Etisalat Annual Report 2015

Transcription

Head Office:
Etisalat Building
Intersection of Zayed The 1st Street and
Sheikh Rashid Bin Saeed Al Maktoum Street
P.O. Box 3838, Abu Dhabi, UAE
Regional Offices:
Abu Dhabi, Dubai, Northern Emirates
Key Highlights of 2015
4
Business snapshots
6
Chairman’s statement
8
Board of Directors
10
Our Journey
12
CEO’s Statement
14
Management Team
16
Etisalat Strategic Piller
21
key events of the year
22
Operational Highlights
24
Etisalat group’s Footprint
28
UAE
30
Sauadi Arabia
34
Egypt
36
Morrocco
38
Nigeria
42
Pakistan
44
Human Resorces
54
Corporate Social Responsibility
56
Corporate Governance
58
Financials
60
Notice of General Annual Shareholders Meeting
122
51.7
167
AED
Billion
Revenue
Million
Aggregate
subscribers
26.6
80
AED
Billion
EBITDA
8.3
AED
Billion
Net Profit
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Annual Report 2015
Fils
Dividend
per share
10.3
AED
Billion
CAPEX
Etisalat Group
05
Our business model is based on meeting our customers’
expectations through continued investment in our networks
to support wider coverage, higher speeds and greater
capacity, and to provide innovative service offerings.
Our aspiration is to be the leading and
most admired emerging markets telecom
group by consistently and pro-actively
serving our customers with a common
set of brand values based on innovation,
customer centricity and building trusted
relationships. This is evidenced by our key
strategic pillars of owning and managing
an attractive, well balanced portfolio
of assets; providing differentiated,
innovative service offerings that
leverage our high quality infrastructure
and networks; and a superior customer
experience.
In 2015, in keeping with these goals and
values, Etisalat Group completed the sale
of our assets in West Africa, integrating
this region into the Maroc Telecom
Group and optimizing the value of our
portfolio. This resulted in the creation
of West Africa’s largest Francophone
telecom group. 2015 also saw the
completion of Etisalat’s sale of our 85%
shares in Tanzania’s Zanzibar Telecom.
The Etisalat Group business model
continues to be guided by the central
principle of meeting and exceeding
customers’ expectations. We aspire to
achieve this through the continued
investment in our networks and
provision of innovative service offerings,
ensuring that we provide our customers
with the best possible experience. At
the same time, we have continued our
practice of high cash generation, so
that we can continue to reward our
shareholders and grow our business.
We have sustained a generous dividend
programme with close to AED 18 billion
returned to shareholders in the past 3
years, including 10% bonus share.
Over the years, we have maintained
a high level of capital expenditure to
support wider coverage, higher speeds
and greater capacity in our networks.
With over 167 million customers, we
are one of the world’s fastest growing
telecom operators, with access to close
to one billion people in the markets we
operate in. The majority of our customers
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Annual Report 2015
and the bulk of our growing mobile
customer base are in Africa and Asia.
We believe that voice is still a growth
area that we intend to tap into with
the continued upgrade of our networks;
however our primary focus is on securing
a leadership position in the more lucrative
data segment. To that end, we have in the
recent past invested in spectrum licences
in Morocco, Mauritania, Pakistan,
Afghanistan, Benin and Cote D’Ivoire
to support our push into mobile data
services and to support future growth.
technology innovation and deployment,
and leads the world in terms of high-speed
broadband penetration. The country
enjoys one of the highest smartphone
penetration rates in the world, with over
80 percent mobile consumers now using
smartphones.
In the years to come, Etisalat Group
plans to lead the way in terms of growth
and innovation within the UAE’s multibillion-dollar telecom market, with
particular focus on the ICT segment.
Our focus is on leveraging our technology
platforms to deliver innovative products
and services that offer both economic
and social benefits to our customers.
We aspire to transform the communities
we operate in, be it through enhancing
financial services access, or enhancing
the access to and quality of healthcare
and education in remote areas.
Meanwhile, Etisalat Group continues
to be committed to being a responsible
global corporate citizen through strategic
partnerships that enhance access to
education and healthcare via the use
of technology. These efforts are greatly
contributing to bridging the gap in terms
of access within the communities we
serve, while generating impressive digital
dividends in the form of jobs, economic
growth and stability.
For nearly 40 years, Etisalat has helped
the UAE sustain its position as the region’s
hub for business, trade and foreign
investment by providing reliable, high
quality services. This was accomplished
through Etisalat’s heavy investment in
advanced world class networks where
both fibre-to-the-home (FTTH) and LTE
roll-out exceeds 90 percent coverage of
the population.
Due to these investments, the UAE today
demonstrates leadership in regional
Etisalat Group
07
2015 was a year of achievement, which
has consolidated our position as a leading
telecommunications operator in emerging markets
As we reflect on 2015 as a year of
achievement, we should also recognise
the significant milestones we have
reached this year. While our achievements
this year have consolidated our position
as a leading telecommunications operator
in emerging markets, our eyes must also
remain on the future. We are witnessing
a period of rapid development in the
global telecommunication industry,
where the only constant is the speed
and acceleration of change. Our four
decades of expertise and experience puts
us in a strong position to adapt to this
rapidly changing environment and take
advantage of the opportunities before us.
The wise leadership of the UAE has
played an important role in making
2015 a significant milestone in Etisalat
Group’s journey of growth. I want
to laud the Government’s historic
decision to allow investors from local
and foreign institutions, as well as
non-local individuals, to own equity in
Etisalat Group. This decision embodied
a new phase in the journey of Etisalat
Group, allowing it to realise its goals of
more growth and prosperity, which will
simultaneously have a positive impact
on both shareholders and the financial
market.
In this respect, consolidated annual
revenues reached AED 51.7 billion, while
net profits, after the federal royalty,
reached AED 8.3 billion. And in line with
our strategy of finding added value for
our shareholders, Etisalat Group Board
has recommended the distribution of
dividends to be of 80 fils per share for
the year 2015.
Embodying our strategic role in
providing innovative solutions which
transform the communities in which
we work, Etisalat Group is heavily
involved in the development of Smart
Cities. Etisalat Group has been given
great responsibility in this aspect and we
look forward to implementing the next
phase, helping to achieve the vision and
ambitions of the UAE Government about
Smart cities and digital transformation.
Last year also witnessed an important
development in the field of network
sharing. The Telecommunications
Regulatory Authority formally
introduced network sharing in the UAE.
This will no doubt have a positive impact
on the telecommunications sector in
the country, providing an incentivised
competitive environment, which will
boost performance and innovation in the
country, to the benefit of operators and
subscribers, in equal measure.
to have a significant role to play. The
platforms and networks that we are
investing in today will provide the
basis for industrial growth, improved
government services and enhanced
personal experiences. By providing
the technological support for a better
life for individuals and communities
across our footprint, it will also provide
new sources of revenue to guarantee
continuous profitability.
2015 was indeed a historic year in
the journey of Etisalat Group. Our
expertise, experience and success in
2015 are a source of strength, making
us more determined and resilient as
we move on to a new chapter in the
Etisalat Group story. I want to thank the
wise Government of the UAE for their
constant support, our customers for their
loyalty and trust in us for delivering
the latest technology and services, our
shareholders for their support, which
enhances our ability to move forward,
and the commitment of all Etisalat
Group employees and the Etisalat Group
management for their dedicated work.
It is as the enabler of the technological
future that Etisalat Group will continue
Eissa Mohamed Al Suwaidi
Chairman - Etisalat Group
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Annual Report 2015
Etisalat Group
09
Eissa Mohamed Ghanem Al Suwaidi
Chairman of the Board
Chairman of Investment & Finance Committee
Sheikh Ahmed Mohd Sultan Bin Suroor
Al Dhahiri
Vice chairman
Member of Audit Committee
Mohamed Sultan Abdulla Mohamed
Alhameli
Board Member
Chairman of Nomination & Remuneration
Committee
Abdulla Salem Obaid Salem Al Dhaheri
Board Member
Member of Nomination & Remuneration
Committee
Hesham Abdulla Qassim Al Qassim
Board Member
Committee
Essa Abdulfattah Kazim Al Mulla
Board Member
Chairman of Audit Committee
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Annual Report 2015
Abdulfattah Sayed Mansoor Sharaf
Board Member
Member of Investment & Finance Committee
Mohamed Hadi Ahmed Abdulla Al Hussaini
Board Member
Abdelmonem Bin Eisa Bin Nasser Alserkal
Board Member
Committee
Khalid Abdulwahed Hassan Alrostamani
Board Member
Member of Audit Committee
Otaiba Khalaf Ahmed Khalaf Al Otaiba
Board Member
Hasan Al Hosani
Company Secretary
Etisalat Group
11
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Annual Report 2015
Etisalat Group
13
Etisalat Group will continue to invest in the
innovative products and services that our customers
demand today and aspire to tomorrow
As we prepare to enter our fifth decade
as a company, Etisalat Group’s performance in 2015 reflects our history of
solid performance and innovation. The
financial results seen in 2015 have consolidated our position as a leading operator in emerging markets. As a result, we
are well-placed to meet the challenges
of the fast-evolving telecommunication
sector and move forward with confidence to provide greater value for our
shareholders and meet the aspirations of
the millions of our customers across our
international footprint.
We are adapting to this evolution admirably so far, even though there is more
work to do. And while it is important to
recognise the challenges, it is just as important to recognise our achievements.
Our results in 2015 continue our longterm pattern of success; a clear indication that we remain in a strong position.
Group revenues grew by 7 per cent to
reach AED 51.7 billion with Operating
Profit before Federal Royalty rising by
14 per cent. Despite the challenges the
industry faced in 2015, we were still able
to deliver strong profits of AED 8.3 billion and with a subscriber base of 167
million. The main source of revenue
growth was the UAE, our most important
market, which grew by 6% driven by a
higher subscriber base and the strong
performance of the mobile and fixed
broadband segments. Performance of
our international operations was muted
by unfavourable movements in foreign
exchange rates and currently make up
44% of Group consolidated revenues.
Operating margins improved to 51%
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Annual Report 2015
supported by the strong performance
of UAE operations and higher contribution from Maroc Telecom Group. Group
capital expenditure of AED 10.3 billion,
represented 20% of the Group consolidated revenue. We allocated AED 4.9 billion - about 48% of consolidated capital
expenditure - to the UAE market given
our unwavering commitment to provide
a state-of-the-art telecommunications
network to the citizens of the UAE, and
reflecting the higher revenue per subscriber in the market. In international
markets, we progressed with strategic
investments that included; acquiring 4G
license and launching of 4G+ services in
Morocco, in addition to license acquisition and renewal in Ivory Coast, Niger
and Mauritania.
To be able to benefit from future opportunities, we need to be at the forefront
of progress today. Only by investing today
can we deliver the future growth that will
ensure our continued prosperity. One example of this approach, is delivering the
objective we share with the UAE Government, to be one of the first countries in
the world to have the fifth generation of
mobile technology that is vital in delivering the Smart City solutions, which will
shape the next stage of human development.
and business. In 2015 we expanded our
Mobile Connect service, which helps customers to manage their Digital Identity
and protect privacy on-line, across the
majority of our operations. This year we
launched Mobile Cashier in five markets
within our footprint. It is a first-of-itskind solution in the region, which enables
business customers to manage transactions through their mobile phones, and
is gradually transforming the SME sector
and B2B capability.
Four decades of delivering large-scale
projects and extensive ICT skills allows
us to provide a value proposition for the
digital age, which is end-to-end, scalable
and innovative, and positions Etisalat
Group firmly as a capable partner for
driving economic growth within the
markets in which we operate. We are
well-placed to deliver the advanced
and innovative solutions that will be
the key to generating future growth
and profitability. Only by adapting and
investing today can meet what our
consumers aspire to tomorrow and
continue to deliver for our shareholders
and customers in the next decade of our
history and beyond.
At the heart of this digital revolution is
the mobile phone. It is the constant in
all our lives and will be the fundamental element of everything that we do.
The smartphone will be your identity,
your wallet, your access to services and
entertainment; ubiquitous to individuals
Etisalat Group
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Hatem Dowidar
Chief Executive Officer, Etisalat UAE
Mr Hatem Dowidar joined Etisalat Group in September 2015 as Group Chief Operating Officer and
was appointed as Acting Chief Executive Officer of Etisalat Group in March 9, 2016. Prior to joining
Etisalat Group, Mr. Dowidar was latterly Chairman of Vodafone Egypt and Group Chief of Staff
for Vodafone Group. Mr Dowidar has over 24 years of experience in multinational companies. He
initially joined Vodafone Egypt in its early start-up operation in 1999 as Chief Marketing Officer.
After successfully undertaking two group assignments and the role of CEO Vodafone Malta, he
became the CEO of Vodafone Egypt from 2009 - 2014.
Engineer Saleh Al Abdooli was appointed as Chief Executive Officer of Etisalat UAE in April 2012.
A strong and charismatic leader, Saleh rose to international fame after his resounding success
in Egypt as the CEO of Etisalat Misr. He built and launched the first 3G operator in Egypt in 7
months. In less than five years, he achieved 27% of revenue share, 28% market share, 36% EBITDA
margin, and 99% 2G/3G coverage. Mr Abdooli also serves on the Board of Etisalat Misr and
Etisalat Services Holding, Al Abdooli holds Bachelor’s and Master’s in Electrical Eng. and Telecom
from University of Colorado at Boulder, USA.
Serkan Okandan
Abdeslam Ahizoune
Chief Financial Officer, Etisalat Group
Chairman of the Management Board, Maroc Telecom
Mr. Okandan joined Etisalat in January 2012 as Chief Financial Officer of the Etisalat Group. Prior
to his appointment, he was the Group Chief Financial Officer of Turkcell. Mr. Okandan started
his professional career at PricewaterhouseCoopers in 1992, and worked for DHL and Frito Lay as
a Financial Controller before joining Turkcell. Mr. Okandan is a board member and Chairman of
the audit and risk committee of Etisalat Nigeria, PTCL, Ufone, Etisalat Services Holding, a board
and audit committee member of Maroc Telecom and a board member of Mobily. Mr. Okandan
graduated from Bosphorus University with a degree in Economics.
Mr. Ahizoune has been Chairman of the Maroc Telecom Management Board since February 2001 and
served as CEO from 1998 to 2001. Earlier, he was Minister of Telecommunications in four different
governments. Mr. Ahizoune has been Chairman of the Moroccan Royal Athletics Federation since
2006, and also serves as a board member of several foundations: Inter Alia; King Mohammed V for
solidarity; King Mohammed VI for the environmental protection, and Princess Lalla Salma against
cancer. He is also the Vice-President of CGEM and the President of its Moroccan-Emirati economic
commission. He holds an engineering degree from Télécom ParisTech.
Abdulaziz Al Sawaleh
Chief Human Resources Officer, Etisalat Group
Chief Executive Officer, Mobily
Mr. Farroukh joined was appointed as CEO of Mobily in July 2015. Prior to joining Mobily, he was
CEO for MTN South Africa. He brings over thirty years of experience across Middle East, Africa,
North America and Europe. Mr. Farroukh began his career in 1983 as the Finance Manager for
Mediterranean Investor Group. After an early career in audit and finance, he joined Investcom in
1996, as Group Finance Controller. He was later appointed as Managing Director for Ghana and
Regional Manager for its West Africa operations. Following Investcom’s acquisition by MTN Group,
he served as CEO MTN Nigeria, Vice President West and Central Africa and later chief operating
officer at MTN Group.
Khalifa Al Shamsi
Hazem Metwally
Khalifa Al Shamsi was appointed as Chief Digital Services Officer of the EG in 2012. Prior to
this role, Mr. Al Shamsi held the position of Senior Vice President of Technology Strategy of the
Etisalat Group. Since joining Etisalat in 1993, Mr. Al Shamsi has held various key senior positions
including Vice President and Senior Vice President of Marketing of Etisalat UAE. Mr. Al Shamsi
serves on the Boards of Mobily and Etisalat Afghanistan, Chair E-vision’s Board and appointed the
Managing Director of Mobily. Mr. Al Shamsi has a Bachelor’s degree in Electrical Engineering from
the University of Kentucky, USA.
Annual Report 2015
Ahmad Farroukh
Mr. Al Sawaleh is the Chief Human Resources Officer (CHRO) of the Etisalat Group. Prior to this
position, he was the CHRO of Etisalat UAE. Mr. Al Sawaleh has more than 25 years’ experience
in various leadership positions. He is responsible for leading the global Human Capital strategies
including the areas of talent development, organization effectiveness, compensation & benefits and
Performance Management. Mr.Al Sawaleh is board member of Atlantique Telecom, Etisalat Nigeria,
and Etisalat Services Holding and the Chairman of E Marine Board. Mr. Al Sawaleh holds an MBA
degree in Global Leadership Management from UAE University and a BBA degree from the USA.
Chief Digital Services Officer, Etisalat Group
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Saleh Al Abdooli
Acting Chief Executive Officer, Etisalat Group
Chief Executive Officer, Etisalat Misr
Mr. Metwally was appointed Chief Executive Officer of Etisalat Misr in October 2015. He started
his telecom career in 1999 in sales distribution and operations focusing on both consumer and
corporate segments. He joined Etisalat Misr in 2006 as Chief Commercial Officer managing
sales, marketing, and customer care functions. In 2012, he was promoted to Chief Operating
Officer expanding his responsibilities to include Carriers Relations and Wholesale Operations. Mr.
Metwally holds a bachelor degree in Telecommunications and Electronics Engineering from Cairo
University.
Etisalat Group
17
Obaid Bokisha
Chief Procurement Officer, Etisalat Group
Obaid Bokisha was appointed as Chief Procurement Officer of the EG in June 2012. Since joining
Etisalat, he was assigned various responsibilities contributed to the network implementation of all existing
systems covering GSM, UMTS, LTE and WiFi networks. Positions held include Vice President Mobile
Networks Planning & Int’l Support of Etisalat UAE and Senior Vice President – Mobile Networks
Optimization EG.Mr. Bokisha serves on the board of Canar, and Etisalat Nigeria. Mr. Bokisha has a
degree in Communications Engineering from the Etisalat College of Engineering.
Dr. Kamal Shehadi, PhD
Chief Legal & Regulatory Officer, Etisalat Group
Kamal Shehadi was appointed as Chief Legal & Regulatory Officer of EG in November 2012. He
Joined Etisalat in 2010 as Head ofthe Regulatory Department. Prior to that, Dr. Shehadi was the
Chairman and CEO of TRA, Lebanon. He has more than 17 years of experience in consulting and
advisory services for telecom regulatory authorities and telecom service providers.Dr. Shehadi
serves on the board of Atlantique Telecom Holding and Etisalat Nigeria. Dr. Shehadi has a B.A. in
Economics from Harvard University and a PhD in International Political Economy from Columbia
University, USA.
Javier Garcia
Chief Internal Auditor, Etisalat Group
Javier Garcia joined Etisalat in December 2012 as Chief Internal Auditor of the EG. Mr. Garcia
was the head of Internal Audit at Telefonica Group before joining Etisalat. He held various
positions with Telefonica including Business Process Audit Director and Vice President of Internal
Audit (Chile) before becoming the Group Head of Internal Audit. Mr. Garcia serves on the audit
committees of Maroc Telecom, PTCL and Ufone. Mr. Garcia holds a Bachelor’s in Economics and a
Master’s in Financial Markets from the Autonomous University of Madrid.
John Wilkes
Chief Internal Control Officer, Etisalat Group
John Wilkes was appointed as the Chief Internal Control Officer for EG in January 2013. Prior
to this, Mr. Wilkes was the General Manager of Risk & Supply Chain of the Vodafone Hutchison
Company. He has more than 24 years of experience in companies such as KPMG Air in New
Zealand where he was the Group Internal Auditor and Stockland in Australia where he held the
position of Chief Risk Officer. Mr. Wilkes is a qualified chartered accountant.
Hatem Bamatraf
Chief Technology Officer at Etisalat Group
Mr. Hatem Bamatraf was appointed Chief Technology Officer at Etisalat Group in September
2013. Prior to this position he wasthe Executive Vice President of Enterprise Business at Du.
Hatem began his professional career in 1995 at Etisalat and was seconded to Mobily in 2004
as Director of Mobile Network Development in the Central Region, KSA. Mr. Bamatraf serves
on the boards of Etisalat Afghanistan and Etisalat Sri Lanka and is the chairman of the Board
of Technologia. He graduated from the Etisalat College of Engineering and holds a bachelor’s
degree in Engineering.
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Annual Report 2015
Etisalat Group
19
One
Company
Vision
Operate consistently across portfolio
with a common set of processes and
systems leveraging scale economies.
To be the leading
and most admired
emerging markets
telecom group
People
& culture
Strengthen company leadership by attracting,
nurturing and retaining management talent;
Empower people by streamlining internal
processes, delegating responsibility, holding
people accountable; Execution focus by
actively measuring performance.
Mission
•Provide best in class total
customer experience for
retail and business
Operational
Excellence
Manage with a strong focus on efficiency
and effectiveness in all operational
and support processes at Group and in
operating companies.
•Deliver attractive returns
to shareholders while
investing in the company’s
long term future
Portfolio
Own and manage controlling stakes in well
positioned operators in target markets,
balancing growth and returns.
•Support economic
development and job
creation through ICT
& socially responsible
behavior
Customer
Experience
Service
offering
Serve customers pro-actively and consistently,
with a common set of brand values based
on in-depth customer understanding and
trusted relationships
Provide differentiated, Innovative service,
media and entertainment offerings –
leveraging broadband Infrastructure and
network of partnerships
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Annual Report 2015
Etisalat Group
21
January 2015
August 2015
Sale of French speaking West African operations to Maroc Telecom
Etisalat Group completed the sale of its shareholding in its operations in
Benin, the Central African Republic, Gabon, the Ivory Coast, Niger, Togo and
Prestige Telecom to Maroc Telecom for Euro 474 million. New Federal Law and Articles of Association
Launch 4G LTE services over VSAT technology in the Middle East
region;Etisalat Group is the first operator to launch 4G LTE and triple play
services (eLife) via VSAT in the Middle East region. It will allow customers
in remote, desert and off shore areas to enjoy high-speed data and watch
eLife channels over VSAT technology.
March 2015
Sign 5G agreement
Etisalat Group and Ericsson signs strategic partnership to develop the next
generation of mobile technology - 5G. The partnership will tap into the
potential of the 450Mbps LTE speed. Etisalat UAE has already demonstrated
115Gbps data transmission rate capability as part of the development of 5G.
April 2015
4G licence in Morocco
In Morocco, Maroc Telecom was awarded a 20-year 4G license for MAD
1 billion.
Tap Issuance of USD 400 million
Etisalat Group successfully completes the tap issuance of US$400 million
notes under its US$7bn GMTN Program.
June 2015
Government approves foreign ownership
The UAE Federal Government approves lifting the restriction on foreign
ownership of Etisalat shares to local institutions, foreign institutions and
expatriate individuals up to a limit of 20%.
July 2015
Credit Ratings affirmed
The three Credit Ratings Agencies Standards & Poor’s, Moodys and Fitch
affirmed Etisalat high credit rating at AA-/Aa3/A+ with stable outlook
Etisalat Group launches region’s first Internet of Things platform
Etisalat Group announced the launch of the region’s first Internet of Things
(IoT) application allowing customers to develop and deploy innovative new
IoT solutions for the growing Machine-to-Machine (M2M) market.
Issuance of Decree by Federal Law no. 3 of and the issuance
of new articles of association of Etisalat converting Emirates
Telecommunications Corporation to a public joint stock
company, changing the name of the company to “Emirates
Telecommunications Group Company PJSC” (“Etisalat Group”),
and allowing Non-UAE natural and legal/judicial persons to
own up to 20% of Etisalat Group’s shares.
Tower sale and leaseback in Nigeria
Etisalat Nigeria and IHS Holding successfully completed the
second phase of 555 towers sale and leaseback. This is part
of Etisalat strategy to drive improvement in the quality of
network performance and to expand coverage to new areas
and accelerate roll out of services to its customers.
September 2015
Foreign and institutional investors effective trading
date in Etisalat Share
Ownership of Etisalat share by foreign investors and local
institutions became effective on 15 September 2015.
October 2015
Etisalat Group completes the sale of Zantel
Etisalat Group completes the sale of Etisalat’s shareholdings of
85% in Zanzibar Telecom Limited (Zantel) to Millicom.
Fixed-network infrastructure sharing in the UAE
Etisalat UAE implemented phase I of fixed-network
infrastructure sharing in the UAE.
November 2015
Etisalat Inclusion in MSCI Index
Equity index compiler MSCI announced the inclusion of
Etisalat in the MSCI Emerging Markets Index post the close of
business day of 30 November 2015.
December 2015
License Renewal/Acquisition in Niger and Ivory Coast
Maroc Telecom Group renewed/acquired 2G/3G licenses
in Niger and granted universal license in Ivory Coast.
