765 Provision for obsolete stores and spares – 271,998 – 271,998 30,176 1,275,829 114,984 1,275,829 23. Other income/ (loss) Profit/(loss) on sale of fixed assets – (6,709) – (6,798) Rental income – – – – USF grant recognised as income 35,123 (84,816) 48,989 25,939 Other income/ (loss) 874 (3,610) 1,448 4,247 35,997 (95,135) 50,438 23,388



(Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand)24. Finance cost Interest/markup 505,652 507,699 1,059,729 1,012,486 Cross currency and interest rate swap contracts cost – 377,947 – 377,947 Amortization of ancillary cost of long term finance 18,246 22,301 39,196 44,602 Finance cost of leased assets – 596 – 852 Bank charges, commission and fees 31,876 28,762 144,884 41,856 Exchange loss/(gain) 447,256 (11,937) 640,554 41,617 1,003,031 925,368 1,884,362 1,519,359 Mark up on long term finance capitalised under property, plant and equipment – (117,196) – (234,392) 1,003,031 808,172 1,884,362 1,284,967

25. Income tax charge/(credit) Current – (12,894) – 3,747 Prior Period – – – 2,601 Deferred (2,097,132) (773,071) (1,718,574) (849,108) (2,097,132) (785,965) (1,718,574) (842,760)

26. Related party transactions Aggregate transactions with related parties during the period were as follows: Parent Company Warid Telecom International LLC, UAE (WTI) Markup charged to WTI – 3,045 – 6,090 Payments made by the Company on behalf of WTI – – – 56 Provision for doubtful advances – 35,911 – 35,911 Shareholders Long term finance received from shareholders 1,203,742 856,579 2,861,637 2,063,379 Markup on long term finance from shareholders 34,859 8,693 67,385 8,693 Associated Companies: Warid Telecom (Private) Limited (WTL) Sale of services 299,609 500,478 627,152 891,537 Cost and expenses charged by company 229,280 86,601 401,193 423,818 Trade debts written off - 76,834 - 76,834 Unearned revenue reversed – 147,315 – 147,315 Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by (WMM) 4,141 13,674 10,132 22,791 Payments made by the Company on behalf of WMM 14,704 3,683 35,506 11,945 Bank Alfalah Limited (BAL) Sale of services 24,651 1,652 46,394 35,312 Markup charged by company on running finance facility 62,238 68,399 103,353 132,571



(Restated) (Restated) 3 months to 6 months to December 31, December 31, December 31, December 31, 2011 2010 2011 2010 (Rupees in thousand) Taavun (Pvt) Limited Long term finance received – 50,000 – 600,000 Markup charged by company on long term finance 23,789 23,789 49,302 23,789 Warid Congo S.A (Warid Congo) Trade debts written off – 125,127 – 125,127 Payments made on behalf of Warid Congo – – – 5,384 Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda – – – 47,474 Trade debts written off – 4,266 – 4,266 Warid Telecom Georgia Limited Provision for doubtful advances – 15,402 – 15,402 Warid Telecom International – Bangladesh Provision for doubtful advances – 5,586 – 5,586 Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen – – – 1,159 Provision for doubtful advances – 16,329 – 16,329 Amoon Media Group (Private) Limited Provision for doubtful advances – 27,960 – 27,960 Advance for construction of Warid Tower Advance paid during the period – – – 3,200 Provision for doubtful advances – 68,916 – 68,916 Gratuity Fund Employer contribution to fund – 8,905 – 27,686 Provident Fund Trust Employer contribution to trust 9,740 4,649 19,859 14,052 Surcharge charged by trust on late payments – 1,142 – 1,142 Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 125,883 110,926 250,036 228,600



Subsequent events after the reporting 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. The Company has managed to rearrange records for the period July 1, 2011 to February 10, 2012 till the date of issuance of these financial statements. The exercise related to the period July 1, 2008 to June 30, 2011 is in progress.

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.

27. Restatement of prior periods financial information 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 year, 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.

28. 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 december 31, 2011...restructuring term sheets were signed with some lenders...

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