Launch of 4G+ services in Morocco
Maroc Telecom Group launched 4G+ commercial services in Morocco.
Launches first Smart machine to sell SIM cards in UAE
Etisalat UAE launched the first interactive touch screen ‘Smart Service’
machine to sell new activated prepaid SIM cards in the UAE.
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Annual Report 2015
Etisalat Group
23
Delivered Strong Operational and
Financial Performance
Subscribers
167
2015
167
2014
Aggregate Subscribers (Mn)
Etisalat Group aggregate subscribers grew
by 0.3% on an annual basis to 167 million
in 2015. The net addition of 0.5 million
subscribers in the year was mainly a factor
of good subscriber growth in the UAE and
Nigeria.
In the UAE, the active subscriber base grew
to 11.6 million subscribers from 11.0 million
in 2015, representing year on year growth
of 6%. Subscriber growth continued to be
driven by strong performance of mobile
and eLife segments. The mobile subscriber
base grew year on year by 7% to over
9.7 million subscribers representing a net
addition of 0.6 million subscribers of which
41% was in the high quality postpaid
segment. Fixed line voice only subscriber
segment contracted 11% year on year
primarily due to migration of subscribers to
the eLife segment that continued to drive
consistent growth with 12% year on year
EBITDA
increase. Total broadband segment grew by
8% year on year to 1.1 million subscribers.
In the international operations, Maroc
Telecom evidenced strong subscriber
growth in the year with year over year
growth of 26% by adding 10.6 million net
additions and closing the year with 50.8
million subscribers. This growth is mainly
attributable to the acquired operations
of Atlantique Telecom and the operations
in Morocco, Mauritania and Burkina
Faso. Nigeria, despite disconnected sim in
compliance with the regulator mandated
registration process, grew subscriber base
to 22.2 million representing year over
year growth of 5%. In Pakistan, subscriber
base declined by 9% year over year to
24.0 million impacted by the biometric
verification process mandated by the
industry regulator
Group consolidated EBITDA grew to
AED 26.5 billion representing a yearover-year growth of 14% in 2015, while
EBITDA margin increased 3 point to
51%. EBITDA growth was mainly due to
higher contribution from Maroc Telecom
operations and continued strong growth in
the domestic operations.
26.5
23.2
2014
In the UAE, EBITDA in 2015 increased by
9% to AED 16.3 billion resulting in EBITDA
margin of 57%, 1 point higher than prior
year. EBITDA growth is mainly attributed to
a higher revenue level and more rigorous
cost control measures.
2015
EBITDA (AED Bn)
EBITDA of international consolidated
operations in 2015 increased by 15% to
AED 9.6 billion contributing 36% to Group
Consolidated EBITDA. In Maroc Telecom’s
EBITDA amounted to AED 6.3 billion with
EBITDA margin declining 4 points to 51%.
In local currency EBITDA in absolute terms
increased by 7% due to international
Revenues
Revenues (AED Bn)
In Pakistan, revenue for 2015 was AED 4.2
billion, a decline of 10% from the prior
year. Revenue continued to be impacted
by a highly competitive environment in
the mobile segment, lower usage base as
a result of disconnected SIMs due to the
biometric verification process and lower
revenue stream from the long distance
international business due to competitive
pricing and fall in incoming traffic. Data
segment continued its growth trend driven
by increase in DSL and EVO subscribers.
8.6
8.3
99
95
Consolidated net profit after Federal
Royalty decreased by 4% to AED 8.3 billion
resulting in profit margin of 16%. The
decrease in profit is attributed to higher
depreciation and amortization expenses,
forex losses compared to forex gain in
prior year, higher finance costs and royalty
charges.
2015
2015
2014
48.5
Revenues of International consolidated
operations, despite the unfavourable
exchange movements that impacted
financial performance of most of the
countries of operations such as Morocco,
West Africa countries, Pakistan and Egypt,
grew year-on-year by 6% resulting in 43%
contribution to Group,. In Maroc Telecom
consolidated revenue amounted to AED
12.3 billion and revenue from international
operations increased year over year by
62%, resulting in 41% contribution to
Maroc Telecom Group’s consolidated
revenue, an increase of 11 points compared
to 2014. This increase is attributed to the
consolidation of the acquired operations
from Atlantique Telecom and growth in the
historic international subsidiaries.
In Egypt EBITDA for the full year was AED
1.7 billion with an EBITDA margin of 37%, 1
points higher than 2014. EBITDA continued
to improve in local currency driven by
enhanced revenue trend and slightly offset
by higher network costs and provision for
staff costs. In Pakistan, EBITDA for the
full year increased year over year by 2%
to AED 1.3 billion with EBITDA margin
increasing by 4 points to 30%. This increase
is mainly attributed to a one-off provision
in the prior year related to the Voluntary
Separation Scheme (VSS). Adjusting for VSS
impact, EBITDA margin would have been
down by 2 points from prior year mainly
due to lower revenue from international
calls and mobile segments.
Net Profit and EPS
2014
51.7
operations that benefited from the
consolidation of Atlantique Telecom
operations.
propose a final dividend for 2015 at the
rate of 40 fils per share, bringing the full
year dividend to 80 fils per share. This
proposal is subject to shareholder approval
at the Annual General Meeting scheduled
for the 27 March 2016.
Earnings per share (EPS) amounted to AED
0.95 for the full year of 2015. On 9 of March
2016 the Board of Directors has resolved to
Net Profit (AED Bn) EPS (Fils)
In Egypt, revenue declined by 6% to AED
4.5 billion, due to unfavourable exchange
rate movements of Egyptian Pound against
AED. In local currency, revenue growth was
2% mainly attributed to growth in the data
segment and higher subscriber base.
24
Annual Report 2015
Etisalat Group
25
CAPEX
8.9
2014
10.3
2015
CAPEX (AED Bn)
Consolidated capital expenditure increased
by 16% to AED 10.3 billion resulting in
capital intensity ratio of 20% compared
to 18% in the prior year. This increase in
capital spending is impacted by the license
acquisitions in Morocco, Ivory Coast and
Niger and license renewals in Mauritania
and Niger. Adjusting for cost of licenses,
capital expenditures would have been AED
9.4 billion and capital intensity ratio 18%.
In the UAE, capital expenditure in 2015
increased by 96% to AED 4.9 billion while
capital intensity ratio increased 8 point to
17%. Capital expenditure was committed
to mobile network modernization and
coverage improvement in addition to
building digital and ICT capabilities.
Capital expenditure in consolidated
international operations amounted to
AED 5.3 billion, a decrease of 15% from
year 2014 level. In Maroc Telecom, capital
Profit and Loss Summary
expenditure amounted to AED 3.3 billion
resulting in a capital intensity ratio of 27%.
This increase is due to acquiring 4G licence
and deploying 4G network in Morocco
and the renewal/acquisition of the 2G/3G
licences in Mauritania and Niger as well
as acquisition of universal licence in Ivory
Coast.
In Egypt, capital expenditure amounted to
AED 0.9 billion resulting in a capital intensity
ratio of 19%. Capital spending focused on
network rollout and capacity enhancement
to address the increased demand for data.
Pakistan operations capital expenditure was
AED 1.0 billion, down 65% year on year and
capital intensity ratio of 24%, signifcnatly
lower than last year This decline is due to
acquisition of a 3G licence and renewal of
the 2G licence as well as the rollout of the
3G network down in 2014.
DEBT
22.2
22.1
Total consolidated debt amounted to
AED 22.1 billion as of December 2015,
as compared to AED 22.2 billion as at 31
December 2014 a decrease of AED 0.1
billion.
As at 31 December 2015, the total amounts
issued under the global medium term
note (GMTN) programme split by currency
are US$ 1.4 billion and Euro 2.4 billion,
representing a total amount of AED 14.6
billion.
2014
2015
DEBT (AED Bn)
26
Annual Report 2015
Consolidated debt breakdown by operations
as of 31 December 2015 is as following:
• Etisalat Group (AED 15.2 billion) (AED m)
2014
2015
Revenue
48,508
51,737
EBITDA
23,212
26,526
EBITDA Margin
48%
51%
Federal Royalty
5,306
6,056
Net Profit
8.601
8,263
18%
16%
2014
2015
18,543
21,422
Total Assets
128,109
128,265
Total Debt
22,229
22,080
Net Debt
(3,686)
(658)
Total Equity
60,214
59,375
2014
2015
Net Profit Margin
Balance Sheet Summary
(AED m)
Cash & Cash Equivalents
• Maroc Telecom (AED 3.6 billion) • Etisalat Misr (AED 2.0 billion) Cash flow Summary
• PTCL Group (AED 1.0 billion) • Etisalat Sri Lanka (AED 0.3 billion)
(AED m)
71% of the debt balance is of long-term
maturity that is due beyond 2017.
Operating
17,209
20,425
Investing
(24,102)
(9,349)
Consolidated cash balance amounted to
AED 21.4 billion as of 31 December 2015
leading to a net debt position of AED 0.7
billion.
Financing
9,162
(8,108)
Net change in cash
2,268
2,967
834
(9)
(9)
(78)
18,543
21,422
Currency mix for external borrowings is
44% in Euros, 28% in US Dollars, 12% in
MAD and 16% in various currencies.
Effect of FX rate changes
Reclassified as held for sales
Ending cash balance
Etisalat Group
27
Afghanistan
Pakistan
Egypt
United Arab Emirates
Saudi Arabia
Sri Lanka
Middle East
28
Asia
Africa
Operator
Country
Etisalat
United Arab Emirates
PTCL/Ufone
Pakistan
Maroc Telecom
Morocco
Onatel
Burkina Faso
Moov
Ivory coast
Moov
Niger
Licence Type:
Etisalat Ownership
Population: (million)
Penetration
Number of operators
Mobile, Fixed and Internet
100%
9
Mobile 208% Fixed 25%
2
23%
189
Mobile: 78% Fixed: 3%
Mobile 5, Fixed 11
Mobile, Fixed
48%
34
Mobile: 127% Fixed: 8%
3
25%
18
80%
3
Mobile
41%
23
106%
5
Mobile
48%
18
38%
4
Operator
Country
Etihad Etisalat (Mobily)
Saudi Arabia
Etisalat
Afghanistan
Etisalat
Nigeria
Moov
Central Afriacn Republic
Sotelma
Mali
Canar
Sudan
Licence Type:
Etisalat Ownership
Penetration
Number of operators
Mobile & Interent
28%
32
186%
Mobile 3
Mobile
100%
33
80%
Mobile 4
Mobile
40%
182
77%
Mobile 4
Mobile
48%
5
26%
4
25%
16
133%
2
Fixed
92%
40
1%
Fixed 2
Operator
Country
Etisalat Misr
Egypt
Etisalat
Sri Lanka
Moov
Benin
Gabon Telecom / Moov
Gabon
Mauritel
Mauritania
Moov
Togo
Licence Type:
Etisalat Ownership
Penetration
Number of operators
Mobile & Interent
66%
92
116%
Mobile 3
Mobile
100%
21
126%
Mobile 5
Mobile
48%
11
83%
5
25% / 44%
2
172%
4
20%
4
115%
3
Mobile
46%
7
Annual Report 2015
65٪
2
Etisalat Group
29
9.7 million
Mobile
Subscribers
28.8 AED
Billion Revenue
16.3 AED
0.9 million
Landline
Subscribers
Billion EBITDA
57%
EBITDA Margin
7.3 AED
Billion Net Profit
1.1 million
Fixed Broadband
Subscribers
30
Annual Report 2015
4.9 AED
Billion CAPEX
Etisalat Group
31
Etisalat reinforced its leadership position driven
by its customer-centric strategy build around
differentiation, innovation and user experience.
In 2015, Etisalat UAE further asserted our
leadership position across all segments,
including the ICT and digital arena via a
focused, forward-looking strategy pivoted
around innovation, customer centricity,
differentiation, and value for money, enabled
by superb infrastructure.
In our ceaseless efforts to capture market
potential within new competitive spaces in the
industry and improve on services delivered to
existing customers, Etisalat UAE continued to
invest in network transformation. This spans
coverage, capacity, bandwidth, affordability,
and customer service. To improve customer
experience, enhance operational efficiency
and support new offerings that require
higher capacity, Etisalat UAE took several
notable actions within the mobile sector in
2015.
Building on our already-outstanding
infrastructure, Etisalat UAE improved mobile
network coverage and capacity considerably
in 2015, which further entrenched our
position as the leading mobile quality
service provider in the UAE market. These
improvements were further bolstered by
the modernization of more than 5400
(8200+ cumulative) mobile sites (2G, 3G,
& 4G) and the tactical deployment of 770
additional new mobile sites (base stations)
across all UAE sectors. Similarly, in response
to global recognition of 4G as the number
one network solution, Etisalat shareholders
and Management supported major strategic
investment in this avenue. Over 2,400 4G
sites were deployed with more than 30% of
the sites supporting LTE advanced features,
and UMTS 900-Mhz band was activated on
more than 2100 sites.
At the same time, we augmented our diverse
product portfolio with additional novel and
market-changing innovations – including
Deal of the Day, data gifting, the Etisalat
Challenge, Mobile Cashier, C’Me, the Etisalat
UAE mobile app, and eCloud (also for eLife
Customers) – within the mobile space.
Several of the services launched in 2015
targeted the reduction of customer expenses.
Whilst Deal of the Day is a daily personalized
offer to prepaid mobile customers, Data
Gifting allows both post-paid and prepaid
customers to send mobile data to others
and get extra data in return. In this way,
32
Annual Report 2015
customers can buy and send any mobile
data packages to any Etisalat subscriber
they choose and Etisalat will present a free
bonus for every data package purchased. This
exclusive service is another Etisalat UAE first
in the region – the Company’s response to
the increasing demand for data – and earned
us Ovum’s Innovative Service of the Month
Award for March 2015. This customer-centric
approach in 2015 extended to the launch
of the Etisalat Challenge campaign, which
commits us to providing the best prices to
our residential mobile customers.
2015 also saw Etisalat UAE collaborate with
the National Bank of Abu Dhabi (NBAD) to
launch Mobile Cashier – the first solution
of its kind in the UAE. Using Mobile Cashier,
business customers can use their mobile
phones to accept credit, debit or prepaid card
payments, and manage cash transactions
efficiently. Merchants can use Mobile Cashier
to accept payments directly on their mobile
phones, securely connected to a card reader
via Bluetooth, and send transaction receipts
via SMS or email.
Meanwhile, Etisalat UAE’s digital presence is
continually evolving to empower customers
and simplify their interactions with the
Company. As part of our digitization strategy,
several usability improvements were made
and features added to the Etisalat UAE
mobile app, which is now available to more
than one million customers who have already
installed it on their smart devices. We have
also refreshed the look and feel of our
website, aligning it with the overall Etisalat
brand image. At the same time, Etisalat
UAE answered increasing customer demand
for easy access to social media by further
expanding our social data packages portfolio.
Now, Etisalat customers can enjoy unlimited
access to their favorite social applications
like WhatsApp, BBM, Twitter, Facebook and
LinkedIn.
To minimize OTT exposure and build the
Etisalat customer base, Etisalat UAE launched
C’Me – the first rich communication suite in
the region. With C’Me, customers can enjoy
reliable high-quality rich communications –
including voice or HD video calls from their
phones or tablets (iOS and Android) over
the mobile network or Wi-Fi. In addition
to innovative rich messaging options, C’Me
users also enjoy features like social network
(e.g. Twitter feed) integration and a secure
address book.
Thanks to these initiatives and others,
Etisalat UAE earned numerous awards
and accolades within the mobile sector in
2015. Among others, Etisalat UAE achieved
the global Number One OOKLA ranking
for our “Best in Class” Mobile service (best
connectivity attracting mass service usage).
Etisalat UAE also won the prestigious Data
Centre Project of the Year Award at the 2015
Network World Middle East Awards, on the
basis of our design excellence, operational
efficiency, environmental friendliness, and
value to customers.
Etisalat also used 2015 to achieve a number
of objectives in terms of both FTTH and cloud
storage services. We enhanced our FTTH
network capacity via the development of
over 70,000 home-ready tenancies across all
strategic areas in the UAE. Additionally, full
redundant fiber connectivity infrastructure
has been prepared for “2,600” enterprise
customers. Meanwhile, Etisalat progressed
in building our ICT capabilities and launched
an eCloud service for our mobile and eLife
customers. eCloud is a cloud storage service
that safeguards customers’ personal digital
content, giving multi-device access on
smartphones, tablets, laptops and desktop
computers. eCloud subscribers receive 10GB
of free storage space and exclusive access
to musical compositions by international
artists, Nenad Bach and Jill Stevenson.
In addition to providing premium services
to our individual customers and surplus
value through a rich portfolio of exclusive
and non-exclusive devices, Etisalat UAE also
placed strong emphasis on our corporate
clients, both small and large, in 2015. In
this regard, our primary concern was with
helping businesses to focus on their core
competencies, without having to worry
about their telecommunications or business
solution needs. We also bore in mind that the
changing competitive landscape in the UAE
is not only raising the demand for bandwidth
and seamless connectivity but is also
increasing security concerns for businesses
of all sizes. Firstly, Etisalat’s fully managed
Business Wi-Fi service, providing wireless
access and high-speed broadband to business
customers, their employees, and guests, was
launched. Business Wi-Fi features segmented
offers for businesses of all types and sizes,
and bundled add-ons specifically focused on
varying industry verticals such as hospitality,
retail, banking, healthcare and government.
Secondly, Etisalat UAE introduced the onboarding program, Hello Business, for new
small and medium-sized businesses setting
up in the region. Hello Business offers many
simple and convenient benefits, including
value-for-money mobile and office product
offerings, a personalized visit from authorized
representatives, an information kit, access to
Etisalat’s state-of-the-art dedicated SMB call
center and the Etisalat online business portal.
Etisalat UAE also continued to strengthen
our position as the key enabler of home
entertainment and automation in the
UAE in 2015. Three different Smart Living
packages, linked to the UAE government’s
drive for eGoverment services and smart
cities were launched: Eye Home, Cool Home
and Safe Home are turnkey solutions that
include free delivery, free installation and
free training. These packages allow users to
monitor, automate, secure and control their
homes remotely from anywhere and at any
time, using a phone, tablet or computer.
Furthermore, Etisalat UAE remained aware
of the diversity of the UAE population and
continued to strive to bring the most relevant
content to our different communities. For
example, in 2015, cricket fans were able to
follow the ICC Cricket World Cup 2015 with
eLife TV and Filipino communities enjoyed the
top-rated Philippines TV shows with MyGMA.
To meet the telecommunication needs of
the millions of visitors hosted by the UAE
every year, Etisalat UAE revamped our visitor
product line with a range of hassle-free talk,
text and surf packs. These packs are primarily
available at airports, Etisalat stores, and
partner outlets, and are the ideal choice for
visitors to stay in touch with their families and
friends back home. Simultaneously, Etisalat
UAE now has global LTE roaming agreements
with 122 international destinations and an
extended roaming network with 734 mobile
operators. The Company’s SmartHub has
become the leading capacity and content hub
in the region, with an ISO certified data center
serving a total 33 high-profile carriers and
content providers. Additionally, during 2015,
Etisalat IPX was classified as a Tier 1 IP Network
with 19 major IPX peering agreements.
Finally, in the IPTV domain, Etisalat continued
to innovate in the content space, breaking
all conventions in terms of video on demand
(VOD) releases. For the first time in the region
and even in Bollywood history, Etisalat
brought the worldwide release of a new
blockbuster directly to the VOD platform,
even before it arrived at cinemas. Other
Hollywood productions were also aired in
eLife VOD at the same time as in UAE and
US cinemas.
Moreover, Etisalat UAE offered our customers
the best connectivity experience wherever
they go through our newly launched UAE
widespread Public Wi-Fi network and our new
Ana Emarat postpaid packages, which are
considered the first in the world to include
satellite minutes. This allows customers to
enjoy our high-quality services while on the
go both on land and at sea.
Persistence in pursuing innovation allowed
Etisalat UAE to launch the Virtual Mall,
which was implemented in one of Dubai’s
leading malls, it is a unique experience in
the region that demonstrated the company’s
innovative capabilities, which were not
limited to propositions, but also extended
to tackle reach and customer convenience
through the launch of “Smart Mobishops” –
which are vans staffed with trained agents
and equipped with advanced systems to
efficiently interact with customers and
conduct on-spot transactions similar to any
physical business center - and Smart Service
Machines, which provide selected essential
services conveniently and quickly in a manner
similar to that of ordinary vending machines.
Moving forward, Etisalat UAE continues to
operate in a fast-moving market that is being
challenged by various industry dynamics and
will be subject to further liberalization when
it comes to mobile and fixed services. Etisalat
UAE is very alert to the fact that this will
enable customers to switch operators while
maintaining original numbers. As such, we
are highly aware of the great opportunities
and new frontiers that will come along. We
are confidently ready to embrace and capture
the benefits of such coming changes. 2015
was an exceptional year for Etisalat UAE
due to our focus on enhancing customer
experience, which began with the remodeling
of the organization design into a leaner and
more agile form.
To enhance the quality of service, a frontline
Assessment Center, which assesses all
applicants to frontline roles, was introduced,
along with a unified induction program for
various frontline staff to cover all customer
touch points. Moreover, the Etisalat UAE
Customer Experience Training Program,
whereby 3,009 staff underwent training in
various modules, was a major achievement in
2015 as it enabled customer-centric learning
for all customer touch points During 2015,
there were 17,000 technical as well as
management training course days - 4.0 days
per full-time staff member.
Online learning and new ways of blended
learning were also been introduced and
Harvard Business Portal access was provided
to 100+ people to keep them abreast of the
latest global business trends. Ultimately, the
Company placed great emphasis on creating
a continuous learning organization in 2015.
Aside from the aforementioned formal
training, cross-functional and targeted
expert training was also prioritized. This
served to facilitate on-the-job training and
knowledge sharing between staff members.
Looking to the future of Etisalat UAE’s
human capital, we continued our efforts to
attract national talent through career fairs
and recruitment campaigns. Etisalat UAE
also supported key events and collaborated
with universities and other educational
institutes to seek fresh competitive local
talent. The commitment and vitality of
this strategy is highly valuable. In addition
to this, Etisalat UAE introduced the
Nationalization Key Performance Indicators
at multi-levels covering top management,
each department’s contribution, and overall
nationalization percentage targets.
Etisalat Group
33
Mobily works tirelessly toward re-establishing its
leadership position in the ICT sector.
Mobily works tirelessly toward reestablishing its strong leadership position
in the Kingdom of Saudi Arabia’s ICT
sector – leveraging product, process and
technological innovations to retain existing
customers and attract a larger share of the
market.
During 2015, the Kingdom of Saudi Arabia’s
ICT market witnessed intense competition
among its various players – largely due
to regulatory changes but also as a result
of price cuts and the proliferation of
other telecom options. One of the most
significant regulatory developments of the
year was the reduction in mobile and fixed
interconnection rates by 40% for mobile
and 30% for fixed termination.
The result was a steep decline in retail prices,
which, in turn, placed immense pressure
on profit margins. In addition, mobile
voice revenues continued to be impacted,
partly due to an increase in over-the-top
(OTT) services in the market and partly due
to the price competition from the newly
launched MVNO services. At the same
time, mobile data remained the key growth
driver facilitated by the increasing number
of medium- to low-end smartphones in
the market. Fixed broadband penetration
also continued to increase as both Mobily
and its main competitor increased their
offerings to the market.
In order to contend with these challenges,
Mobily progressed with several product,
process and technology innovation
initiatives – all ultimately geared at
greater customer satisfaction in this highly
competitive market – in 2015. The success
of these initiatives can largely be attributed
to the fact that innovation has always
been a key objective and differentiator for
Mobily. The Mobily Call Center, for example,
introduced “Virtual Queue”, which allows
customers to leave the call center queue
and receive a call back when their turn
comes. Mobily also managed to drop the
billing cycle time from four days to less
than 24 hours for its postpaid customers.
In the technology domain, Mobily
implemented unified licensing, provisioning,
and operations for all types of technologies
(public Wi-Fi, VoWi-Fi, FTTH, GGSN/PGW
2G, 3G and 4G) through the introduction of
unified authentication, authorization and
accounting.
34
Annual Report 2015
All the while, customer centricity continues
to be embedded as a core element in Mobily’s
strategy and operations, ranging from
branding to unique offers to the Company’s
efforts to better understand customers’
needs along all touch points. In an effort
to satisfy customer needs in an extremely
efficient manner, Mobily implemented the
User Process Management (UPM) system,
which provides comprehensive insights
into customer behavior and experience
trends when contacting the Call Center, so
that marketing and customer experience
initiatives can be fine-tuned in line with
customer needs.
Furthermore, Mobily continued its support
for entrepreneurial responsibility initiative,
FIRNAS, the first open innovation platform
in the region,
14.4 SAR
Billion Revenue
2.9 SAR
Billion EBITDA
3.4 SAR
Billion CAPEX
by enabling young Saudi entrepreneurs
to pitch their business ideas to public
and potential investors. To similar ends,
Mobily actively worked on increasing its
nationalization rate and developing fresh
Saudi graduates. In addition, Mobily has
introduced Mobily Elite as the Company’s
flagship development program, which aims
to attract and develop outstanding young
Saudi talents.
To promote Global Family synergy, Mobily is
actively participating in various initiatives
– which improve efficiency, reduce costs,
and stimulate revenue – with the Etisalat
Group. In 2015, among other things, Mobily
sought and benefited from Etisalat Group
expertise in reviewing, restructuring and insourcing of Customer Value Management
(CVM) campaigns to increase marketing
efficiency and performance.
Mobily and the Etisalat Group digital team
worked closely together to accelerate the
commercial
activities related to Machine-to-Machine
(M2M) communications – in particular, the
Jasper Platform. As a result, Mobily was first
to market M2M control center solutions in
the Kingdom. In addition, the collaboration
was strengthened in the fields of connected
cars and the Internet of Things. In the
wholesale domain, joint-procurement
initiatives with the Etisalat Group resulted
in significant cost savings through volume
discounts, due to collective buying of IP
transit capacity. Furthermore, the roaming
connectivity GRX backbone was upgraded
1.2Gbps with Etisalat.
Within the Home segment, Mobily
continued increasing its penetration of
households in the Kingdom through the
Company’s FTTH and IPTV offerings in
2015. The Mobily Business Unit, meanwhile,
continued its growth in revenue, in addition
to acquiring noteworthy accounts –
including Al Rajhi Bank, SAMASCO, SECO,
Dallah TransArabia, Samba Bank, SABIC,
Sadara Chemicals, Tayyaba University,
and SACO. Moreover, the Wholesale and
Carrier Services division achieved savings
on international capacity and enhanced the
portfolio by materializing deals with both
domestic and foreign players.
Mobily’s aim for 2016 is to return to its
strong challenger position. To achieve
this, management has outlined certain
strategic priorities– which include boosting
data profitability and leveraging customer
experience to win market share. Next to
mobile data, one of the key growth drivers
is the monetization of our fiber-optic
infrastructure, supported by revamped
state-of-the-art sales, system and execution
capabilities. Moreover, to improve efficiency
and keep pace with our customers’
connected-lifestyle requirements, Mobily
plans to further digitize both internal
and customer-facing operations. Finally,
the Company aims to improve returns by
placing strong emphasis on market- and
profit-driven capital expenditure allocation
in addition to the optimization of operating
costs. However, none of this would be
possible without continued investments in
Mobily’s key competitive advantage – our
human resources.
Etisalat Group
35
Every initiative was informed by the central value of
customer centricity to drive competitive advantage.
Customer centricity has become a major
strategic priority in Etisalat Misr’s drive
to create competitive advantage in the
bourgeoning Egyptian mobile market whilst
respecting crucial regulatory requirements.
Every EM initiative in 2015 has been informed
by this central value.
In 2015, Etisalat Misr has navigated an
oftentimes challenging external environment
by complying with regulatory mandates,
expanding control channels, and introducing
a new business model to ensure sustainability,
profitability and increased customer
satisfaction. To this end, we have launched
various initiatives related to Innovation,
Customer Centricity, and the Global Family
in 2015.
The imposed regulatory mandate to sell
SIMs through controlled channels impacted
the growth potential in the mobile sector.
Within this regulatory framework, Etisalat
Misr has strategically increased its retail
footprint to reach 1.6K controlled outlets,
which allows a wider reach to new customers
and makes the Company a market leader in
ensuring excellent customer experience in an
exponentially expanding direct channel.
2015 saw the launch of Egypt’s first mass
market reward program. The innovative
“Choose Your Gift” loyalty program allows
customers to select gifts from various
categories (telecom, instant rewards, and
raffles). By granting non-telecom lifestylefocused benefits to customers, we show that
we both appreciate and understand them as
people and not just telecom users. The level
of customer loyalty that this engenders is
a significant competitive advantage in this
increasingly saturated market.
Our focus on customer experience made us
pay special attention to the Top 20% of the
Company’s clients by insourcing their services,
which were previously all outsourced. This
has had a direct positive impact on the
quality of the services offered and improved
productivity as handling time within calls has
decreased by an average of 11%, repeatability
of calls has decreased by 37%, and queue
agent attrition has decreased by 60%.
Etisalat’s overall customer base was
considerably broadened this year with
our launch of the “Internet.Org/ www.
Freebasics.com” initiative. This collaborative
ES-Facebook project aims to bring more
Egyptians online through mobile devices
– a first in the country. Customers can use
36
Annual Report 2015
Free Basics to access a variety of popular
and useful websites and online services for
free, such as Facebook and FB Messenger,
Wikipedia, Accuweather and others. It is
anticipated that the launch of Free Basics
will lead to increased internet accessibility,
customer engagement, data usage, and
revenue generation, as well as a push for new
subscribers.
In a further drive for mobile internet growth,
Etisalat Misr has begun offering two new
daily bundles: The Social Bundle allows
customers to enjoy unlimited usage of
Facebook, Twitter, WhatsApp and Instagram,
whilst the Chat Bundle offers unlimited usage
of WhatsApp, Viber, Line and BBM Chat.
Indeed, internet services have become
strategic priorities for our customers in recent
9.5 EGP
Billion Revenue
3.6 EGP
Billion EBITDA
1.9 EGP
Billion CAPEX
years, which is why the successful launch
of the channel serving social media has
resulted in multiple ongoing improvements.
EM’s response time reached two minutes and
Facebook service levels for all cases were
met to 100% satisfaction. In fact, EM was
officially recognized for the success of our
social media initiatives: we were named the
most socially devoted service provider for
2015, we achieved second and third place
for growth rate and audience respectively
on Facebook, and second place for both
audience and growth rate on Twitter.
Beyond these specifically mobile-based
services and technologies, EM also released
two other initiatives in 2015: eCloud hosted
services and a “machine-to-machine” inhouse platform for SIM management.
eCloud securely delivers hosted services (like
storage, software applications, and software
development platforms) over the Internet. It
includes both SaaS (software as a service) and
IaaS (Infrastructure as a service) and offers
several unique business applications. A3maly,
for example, is a fully fledged ERP solution
that includes a comprehensive suite of
business applications, including accounting,
warehouse management, manufacturing,
and human resource management. Another
eCloud application handles email and web
hosting, including professional templates
and designs as well as a website builder that
can create a single website adapted to all
technologies and devices.
Also part of eCloud, My Customers organizes
sales, marketing and support information
within a single application that keeps
information-flow management simple. My
Storage enables SMEs to control files and
applications using cloud storage technology.
In addition, it enables companies to access
their data from anywhere using any device. My
Documents is a software-collaboration tool
that helps corporate employees to manage all
company documents online instead of using
paper documents. It helps them to handle
large and important electronic documents in
various formats (text, graphics, audio, etc.).
eCloud’s IaaS Virtual Servers enable users to
host their companies’ websites or operate
software that needs servers (like business
applications, communication applications,
file-sharing applications, and so forth)
without the costs of purchasing and
maintaining these servers.
Additionally, EM has developed an in-house
platform for the “machine to machine”
enterprise segment to enable customers
to manage their SIMs in M2M/IoT space.
Managed SIM is a new service, whereby
customers can activate, deactivate, suspend,
change RP, and track their embedded SIMs. It
is our first step towards becoming the M2M
provider of choice in Egypt and paves the way
for all future M2M/IoT solutions.
Going forward, our focus will be on
introducing more value added services,
applications and increasing awareness of
cloud service as the solution of choice in
Egypt. In 2016, we aim to create distinctive
propositions and customer experience
(differentiate through proposition leadership
and a concentrated focus on customer
demands across all touch points), and engage
with key stakeholders including regulator and
government for favorable outcomes on issues
related to spectrum, licenses and pricing.
Etisalat Group
37
47.7 million
Mobile
Subscribers
34.1 MAD
Billion Revenue
1.9 million
Landline
Subscribers
16.7 MAD
Billion EBITDA
49%
EBITDA Margin
5.6 MAD
1.2 million
Broadband
Subscribers
Net Profit
8.8 MAD
Billion CAPEX
38
Annual Report 2015
Etisalat Group
39
Maroc Telecom Group succeeded in expanding its
international footprint by acquiring six operations in
West Africa.
The Maroc Telecom Group’s strategic
acquisitions,
speedy
operational
consolidation, and ongoing investment in
network densification and modernization
combined with its innovative solutions,
make the Group a key industry player in
Morocco and the rest of Africa.
2015 marked the finalization of Maroc
Telecom’s acquisition of six new operators
in Africa, significantly boosting the Group’s
presence in markets with major growth
potential. Meanwhile, on the home front,
the development of local business activities,
including the launch of 4G+ services, served
to strengthen Maroc Telecom’s technological
leadership position and promote the growth
of mobile high-speed broadband services
throughout Morocco.
In July, Maroc Telecom put its 4G+ network,
the most advanced version of the fourth
generation mobile with data rates up to
225Mbps, into operation. Customers are
able to access to new network without
changing SIM card and at no additional cost.
Simultaneously, the launch of an important
network densification and modernization
program provided support during the
operational consolidation of the Group’s
new subsidiaries to encourage profitable,
sustainable and robust growth.
Together, the launch of 4G+ and the rapid
expansion of Maroc Telecom’s fiber-optic
40
Annual Report 2015
internet infrastructure have cemented the
Group’s position as an innovation leader.
The Maroc Telecom Group mobilizes all of
its innovation capability to provide offers
that meet the needs of all its customers and
attract a greater share of the market.
A major area of innovation to which Maroc
Telecom attaches great importance is the
facilitation of access to digital content. In
2015, the Group partnered with YouTube
and Dailymotion to launch the Pass Video
prepaid mobile top-up offering (the first
of its kind in Morocco), which allows users
to purchase large volumes of data at very
affordable prices to view and upload videos
on both of these platforms.
The Group also introduced its Icflix service
offering unlimited HD movies, series,
animated content, and documentaries on
five devices simultaneously via the Internet.
In addition to rolling out these various
new innovations, Maroc Telecom focused
on enhancing product offerings in 2015.
Accordingly, it launched the permanent
quadruple top-up offer
for prepaid mobile customer, replacing the
double and triple top-up deals.
2015 also saw the launch of My Cloud, the
first local online storage service to be fully
hosted in Morocco.
My Cloud users can record data on servers
located in Morocco, enabling them to access
and share it easily and securely from any
connected device.
Being customer centric with primary focus
on providing more value to customers, many
hours of talk-time and large volumes of
data were added to all mobile rate plans
with no impact on prices. Additionally, in
consideration of the unique needs of each
user, the unlimited mobile offer, which
was originally one single package, was
segmented into three, more specific offers –
unlimited national calls; unlimited national
and international calls; and unlimited
national, international calls and internet.
Maroc Telecom also continued to diversify
its prepaid packages, which are currently
the most generous on the market. The
enhancement of the customer experience
was also extended to our postpaid
customers with the “Fidelio”, the Moroccan
telecoms industry’s first points-based loyalty
program, allows customers to accumulate
points based on usage and receive benefits
in the form of free or discounted products
or services.
In addition to these enhancements of
mobile and fixed-line offers, companies
and professionals enjoyed even more
personalized services with Maroc Telecom
in 2015.
Several solutions were designed with
corporate clients, in particular, in mind: SMS
Connect, to create and send SMS campaigns;
an abbreviated dialing service; Security
Pack GateProtect and Cyberoam, to protect
Internet connections; and MobiControl, an
MDM (Mobile Device Management) solution
for managing mobile fleets.
Among the services designed to provide
more convenience to customers’ lives
are the M-payment solutions, which are
implemented by almost all of the Group’s
operators. Maroc Telecom was the first
operator to launch this service, under the
product title Mobicash, in Morocco in 2010.
In 2015, Moov Cote d’Ivoire, Moov Niger,
Moov Togo, and Etisalat Bénin enhanced
their M-payment service, Flooz, to allow
money transfers within the sub-region,
including Benin, Ivory Coast, Niger and Togo.
As a technology leader, the Group continued
its practice of renewing its infrastructure
and introducing very high-speed internet.
Almost half of the mobile network has now
been upgraded and modernized to run
on single radio access network (RAN)
equipment, the most advanced technology
available. For fixed-line access, the multiservice access node (MSAN) equipment is
now deployed close to customers to increase
speed and improve the quality of service.
Maroc Telecom Group maintained its
commitment to the Group’s international
networks and infrastructure to improve
operating companies’ competitiveness,
enhance customer experience and support
new offerings that require higher capacity.
In Gabon, a 3G/4G licensewas awarded to
Gabon Telecom and 2G license was renewed
in Mauritania.
In 2015, the Group completed deployment
of the “TransAfrican” – a fiber-optic cable
that connects Morocco to Burkina Faso
and Niger via Mauritania and Mali, over
a distance of 5,700 kilometers. This cable
enhances the high-speed broadband
connectivity of Maroc Telecom’s subsidiaries
in these countries by connecting them to
the submarine cable system to which the
Group has access.
In 2015, Maroc Telecom continued to
implement measures to strengthen the
protection of its information systems and
online services against attacks. This is inline
with the commitment it made to protect
personal data (ISO 27001 version 2013) and
in keeping with the 09/08 law on protection
of natural persons with respect to
the treatment of personal data.. The Group
also ensures that all processing of personal
data does not pose any risk to privacy and
is carried out under the authorizations
granted by the National
Commission for the Protection of Personal
Data (CNDP). Internal and external audits
are conducted annually to verify
the compliance of Maroc Telecom’s activities
and process with legal and regulatory
requirements and with ISO 27001 standards.
Maroc Telecom and its subsidiaries constitute
a unique network providing lower roaming
charges. Nomadis, launched in 2010, ensures
that all of Group roaming customers are
charged domestic rates while using one
of the Group networks. In 2015, Maroc
Telecom expanded the Nomadis offer to
the new Moov subsidiaries, enabling all
Maroc Telecom group customers to use the
roaming service at reduced rates across all of
the Group’s mobile network.
In 2016, Maroc Telecom focus will be on
extracting synergies within its subsidiaries
with the aim to enhance investments
and share technological and operational
expertise. This will require upgrading
management
processes,
optimizing
distribution activity, standardizing the
automation of collection processes, and
securing strategic infrastructure to ensure
uninterrupted service to customers. In
addition, strategic negotiations with
vendors and centralizing of procurements,
will enable cost savings.
Etisalat Group
41
Etisalat Nigeria’s unmatched service and network
quality strengthened market position.
Etisalat Nigeria has leveraged innovative
products and services, a quality network,
and excellent customer service to strengthen
market position and give customers even
more reasons to connect with the Company
in 2015.
Building on the Company’s position as a
local telecom market leader, Etisalat Nigeria
has further introduced a number of valuable
and innovative products and services –
including Cliqliteworld, GTEasysavers and
SME Share Data Bundles – to enhance
customer convenience and overall quality
of life in 2015. These developments span
the broad spectrum of everyday life – from
education to banking and beyond.
Cliqliteworld was introduced to the market
in 2015 to expand on the success of
Etisalat Nigeria’s 2014 release, Cliqlite, an
educational plan for children aged 8 to 15
years. Cliqliteworld provides primary and
secondary school students with access to
a large volume of educational content.
Subscribers to the platform can access
government-approved textbooks, interactive
educational videos, engaging science
simulations, and educational games. Parents
can also find recommended appropriate
schools or teachers, while ensuring their
children’s online safety by activating the
parental control feature.
In the mobile banking sphere, Etisalat
Nigeria has partnered with Guaranty
Trust Bank to create GTEasysavers in 2015.
GTEasysavers is a pioneering GTBank savings
account product that enables customers to
open bank accounts instantly at the click of
a button and then operate them from their
mobile phones. It was designed to enable
under-banked and unbanked individuals
to achieve their financial goals while
operating a regular bank account via their
mobile phones.
Uniquely, GTEasysavers generates an
instant bank account for the customer
upon request, enabling subscribers to
deposit cash, top up airtime, and transfer
cash easily via their mobile phones.Finally,
Etisalat Nigeria has also made inroads on the
business world in 2015 with our SME Share
Data bundles. SME Share Data bundles are
prepaid and postpaid packages that enable
business owners to buy large data bundles
and share them with employees. They
42
Annual Report 2015
come as internet wallet bundles, which
can be divided into smaller bundles with
multiple SIMs or MSISDNs, regardless of
beneficiaries’ geographical locations. Unlike
similar competitor offerings, SME Share
Data by Etisalat Nigeria has a Web-accessrestriction feature that gives business
owners control over the types of sites visited
by their staff. Business owners can allocate
a variety of SME Share Data bundles from
Etisalat data sizes to a maximum of 30
different beneficiaries.
While most actions taken in 2015, have
been underpinned by the high premium the
Company place on customer satisfaction, the
primary aim was to bridge the gap between
sales and service outlets in locations where
the return on investment for experience
centers is not viable.
227.6 NGN
Billion Revenue
41.7 NGN
Billion EBITDA
60.2 NGN
Billion CAPEX
This entailed the aggressive deployment of
branded outlets to improve Etisalat Nigeria
presence in identified areas across Nigeria,
and enhanced service portfolio/capabilities
in Digital Access Carrier Systems (DACs) and
their return to EEC standard.
The immediate impact of this has taken the
form of increased foot traffic and loyalty
from subscribers and partners;increased
SIM push; reduction in distance-to-serve,
especially in rural areas; and improved
customer satisfaction (as indicated in
monthly customer service surveys).
Another significant challenge identified
with regard to the Etisalat customer
roaming experience was different rates
charged across Etisalat’s partner networks
within a roaming destination. To resolve
this issue, the Company decided to create
a one-country-one-rate roaming tariff by
standardizing all tariffs across the operators
in each country. We deployed
a standardized tariff on voice, SMS and PAYG
data across our Top 10 high-value roaming
destinations in July 2015. Subsequent to
this, we recorded 29% growth in revenue in
these 10 destinations.
In July 2011, a Global Plan aimed at
eliminating new HIV infections among
children and keeping their mothers alive
was launched at the United Nations
General Assembly High Level Meeting on
AIDS. Nigeria’s part in this is the 20152016 National Operational Plan, unveiled
in November 2014, for the elimination of
mother-to-child HIV transmission. This plain
is intended to bolster the implementation of
such efforts in Nigeria.
It is within this context that Etisalat Nigeria
partnered with UNAIDS to support the
National Agency for the Control of AIDS
(NACA), other government departments,
and civil society to boost Nigeria’s efforts to
eliminate mother-to-child HIV transmission.
In the first partnership of its kind, Etisalat
Nigeria collaborated with the Joint United
Nations Programme on HIV/AIDS to ensure
that no more children in Nigeria are born
with HIV. As part of this, EN subscribers
received regular text messages explaining
how and where to access services for
the prevention of mother-to-child HIV
transmission in Nigeria.
Etisalat Nigeria anticipates regulatory
developments in 2016 that will have longlasting impacts on the Nigerian telecom
industry. Significantly, the prevailing Mobile
Termination Rate (MTR) regime is scheduled
to expire in March 2016. In addition, the
Nigerian Communications Commission
(NCC) has indicated that it will consider
developing a framework for the sharing of
active infrastructure in 2016. Etisalat Nigeria
will continue to engage with the regulator
in efforts to secure approval for active
infrastructure sharing and national roaming.
Compliance and enforcement continue
to be focus areas for both the regulator
and operators. Etisalat Nigeria has taken
proactive steps to strengthen its end-toend SIM card registration processes and will
continue to monitor them. This encompasses
re-training of agents, stronger contractual
terms, and upgrades and improvements to IT
and back-end processing.
Etisalat Group
43
20 million
Mobile
Subscribers
118.6 PKR
Billion Revenue
36.2 PKR
Billion EBITDA
4 million
Landline
Subscribers
31%
EBITDA Margin
1.9 PKR
Billion Net Profit
28.9 PKR
Billion CAPEX
44
Annual Report 2015
Etisalat Group
45
PTCL built and maintained high-capacity data
networks to offer unparalleled services nationwide.
PTCL has continued to strengthen its
leadership position in the Pakistani market
in 2015 by intensifying the customer
centricity of its offerings, taking innovative
measures to further develop its nationwide
presence
and
matchless
network
capabilities.
PTCL initiatives and innovations in 2015
have been underpinned by a single unifying
principle – the importance of creating
a customer-centric culture that ensures
customer loyalty as well as subscriber
growth. This long-held strategic imperative
has taken on even greater significance this
year, as the competitiveness of the local
telecom market continues to intensify.
Thus, even actions not directly related to
customer centricity have been conceived
and executed with the enhancement of the
PTCL customer experience as their ultimate
objectives.
One measure taken this year specifically
to increase customer convenience and
resolve complaints speedily was the
introduction of a one-window platform
for complaint management, device
support, and customer self-management.
Similarly, in view of the essential position
occupied by tradition and cultural values
in Pakistani society, we have launched
the PTCL IVR (Interactive Voice Response),
enabling complaint registration and order
provisioning in regional languages. PTCL
has also introduced a dedicated helpline
to provide priority customer care for
customers, their families, and their friends
in a timely manner. Complementing these
measures has been the introduction of
online channel accessibility, an e-payment
channel that allows cash and credit card
payments as well as automatic restoration
of suspended accounts. At the same time,
PTCL has gone to great lengths to improve
its product offerings during 2014. Although
PTCL is already the only telecom operator
in Pakistan with a network of three major
submarine cable systems, the Company
has invested significant resources in
further upgrading the IMEWE and SMW4
submarine cables. We are also participating
in the AAE1 cable system to further expand
our global communication route. This is
intended to better serve digital customers’
ever-growing bandwidth requirements and
improve network resiliency. Additionally,
46
Annual Report 2015
we have started working to upgrade our
10G Metro DWDM transmission network to
100G DWDM (to meet the data surge caused
by 3G and 4G services and OTT players) and
expanded our network to backhaul the
Ufone 3G services on 77 new routes.
Innovation occupies a central position in
PTCL’s working culture and it helps us build
and maintain high-capacity data networks
to offer unmatched services nationwide.
PTCL proudly operates Pakistan’s largest
GPON-enabled Wi-Fi network across
Islamabad’s mass-transit Metro Bus route.
This first-of-its-kind Wi-Fi service provides
commuters with on-the-move connectivity
and has already clocked 6.4 Tera Bytes of
data in its first three months. It enabled PTCL
to provide Islamabadi society with access
to the benefits of broadband. PTCL has
also launched Pakistan’s first customized
LTE tablet to offer high-speed broadband
services to our valued customers. This
tailored tablet solution for motorists is
fully equipped with Sygic GPS Navigation,
free LTE internet, and a SmartTV app that
allow customers to stream hundreds of live
TV channels, movies, and video-on-demand
anytime, anywhere. Another significant
success story has been the launch of the
SmartLink service, which allowed customers
the freedom to make and receive landline
calls via a SmartLink OTT on smartphones.
PTCL also worked relentlessly to offer
customized and innovative solutions to
its corporate customers and, as part of
this, the Company has launched SMART
CLOUD (a Software as a Service platform
offering applications and software without
any upfront capital investment by the
customer), CorpWatch (an online portal
for corporate clients to overview their
product statistics), and SIP Trunk (offering
traditional voice over internet protocol
services instead of more modern, advanced
technologies).
In addition to all of this, PTCL has continued
to grow network capacity and efficiency
via Solar Power project for alternate
power back-up solutions. So far, 185 sites
have been powered up and another 250
are in progress. This will enable PTCL to
counter the effects of widespread power
outages in the country, helping to cut
down operational expenses and provide
uninterrupted customer service.
PTCL undertook several to improve
collaboration and synergy with other
Etisalat Group operating companies. MCB,
Regus, China Unicom, Thomson Reuters,
and Carrefour are a few examples of PTCL
teaming up with other Etisalat OpCos to
realize their common goal of bringing
international corporate clients onboard.
PTCL also facilitated a promotional deal
between Etisalat Afghanistan and Ufone,
which resulted in increased traffic and
revenue from these companies.
Yammer, an Etisalat Group social network
to get work done smarter and faster, was
launched for PTCL employees. This resource
was aggressively promoted within the
organization as a tool for bringing together
the Etisalat Global Family to share new
ideas and best practices. Awareness sessions
regarding the benefits of yammer as a
collaborative tool led to the registration of
a significant number of PTCL staff members,
who are now actively contributing on the
forum. To further strengthen ties within
the Etisalat Global Family, employees
participated in the mHealth Grand Tour,
representing Etisalat in creating global
diabetes awareness.
PTCL is a strong advocate of corporate
social responsibility initiatives and believes
in giving back to the community. In keeping
with this, PTCL provided medical relief to
more than 6,700 flood victims and also
launched the ILM (Illuminating Learning
Movement) Online Learning Platform for
underprivileged youth to improve the
prospects of deserving students. PTCL also
lead a tree-planting drive in an effort
to preserve the environment for future
generations.
Looking ahead to 2016, PTCL plans to
consolidate its broadband market leadership
by enhancing customer experience through
continuous improvement in our network
infrastructure and monetization, expand
into digital entertainment, and achieve
greater diversification.
Ufone grew its mobile data segment by leveraging
its investment in 3G network.
Ufone’s progress in 2015 has largely been
focused on growing the mobile data
segment via innovation and alertness to
the market’s increasing demands in order
to provide services of impeccable quality.
The initiatives taken by Ufone during
2015 were developed and implemented
within the macro-context of the uniquely
challenging Pakistani mobile industry. These
challenges include stiff competition leading
to price wars and declining revenue trends,
an extended energy crisis, a deteriorating
legal framework, an unfavorable tax regime,
and fluctuating local currency leading to
high operational costs.
One of Ufone’s major achievement in
2015, has been the successful creation
and implementation of a secure, scalable
and highly robust Biometric Verification
System (BVS), originally launched in
2014 in response to the strict Pakistani
Telecommunication Authority policy that
all mobile operators must eliminate unregistered and non-verified SIMs from
the country. Over the course of 2015, the
Ufone BVS has come into use at business
centers and franchises all over Pakistan, as
effectively meeting threats and ensuring
all citizens’ safety of remains top of mind
for the Pakistani Government.
Among the innovative initiatives launched
in 2014 and continued in 2015 is the Super
Card initiative. It is an inventive way to
present customers with rewards, rather
than cash, in return for recharging. 2015
has seen a strong customer uptake as the
brand value of convenience presented
by Super Card has resonated with the
market. Super Card has become Ufone’s
biggest product, achieving new levels of
end-customer satisfaction. Indeed, Ufone
has an almost six-month lead on our
competitors in this industry-changing
innovation. Despite competitors’ reaction,
it did not slow down the growth of this
Ufone product’s popularity.
Also launched in 2014 and further
developed in 2015 is the world’s first
Islamic Branchless Banking service. While
several new players have entered the
mobile financial services playing field
in the last couple of years, there is no
product differentiation. Retailers have
high bargaining power and are heavily
incentivized to influence customer choices.
To break through the clutter, Ufone
collaborated with Pakistan’s largest Islamic
Bank, Meezan Bank Limited, to offer the
first Islamic Branchless Banking service
under the brand name, Meezan-UPaisa. Due
to the local population’s strong religious
affiliations, a customer pull for the Islamic
service as opposed to traditional services
is expected to reduce retailer bargaining
power, resulting in increased market share
and improved profitability.
In 2015, Ufone also made further progress
with our 2014 Converged Billing System
(CBS) initiative. Despite the complexity of
CBS projects due to the re-engineering of
business processes, several major benefits
have resulted from the CBS upgrade thus
far. These include the provision of real-time
credit visibility and control for postpaid
customers; increased customer loyalty
in exchange for real-time promotions/
rewards; the development of innovative
rating and charging features for postpaid
subscribers; a shortened overall billing
and invoicing cycle; and increases in the
dimensions of MIS data for management
reporting. The project has contributed
considerably
to
overall
customer
satisfaction and operational efficiency.
Another major initiative launched in 2015
and focused on evolving and enhancing
retail customer experience is the “Own
Shop” project, the first its kind in the
country.
It was created to entice customers to
visit Ufone retail outlets, which were
transformed into modern centers equipped
with LED media walls, digital posters,
interactive self-service screens, experience
stalls with the latest handsets, and virtual
teller machine zones, and trained customer
services staff. Currently, there are six
company-operated service centers and 40
Own-Shop-model Franchises.
Meanwhile, Ufone has continued its
aggressive 3G network roll-out in the
second half of the 2015 and introduced
3G coverage in 86 cities. Roll-out has
included the addition of new 3G sites
to unserved areas, and capacity sites to
already launched cities where 3G capacity
is choked due to high data traffic. Ufone
has also expanded our backhaul capacity
to provide higher speeds and, ultimately,
improved end-customer experience, as a
part of our customer centricity drive.
In an effort to ease the hardships faced by
farmers because of unfavorable weather
conditions, floods and declining profits,
the Pakistani Prime Minister announced
the provision of relief package of Rs341
billion to revive the farm sector in 2015.
To support this initiative, Ufone, being
a socially responsible corporate entity,
devised an innovative solution for
biometric verification to ensure fair cash
disbursement to farmers.
2015 also saw the launch of a cuttingedge automated self-service kiosk known
as a VTM (Virtual Teller Machine). A VTM
is an in-house-built solution that serves
as a remote office capable of performing
all office activities. Ufone is currently in
the expansion phase and is in the process
of acquiring more VTMs, to be installed
at high-foot-traffic areas like malls,
community flats, enclosed communities,
and airports.
Finally, by participating in multiple roaming
agreements through Etisalat Group, we
have achieved smoother overall Ufone
roaming operations. In the last 12 months,
Ufone has entered into agreements with
Mobily, Etisalat Sri Lanka, Vodafone,
Telefonica, and T-Mobile to maintain a
competitive edge and traffic inflow.
Ufone is all geared up to reshape the
digital revolution in Pakistan in 2016
by capitalizing on its market position,
aiming to offer innovative new solutions
to Pakistanis during the next few years.
Considering the prevailing trends, Pakistan
is expected to have over 40 million
smartphone users, spending roughly 2.5
hours per day on mobile devices, by 2018.
This is why definitive on-demand mobile
services comprise the exact market area
into which Ufone is hoping to tap.
Etisalat Group
47
In 2015, ESH delivered creative business solutions to
strategically benefit the operations of it’s customers.
Etisalat Services Holding (ESH) strives to add
strategic value to its customers by delivering
innovative
telecom-related
business
services.
In 2015, ESH continued its commitment to
achieving operational excellence across all
business units, thereby paving the way for
innovation and revenue maximization in the
coming year.
Since its inception in 2007, ESH has come
to manage a portfolio of over one billion
dirham and a total workforce exceeding
six thousand staff members. Our clientmanagement activities spread across various
industries and geographies, including
Etisalat Group operating companies, global
telecom operators, large clients in multiple
industries, and prominent government
entities. Our capacity to deliver seamless
solutions, with a central focus on innovation
and value-added services, continues to
surpass all expectations.
ESH consists of eight companies, each of
which offers unique tailored solutions to
meet the needs of the other Etisalat Group
companies as well as their external clients.
These are: Etisalat Facilities Management
(EFM), Emirates Data Clearing House
(EDCH), E-marine, Tamdeed Projects, Etisalat
Information Services (eIS), Ebtikar Card
Systems (ECS), Etisalat Academy (EA), and
Etisalat Real Estate (eRE).
ETISALAT
(EFM)
FACILITIES
MANAGEMENT
EFM’s visionary outlook and emphasis on
high-quality services continues to inform
all of its actions in offering integrated
facilities management within the wide
spectrum of all related areas. The Company
has many years of experience in facilities
management, specializing in telecom and
critical infrastructure portfolios. In 2015,
EFM has also set up a joint venture with
Emirates Transport to serve the Government
sector exclusively. This partnership is
expected to bring unparalleled advances
to the sector and the country in the near
future. EFM plans to stimulate ongoing
progress via several unique initiatives,
consultation with industry experts, and
enhanced product knowledge, coupled with
strategic investment in original products
48
Annual Report 2015
and solutions. Thanks to the success of its
energy-saving product, Mabanina, initially
launched in 2014, EFM’s contribution to the
environment and UAE society has become
considerable and is expected to experience
exponential growth in the coming years.
EMIRATES DATA CLEARING HOUSE
(EDCH)
its dominance in the core submarine cable
business at the end of 2015. The Company
is also preparing to tap into the oil and gas
market so that, when the market rebounds
in this segment within the next two-three
years, E-Marine will be ready with a vessel
specific to the needs of the energy sector to
capture a sizeable portion of this promising
source of revenue.
Since the inception of Emirates Data Clearing
House (EDCH) in 1994, it has maintained a
single source of support for roaming telecom
facilities. EDCH has always stood out as one
of only a handful of suppliers worldwide
with its capacity to deliver innovative,
reliable and secure services to the Global
System for Mobile Communications (GSM)
roaming community. As part of this, EDCH
validates data to standards compatible with
the requirements of the GSM Association
by offering data and financial clearing, as
well as an increasing number of customized
value-added services.
Furthermore, to cater to the rapidly
developing East African market, E-Marine is
also planning to open a third depot in this
region. This will create a strategic advantage
for E-marine – not only in its ability to
procure additional business but also in
terms of its position relative to competitors.
To summarize, E-Marine’s comprehensive
business blueprint will give the Company
the edge it needs to become the preferred
choice for the customers in the region and
beyond.
In 2015, EDCH worked intensively on
enhancing its portfolio to position itself
as the intelligent roaming and revenue
management partner of choice. This has
also entailed the provision of simplified
roaming services, improved utilization of
available resources, and increased operator
profitability.
With its focus on producing unique
infrastructure solutions, encompassing all
facets of the building networks, Tamdeed
Projects is an industry frontrunner when
it comes to visionary technological
breakthroughs.
Among other initiatives, EDCH joined
forces with top telecom and IT solution
providers to create an intelligent solution
for predicting subscribers’ behavior,
awakening silent roamers, preventing bill
shocks, and improving subscribers’ overall
experience. In addition, EDCH launched
several services and innovative products –
such as Mobile Money hub solutions, cloudbased services, a Wi-Fi roaming hub, a datapackage engine, silent-roamer analysis, IREG
dashboard, interconnect ecosystem, and bill
shock prevention – to add to its long list of
products to support roaming.
E-MARINE
E-marine is the trusted principal provider of
submarine cable solutions in the Middle East
and the Sub-Continent and is committed
to the expansion and advancement of the
region. In keeping with this, it added a new
cable ship, the CS MARAM, to help maintain
TAMDEED PROJECTS
Tamdeed’s dynamic network of feedback
loops is composed of smart materials,
sensors, data exchange, and automated
systems that merge together, functioning as
a security-sensitive virtual information and
communications technology system.
With a portfolio of outside- and insideplant solutions seamlessly integrated into its
outdoor network and in-building solutions,
Tamdeed is a market leader in producing
sustainable, reactive and communityoriented intelligent building solutions,
enabling users to engage and communicate
efficiently across vast spaces.
Via Tamdeed’s ongoing collaboration
with Etisalat Services Holding’s various
business units, the Company has become
an industry-leading single-service provider,
capable of undertaking turn-key projects
from design to delivery – including the
physical infrastructure layer, low-voltage
components, systems and platforms,
communication, and application.
ETISALAT INFORMATION SERVICES (eIS)
Widely regarded as the UAE’s leading
directory services provider, Etisalat
Information Services (eIS) is utilized by
Directory Enquires (181) and also publishes
printed and digital directories on web and
mobile app platforms.
The directional media advertising industry
is very quickly evolving into the digital
space and it is estimated that the digital
media advertising industry will grow at
a CAGR rate of 38% over the next few
years. Meanwhile, sales figures for printed
hard-copy directories continue to decline.
In response to these trends, eIS began to
focus more intensively on digital media
advertising in 2015, partnering with global
industry innovators to create
www.connect.ae. This is the UAE’s first hyperlocal search engine enabling location-based
search and navigation services for all small
and medium-sized businesses in the country.
eIS also formed multiple partnerships with
various players – including industry leaders
like Booking.com, Roundmenu.com and
Zomato – in the digital play arena and it
continues to aggregate various verticals by
enhancing these partnerships.
In 2016, eIS has planned several aggressive
marketing campaigns that will help to
create awareness and encourage a much
greater number of potential customers to
utilize eIS products. As 2016 undergoes
the aforementioned shift in the digital
advertising industry, eIS and its stakeholders
will be ready and waiting to derive maximum
profit from this industry evolution.
EBTIKAR CARD SYSTEMS (ECS)
Ebtikar Card Systems (ECS) is a major
provider of smart card solutions and one
of the best secure industrial organizations
in the UAE. ECS was established in 1996 to
fulfill the growing business and application
demands for smart cards in this market.
The ECS factory is certified with the GSMA
Association’s Security Accreditation Scheme
certificate (SAS) for SIM and Smartcard
manufacturing, in addition to being ISO
9000, 14000 and 18001 certified for quality,
health and safety standards.
In 2015, ECS enhanced internal production
capacity to support market growth,
demonstrating the Company’s ability to
produce high volumes of high-quality SIM
cards, whilst still adhering to the strictest
set of standardized security criteria. During
this time, ECS introduced multiple new
products, including Trio Cards (multi SIM)
and M2M and 4G/ LTE SIM cards. Concurrent
to ensuring operational excellence, ECS
drastically reduced OPEX via supplier
negotiations to save considerably on
procurement costs.
2016 will see a more aggressive drive to
procure new customers, while steps are taken
to enhance production capacity to support
market growth. Ebtikar is also planning
to introduce several new products – like
quarter SIM card with multiple plug forms,
M2M, 4G/LTE products, and embedded SIM
subscriptions management – which will not
only ensure client retention through crossselling but will also enable Ebtikar to move
into new markets in a focused manner.
ETISALAT ACADEMY (EA)
Etisalat Academy (EA) is the largest inbound and out-bound single sourcetraining provider for the Middle East for
telecommunications, technology and
business training. EA also offers human
resources and competency consultancy
training.
ETISALAT REAL ESTATE (eRE)
Etisalat Real Estate (eRE) manages and
oversees the Portfolio of Etisalat Properties
in the UAE and is in the process of
implementing [TRIRIGA], a Real Estate
Management System by (IBM), which
provides enterprise-level capabilities for
asset management, tenant management,
space management and staff movement,
and third-party integration.
eRE performs registration and asset
optimization activities for Etisalat properties
in the UAE to assist it to efficiently utilize
office spaces, and maximize the potential
use of the unutilized spaces for revenue
generation. This is addition to supporting
other ESH Business Units and Etisalat
UAE in technical consultancy and project
management.
ESH has earmarked 2016 as a year for
aggressive growth through innovation and
distribution. The focus will be spread across
products, markets, customer segments, and
the competitive landscape. The Company
has already lined up multiple strategic
initiatives across the various businesses and
is working with industry leaders to develop
winning partnerships, offering a variety of
new business models in 2016. These business
models will ensure rapid growth for ESH and
its associated companies.
In the summer of 2015, EA conducted one
of the UAE’s largest and most diverse youth
summer camps, sponsored by the ICTFund
of the Telecommunications Regulatory
Authority (TRA). Camp activities were
conducted in several emirates and the
number of participants exceeded 1200
Emirati national students from primary,
preparatory and secondary schools.
Locally, EA kicked-off the special Etisalat
Sales Academy project for Etisalat UAE and
maintained strong ties with government
entities. Internationally, EA conducted
several projects in the KSA, Oman and
Nigeria.
EA is working on adding several new
clients to its customer base in the next
few months, thereby diversifying its clientspecific courses and programs.
Etisalat Group
49
Etisalat Afghanistan cultivated consumer-brand affinity via
innovation and exceptional network performance.
In 2015, Etisalat Afghanistan has gained
further traction in the country’s increasingly
competitive telecommunications sector
by placing special emphasis on customer
centricity whilst continuing to build on the
innovative approach cultivated in 2014.
With the proliferation of Over-the-Top
telecommunications services as well as the
3G licensing of all operators in the market,
Afghanistan’s telecommunications sector
is growing ever-more competitive. An
additional factor in the regulatory sphere
has placed further pressure on local telecoms
companies in terms of ensuring customer
satisfaction. This is the telecom regulator’s
recent introduction, by presidential decree,
of a new 10% telecom service fee tax,
deductible upfront from all airtime topups and other bills, with effect from 23
September 2015. This has profoundly
affected the financial performance of
Afghani telecoms operators as well as other
players, including the customer, further
downstream. Most significantly, the tax
burden has been passed on to customers
and business partners.
As a result, retaining existing subscribers
and attracting new ones has become far
more challenging. This is why Etisalat
Afghanistan has placed great emphasis
on cultivating consumer-brand affinity
via various key innovations, competitive
pricing,
and
exceptional
network
performance in 2015. Meanwhile, we have
continued to explore potential avenues for
new acquisitions and revenue streams.
Thus, Etisalat Afghanistan’s various
customer-centric initiatives in 2015
reflect the Company’s ever-deepening
commitment to provide relevant products
and services that improve engagement
and promote the economic and social
empowerment of our customers. In the past
year, we have shifted our focus to the youth
and businesses in their elementary stages.
To improve service penetration, we have
developed innovative products for young
students and have sought to add value to
our SME customer experience by providing
various business solutions and services.
Within the youth market, Etisalat has
lessened barriers to telecom services
50
Annual Report 2015
for students who use this technology
for communication and research in
their studies. We have achieved this by
subsidizing call charges within the closed
user group of students registered under the
special campus package and pre-loading
student dongles with free data.
The extension of this customer-centric
approach to the business sector has
included several SME business forums,
where entrepreneurs were trained on how
to run successful and profitable businesses
using widely acclaimed business guidelines,
conducted by Etisalat Afghanistan in
various provinces.
In addition to these specific focus areas, we
have also taken numerous other actions to
improve the Etisalat Afghanistan customer
experience across the board. This includes
the introduction, in collaboration with other
Etisalat Groups’ operations, of a new data
roaming product designed with citizens
of the global village in mind. Additionally,
we have explored opportunities for retail
channel expansion that brings the product
closer to where people need it, despite
the challenges posed by the security
environment. We have achieved this by
expanding our retail network, improving
retailer incentive schemes, micromarketing
activities at grassroots level, and pushing
for E-Top Up services. Etisalat has also
promoted the use of mobile money to
enable easier customer access to services
and payments. In addition, mobile money
services to government entities have been
explored for the disbursement of payments.
As part of Etisalat’s determination
to contribute to the development of
Afghanistan, our CSR Strategy continues
to focus on the development of sports and
sportspeople in the country. In 2015, we
renewed our commitment to the National
Volley Ball Federation, as the official
sponsors of the sport. Two international
tournaments and 15 national tournaments
took place. Etisalat also sponsored several
other sporting events in the fields of
cycling, football, swimming and cricket and
our product and services are endorsed by
the two National Team Cricket Celebrities.
Etisalat Afghanistan’s CSR efforts extended
beyond sports into the cultural arena in
2015. The Etisalat Annual Quran Contest
– which, along withthe Annual Ramadan
Food distribution drive, is one of the most
anticipated annual events in Afghanistan
– drew over 2,000 participants from all 34
provinces and was watched by more than
seven million national television viewers.
As part of our people focus, we celebrated
International Women’s Day on 8 March
2015 and initiated several awareness
sessions aimed at creating safe working
environments for employees. We also
celebrated ‘Apple Day’, under the theme
‘We Care’, to communicate the importance
of leading a healthy lifestyle. We conducted
a blood-donation camp, wherein over 110
employees including the CEO participated,
at our head office on 15 June 2015.
Subsequent to the blood-donation camp
and in response to arequest from the
Ministry of Public Health, we sent blooddonation awareness SMSs to more than
100,000 customers.
As part of our Global Family initiative,
we, along with other Etisalat affiliate
companies, participated in the 2015 Health
Grand Tour from 3 to 12 September. The
1,500km race began in Brussels on 3
September and concluded in Geneva on 12
September. The objective of the tour was
to create awareness surrounding diabetes
and help to test and develop new mobile
health solutions. Mr. Ahmad Shekib Noori,
from Etisalat Afghanistan, participated in
this event.
With continued focus on data as the
next frontier for further growth, Etisalat
Afghanistan will be looking at the following
areas in 2016 and beyond: Developing
the retail network and micromarketing
activities at grassroots level of each lowpenetration province; leveraging smallscreen vs. large-screen data propositions
in pursuit of increased customer-focused
innovations;Wi-Fi off-loading of 3G data
services for improved service quality; and
developing limited commercialization
models for OTT as data continues to
cannibalize IDD revenues.
Etisalat Lanka’s customer centric approach helped
retain existing customers and attract new ones.
In today’s highly volatile, politicized and
competitive Sri Lankan mobile telecom
industry, Etisalat Lanka used a customer
centric approach and increased brand
visibility to retain old customers and draw
new ones in 2015.
The Sri Lankan mobile sector has less than
20 million subscribers serviced by five
operators. This goes a long way to explaining
why the industry, which is also highly
volatile and politicized, has become so
intensely competitive. This competitiveness
is exacerbated by the fact that Sri Lanka
has the world’s lowest data prices and
among the world’s lowest mobile voice
prices. Meanwhile, the Sri Lankan telecom
regulatory pricing regime, due to a price
differential, is also fairly skewed and biased
in favor of larger players. At the same time,
telcos must contend with the threat posed
by the low pricing offered by Over-The-Top
(OTT) service providers and Mobile Virtual
Network Operators (MVNOs). The task of
increasing revenue and profitability is thus
very challenging for any telecom operator
in this market.
Nevertheless, Etisalat Lanka took on this
daunting task and prevailed in 2015 thanks
to innovative marketing campaigns and
promotions, improved leverage of social
media, customer loyalty rewards, and a
purposeful drive to increase brand visibility
and awareness.
As Etisalat Lanka’s customers have always
been an integral part of all company
activities, we designed several promotions
in 2015 to reward our most loyal customers.
Significant among these campaigns was the
25th Anniversary promotion in celebration
of the Copmany’s quarter-century-long
presence in Sri Lanka.
This promotion ran for a period of six
months, during which customers were
presented with daily, weekly and monthly
rewards to the value of LKR 25 million in
total.
2015 also saw the launch of our campaign
– entitled ‘If its internet, its Etisalat’ – to
promote Etisalat Lanka as the network of
choice for internet services on the island.
Meanwhile, Etisalat Lanka became the
country’s first network to partner with the
biggest OTT player in the market, WhatsApp,
to offer unique daily and monthly plans to
our prepaid customers.
Campaigns
aimed
specifically
at
strengthening Etisalat Lanka’s overall
presence in the social media sphere
included the Twitter Premier League and
Social Media Day – which we hosted for
the third and fourth consecutive years,
respectively. Our Social Media Day was
recommended by Mashable as one of the
Top Five social media events in the world
to attend.
Further to our customer-centric approach
in 2015, Etisalat Lanka used creative loyalty
rewards to bring our customers’ preferred
lifestyles closer to them. The Etisalat Epic
Rewards program treats customers to
special offers such as exclusive passes to
events and experiences. Devoted Etisalat
Lanka customers are able to access this
choice lifestyle by redeeming the loyalty
currency they earn when they make their
postpaid bill payments and purchase
prepaid reloads. Focusing on the High Value
Customer, Elite and Top Corporate segments
were gifted with exclusive personalized
Etisalat merchandise, accompanied by a
message promising exciting rewards in
the coming year. Etisalat Lanka organized
exclusive movie screenings at Sri Lanka’s
largest 3D cinema for its customers in the
Epic Rewards High Value and Etisalat Very
High Value Post-Paid Individual segments.
locations in and around Sri Lanka to gain
brand ownership and drive our products
and services. For example, we now own
brand visibility in one of Sri Lanka’s most
popular malls, Crescat, which receives a
large number of local and Middle Eastern
visitors each day. Other locations include
the International Airport and bus stops.
As part of the Company’s corporate social
responsibility efforts, the Etisalat Spectacle
Dansala was held for the third consecutive
year. The initiative saw the distribution
of over 4,000 spectacles during this
Poson season. Etisalat Lanka partnered
with non-government organization So
Others May See (SOMS) to conduct this
program to provide spectacles and essential
professional optometry services to needy
individuals.
Furthermore, in celebration of the Poson
season, we offered a free train shuttle
service to all Sri Lankans. Conducted in
collaboration with the Sri Lanka Railway
Department, this special train shuttle
service completed over 70 trips during its
three-day run. Over 40,000 tickets were
given away for free over the course the
initiative.
Etisalat Lanka focus in 2016 will continue
to be centered on enhancing customer
experience, as well as improving efficiency
and optimising cost structures. Our
innovative solutions will influence mobile
usage and positively impact the community
through the launch of value-added
products and services catered to customers’
needs and preferences.
Finally, to show how in touch we are with
our customers and their desired lifestyles,
Etisalat Lanka hosted special live screenings
of cricket matches and 2015 Rugby World
Cup games where customers were able to
enjoy Sri Lanka’s two favorite sports in a
festive atmosphere with signature Etisalat
hospitality.
In addition to rewarding our existing
customers, Etisalat Lanka actively worked
on enhancing brand visibility to draw new
customers in 2015 and beyond. Targeting
both local and foreign shoppers, travelers
and youth, we strategically selected
some of the most significant and popular
Etisalat Group
51
Thuraya tackled challenges with a proactive
combination of innovation and customer centricity.
Canar realized the benefits of developing new digital
products and services.
As the MSS industry faces increasing
threats from cellular communication, fixed
satellite services, and weak macroeconomic
developments, Thuraya uses a customercentric and innovative business model to
continue to grow within traditional MSS
sectors and expand into the retail sector.
Canar continues to develop new digital
products and services in response to
prevailing trends, thus expanding revenue
streams, whilst always placing a very
high premium on operational excellence,
customer centricity, and innovation.
Consumer and enterprise worldwide are
showing an ever-increasing awareness of
mobile satellite services (MSS), in general,
and of Thuraya, in particular. Thuraya
has largely been a pioneering force for
this trend through innovative products
like SatSleeve – the world’s first satellite
adaptor for smartphones – which was
launched in 2014.
However, while Thuraya remains committed
to the growth that had outpaced the
industry in past years, new macroeconomic
and industry-specific challenges have
recently caused this trend to slow down.
Specifically, the continued penetration
expansion of the Global System for Mobile
communications’ (GSM) through terrestrial
networks is increasingly encroaching on
the MSS industry and so is a threat to
growth. In 2015, Thuraya experienced this
impact directly when the erection of GSM
towers in Niger resulted in our losing all
the event-based voice revenue we had
benefited from during the “gold rush” in
2014 and the beginning of 2015. From only
60% of people having access to cellular
networks back in 2005, more than 85%
have access today.
Meanwhile, the MSS industry faces
additional challenges from other avenues,
such as the increasing convergence of
Fixed Satellite Services (FSS) via the Ku
and Ka bands as coverage is expanding and
terminal sizes and prices are decreasing,
making the FSS service more affordable
and appealing. Moreover, although natural
and man-made events are typically
beneficial to the MSS industry, terrestrial
resumption is now quicker and mobile base
stations reduce the need for prolonged
MSS “emergency” dependence.
Adding to this, military troop withdrawals
in certain countries and budget cuts are
also reducing demand from the traditional
52
Annual Report 2015
primary MSS customer – government. This
resulted in increasing competition in the
industry for a larger piece of the declining
demand.
During 2015, Thuraya proactively faced
these significant challenges with a
combination of innovative products,
expansion into new sectors, and increased
customer centricity.
Our greatest innovation of 2015 was
arguably our launch of the industry’s most
advanced satellite phone, the Thuraya XTPRO. Targeted at professional users across
a range of market sectors – including
government, energy, media and NGOs, –
the Thuraya XT-PRO offers talk-time of up
to nine hours, which is the longest on any
satellite phone currently on the market.
Also in 2015, Thuraya teamed up with
DigiGone to launch DigiMed, a telemedicine
solution to assist relief aid teams working
in remote areas. The cutting-edge DigiMed
kit allows crucial face-to-face consults to
take place between patients and doctors
through
real-time
teleconferencing,
enabled by Thuraya’s portfolio of
broadband terminals. It is also capable of
streaming patient data in real time and
allowing medical professionals to make onthe-spot decisions in emergency situations.
DigiMed can be used with the Thuraya IP,
IP+, IP Voyager and Orion IP terminals to
establish a secure, flexible platform that
can be customized to a specific business.
Meanwhile, Thuraya expanded our
retail and online presence in2015 via a
groundbreaking agreement with leading
online retailer, Expansys, to facilitate
the delivery of our products to the retail
market. This coincided with the launch of
a new generation of SatSleeve models –
SatSleeve+ and SatSleeve Hotspot – which
build on the original SatSleeve concept
by offering greater choice, improved
quality, and a new hotspot option.
Thuraya is, again, leading in innovation
by developing new ways to deliver its full
SatSleeve product range to key target
markets, which extend to a consumer
audience alongside key enterprise sectors.
The Expansys agreement enabled the
SatSleeve+ and SatSleeve Hotspot models
to become available immediately in 28
countries across Europe. The full scope of
the Expansys distribution agreement also
means that Thuraya SatSleeve models are
now available in high-profile third-party
online stores, such as Amazon, Orange and
Carrefour. This also allows managers and
ship owners to monitor budgets effectively,
as usage is charged to the Calling Card and
not the telephone account.
Finally, Thuraya announced the launch
of Calling Card – a dynamic market
solution that reinforces value-for-money,
convenience and versatility for both
individual users and business managers –
in 2015. Thuraya Calling Card was carefully
developed with the customer’s needs in
mind and will come as a welcome relief
to cost-conscious managers, particularly
in the maritime and energy sectors, who
need to control operational costs of both
equipment and staff. Thuraya Calling Card
allows entire crews to use their individual
Calling Cards to make personal calls from a
single phone – ensuring that business and
personal calls are kept separate.
As we move into 2016, Thuraya remains
focused on growing its revenues in
traditional MSS sectors (i.e. maritime, voice
and IP), which are typically accessed through
enterprise and government customers.
However, Thuraya also plans to combat
the aforementioned macroeconomic and
industry-related threats to these revenue
streams by simultaneously tapping more
into the retail and mobile network operator
markets to grow revenue in non-traditional
ways. In addition, Thuraya will focus
on preserving C-Band for satellite use,
expanding licensing into new geographies,
obtaining type approvals for new products,
protecting existing spectrum, and securing
additional spectrum in certain areas (i.e.
Asia). All the while, Thuraya will remain
committed to controlling costs while
pursuing strategic initiatives that prepare
the company for the next generation
constellation.
In 2015, Canar has built on the milestones
achieved in 2014 by carefully tracking
trends in the Sudanese market to develop
innovative new products and services and
update packages and bundles accordingly.
This has contributed considerably to
the expansion of Canar’s digital services
revenue stream. Among other things, we
have developed Transit Traffic Termination
in Africa, extended our fiber network to
new markets and neighboring countries
(e.g. CHAD, Eretria and South Sudan),
and leveraged our EASSY connectivity by
developing wholesale businesses in East
Africa. In addition, Canar has developed
new capacity solutions (e.g. Fiber to BTS)
for operators in Sudan and upgraded the
existing CDMA/WIMAX network to LTE,
whilst continuously providing state-of-the
art technology and excellent QoS. Through
all of these actions, Canar has become
the leading Sudanese broadband service
provider.
Whilst focusing specifically on product and
service development and improvement,
Canar has always maintained strong
emphasis on enhancing our operational
excellence.
In 2015, we endeavored to become an
efficient and lean operation, engage
continuously in performance-improving
activities, enhance our support services,
and increase the quality of all of our
services. Further actions taken to improve
operational
excellence
include
the
automation of operational workflow, and
the re-engineering of operational processes
to decrease time-to-market periods.
Such levels of operational excellence could
not have been achieved were it not for our
strongly customer-centric approach, by
which the needs of the client are always at
the top of our mind. As such, Canar devoted
2015 to: creating operational objectives
designed to enhance customer satisfaction
rates, defining staff performance key
performance indicators built around
customer satisfaction, defining network
and service quality parameters, creating
dashboards to monitor Quality of Services,
conducting ongoing customer satisfaction
surveys (the results of which were responded
to promptly and appropriately), developing
the Canar Call Center with for stronger focus
on corporate business, and outsourcing
corporate customer provisioning.
Furthermore, as an important facet of
customer-centricity, customer certainty
was a major priority in 2015. As part of
this, Canar introduced its new Customer
Relations Management (CRM) section within
the Enterprise Sales Unit. The CRM section
caters to VIP customers and enables our
account managers to give more attention to
each customer segment without prioritizing
any one over the others.
existing networks and infrastructure.
Through this model, Canar will overcome
distribution obstacles such as high
operating costs, service availability, better
geographical coverage, and so forth.
Looking forward, Canar will leverage the
success achieved in 2015 and introduce
further innovative and services that aim to
elevate the customer experience.
Being an enterprise-focused organization,
Canar strives to provide corporate customers
with a superior customer experience. In
keeping with this, we established accounts
on various social media outlets (such as
WhatsApp and Facebook) to enable more
efficient support and feedback to our
corporate clients.
Beyond our accountability to our direct
customers, our commitment to responsible
corporate citizenship within the country
of Sudan continued in 2015, during which
time Canar focused its CSR activities on the
education sector.
Canar set a precedent in the market through
its flat rate offer to lease backhauling
capacity to MTN, allowing the telecom
provider to relay on the Canar network.
Canar rewarded its employees through
the Fikrati reward program, designed to
acknowledge special contributions or
achievements outside of normal day-today tasks. Rewards were based on specific
elements, such as cost optimization, staff
productivity, revenue growth, improvement
of service quality, innovation in systems and
tools improvement, and enhancement of
governance and processes.
Finally, innovation played a central role in
Canar’s 2015 activities. We developed a
virtual network operator model to monetize
Etisalat Group
53
We remain committed to develop and invest in our
people who will determine our long-term success
Capability building, performance alignment
and people development remain at the top
of the Etisalat Group agenda, as we remain
committed to develop and invest in our
people to support career growth and reach
business objectives.
Etisalat Group’s talent initiatives run
across many different countries and
talent programs with differing levels of
shareholding implemented across multiple
geographies. In light of this, to ensure that
our HR initiatives have a truly meaningful
impact, Etisalat Group takes context into
careful consideration and monitors the rate
of transformation very closely. This helps
us to build a cohesive, powerful workforce
within a culturally diverse environment.
We ensure the placement of best-inclass specialists, with the ability to set
agendas and govern operations effectively
within their areas of expertise, within all
Group functions. To identify and attract
employees of this caliber, talent acquisition
teams across our footprint now leverage
professional social media platforms with
remarkable results.
Our talent management initiatives
continued to build on the successes of the
past years in 2015, with the second cohort of
High Potentials completing the program this
year. This Group program has evolved over
the years, with the aim of developing future
leaders via collaboration between Etisalat
and various best-in-class institutions. These
institutions are all leaders in innovative
learning solutions and executive education
and include Harvard Manage Mentor,
Informa Telecoms Academy, and HEC Paris.
The High Potentials program is part of a
concerted effort on the part of the Etisalat
Group and our operating companies to
grow future leaders from within, involving
people from 21 nationalities across our
footprint. We have also completed the Core
Leadership Programme (CLP), for group
middle management, and commenced
the Global Leadership Programme (GLP),
for executive development. The success of
these programs is reflected in the fact that
the number of critical executive positions
filled internally has increased to 68%.
The global mobility of our assignees is one
of the pillars of our talent management
54
Annual Report 2015
approach and is a valuable tool for
attracting, developing and retaining
top talent. As part of this, in 2015, we
substantially increased the number of
cross-operating companies’ assignments.
By actively managing our assignees and
working closely with key stakeholders,
we continue to optimize our assignment
management, resulting in a more effective
and efficient business model.
Etisalat UAE’s continued commitment
to supporting the progress, learning and
development of UAE nationals is part of our
wider goal of developing local communities
across our footprint. As such, nurturing
national talent and investing in enhancing
the skills and capabilities of UAE nationals
remains a key strategic priority.
The global employee survey continues to
grow in strength each year, with the 2015
survey seeing a record 82% of employees
participating across the group. Inputs from
the survey are instrumental in driving
innovation and improvements in business
performance across all our operations.
As a result of these and other initiatives,
our employer brand image continues to
improve, with our Talent Brand Index now
at 18%. In 2015, the Etisalat Group was
recognized as one of the Top 100 Most
“In Demand” Employers in the EMEA and
ranked Number 1 in the telecommunication
industry in addition to being named
“Dream Company to Work For” at the Asia
Best Employer Awards 2015.
2015 Awards); CHRO Etisalat UAE – HR
Professional of the Year Private Sector,
Best Employer Award for Promoting Health
in the Workplace, Award for Excellence
in HR through Technology (World HRD
Congress Awards), Etisalat Misr – Employer
of the Year award, Etisalat Nigeria – Best
Company in Education and Best Company
in the Promotion of Gender Equality (2015
SERAs Awards), in acknowledgement of
the Company’s commitment to Corporate
Social Responsibility in Nigeria.
Extending this beyond the workplace,
the Etisalat Group is also committed to
promoting active, healthy lifestyles in our
employees. Accordingly, in 2015, we joined
hands with the global community and
leading technology partners once more
to promote mHealth solutions for better
healthcare in general and the prevention
and proper management of diabetes in
particular.
Given our belief that our people are what
will determine our long-term success, in
2016, Etisalat Group will continue to search
for innovative and effective solutions to
motivate and grow our talent to drive
optimal performance throughout our
footprint.
The performance management of HR
activities is thus central to our ability to
enact our strategy, as the Etisalat Group’s
objectives are shared and aligned across
all OpCo executives. The Etisalat Group’s
emphasis on human resources to drive
business performance was recognized in
the form of several international awards in
2015 “Best HR Strategy”, “Best HR Strategy
in Line with the Business”, “Dream Company
to Work For”, “Asia’s Best Employer Brand”
and “Excellence in improving Performance
through Leadership”
Furthermore, operating companies across
the group won many awards of their own:
Etisalat UAE – HR Team of the Year Award
(Human Assets Expansion Summit MENA
Etisalat Group
55
Etisalat Group partners with key players to foster good
health, education, local culture, and sustainability,
whilst realising pivotal business objectives.
In 2015, Etisalat Group’s ongoing commitment
to corporate social responsibility was once
again evidenced by its numerous initiatives
to address local economic development in
the areas of education, health, environment
and personal finances. These initiatives –
some brand new and some continuations of
existing programs – are about empowering
the communities that Etisalat Group serves
across its international footprint. They aim
to improve communities by connecting
people in ways never thought possible. In
doing so, Etisalat not only helps to bridge
the gap between emerging markets and
developed nations but also to bring home the
benefits of its digital dividend in the form of
employment, economic growth and stability.
Etisalat Group recognises and values mobile
technology as a tool for empowerment, but
in order for CSR to be truly effective, it has
to tie in with business objectives. As such,
CSR has become an integral aspect of Etisalat
Group’s business strategy, which entails longterm commitments to the markets in which
it operates by working to build trust as a
reliable partner for growth.
In Africa, for example, Etisalat has already
begun to realise its ability to have a
real transformational impact on local
communities. By enabling small businesses
to grow, Etisalat can help to create jobs and
deliver new, innovative products and services
to stimulate vast improvements in education,
healthcare and many other socially vital
initiatives. This is sustainability in action.
Etisalat Group’s sustainability and social
responsibility strategy has been transformed
in recent years, as it has undertaken several
commitments to ensure that its efforts are
better coordinated across all operations.
This included pledging its support to the
United Nations Global Compact (including
adherence to the Compact’s Ten Principles)
and working with the telecommunication
industry body, GSMA to respond positively to
sustainability issues through its Ambassador
Programme.
In April 2015, Etisalat Group joined forces
with Ericsson and Refugees United (REFUNITE)
to launch a campaign to help the thousands
of refugees and almost two-million internally
displaced people in Pakistan and Afghanistan
to reconnect through mobile services.
This involved a free mobile application, a
56
Annual Report 2015
free helpline, and a free SMS notification
service, as well as awareness campaigns in
conflict zones, refugee camps and tented
cities. Coordinated, international efforts,
like this, can only be achieved through the
multinational, cross-agency cooperation
managed by Etisalat Group.
Similarly, Etisalat took measures to assist
refugees in countries like Mali, the Central
African Republic, Northern Nigeria, Egypt,
Afghanistan, and Pakistan. Displaced to
remote areas by tragic regional conflicts and
political unrest, these refugees were given
access to financial aid through a partnership
between the Etisalat Group and the World
Food Programme. This took the form of
a secure and simple transaction tool (the
Electronic Social Cash initiative), which was
instantly rolled out across entire countries,
enabling refugees to satisfy their needs,
even in the areas with no power or banking
infrastructure.
The programme provided the refugees with
cards pre-loaded with credit, which they
could use to purchase goods (via a scanning
system) or with telephone SIM cards loaded
with credit for financial transactions. The
additional advantage of this programme was
that it controlled merchant price levels for
subsidised goods and allowed for control over
the distribution of funds.
Also in Africa, Etisalat Group also teamed up
with the African Union in response to the
outbreak of the deadly Ebola virus on the
continent. Seven countries (Nigeria, Benin,
Togo, Gabon, Niger, Central Africa, Burkina
Faso and Cote d’Ivoire) participated in a SMS
campaign to raise awareness and funds to
support the fight against the disease.
2015 also witnessed the continued success
of Etisalat Group’s flagship CSR initiatives,
Weena – a mobile-for-development
programme that focuses on empowering
women in rural Africa and Asia. It is an
integrated mobile service, providing dynamic
and effective opportunities for women in
resource-poor areas who experience low
income, low empowerment, limited access to
education, and limited mobility.
Weena agents, who own and use mobile
phones, are rewarded for that usage through
a unique community-focused programme
based on Etisalat’s Mobile Money platform.
Weena now employs over 93,000 female
selling agents in Togo, Benin, Cote d’lvoire,
Nigeria, Afghanistan and Pakistan and has,
so far, impacted the lives of over 1.3 million
people. In Nigeria, Etisalat partnered with
the Charity for Cheer Foundation and the
Bauchi State Government to launch the Free
Eye Surgeries Camp, a community support
initiative dedicated to positive intervention
in areas related to health and education. As
a result, 50 patients suffering from cataract
infections underwent surgery and regained
full sight.
In Saudi Arabia, Etihad Etisalat (or Mobily), in
collaboration with several Saudi government
departments, issued over 90 million
“awareness SMS” across the country in 2015.
These simple but effective texts are aimed
at educating citizens in various fields, such
as health care and legal matters, in order
to improve various national economic and
social sectors. In Egypt, the Origin program
continues to provide water connections to
the underprivileged in society. Through this
initiative the most marginalized children and
their families have a chance to get their basic
needs for safe water met and enjoy better
health, hygiene, and opportunities to fulfill
their potential.Origin’s initial target was
to benefit 5,000 community members, but
this ongoing project has, so far, benefited
the daily lives of half a million people. The
ultimate goal is to provide safe drinking
water nationally.
Etisalat is also utilising new technology to
help with environmental issues in the UAE.
In 2015, Etisalat introduced the Middle East’s
first embedded SIM cards, to be used with
refuse bins for smart refuse management.
The sensors show which bins are full and
provide a more efficient way to plan and
manage the deployment of bins and the fleet
of collection vehicles.
Finally, in line with Etisalat’s strong belief
in the necessity of strengthening its CSR
programme across all operating companies,
the Group launched an internal CSR
Excellence award campaign. to promote
and share best practices across the Group. In
recognition of the business imperative, the
assessment criteria included sustainability
and return on investment.
Etisalat Group
57
The General Assembly:
The General Assembly (“GA”) is composed
of all the shareholders and exercises all
the powers granted thereto under the Law
of incorporating the Company (“Company
Law”) and its Articles of Association (AoA).
The General Assembly of the Company
is entitled to look into all the matters
related to the Company, and is, particularly,
entrusted with approving the Annual
Report on the Company’s activities &
financial position during the preceding
financial year, appointing external auditors
& approving their report, and discussing &
approving the balance sheet and the profit
& loss accounts for the previous year. It
also has the power to approve the Board of
Directors’ recommendations with regard to
dividends’ pay-outs.
The General Assembly is vested with
electing the Board Members who are not
appointed by the Government Shareholder
and reviewing the Board remunerations
& setting them. The GA is the authority
which absolves the Board members and the
external auditors from liability, discharges
them or files a liability lawsuit against
them.
Board of Directors:
The Board of Directors exercises all the
powers required to carry out Company’s
business as mandated in its objects, unless
a Special Resolution passed to the contrary
by the General Assembly or otherwise
is explicitly stated in the Company Law
or Articles of Association. The Board of
Directors of Etisalat currently consists of
eleven members. Seven Board Members,
including the Chairman of the Board, were
appointed by virtue of Federal Decree No.
58
Annual Report 2015
30 of 2015 concerning the appointment
of the Government’s representatives in
Etisalat Board of Directors.
The other four members of the Board of
Directors were elected during the General
Assembly meeting which was held on 24th
March 2015 by the shareholders who own
40 per cent of the Company’s shares, i.e.
the shares which are not held by Emirates
Investment Authority (the entity which
represents the Federal Government’s stake
in Etisalat).
Etisalat is committed to applying best
practices and corporate governance
standards, taking into consideration best
international standards in this regard and
the applicable laws in the UAE. Therefore,
the composition of the Company’s
Board of Directors took into account the
requirements of the Ministerial Resolution
No. 518 of 2009 concerning Governance
Rules and Corporate Discipline Standards
with respect to the capacity of the Board
members, where all current Board members
are non-executive and independent.
Committees of the Board of Directors:
For the purpose of rendering the assistance
to the Board of Directors in discharging its
responsibilities, the Board has established
three Committees, namely:
1) Audit Committee;
2) Nomination and Remuneration Committee;
and
3) Investment and Finance Committee.
Audit Committee:
The Audit Committee undertakes its duties
in accordance with its Charter, which
complies with the Ministerial Resolution
No. 518 of 2009 concerning Governance
Rules and Corporate Discipline Standards.
This Charter is considered a delegation
from Board to the Audit Committee to
undertake the tasks mentioned therein,
which include the following :
-Ensuring the safety and integrity of
theCompany’s financial statements;
-Reviewing and implementing systems and
internal control policies, and supervising
the Internal Control Department to ensure
that it is undertaking its duties accurately;
-Monitoring the Company’s abidance by
the laws and regulations;
-Developing and implementing a policy for
contracting with the external auditors and
ensuring their independence; and
-Reviewing financial control systems and
risk management.
The Committee’s Charter has clarified the
Audit Committee’s duties in detail, its
composition, the conditions & quorum of
convening its meetings, and the mechanism
of its decision-making.
The Committee is comprised of three (3)
non-executive and independent members
of the Board of Directors, in addition
to an external member experienced in
accounting and finance. The Committee
convenes quarterly or whenever necessary.
to undertake the duties stipulated under
the Committee’s Charter, which is in line
with the Ministerial Resolution No. 518
of 2009 concerning Governance Rules
and Corporate Discipline Standards. This
Charter is considered a delegation from
the Board of Directors to the Committee to
discharge its duties mentioned therein.
The main objective of constituting the
Nomination and Remuneration Committee
is to ensure that the Board of Directors
is undertaking its duties diligently and is
complying with the Governance Rules and
Discipline Standards. The Committee is also
responsible for organizing and following
up the nomination procedures for the
Board membership, constantly ensuring
the independence of the members of the
Board of Directors and reporting to the
Board if any Board member becomes no
more independent.
The Committee is further entrusted
with developing policies with respect to
determining the Company’s needs for talents
at the level of executive management and
employees as well as developing policies
for granting remunerations, incentives and
salaries to the Company’s Board members,
executive management and employees in a
manner that ensures meeting its objectives
and commensurate with its performance.
Nomination and Remuneration
Committee:
The Committee’s Charter provided for the
detailed powers of the Committee, its
composition, the conditions & quorum
of its meetings convention and decisionmaking mechanism.
In compliance with the applicable
laws in the field of governance and in
implementation of its best practices, the
Board of Directors has constituted the
In the course of exercising its functions,
the Committee takes into consideration
the competitive nature of the Company
strategy and the fair compensations
commensurate with the same to attract
and retain talented employees
achievement of best results.
for
is comprised of four (4) non-executive
independent members from the Board of
Directors. The Committee holds at least
four meetings per year.
Investment and Finance Committee:
In addition to the Audit Committee and the
provided for in the Ministerial Resolution
No.518 of 2009 concerning Governance
Rules and Corporate Discipline Standards,
the Board of Directors of Company
constituted the Investment and Finance
Committee to assist the Board in carrying
out its functions related to the Company’s
internal and external investments.
The Charter of the Committee defined
the functions and duties assigned to
the Committee and specified the cases
where the Committee is entitled to make
decisions as it deems appropriate. On the
other hand, it provided for the cases where
the Committee’s role is confined with
raising recommendations to the Board for
passing appropriate resolutions thereon.
This Charter is deemed an authorization
by the Board for the Committee to carry
out the functions and responsibilities
stipulated therein.
The purpose was to manage its international
expansion strategy, protect value resulting
from the Company’s operations
in the United Arab Emirates and overseas,
and gain the trust of its stakeholders by
putting in place a solid structure based on
best governance practices and corporate
punctuality.
At the level of the United Arab Emirates,
the Group organization structure features
two autonomous Operating Units: Etisalat
UAE Unit (which is entrusted with providing
the licensed telecom services in the United
Arab Emirates); and the Etisalat Services
Unit (a wholly owned holding company
entrusted with providing certain non-core,
non-telecom services to the Company as
well as third parties).
The Company carries out its wide array of
activities and responsibilities and defines
the framework for the same. It also
establishes key policies of its operating
companies, prepares their plans, monitors
their operational & financial performance,
and presents reports on the same to the
Board of Directors on a regular basis.
The Investment and Finance Committee is
comprised of four (4) independent nonexecutive members from the Board of
Directors.
Operating Structure of the Company
During 2015, Etisalat continued to
implement its revised structure, which was
commenced in 2009.
Etisalat Group
59
Independent Auditor’s Report to the Shareholders Report on the consolidated financial
statements
We have audited the accompanying
consolidated financial statements of
Emirates
Telecommunications
Group
Company PJSC (“the Company”) and its
subsidiaries (together, the “Group”), which
comprise the consolidated statement of
financial position as at 31 December 2015,
and the consolidated statements of profit
or loss, comprehensive income, changes
in equity and cash flows for the year
then ended and a summary of significant
accounting policies and other explanatory
information.
Management’s responsibility for the
consolidated financial statements
Management is responsible for the
preparation and fair presentation of
these consolidated financial statements
in accordance with International Financial
Reporting Standards and their preparation
in compliance with the applicable
provisions of the UAE Federal Law No. (2)
of 2015, and for such internal control as
management determines is necessary to
enable the preparation of consolidated
financial statements that are free from
material misstatement, whether due to
fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion
on these consolidated financial statements
based on our audit. We conducted our audit
in accordance with International Standards
on Auditing. Those standards require that
we comply with ethical requirements and
plan and perform the audit to obtain
reasonable assurance about whether the
consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts
and disclosures in the consolidated
financial statements. The procedures
selected depend on the auditor’s
judgement, including the assessment of
the risks of material misstatement of the
consolidated financial statements, whether
due to fraud or error. In making those
risk assessments, the auditor considers
internal control relevant to the entity’s
preparation and fair presentation of the
consolidated financial statements in
order to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the entity’s internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of accounting
estimates made by management, as well as
evaluating the overall presentation of the
consolidated financial statements.
considered necessary for the purposes of
our audit;
We believe that the audit evidence we
have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
vii. Based on the information that has been
made available to us nothing has come to
our attention which causes us to believe
that the Group has contravened during the
financial year ended 31 December 2015
any of the applicable provisions of the UAE
Federal Law No. (2) of 2015 or in respect
of the Company, its Articles of Association
which would materially affect its activities
or its financial position as at 31 December
2015; and
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material
respects, the financial position of the
Group as at 31 December 2015 and its
financial performance and its cash flows
for the year then ended in accordance
with International Financial Reporting
Standards.
Report on other legal and regulatory
requirements
ii. The consolidated financial statements
have been prepared and comply, in all
material respects, with the applicable
provisions of the UAE Federal Law No. (2)
of 2015;
iii. The Group has maintained proper books
of account;
iv. The financial information included in
the Chairman’s statement is consistent
with the books of account of the Group;
v. As disclosed in note 12 to the consolidated
financial statements, the Group has further
invested in shares in subsidiaries during the
financial year ended 31 December 2015;
vi. Note 16 to the consolidated financial
statements discloses material related party
transactions and balances, and the terms
under which they were conducted;
viii. Note 5 to the consolidated
financial statements discloses the social
contributions made during the financial
year ended 31 December 2015.
Further, as required by the UAE Federal Law
No. (2) of 2015, we report that:
i. We have obtained all the information we
Deloitte & Touche (M.E.)
Rama Padmanabha Acharya
Registered Auditor Number 701
9 March 2016
60
Annual Report 2015
Etisalat Group
61
Emirates Telecommunications Group Company PJSC
Consolidated statement of profit or loss for the year ended 31 December 2015
Consolidated statement of comprehensive income for the year ended 31 December 2015
Notes
2015
AED’000
Continuing operations
Revenue
51,737,018
48,508,398
5
(33,048,845)
(31,705,838)
Impairment and other losses
9
(995,330)
(931,963)
13
(315,929)
(639,173)
Operating profit before federal royalty
Federal royalty
2014
(Restated)
AED’000
9,510,918
9,562,546
(55,432)
(141,596)
(3,248,799)
(2,445,629)
1,255,830
1,301,869
Loss on revaluation of financial assets during the year
(172,162)
(27,969)
295,964
-
(16,076)
(284,991)
(1,940,675)
(1,598,316)
7,570,243
7,964,230
The equity holders of the Company
7,674,508
7,723,284
Non-controlling interests
(104,265)
240,946
7,570,243
7,964,230
7,964,230
Notes
Profit for the year
Operating expenses
Share of results of associates and joint ventures
2015
AED’000
2014
(Restated)
AED’000
5
Operating profit
17,376,914
15,231,424
(6,054,976)
(5,305,530)
11,321,938
9,925,894
Other comprehensive (loss) / income
Items that will not be reclassified subsequently to profit or
loss:
Remeasurement of defined benefit obligations - net of tax
Finance and other income
6
916,078
2,652,927
Finance and other costs
7
(1,212,177)
(1,736,288)
11,025,839
10,842,533
(1,277,590)
(1,165,325)
9,748,249
9,677,208
(237,331)
(114,662)
9,510,918
9,562,546
8,262,756
8,601,086
1,248,162
961,460
9,510,918
9,562,546
Reclassification adjustment relating to available-for-sale
financial assets impaired during the year
AED 0.95
AED 0.99
financial assets on disposal
Profit before tax
Taxation
8
Profit for the year from continuing operations
Discontinued operations
Loss from discontinued operations
35
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the year
Exchange differences on translation of foreign operations
Gain on hedging instruments designated in hedges of the
net assets of foreign operations
22
Available-for-sale financial assets
Profit attributable to:
Earnings per share
Basic and diluted
34
28
Total other comprehensive loss
Total comprehensive income for the year
Attributable to:
Chairman
The accompanying notes on pages 67 to 121 form an integral part of these consolidated financial statements.
The Independent Auditor’s report is set out on page 61
62
Annual Report 2015
Board Member
Etisalat Group
63
Consolidated statement of financial position as at 31 December 2015
Consolidated statement of changes in equity for the year ended 31 December 2015
2015
Notes
AED’000
2014
(Restated)
AED’000
Attributable to equity holders of the Company
2013
(Restated)
AED’000
Non-current assets
Goodwill
9
14,577,512
15,690,382
5,552,266
Other intangible assets
9
17,193,072
19,094,776
9,447,281
Property, plant and equipment
10
46,269,981
45,972,612
31,319,161
Investment property
11
39,357
41,378
41,211
Investments in associates and joint ventures
14
4,648,888
4,969,044
6,491,053
Other investments
15
812,338
983,997
866,984
Other receivables
18
213,645
240,066
595,981
Derivative financial instruments
22
675,412
293,584
-
Loans to related party
16
1,232,884
2,390,194
2,390,194
8
308,734
317,383
243,042
89,993,416
56,947,173
Deferred tax assets
85,971,823
Current assets
Inventories
17
774,089
624,652
498,232
Trade and other receivables
18
18,215,158
17,318,579
10,613,248
8
703,089
637,299
503,396
Due from associates and joint ventures
16
565,804
459,855
683,833
Other investments held for sale
15
-
-
448,448
Cash and bank balances
19
21,422,354
18,542,859
15,450,248
41,680,494
37,583,244
28,197,405
532,757
-
Current income tax assets
Assets classified as held for sale
35
Total assets
612,230
128,264,547
128,109,417
85,144,578
20
1,533,176
1,075,481
828,565
Non-current liabilities
Other payables
Notes
Balance at 1 January 2014 (as
previously reported)
Effects of restatement
Balance at 1 January 2014 (as
restated)
Total comprehensive income for the
year as restated
Transactions with owners:
Acquisition of non-controlling
interests
Equity contribution from noncontrolling interests for acquisition
of a subsidiary
Dividends
1,404,543
Payables related to investments and licenses
23
3,213,147
3,133,794
2,963,623
Current income tax liabilities
8
320,115
369,379
185,812
Finance lease obligations
24
7,070
6,983
2,564
Provisions
25
1,918,844
1,976,404
1,172,286
42,344,526
39,867,123
26,703,396
326
356
682
-
-
-
-
8,159,944
8,159,944
-
12
-
-
12
-
-
33
(150,933)
(150,933)
-
1,791,831
1,791,831
(1,392,078)
(6,923,982)
7,674,508
770
770
16,362
17,132
-
-
-
-
Other movements in equity
Transfer to reserves
(575,277)
-
-
28
-
881,313
36
-
(162,993)
Acquisition of non-controlling
interests
Repayment contribution of equity
contribution to non-controlling
interests for acquisition of a
subsidiary
-
-
-
-
(881,313)
-
790,614
-
(790,614)
Dividends
33
-
-
(6,243,152)
8,696,754
27,583,414
7,208,883
7,570,243
115,450
(47,543)
(434)
(5,664)
(6,098)
(209,094)
(209,094)
-
27
(104,265)
(162,993)
(434)
Bonus issue of 790.614 million fully
paid shares of AED 1
Balance at 31 December 2015
(5,531,904)
(18,364)
8,249,785
Total comprehensive income for the
year
(5,531,904)
-
132,569
60,214,472
Disposal of a subsidiary
20,974,568
326
(18,241)
17,994,120
Transactions with owners:
3,609,711
7,964,230
42,220,352
2,460
30,770,852
240,946
6,873,841
17,283
4,199,637
7,723,284
27,440,371
10,934
32,685,713
8,568,134
7,906,140
24
21
49,240,131
Balance at 1 January 2015
-
20
9,060,552
60,214,472
1,721,291
Borrowings
40,179,579
17,994,120
-
Trade and other payables
4,006,459
42,220,352
4,702,839
9,201,051
(352,565)
6,873,841
1,607
27,523,037
-
49,592,696
27,440,371
4,015,579
26,253,770
(844,850)
(352,565)
9,060,552
AED’000
7,906,140
8
Current liabilities
-
40,532,144
AED’000
-
22
201,089
28,266,980
(352,565)
AED’000
Total
equity
-
1,911,773
7,906,140
4,359,024
Owners' Non-controlling
equity
interests
Balance at 31 December 2014 (as
restated)
68,751
126,736
-
-
4,467,122
2,044,540
-
-
936,699
207,808
28,266,980
Acquisition of a subsidiary
18,619,459
1,910,480
7,906,140
-
693,661
25
AED’000
18,241
17,880,525
26
AED’000
-
21
Provisions
AED’000
-
23
Provision for end of service benefits
Retained
earnings
Other movements in equity
Borrowings
Reserves
Transfer to reserves
Deferred tax liabilities
38
Share capital
-
(6,243,152)
43,489,051
(1,920,861)
15,886,048
(8,164,013)
59,375,099
Liabilities directly associated with the assets
classified as held for sale
35
291,152
504,785
-
Total liabilities
68,889,448
67,894,945
35,904,447
Net assets
59,375,099
60,214,472
49,240,131
Equity
Share capital
27
8,696,754
7,906,140
7,906,140
Reserves
28
27,583,414
27,440,371
28,266,980
Retained earnings
7,208,883
Equity attributable to the equity holders of the Company
Total equity
43,489,051
12
6,873,841
4,006,459
42,220,352
40,179,579
15,886,048
17,994,120
9,060,552
59,375,099
60,214,472
49,240,131
Chairman
64
Annual Report 2015
Board Member
Etisalat Group
65
Notes
2015
AED’000
11,087,406
2014
(Restated)
AED’000
9,834,941
Depreciation
10, 11
5,837,793
5,163,502
Amortisation
9
1,828,310
1,694,716
9,10
995,330
931,963
13
315,929
639,173
Provisions and allowances
886,745
1,079,753
Other non-cash movements
(84,654)
(21,694)
20,866,859
19,322,354
Inventories
(176,155)
51,816
Due from associates and joint ventures
(104,283)
223,979
(1,904,834)
(2,560,729)
Consolidated statement of cash flows for the year ended 31 December 2015
Operating profit including discontinued operations
Adjustments for:
Share of results of associates and joint ventures
Operating profit before changes in working capital
Changes in working capital:
Cash generated from operations
Income taxes paid
Payment of end of service benefits
26
3,952,581
3,143,763
22,634,168
20,181,183
(1,762,003)
(2,266,300)
(447,245)
(706,363)
20,424,920
17,208,520
Net cash from (acquisition) / disposal of other investments
(33,792)
486,928
Net cash outflow on disposal of a subsidiary
(22,756)
-
(8,779,322)
(6,874,794)
196,558
239,141
(1,529,228)
(2,038,764)
127,329
25
(3,457,471)
(962,898)
7,800
797,559
(99,956)
783,982
(18,660,985)
(18,370)
1,966,853
(12,806,856)
(25,065,305)
5,694,619
34,636,255
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of other intangible assets
Proceeds from disposal of other intangible assets
Movement in term deposits with maturities over three months
19
Dividend income received from associates and other investments
Acquisition of Maroc Telecom, net of cash acquired
Acquisition of additional equity in subsidiary
Finance and other income received
30
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings and finance lease obligations
Repayments of borrowings and finance lease obligations
Equity (repayment to)/contribution from
non-controlling interests for acquisition of a subsidiary
Dividends paid
(4,186,981)
(18,608,720)
(209,094)
(8,164,013)
1,813,528
(6,923,982)
Finance and other costs paid
(1,242,993)
(1,755,522)
Net cash (used in) / generated from financing activities
(8,108,462)
9,161,559
Net (decrease) / increase in cash and cash equivalents
(490,398)
1,304,774
Cash and cash equivalents at the beginning of the period
6,052,923
3,914,295
(9,225)
833,854
6,052,923
Effects of foreign exchange rate changes
Cash and cash equivalents at the end of the year
19
5,553,300
During the year, the Group concluded the swap of its entire stake in one of the available for sale financial assets with the stake of one of the minority shareholders in Canar and the
derecognition of the spectrum in PTCL, having a non cash impact of AED 6.1 million and AED 80 million respectively, which have been reflected as non-cash transactions in the consolidated
statement of cash flows for the year ended 31 December 2015.
Certain fixed deposits having maturities greater than three months have been excluded from cash and cash equivalents and the comparative figures have accordingly been reclassified
(refer note 19).
The Independent Auditor’s report is set out on pages 61
66
Annual Report 2015
Notes to the consolidated financial statements for year ended 31 December 2015
1. General information
The Emirates Telecommunications Group
(‘’the Group’’) comprises the holding company Emirates Telecommunications Group
Company PJSC (‘‘the Company’’), formerly
known as Emirates Telecommunications
Corporation (“Corporation”) and its subsidiaries. The Corporation was incorporated in
the United Arab Emirates (“UAE”), with limited liability, in 1976 by UAE Federal Government decree No. 78, which was revised
by the UAE Federal Act No. (1) of 1991 and
further amended by Decretal Federal Code
No. 3 of 2003 concerning the regulation of
the telecommunications sector in the UAE.
In accordance with Federal Law No. 267/10
for 2009, the Federal Government of the
UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which
is ultimately controlled by the UAE Federal
Government.
In accordance with the Decree by Federal
Law no. 3 of 2015 amending some provisions
of the Federal Law No. 1 of 1991 (the “New
Law”) and the new articles of association of
Emirates Telecommunications Group Company PJSC (the “New AoA”), Emirates Telecommunications Corporation has been converted
from a corporation to a public joint stock
company and subject to the provisions of
UAE Federal Law no. 2 of 2015 on Commercial Companies (the “Companies Law”) unless
otherwise stated in the New Law or New AoA.
Accordingly, the name of the corporation
has been changed to Emirates Telecommunications Group Company PJSC. The new law
introduces two new types of shareholders relating to government shareholders, a Special
Shareholder and a Government Shareholder.
Under the new law, the Company may issue
different classes of shares, subject to the approval of the Special shareholder. The new
law reduces the minimum number of shares
held by any UAE government entity in the
Company from owning at least 60% shares
in the Company’s share capital to an ownership of not less than 51%, unless the Special Shareholder decides otherwise. Under
the new Law, foreign shareholders (whether
natural or legal / judicial persons) may own
up to 20% of the Company’s ordinary shares
provided that shares owned by such foreign
persons / entities shall not hold any voting
rights in the Company’s general assembly
(however, holders of such shares may attend
such meeting). The Company has to undertake the procedures required to implement
and align its status with the provisions of the
new law within one year from the date of its
issue, renewable by a decision of the Special
Shareholder. The address of the registered
office is P.O. Box 3838, Abu Dhabi, United
Arab Emirates. The Company’s shares are
listed on the Abu Dhabi Securities Exchange.
The principal activities of the Group are to
provide telecommunications services, media
and related equipment including the provision of related contracting and consultancy
services to international telecommunications
companies and consortia. These activities are
carried out through the Company (which
holds a full service license from the UAE Telecommunications Regulatory Authority valid
until 2025), its subsidiaries, associates and
joint ventures.
These consolidated financial statements were
approved by the Board of Directors and authorised for issue on 9 March 2016.
2. Significant accounting policies
The significant accounting policies adopted
in the preparation of these consolidated
financial statements are set out below.
Basis of preparation
The consolidated financial statements
of the Group have been prepared in
accordance with International Financial
Reporting Standards (“IFRS”) applicable
to companies reporting under IFRS and
the applicable provisions of UAE Fderal
Law No. (2) of 2015. The preparation of
financial statements in conformity with
IFRS requires the use of certain critical
accounting estimates. It also requires
management to exercise its judgement
in the process of applying the Group’s
accounting policies. The areas involving a
higher degree of judgement or complexity,
or areas where assumptions and estimates
are significant to the consolidated
financial statements are disclosed in note
3. The consolidated financial statements
are prepared under the historical cost
convention except for the revaluation
of certain financial instruments and in
accordance with the accounting policies
set out herein.
Historical cost is generally based on the
fair value of the consideration given in
exchange for goods and services. Fair value
is the price that would be received to sell
an asset or paid to transfer a liability in
an orderly transaction between market
participants at the measurement date,
regardless of whether the price is directly
observable or estimated using another
valuation technique.
The consolidated financial statements
are presented in UAE Dirhams (AED)
which is the Company’s functional and
presentational currency, rounded to the
nearest thousand except where otherwise
indicated.
New and amended standards
adopted by the Group
The accounting policies adopted in the
preparation of the consolidated financial
statements are consistent with those
followed in the preparation of the Group’s
annual consolidated financial statements
for the year ended 31 December 2014,
except for the adoption of the following
new or amended accounting policies
and new standards and interpretations
effective as of 1 January 2015.
The following revised IFRSs have been
adopted in this consolidated financial
statements. The application of these revised
IFRSs has not had any material impact on
the amounts reported for the current and
prior periods but may affect the accounting
for future transactions or arrangements.
•
•
•
Annual Improvements to IFRSs
2010 - 2012 Cycle that includes
amendments to IFRS 2, IFRS 3,
IFRS 8, IFRS 13, IAS 16, IAS 24
and IAS 38.
Annual Improvements to IFRSs
2011 - 2013 Cycle that includes
amendments to IFRS 1, IFRS 3,
IFRS 13 and IAS 40.
Amendments
to
IAS
19
Employee Benefits to clarify the
requirements that relate to how
contributions from employees or
third parties that are linked to
service should be attributed to
periods of service.
Etisalat Group
67
2. Significant accounting policies (continued)
Basis of consoldation (continued)
New and amended standards adopted (continued)
Where necessary, adjustments are made to
the financial statements of subsidiaries to
bring the accounting policies used in line
with those used by the Group.
New and amended standards in issue but not yet effective
At the date of the consolidated financial statements, the following Standards, Amendments and Interpretations have not been
effective but have not been early adopted:
Effective date
IFRS 9 Financial Instruments (revised versions in 2009, 2010, 2013 and 2014)
1 January 2018
Amendment to IFRS 7 Financial Instruments: Disclosures relating to transition to IFRS 9 (or otherwise when IFRS 9
is first applied)
When IFRS 9 is first
applied
IFRS 14 Regulatory deferral accounts
1 January 2016
IFRS 7 Financial Instruments: Disclosures relating to the additional hedge accounting disclosures (and consequential
amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9
When IFRS 9 is first
applied
Amendments to IFRS 11 - Accounting for acquisitions of Interests in Joint operations
1 January 2016
Amendments to IAS 16 and IAS 38 - Clarification of acceptable methods of depreciation and amortisation
1 January 2016
Amendments to IAS 16 and IAS 41 - Agriculture: Bearer plants
1 January 2016
IFRS 15 – Revenue from contracts with customers
1 January 2018
Amendment to IAS 27 Separate Financial Statements (as amended in 2011) relating to reinstating the equity
method as an accounting option for investments in in subsidiaries, joint ventures and associates in an entity’s separate financial statements
1 January 2016
Annual Improvements to IFRSs 2012 - 2014 Cycle covering amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34
1 January 2016
Amendments to IFRS 10 and IAS 28 clarify that the recognition of the gain or loss on the sale or contribution of
assets between an investor and its associate or joint venture depends on whether the assets sold or contributed
constitute a business
1 January 2016
IFRS 16 Leases
1 January 2019
IAS 1 Presentation of Financial Statements: Amendments resulting from the disclosure initiative
1 January 2016
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures
(2011) relating to the treatment of the sale or contribution of assets from and investor to its associate or joint venture 2.3
Effective date deferred indefinitely
Management anticipates that the application of the above Standards and Interpretations in future periods will have no material
impact on the consolidated financial statements of the Group in the period of initial application with the exception of IFRS
15 Revenue From Contracts with Customers, IFRS 9 Financial Instruments and IFRS 16 Leases which management is currently
assessing. However, it is not practicable to provide a reasonable estimate of effects of the application of these standards until the
Group performs a detailed review.
Basis of consolidation
These consolidated financial statements
incorporate the financial statements of the
Company and entities controlled by the
Company. Control is achieved when the
Group has:
•
•
has power over the investee;
•
has the ability to use its power to
affect its returns.
is exposed , or has rights, to variable
returns from its involvement;
The existence and effect of potential
voting rights that are currently exercisable
or convertible are considered when
assessing whether the Group has the
68
Annual Report 2015
power to control another entity.
Non-controlling interests in the net assets
of consolidated subsidiaries are identified
separately from the Group’s equity therein.
Non-controlling interests consist of the
amount of those interests at the date of
the original business combination and the
non-controlling interests share of changes
in equity since the date of the business
combination. Total comprehensive income
within subsidiaries is attributed to the
Group and to the non-controlling interest
even if this results in non-controlling
interests having a deficit balance.
Subsidiaries
are
consolidated
from
the date on which effective control is
transferred to the Group and are excluded
from consolidation from the date that
control ceases. Specifically, income and
expenses of a subsidiary acquired or
disposed of during the year are included
in the consolidated statement of profit or
loss and other comprehensive income from
the date the Company gains control until
the date when the Company ceases to
control the subsidiary.
Intercompany transactions, balances
and any unrealised gains/losses between
Group entities have been eliminated in the
consolidated financial statements.
Business combinations
The acquisition of subsidiaries is accounted
for using the acquisition method. The
cost of an acquisition is measured as the
aggregate of the fair value, at the date
of exchange, of the assets given, equity
instruments issued and liabilities incurred
or assumed. The acquiree’s identifiable
assets and liabilities that meet the
conditions for recognition under IFRS 3
Business Combinations are recognised at
their fair values at the acquisition date.
Acquisition-related costs are recognised
loss as incurred.
Goodwill arising on acquisition is
recognised as an asset and initially
measured at cost, being the excess of
the cost of the business combination
over the Group’s interest in the net fair
value of the identifiable assets, liabilities
and contingent liabilities recognised. If,
after reassessment, the Group’s interest
in the acquisition-date net fair value
of the acquiree’s identifiable assets and
liabilities exceeds the cost of the business
combination, the excess is recognised
immediately in the consolidated statement
of profit or loss.
The non-controlling interest in the acquire
is initially measured at the minority’s
proportion of the net fair value of the
assets, liabilities and contingent liabilities
recognised.
Step acquisition
If the business combination is achieved
in stages, the acquisition date carrying
value of the acquirer’s previously held
equity interest in the acquire is remeasured to fair value at the acquisition
date; any gains or losses arising from
such re-measurement are recognised in
the consolidated statement of profit or
loss. Amounts arising from interests in the
acquire prior to the acquisition date that
have previously been recognised in other
comprehensive income are reclassified
to profit or loss where such treatment
would be appropriate if that interest were
disposed of.
Associates and joint
ventures
A joint venture is a joint arrangement
whereby the Group has joint control of the
arrangement and has corresponding rights
to the net assets of the arrangement. Joint
control is the contractually agreed sharing
of control of an arrangement, which exists
only when decisions about the relevant
activities require unanimous consent of
the parties sharing control. Associates
are those companies over which Group
exercises significant influence but it does
not control or have joint control over
those companies. Investments in associates
and joint ventures are accounted for using
the equity method of accounting except
when the investment, or a portion thereof,
is classified as held for sale, in which case
it is accounted for in accordance with
IFRS 5. Investments in associates and joint
ventures are carried in the consolidated
statement of financial position at cost
as adjusted by post-acquisition changes
in the Group’s share of the net assets of
the associates and joint ventures less any
impairment in the value of individual
investments. Losses of the associates and
joint ventures in excess of the Group’s
interest are not recognised unless the
Group has incurred legal or constructive
obligations.
The carrying values of investments in
associates and joint ventures are reviewed
on a regular basis and if impairment in the
value has occurred, it is written off in the
period in which those circumstances are
identified.
Any excess of the cost of acquisition over
the Group’s share of the fair values of the
identifiable net assets of the associates at
the date of acquisition is recognised as
goodwill and included as part of the cost
of investment. Any deficiency of the cost
of acquisition below the Group’s share of
the fair values of the identifiable net assets
of the associates at the date of acquisition
is credited to the consolidated statement
of profit or loss in the year of acquisition.
Group’s reporting date. Accounting policies
of associates and joint ventures have
been adjusted, where necessary, to ensure
consistency with the policies adopted by
the Group.
Profits and losses resulting from upstream
and downstream transactions between
the Groups (including its consolidated
subsidiaries) and its associate or joint
ventures are recognised in the Group’s
financial statements only to the extent
of unrelated group’s interests in the
associates or joint ventures. Losses may
provide evidence of an impairment of the
asset transferred, in which case appropriate
provision is made for impairment.
Dilution gains and losses arising on deemed
disposal of investments in associates
and joint ventures are recognised in the
consolidated statement of profit or loss.
Revenue
Revenue is measured at the fair value of
the consideration received or receivable
and represents amounts receivable for
telecommunication products and services
provided in the normal course of business.
Revenue is recognised, net of sales taxes,
discounts and rebates, when it is probable
that the economic benefits associated with
a transaction will flow to the Group and
the amount of revenue and associated cost
can be measured reliably. Revenue from
telecommunication services comprises
amounts charged to customers in respect
of monthly access charges, airtime usage,
messaging, the provision of other mobile
telecommunications services, including
data services and information provision
and fees for connecting users of other
fixed line and mobile networks to the
Group’s network.
Access charges and airtime used by
contract customers are invoiced and
recorded as part of a periodic billing cycle
and recognised as revenue over the related
access period, with unbilled revenue
resulting from services already provided
from the billing cycle date to the end of
each period accrued and unearned revenue
from services provided in periods after
each accounting period deferred.
The Group’s share of associates’ and joint
ventures’ results is based on the most
recent financial statements or interim
financial statements drawn up to the
Etisalat Group
69
iii) Foreign exchange differences (continued)
Revenue (continued)
Leasing
Revenue from the sale of prepaid credit is
recognised on the actual utilisation of the
prepaid credit and is deferred as deferred
income until such time as the customer
uses the airtime, or the credit expires.
Leases are classified as finance leases
whenever the terms of the lease transfer
substantially all the risks and rewards of
ownership to the lessee. All other leases
are classified as operating leases.
Revenue from data services and
information provision is recognised when
the Group has performed the related
service and, depending on the nature of
the service, is recognised either at the
gross amount billed to the customer or
the amount receivable by the Group as
commission for facilitating the service.
Incentives are provided to customers in
various forms and are usually offered
on signing a new contract or as part
of a promotional offering. Where such
incentives are provided on connection of a
new customer or the upgrade of an existing
customer, revenue representing the fair
value of the incentive, relative to other
deliverables provided to the customer as
part of the same arrangement, is deferred
and recognised in line with the Group’s
performance of its obligations relating to
the incentive.
In revenue arrangements including more
than one deliverable that have value
to a customer on standalone basis, the
arrangement consideration is allocated
to each deliverable based on the relative
fair value of the individual elements. The
Group generally determines the fair value
of individual elements based on prices at
which the deliverable is regularly sold on a
standalone basis.
Contract revenue is recognised under the
percentage of completion method. Profit
on contracts is recognised only when
the outcome of the contracts can be
reliably estimated. Provision is made for
foreseeable losses estimated to complete
contracts.
Revenue from interconnection of voice and
data traffic with other telecommunications
operators is recognised at the time the
services are performed based on the actual
recorded traffic.
Interest income is accrued on a time basis,
by reference to the principal outstanding
and at the effective interest rate applicable,
which is the rate that exactly discounts
estimated future cash receipts through the
expected life of the financial assets to that
asset’s net carrying amount.
70
Annual Report 2015
i) The Group as lessor
Amounts due from lessees under finance
leases are recorded as receivables at the
amount of the Group’s net investment
in the leases. Finance lease income is
allocated to accounting periods so as to
reflect a constant periodic rate of return
on the Group’s net investment outstanding
in respect of the leases.
Revenues from the sale of transmission
capacity on terrestrial and submarine
cables are recognised on a straight-line
basis over the life of the contract. Rental
income from operating leases is recognised
on a straight-line basis over the term of
the relevant lease. Initial direct costs
incurred in negotiating and arranging an
operating lease are added to the carrying
amount of the leased asset and recognised
on a straight-line basis over the lease term.
ii) The Group as lessee
Rentals payable under operating leases are
charged to the consolidated statement of
profit or loss on a straight-line basis over
the term of the relevant lease. Benefits
received and receivable as an incentive
to enter into an operating lease are also
spread on a straight-line basis over the
lease term.
In preparing the financial statements of
the individual companies, transactions in
currencies other than the entity’s functional
currency are recorded at exchange rates
prevailing at the dates of the transactions.
At end of reporting period, monetary items
that are denominated in foreign currencies
are retranslated into the entity’s functional
currency at rates prevailing at that date.
Non-monetary items carried at fair value
that are denominated in foreign currencies
are translated at the rates prevailing at the
date when the fair value was determined.
Non-monetary items that are measured
in terms of historical cost in a foreign
currency are not retranslated.
ii) Consolidation
On consolidation, the assets and liabilities
of the Group’s foreign operations are
translated into UAE Dirhams at exchange
rates prevailing on the date of end of each
reporting period. Goodwill and fair value
adjustments arising on the acquisition
of a foreign entity are also translated at
exchange rates prevailing at the end of each
reporting period. Income and expense items
are translated at the average exchange
rates for the period unless exchange rates
fluctuate significantly during that period,
in which case the exchange rates at the
date of transactions are used. Exchange
differences are recognised in other
comprehensive income and are presented
in the translation reserve in equity. On
disposal of overseas subsidiaries or when
significant influence is lost, the cumulative
translation differences are recognised as
income or expense in the period in which
they are disposed of.
Foreign currencies
i) Functional currencies
iii) Foreign exchange
differences
The individual financial statements of
each of the Group’s subsidiaries, associates
and joint ventures are presented in
the currency of the primary economic
environment in which they operate (its
functional currency). For the purpose of
the consolidated financial statements, the
results, financial position and cash flows of
each Group company are expressed in UAE
Dirhams, which is the functional currency
of the Company, and the presentation
currency of the consolidated financial
statements.
Exchange differences are recognised in
the consolidated statement of profit
or loss in the period in which they arise
except for exchange differences that
relate to assets under construction for
future productive use. These are included
in the cost of those assets when they are
regarded as an adjustment to interest costs
on foreign currency borrowings. Exchange
differences on transactions entered into to
hedge certain foreign currency risks; and
exchange differences on monetary items
receivable from or payable to a foreign
operation for which settlement is neither
planned nor likely to occur, which form
part of the net investment in a foreign
operation are recognised initially in other
comprehensive income and reclassified
from equity to the consolidated statement
of profit or loss on disposal of net
investment.
Borrowing costs
Borrowing costs directly attributable to
the acquisition, construction or production
of qualifying assets, which are assets that
necessarily take a substantial period of
time to get ready for their intended use
or sale, are added to the cost of those
assets, until such time as the assets are
substantially ready for their intended use
or sale.
Investment income earned on the
temporary
investment
of
specific
borrowings pending their expenditure on
qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in
the consolidated statement of profit or loss
in the period in which they are incurred.
Government grants
Government grants relating to nonmonetary assets are recognised at nominal
value. Grants that compensate the
Group for expenses are recognised in the
consolidated statement of profit or loss on
a systematic basis in the same period in
which the expenses are recognised. Grants
that compensate the Group for the cost of
an asset are recognised in the consolidated
statement of profit or loss on a systematic
basis over the expected useful life of the
related asset upon capitalisation.
End of service benefits
Payments to defined contribution schemes
are charged as an expense as they fall due.
Payments made to state-managed pension
schemes are dealt with as payments to
defined contribution schemes where the
Group’s obligations under the schemes are
equivalent to those arising in a defined
contribution scheme.
Provision for employees’ end of service
benefits for non-UAE nationals is made in
accordance with the Projected Unit Cost
method as per IAS 19 Employee Benefits
taking into consideration the UAE Labour
Laws. The provision is recognised based on
the present value of the defined benefit
obligations.
The present value of the defined benefit
obligations is calculated using assumptions
on the average annual rate of increase in
salaries, average period of employment
of non-UAE nationals and an appropriate
discount rate. The assumptions used are
calculated on a consistent basis for each
period and reflect management’s best
estimate. The discount rates are set in
line with the best available estimate of
market yields currently available at the
reporting date with reference to high
quality corporate bonds or other basis, if
applicable.
Taxation
The tax expense represents the sum of the
tax currently payable and deferred tax.
The tax currently payable is based on
taxable profit for the year. Taxable profit
differs from profit as reported in the
consolidated statement of profit or loss
because it excludes items of income or
expense that are taxable or deductible
in other periods and it further excludes
items that are never taxable or deductible.
The Group’s liability for current tax is
calculated using tax rates that have been
enacted or substantively enacted by end of
the reporting period.
Deferred tax is the tax expected to be
payable or recoverable on differences
between the carrying amounts of assets
and liabilities in the financial statements
and the corresponding tax bases used in
the computation of taxable profit, and is
accounted for using the liability method.
Deferred tax is calculated using relevant
tax rates and laws that have been enacted
or substantially enacted by the reporting
date and are expected to apply when the
related deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax is charged or credited in the
consolidated statement of profit or loss,
except when it relates to items charged or
credited directly to equity, in which case
the deferred tax is also dealt with in equity.
Deferred tax liabilities are generally
recognised for all taxable temporary
differences and deferred tax assets are
recognised to the extent that it is probable
that sufficient taxable profits will be
available in the future against which
deductible temporary differences can be
utilised.
The carrying amount of deferred tax assets
is reviewed at the end of the reporting
period and reduced to the extent that it is
no longer probable that sufficient taxable
profits will be available to allow all or
part of the asset to be recovered. Such
assets and liabilities are not recognised if
the temporary difference arises from the
initial recognition of goodwill or from the
initial recognition (other than in a business
combination) of other assets and liabilities
in a transaction that affects neither taxable
profit nor the accounting profit.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
set off current tax assets against current
tax liabilities and when they relate to
income taxes levied by the same taxation
authority and the Group intends to settle
its current tax assets and liabilities on a net
basis.
Deferred tax liabilities are recognised for
taxable temporary differences arising on
investments in subsidiaries and associates,
and interests in joint ventures, except
where the Group is able to control the
reversal of the temporary difference and it
is probable that the temporary difference
will not reverse in the foreseeable future.
Property, plant and
equipment
Property, plant and equipment are only
measured at cost, less accumulated
depreciation and any impairment. Cost
comprises the cost of equipment and
materials, including freight and insurance,
charges from contractors for installation
and building works, direct labour costs,
capitalised borrowing costs and an
estimate of the costs of dismantling and
removing the equipment and restoring the
site on which it is located.
Etisalat Group
71
Property, plant and equipment (Continued)
identifiable assets of the acquired
subsidiary at the date of acquisition.
Goodwill is initially recognised as an asset
at cost and is subsequently measured at
cost less any accumulated impairment
losses.
•
For the purpose of impairment testing,
goodwill is allocated to each of the Group’s
cash-generating units (CGUs) expected
to benefit from the synergies of the
combination. CGUs to which goodwill has
been allocated are tested for impairment
annually, or more frequently when there is
an indication that the unit may be impaired.
If the recoverable amount of the cashgenerating unit is less than the carrying
amount of the unit, the impairment loss
is allocated first to reduce the carrying
amount of any goodwill allocated to the
unit and then to the other non-financial
assets of the unit pro-rata on the basis of
the carrying amount of each asset in the
unit. An impairment loss recognised for
goodwill is not reversed in a subsequent
period.
Internally-generated intangible assets are
amortised on a straight-line basis over
their useful lives of 3-10 years. Where no
internally-generated intangible asset can
be recognised, development expenditure is
recognised as an expense in the period in
which it is incurred.
Assets in the course of construction are carried at cost, less any impairment. Cost includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets commences when the assets
are ready for their intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All
other repairs and maintenance costs are charged to consolidated statement of profit or loss during the period in which they are incurred.
Other than land (which is not depreciated), the cost of property, plant and equipment is depreciated on a straight line basis over the
estimated useful lives of the assets as follows:
Buildings:
Permanent – the lesser of 20 – 30 years and the period of the land lease.
Temporary – the lesser of 4 – 10 years and the period of the land lease.
Years
Plant and equipment:
Submarine – fibre optic cables
20
10
– coaxial cables
Cable ships
15
Coaxial and fibre optic cables
15 – 25
Line plant
15 – 25
Exchanges
5 – 10
Switches
Radios/towers
15
10 – 15
Earth stations/VSAT
Multiplex equipment
5 – 10
10
On disposal of an associate, joint venture,
or a subsidiary or where Group ceases to
exercise control, the attributable amount
of goodwill is included in the determination
of the profit or loss on disposal.
Power plant
5–7
Subscribers’ apparatus
3–5
(II) Licenses
General plant
2–7
Acquired telecommunication licenses
are initially recorded at cost or, if part
of a business combination, at fair value.
Licenses are amortised on a straight line
basis over their estimated useful lives
from when the related networks are
available for use. The estimated useful lives
range between 10 and 25 years and are
determined primarily by reference to the
unexpired license period, the conditions
for license renewal and whether licenses
are dependent on specific technologies.
Other assets:
Motor vehicles
5
Computers
5
Furniture and fittings
4-6
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of the reporting period.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in the consolidated statement of profit or loss.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is carried at cost less accumulated depreciation
and impairment loss. Investment properties are depreciated on a straight-line basis over the lesser of 20 years and the period of the lease.
Intangible assets
(i) Goodwill
Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net
72
Annual Report 2015
(III) Internally-generated
intangible assets
An internally-generated intangible asset
arising from the Group’s IT development
is recognised at cost only if all of the
following conditions are met:
•
an asset is created that can be
identified (such as software and new
processes);
•
it is probable that the asset created will
generate future economic benefits;
and
the development cost of the asset can
be measured reliably.
(IV) Indefeasible Rights of
Use (“IRU”)
IRUs correspond to the right to use a
portion of the capacity of a terrestrial or
submarine transmission cable granted for
a fixed period. IRUs are recognised at cost
as an asset when the Group has the specific
indefeasible right to use an identified
portion of the underlying asset, generally
optical fibres or dedicated wavelength
bandwidth, and the duration of the right
is for the major part of the underlying
asset’s economic life. They are amortised
on a straight line basis over the shorter of
the expected period of use and the life of
the contract which ranges between 10 to
20 years.
(V) Other intangible assets
Customer relationships and trade names
are recognised on acquisition at fair values.
They are amortised on a straight line basis
over their estimated useful lives. The useful
lives of customer relationships range from
3-13 years and tradenames have a useful
life of 15-25 years.
Impairment of tangible and
intangible assets excluding
goodwill
The Group reviews the carrying amounts of
its tangible and intangible assets whenever
there is any indication that those assets have
suffered an impairment loss. If any such
indication exists, the recoverable amount of
the asset is estimated in order to determine
the extent of any impairment loss. Where
the asset does not generate cash flows that
are independent from other assets, the
Group estimates the recoverable amount
of the cash-generating unit to which the
asset belongs. An intangible asset with an
indefinite useful life (including goodwill) is
tested for impairment annually.
Recoverable amount is the higher of an
asset’s fair value less costs to sell and
value in use. In assessing value in use, the
estimated future cash flows are discounted
to their present value using a pre-tax
discount rate that reflects current market
assessments of the time value of money
and the risks specific to the asset for which
the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or
cash-generating unit) is estimated to be
less than its carrying amount, the carrying
amount of the asset (or cash-generating
unit) is reduced to its recoverable amount.
An impairment loss is recognised as an
expense immediately, unless the relevant
asset is carried at a revalued amount, in
which case the impairment loss is treated as
a revaluation decrease.
Non-financial assets other than goodwill
that suffered impairment are reviewed
for possible reversal of the impairment at
each reporting date. Where an impairment
loss subsequently reverses, the carrying
amount of the asset (or cash-generating
unit) is increased to the revised estimate
of its recoverable amount, but so that
the increased carrying amount does not
exceed the carrying amount that would
have been determined had no impairment
loss been recognised for the asset (or cashgenerating unit) in prior years. A reversal
of an impairment loss is recognised as
income immediately, unless the relevant
asset is carried at a revalued amount, in
which case the reversal of the impairment
loss is treated as a revaluation increase.
Inventory
Inventory is measured at the lower of cost
and net realisable value. Cost comprises
direct materials and where applicable,
directs labour costs and those overheads
that have been incurred in bringing the
inventories to their present location
and condition. Allowance is made,
where appropriate, for deterioration
and obsolescence. Cost is determined in
accordance with the weighted average
cost method. Net realisable value
represents the estimated selling price less
all estimated costs of completion and costs
to be incurred in marketing, selling and
distribution.
Etisalat Group
73
vi) Loans and receivables (continued)
Financial instruments
Financial assets and financial liabilities
are recognised in the consolidated
statement of financial position when the
Group becomes a party to the contractual
provisions of the instrument.
i) Fair value
Financial assets and financial liabilities are
initially measured at fair value The fair
values of financial assets and financial
liabilities are determined as follows:
•
•
the fair value of financial assets and
financial liabilities with standard terms
and conditions and traded on active
liquid markets are determined with
reference to quoted market prices; and
the fair value of other financial assets
and financial liabilities are determined
in accordance with generally accepted
pricing models based on discounted
cash flow analysis using prices
from observable current market
transactions.
receipts (including all fees on points paid or
received that form an integral part of the
effective interest rate, transaction costs
and other premiums or discounts) through
the expected life of the debt instrument,
or, where appropriate, a shorter period.
Income is recognised on an effective
interest rate basis for debt instruments
that are held-to-maturity, are availablefor-sale, or are loans and receivables.
iv)Held-to-maturity
investments
Bonds and Sukuk bonds with fixed or
determinable payments and fixed maturity
dates that the Group has the positive
intent and ability to hold to maturity are
classified as held-to-maturity investments.
Held-to-maturity investments are recorded
at amortised cost using the effective
interest method less any impairment,
with revenue recognised on an effective
yield basis. The Group considers the credit
risk of counterparties in its assessment of
whether such financial instruments are
impaired.
ii) Financial assets
Financial assets are classified into the
following specified categories: ‘held-tomaturity’ investments, ‘available-for-sale’
financial assets and ‘loans and receivables’.
The classification depends on the nature
and purpose of the financial assets
and is determined at the time of initial
recognition.
All financial assets are recognised and
derecognised on trade date where the
purchase or sale of a financial asset is
under a contract whose terms require
delivery of the investment within the
timeframe established by the market
concerned, and are initially measured at
fair value, plus transaction costs, except
for those financial assets classified as at
fair value through profit or loss, which are
initially measured at fair value.
iii) Effective interest method
The effective interest method is a method
of calculating the amortised cost of a
debt instrument and of allocating interest
income over the relevant period. The
effective interest rate is the rate that
exactly discounts estimated future cash
74
Annual Report 2015
v) Available-for-sale financial
assets (“AFS”)
Listed securities held by the Group that are
quoted in an active market are classified
as being AFS and are stated at fair value
at the end of each reporting period. Gains
and losses arising from changes in fair
value are recognised directly in equity
in the investment revaluation reserve
with the exception of impairment losses,
interest calculated using the effective
interest method and foreign exchange
gains and losses on monetary assets, which
are recognised directly in profit or loss.
Where the investment is disposed of or is
determined to be impaired, the cumulative
gain or loss previously recognised in the
investments revaluation reserve is included
loss.
Dividends on AFS equity instruments are
recognised in the consolidated statement
of profit or loss when the Group’s right to
receive the dividends is established.
The fair value of AFS monetary assets
denominated in a foreign currency is
determined in that foreign currency and
translated at the exchange rate prevailing
at the end of each reporting period. The
foreign exchange gains/losses that are
recognised in the consolidated statement
of profit or loss are determined based on
the amortised cost of the monetary asset.
Other foreign exchange gains/losses are
recognised in other comprehensive income.
The Group assesses at the end of each
reporting period whether there is objective
evidence that AFS assets are impaired. In
the case of equity securities, a significant
or prolonged decline in the fair value of the
security below its cost is considered as an
indicator that the securities are impaired.
When an AFS financial asset is impaired, the
cumulative loss that had been recognised
in other comprehensive income shall be
reclassified from equity to profit or loss as a
reclassification adjustment even though the
financial asset has not been derecognised.
Impairment losses previously recognised in
profit or loss for an investment in an equity
instrument classified as available for sale
shall not be reversed through profit or loss.
AFS equity investments that do not have
a quoted market price in an active market
and whose fair value cannot be reliably
measured are measured at cost less any
identified impairment losses at the end of
each reporting period.
or inability of the Group’s customers to
make required payments. The estimates
are based on the ageing of customer’s
accounts and the Group’s historical writeoff experience.
vii) Cash and cash equivalents
Cash and cash equivalents comprise cash
on hand and demand deposits and other
short-term highly liquid investments that
are readily convertible to a known amount
of cash and are subject to an insignificant
risk of changes in value.
viii) Financial liabilities
Financial liabilities are classified as either
financial liabilities ‘at fair value through
profit or loss’ (“FVTPL”) or other financial
liabilities.
ix) Financial guarantee
contract liabilities
Financial guarantee contract liabilities are
measured initially at their fair values and
are subsequently measured at the higher
of:
•
vi) Loans and receivables
Trade receivables, loans and other
receivables that have fixed or determinable
payments that are not quoted in an
active market are classified as ‘loans
and receivables’. Loans and receivables
are recognised initially at fair value and
subsequently measured at amortised cost
using the effective interest method less
impairment. Interest income is recognised
by applying the effective interest rate,
except for short-term receivables when
the recognition of interest would be
immaterial.
Appropriate allowances for estimated
irrecoverable amounts are recognised in
loss where there is objective evidence
that the asset is impaired. The allowance
recognised is measured as the difference
between the assets’s carrying amount and
the present value of estimated future cash
flows discounted at the effective interest
rate computed at initial recognition.
The allowance for doubtful debts reflects
estimates of losses arising from the failure
•
the amount of the obligation under the
contract, as determined in accordance
with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets; and
the amount initially recognised
less, where appropriate, cumulative
amortisation
recognised
in
accordance
with
the
revenue
recognition policies set out above.
x) Financial liabilities at
FVTPL
Financial liabilities are classified as at
FVTPL where the financial liability is
either held for trading or it is designated
as such. A financial liability is classified
as held for trading if it has been incurred
principally for the purpose of disposal in
the near future or it is a derivative that is
not designated and effective as a hedging
instrument. Financial liabilities at FVTPL
are stated at fair value, with any resultant
gain or loss recognised in the consolidated
statement of profit or loss.
xi) Other financial liabilities
xv) Hedge accounting
Other financial liabilities (including
borrowings and trade and other payables)
are subsequently measured at amortised
cost using the effective interest method,
with interest expense recognised on an
effective yield basis. The effective interest
method is a method of calculating the
amortised cost of a financial liability and
of allocating interest expense over the
relevant period. The effective interest
rate is the rate that exactly discounts
estimated future cash payments through
the expected life of the financial liability,
or, where appropriate, a shorter period.
The Group may designate certain hedging
instruments, which include derivatives,
embedded derivatives and non-derivatives
in respect of foreign exchange risk, as
either fair value hedges, cash flow hedges,
or hedges of net investments in foreign
operations. Hedges of foreign exchange
risk on firm commitments are accounted
for as cash flow hedges where appropriate
criteria are met.
xii) Derecognition of financial
liabilities
The Group derecognises financial liabilities
when, and only when, the Group’s
obligations are discharged, cancelled or
they expire.
xiii) Derivative financial
instruments
The Group enters into a variety of
derivative financial instruments to manage
its exposure to interest rate and foreign
exchange rate risk, including forward
foreign exchange contracts, interest rate
swaps and cross currency swaps.
Derivatives are initially recognised at fair
value on the date a derivative contract
is entered into and are subsequently
remeasured to their fair value at each
reporting date. A derivative with a positive
fair value is recognised as a financial asset
whereas a derivative with a negative fair
value is recognised as a financial liability.
xiv) Embedded derivatives
Derivatives embedded in other financial
instruments or other host contracts are
treated as separate derivatives when their
risks and characteristics are not closely
related to those of host contracts and the
host contracts are not measured at fair
value with changes in fair value recognised
loss.
At the inception of the hedge relationship,
the entity documents the relationship
between
the
hedging
instrument
and the hedged item, along with its
risk management objectives and its
strategy for undertaking various hedge
transactions. Furthermore, at the inception
of the hedge and on an ongoing basis, the
Group documents whether the hedging
instrument is highly effective in offsetting
changes in fair values or cash flows of the
hedged item.
xvi) Put option arrangements
The potential cash payments related to
put options issued by the Group over
the equity of subsidiary companies are
accounted for as financial liabilities when
such options may only be settled other
than by exchange of a fixed amount of
cash or another financial asset for a fixed
number of shares in the subsidiary.
The amount that may become payable
under the option on exercise is initially
recognised at fair value within borrowings
with a corresponding charge directly to
equity. The charge to equity is recognised
separately as written put options over
non-controlling interests, adjacent to
non-controlling interests in the net assets
of consolidated subsidiaries. For options
that involve a fixed amount of cash for a
fixed number of shares in the subsidiary,
the Group recognises the cost of writing
such put options, determined as the excess
of the fair value of the option over any
consideration received, as a financing cost.
Such options are subsequently measured
at amortised cost, using the effective
interest rate method, in order to accrete
the liability up to the amount payable
under the option at the date at which
it first becomes exercisable. The charge
arising is recorded as a financing cost.
Etisalat Group
75
3. Critical accounting judgements and key sources of estimation uncertainty (continued)
xvi) Put option arrangements (continued)
i) Fair value of other intangible assets (continued)
In the event that the option expires
unexercised, the liability is derecognised
with a corresponding adjustment to equity.
more relevant information (i.e. it
eliminates or significantly reduces
a measurement or recognition
inconsistency that would otherwise
arise from measuring assets or
liabilities and their gains and losses
on different basis; or a group of
financial assets and/or financial
liabilities is both managed and its
performance is evaluated on a fair
value basis; or if the instrument
contains one or more embedded
derivatives)
xvii) Derecognition of
financial assets
The Group derecognises a financial asset
only when the contractual rights to
the cash flows from the asset expire;
or it transfers the financial asset or
substantially all the risk and rewards of
ownership to another entity. If the Group
neither transfer nor retains substantially
all the risks and reward of ownership and
continues to control the transferred asset,
the Group recognises its retained interest
in the asset and associated liability for
amounts it may have to pay. If the Group
retains substantially all the risks and
rewards of ownership of a transferred
financial asset, the Group continues to
recognise the financial asset and also
recognises a collateralised borrowing for
the proceeds received.
xviii) Financial asset at fair
value through profit
or loss
A financial asset at fair value through
profit or loss is a financial asset that meets
either of the following conditions:
a)It is classified as held for trading, i.e.
it is:
(i)
acquired or incurred principally
for the purpose of selling or
repurchasing it in the near term;
Provisions
Provisions are recognised when the Group
has a present obligation as a result of a past
event, and it is probable that the Group
will be required to settle that obligation.
Provisions are measured at the directors’
best estimate of the expenditure required
to settle the obligation at the reporting
date, and are discounted to present value
where the effect is material.
Transactions with noncontrolling interests
The Group applies a policy of treating
transactions with non-controlling interest
holders as transactions with parties
external to the Group. Disposals to noncontrolling interest holders result in gains
and losses for the Group and are recorded
in the consolidated statement of profit
or loss. Purchases from non-controlling
interest holders result in goodwill, being
the difference between any considerations
paid and the relevant share acquired of
the carrying value of net assets of the
subsidiary.
(ii)
part of a portfolio of identified
financial instruments that are
managed together and for which
there is evidence of a recent actual
pattern of short-term profit taking;
or
Dividends
(iii)a derivative (except for a derivative
that is a designated and effective
hedging instrument).
Disposal of Assets/ Assets
Held for Sale
b)
Upon initial recognition it is
designated by the entity as “at fair
value through profit or loss” (FVTPL).
An entity may use this designation
only when doing so results in
76
Annual Report 2015
Dividend distributions to the Group’s
shareholders are recognised as a liability
in the consolidated financial statements
in the period in which the dividends are
approved.
•
Assets may be disposed of individually
or as part of a disposal group. Once
the decision is made to dispose of an
asset, it is classified as “Held for Sale”
and shall no longer be depreciated.
Assets that are classified as “Held for
•
Sale” must be disclosed in the financial
statements.
An asset is considered to be Held for
Sale if its carrying amount will be
recovered principally through a sale
transaction, not through continuing
use. The criteria for classifying an asset
as Held for Sale are as follows:
º It must be available for immediate
sale in its present condition,
º Its sale must be highly probable,
and
º It must be sold, not abandoned.
3. Critical accounting
judgements and key sources
of estimation uncertainty
In the application of the Group’s
accounting policies, which are described in
Note 2, the directors are required to make
judgements, estimates and assumptions
about the carrying amounts of assets and
liabilities that are not readily apparent
from other sources. The estimates and
associated assumptions are based on
historical experience and other factors
that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in
the period in which the estimate is revised
if the revision affects only that period or
in the period of the revision and future
periods if the revision affects both current
and future periods.
The key assumptions concerning the
future, and other key sources of estimation
uncertainty at the reporting date, that
have a significant risk of causing a material
adjustment to the carrying amounts
of assets and liabilities within the next
financial year, are disclosed below.
and the discount rate would change the
valuation of the intangible assets.
The relative size of the Group’s intangible
assets, excluding goodwill, makes the
judgements surrounding the estimated
useful lives critical to the Group’s financial
position and performance.
The useful lives used to amortise intangible
assets relate to the future performance of
the assets acquired and management’s
judgement of the period over which
economic benefit will be derived from the
asset.
ii) Business combinations
The recognition of business combinations
requires the purchase price of acquisitions
to be allocated to the identifiable assets
acquired and the liabilities assumed
measured at their acquisition-date fair
values. The Group makes judgments and
estimates in relation to the fair value
determination of the assets acquired and
liabilities assumed and allocation of the
purchase price. If any unallocated portion
is positive it is recognised as goodwill and if
negative, it is recognised in the statement
of profit or loss.
iii) Impairment of goodwill
and associates
Determining whether goodwill is impaired
requires an estimation of the value-in-use
of the cash-generating unit to which the
goodwill has been allocated. The value-inuse calculation for goodwill and associates
requires the Group to calculate the net
present value of the future cash flows for
which certain assumptions are required,
including management’s expectations of:
•
•
long term growth rates in cash flows;
timing and quantum of future capital
expenditure; and
the selection of discount rates to
reflect the risks involved.
i) Fair value of other intangible
assets
•
On the acquisition of mobile network
operators, the identifiable intangible assets
may include licenses, customer bases and
brands. The fair value of these assets is
determined by discounting estimated
future net cash flows generated by the
asset, where no active market for the assets
exists. The use of different assumptions
for the expectations of future cash flows
Further, in assessing the recoverability of
its loans to associate, management has
taken into consideration the estimation of
the value-in-use of that related party in
determining its ability to repay the loans
and the resulting impairment amount, if
any.
The key assumptions used and sensitivities
are detailed on Note 9 of the consolidated
financial statements. A change in the key
assumptions or forecasts might result in an
impairment of goodwill and investment in
associates.
iv) Impairment of intangibles
Impairment testing is an area involving
management judgement, requiring
assessment as to whether the carrying
value of assets can be supported by
the net present value of future cash
flows derived from such assets using
cash flow projections which have been
discounted at an appropriate rate. In
calculating the net present value of the
future cash flows, certain assumptions
are required to be made in respect of
highly uncertain matters including
management’s expectations of:
vii) Classification of
associates, joint ventures
and subsidiaries
The appropriate classification of certain
investments as subsidiaries, associates
and joint ventures requires significant
analysis and management judgement as
to whether the Group exercises control,
significant influence or joint control
over these investments. This may involve
consideration of a number of factors,
including ownership and voting rights,
the extent of Board representation,
contractual arrangements and indicators
of defacto control.
•
long term growth rates in cash
flows;
Changes to these indicators and
management’s assessment of the power to
control or influence may have a material
impact on the classification of such
investments and the Group’s consolidated
financial position, revenue and results.
•
timing and quantum of future
capital expenditure; and
viii) Federal royalty
•
the selection of discount rates to
reflect the risks involved.
v) Property, plant and
equipment
Property, plant and equipment represent
a significant proportion of the total assets
of the Group. Therefore, the estimates
and assumptions made to determine their
carrying value and related depreciation are
critical to the Group’s financial position
and performance. The charge in respect
of periodic depreciation is derived after
determining an estimate of an asset’s
expected useful life and the expected
residual value at the end of its life.
Increasing/decreasing an asset’s expected
life or its residual value would result in a
reduced/increased depreciation charge in
loss.
vi) Impairment of trade
receivables
The Group determines the impairment of
trade receivables based on their ageing
when objective evidence indicates that one
or more events have had a negative effect
on the estimated future cash flows of the
trade receivables. Management exercises
significant judgments in assessing the
impact of adverse indicators and events on
recoverability of trade receivables.
The computation of Federal Royalty in
accordance with the Cabinet of Ministers
of UAE decision No. 320/15/23 of 2012
and guidelines issued by the UAE Ministry
of Finance (“the MoF”) dated 21 January
2013 and subsequent clarification letters
dated 24 April 2013, 30 October 2013
and 29 January 2014 requires a number
of calculations. In performing these
calculations, management has made
certain critical judgments, interpretations
and assumptions. These mainly relate
to the segregation of items between
regulated and other activities and items
which the Company judges as not subject
to Federal royalty or which may be set off
against profits which are subject to Federal
royalty.
In addition, in the prior year, certain
clarifications have been received from the
Ministry of Finance vide its letter dated
23 December 2014 on the mechanism of
computation of federal royalty for the
prior years. These clarifications have been
considered for the computation of federal
royalty for the year ended 31 December
2014 (refer note 5(b)).
The mechanism for computation of federal
royalty for the year ended 31 December
2015 is in accordance with the revised
guidelines received from the MOF, which
are subject to clarifications from the MOF.
The Company has made certain judgements
for the computation of federal royalty in
Etisalat Group
77
3. Critical accounting judgements and key sources of estimation uncertainty (Continued)
4. Segmental information (continued)
viii) Federal royalty (continued)
the absence of clarifications from MOF.
The Group is in discussion with MOF on the
basis of allocation of indirect costs between
regulated and non regulated services.
ix) Regulatory expenses
The Company is required to pay the
UAE
Telecommunication
Regulatory
Authority (TRA) 1% of its revenues
annually as regulatory expenses towards
ICT contributions. In the computation of
the regulatory expenses, the Company
has made certain critical judgments
and assumptions relating mainly to
the interpretation of revenues, which
the Company contends to include UAE
regulated revenues only and not revenues
in other UAE entities as well as overseas
subsidiaries.
x) Valuation of derivative
financial instruments
The fair values of derivative financial
instruments measured at fair value or
generally obtained by reference to quoted
market prices, discounted cash flow
models and recognized pricing models
as appropriate. Information about the
valuation techniques and inputs used in
determining the fair value of derivative are
disclosed in note 22.
deferred tax assets for tax losses, relevant
tax law is considered to determine the
availability of the losses to offset against
the future taxable profit.
4.Segmental information
Information regarding the Group’s
operating segments is set out below
in accordance with IFRS 8 Operating
Segments. IFRS 8 requires operating
segments to be identified on the basis
of internal reports that are regularly
reviewed by the Group’s chief operating
decision maker and used to allocate
resources to the segments and to assess
their performance.
a)Products and services from
which reportable segments
derive their revenues
The Group is engaged in a single
line of business, being the supply of
telecommunications services and related
products. The majority of the Group’s
revenues, profits and assets relate to its
operations in the UAE. Outside of the
UAE, the Group operates through its
subsidiaries and associates in eighteen
countries which are divided in to the
following operating segments:
xi) Impairment of Availablefor-sale financial assets
(“AFS”)
•
•
•
•
The Group determines the impairment of
AFS financial assets based on the objective
evidence of significant and prolonged
decline in the share market price below its
cost.
Revenue is attributed to an operating
segment based on the location of the
Company reporting the revenue. Intersegment sales are charged at arms’
length prices.
xi) Recognition of deferred
tax asset
b)Segment revenues and
results
The recognition of deferred tax asset
is based upon whether it is more likely
than not that there will be sufficient
and suitable taxable profits in the
relevant legal entity or tax group against
which to utilise the assets in the future.
Judgement is required when determining
probable future taxable profits, which
are estimated using the latest available
profit forecasts. Prior to recording
Segment results represent operating
profit earned by each segment without
allocation of finance income, finance
costs and federal royalty. This is the
measure reported to the Group’s Board
of Directors (“Board of Directors”) for
the purposes of resource allocation and
assessment of segment performance.
78
Annual Report 2015
Pakistan
Egypt
Morocco
International - others
The Group’s share of results from
associates and joint ventures has been
allocated to the segments based on the
geographical location of the operations
of the associate and joint venture
investments. The allocation is in line
with how results from investments in
associates and joint ventures are reported
to the Board of Directors.
c) Segment assets
For the purposes of monitoring
segment performance and allocating
resources between segments, the
Board of Directors monitors the
tangible, intangible and financial assets
attributable to each segment. All assets
are allocated to reportable segments.
Goodwill is allocated based on separately
identifiable CGUs as further disclosed in
Note 9. Assets used jointly by reportable
segments are allocated on the basis
of the revenues earned by individual
reportable segments.
The segment information has been
provided on the following page.
International
UAE
AED’000
Morocco
AED’000
Egypt
AED’000
Pakistan
AED’000
Others Eliminations
AED’000
AED’000
Consolidated
AED’000
29,473,205
7,926,522
4,509,866
4,178,315
5,649,110
-
369,406
78,901
33,636
58,053
274,691
(814,687)
-
Total revenue
29,842,611
8,005,423
4,543,502
4,236,368
5,923,801
(814,687)
51,737,018
Segment result
14,068,713
2,784,764
774,020
41,383
(291,966)
-
17,376,914
31 December 2015
Revenue
External sales
Inter-segment sales
Federal royalty
51,737,018
(6,054,976)
916,078
Finance and other
other costs
costs
(1,212,177)
(1,212,177)
Profit before tax
11,025,839
Taxation
Profit for the year from continuing operations
(1,277,590)
9,748,249
Total assets
57,168,689 32,604,589
12,982,700
Non-current assets *
25,299,915 29,643,138
11,062,738
17,151,841
Depreciation and amortisation
19,909,477 20,869,205
(15,270,113)
128,264,547
14,860,508 (13,030,463)
84,987,677
1,930,585
2,045,383
870,844
1,188,459
1,545,283
-
7,580,554
947,274
-
-
5,627
42,429
-
995,330
4,814,366
29,983
4,844,349
834,616
4,436,395
282,143
4,718,537
126,921
5,394,001
180,219
5,574,220
(965,193)
(980,051)
(980,051)
-
20,967,801 (13,656,100)
15,688,048 (9,694,741)
899,543
931,963
-
48,508,398
48,508,398
15,231,424
(5,305,530)
2,652,927
(1,736,288)
10,842,533
(1,165,325)
9,677,208
128,109,417
89,382,449
6,768,761
931,963
2015
AED million
24,724
5,119
29,843
2014
AED million
23,741
4,511
28,252
2015
AED’000
-
2014
AED’000
540,328
8,014
6,818
40,042
384,817
31 December 2014 (Restated)
Revenue
External sales
27,802,546
6,061,090
Inter-segment sales
449,617
38,089
Total revenue
28,252,164 6,099,179
Segment result
13,120,843 2,114,237
Federal royalty
Profit before tax
Taxation
Profit for the year from continuing operations
Total assets
53,384,094 32,818,038
Non-current assets *
23,054,772 30,242,110
Depreciation and amortisation
1,767,218 2,095,574
-
13,727,236 20,868,347
11,988,655 18,103,605
926,980
1,079,446
-
UAE Segment revenue breakup:
UAE Revenue - TRA regulated
UAE Revenue - Non-regulated
Impairment details
of which relating to goodwill
of which relating to property, plant and equipment
(Note 10)
of which relating to other financial assets
of which relating to available-for-sale financial assets
(quoted equity instruments) (Note 28)
of which relating to loans to related party
295,964
651,310
995,330
931,963
In May 2014, the Group acquired 53% stake in Maroc Telecom. Maroc Telecom is accordingly consolidated in the Group consolidated financial
statements from the date of acquisition.
Accordingly, the comparatives for the year ended 31 December 2014 include the results of operations relating to Maroc Telecom with effect from
the date of acquisition.
* Non-current assets exclude derivative financial assets and deferred tax assets.
Etisalat Group
79
5. Operating expenses and federal royalty
7. Finance and other costs
2015
AED’000
435,651
2014
(Restated)
AED’000
431,990
Interest on other borrowings
527,332
662,069
Other costs
215,896
620,964
33,298
21,265
1,212,177
1,736,288
1,240,819
1,762,788
AED’000
2014
(Restated)
AED’000
Interest on bank overdrafts, loans and other financial liabilities
Direct cost of sales
11,112,853
10,294,285
Staff costs
5,433,064
6,192,735
Depreciation (Notes 10,11)
5,772,304
5,092,328
Unwinding of discount
Network and other related costs
2,974,392
2,793,203
Amortisation (Note 9)
1,808,250
1,676,433
Total borrowing costs
Less: amounts included in the cost of qualifying assets (Note 10)
a) Operating expenses (before federal royalty)
2015
Marketing expenses
973,298
1,277,551
Regulatory expenses
1,013,150
1,039,950
Operating lease rentals
304,917
225,035
Foreign exchange (losses)/gains
257,156
(359,870)
Other operating expenses
Operating expenses (before federal royalty)
3,399,461
3,474,188
33,048,845
31,705,838
Operating expenses include an amount of AED 5.49 million (2014: AED 29.51 million), relating to social contributions made during
the year.
On 9 December 2012, the Cabinet of
Ministers of UAE issued decision no.
320/15/23 of 2012 in respect of a new
royalty mechanism applicable to Company. Under this mechanism a distinction was made between revenue earned
from services regulated by Telecommunications Regulatory Authority (“TRA”)
and non-regulated services as well as
between foreign and local profits. The
Company was required to pay 15 % royalty fee on the UAE regulated revenues
and 35 % of net profit after deduction
of the 15 % royalty fee on the UAE
regulated revenues. In respect of foreign
profit, the 35 % royalty was reduced by
the amount that the foreign profit has
already been subject to foreign taxes.
During 2014, certain clarifications had
been received from the Ministry of Finance (“MOF”) on the mechanism of
computation of federal royalty for the
prior years. These clarifications have
been considered for the computation of
federal royalty for the year ended 31 December 2014. On 25 February 2015, MOF
issued revised guidelines (which was
received by the Company on 1 March
2015) for the computation of federal
royalty for the financial years ending 31
December 2014, 2015 and 2016 (“Guidelines”).
The Company responded to the MOF
with a letter dated 23 March 2015 and
was engaged in discussions with the
MOF seeking clarifications regarding the
Guidelines.
The mechanism for computation of federal royalty for the year ended 31 December 2015 is in accordance with the
Guidelines, which are subject to clarifications from the MOF. The Company has
made certain judgements for the computation of federal royalty in the absence
of clarifications from MOF. The Group is
in discussion with MOF on the basis of
allocation of indirect costs between regulated and non regulated services.
The federal royalty has been treated as
an operating expense in the consolidated
statement of profit or loss on the basis
that the expenses the Company would
otherwise have had to incur for the use
of the federal facilities would have been
classified as operating expenses.
8. Taxation
80
Annual Report 2015
Deferred tax credit
2015
AED’000
1,768,096
2014
(Restated)
AED’000
1,527,471
(490,506)
(362,146)
1,277,590
1,165,325
a) Current tax
Corporate income tax is not levied in the UAE for telecommunication companies and accordingly the effective tax rate for the
Corporation is 0% (2014: 0%). The table below reconciles the difference between the expected tax expense, (based on the UAE effective tax rate) and the Group’s tax charge for the year.
Profit before tax
Tax at the UAE corporate tax rate of 0% (2014: 0%)
Effect of different tax rates of subsidiaries operating in other jurisdictions
2015
AED’000
11,025,839
2014
(Restated)
AED’000
10,842,533
-
-
1,768,096
1,527,471
1,768,096
1,527,471
b) Current income tax assets and liabilities
The current income tax assets represent refunds receivable from tax authorities and current income tax liabilities represent income
tax payable.
c) Deferred tax
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when these relate to the same income tax authority. The amounts recognised in the consolidated statement of
financial position after such offset are as follows:
6. Finance and other income
Other income
Current tax expense
Current tax expense for the year
The Company assumed the guidelines
would not apply for the Financial Year
ending 31 December 2014, which was
already closed at the time the Guidelines
were issued.
Interest on bank deposits and held-to-maturity investment
(26,500)
1,736,288
All interest charges are generated on the Group’s financial liabilities measured at amortised cost. Borrowing costs included in the
cost of qualifying assets during the year arose on specific and general borrowing pools. Borrowing costs attributable to general
borrowing pools are calculated by applying a capitalisation rate of 8.50% (2014: 9.28%) to expenditure on such assets. Borrowing
costs have been capitalised in relation to loans by certain of the Group’s subsidiaries.
b) Federal Royalty
In accordance with the Cabinet decision No. 558/1 for the year 1991, the
Company (formerly known as “Corporation”) was required to pay a federal
royalty, equivalent to 40% of its annual
net profit before such federal royalty, to
the UAE Government for use of federal
facilities. With effect from 1 June 1998,
Cabinet decision No. 325/28M for 1998
increased the federal royalty payable to
50%.
(28,642)
1,212,177
2015
AED’000
436,440
2014
(Restated)
AED’000
388,897
Deferred tax assets
479,638
2,264,030
916,078
2,652,927
2015
AED’000
308,734
2014
(Restated)
AED’000
317,383
(4,015,579)
(4,702,839)
(3,706,845)
(4,385,456)
Etisalat Group
81
8. Taxation (Continued)
9. Goodwill, other intangible assets, impairment
Other Intangible assets
and other losses
The following represent the major deferred tax liabilities and deferred tax assets recognised by the Group and movements thereon
without taking into consideration the offsetting of balances within the same tax jurisdiction.
Cost
At 1 January 2014
Accelerated
tax
depreciation
AED’000
Deferred tax on
overseas earnings
AED’000
Others
AED’000
Total
AED’000
1,809,381
181,243
49,756
2,040,380
At 1 January 2014
(Credit)/charge to the consolidated
statement of profit or loss
70,150
(Credit)/charge to other comprehensive income
Acquisition of Maroc Telecom (Note 30)
Exchange differences
At 31 December 2014 (previously reported)
Restatement
At 31 December 2014 (Restated)
Charge to the consolidated statement of profit or loss
(22,882)
(205,012)
(157,744)
-
-
3,494
3,637,635
3,494
3,637,635
85,296
-
(381,403)
(296,107)
1,964,827
158,361
3,104,470
5,227,658
-
(37,453)
-
(37,453)
1,964,827
120,908
3,104,470
5,190,205
(87,838)
(14,838)
(267,408)
(370,084)
(102,329)
-
(288,527)
(390,856)
At 31 December 2015
1,774,660
106,070
2,548,535
4,429,265
Deferred tax assets
At 31 December 2014
(Credit)/charge to the consolidated
statement of profit or loss
Credit to other comprehensive income
At 31 December 2015
Trade names
Others
Total
AED’000
AED’000
AED’000
7,174,907
12,891,983
237,006
2,717,480
15,846,469
1,429,854
-
608,910
2,038,764
11,761,694
-
6,292,302
2,218,006
2,218,924
10,729,232
(44,896)
(6,087)
-
(108,452)
(114,539)
-
-
(25,660)
(25,660)
(229,033)
(694,066)
(2,054,311)
2,225,979 4,717,136
26,419,955
Additions
Reclassified as held for sale (Note 35)
-
Disposals
At 31 December 2014
Amortisation and impairment
At 1 January 2014
(1,047,116)
(1,131,212)
17,844,589
19,476,840
1,622,641
4,845,027
15,800
1,538,360
6,399,187
767,137
57,882
869,697
1,694,716
540,328
-
-
-
-
-
Elimination on items reclassified as held for sale (Note 35)
-
(1,205)
-
(39,259)
(40,464)
Disposals
-
-
-
(25,635)
(25,635)
(3,299)
Charge for the year
Impairment losses
(8,762)
(200,374)
(498,952)
(702,625)
At 31 December 2014
2,154,207
5,410,585
70,383 1,844,211
7,325,179
Carrying amount
At 31 December 2014
15,690,382
14,066,255
2,155,596 2,872,925
19,094,776
17,844,589
19,476,840
2,225,979
4,717,136
26,419,955
47,496
1,004,996
-
439,172
1,444,168
Tax losses
AED’000
Others
AED’000
Total
AED’000
Additions
173,467
234,457
125,659
533,583
Transfer from Assets under construction
-
-
-
125,681
125,681
-
(88,390)
-
(47,774)
(136,164)
Charge to the consolidated statement of profit or loss
Licenses
AED’000
Retirement
benefit
obligations
AED’000
At 1 January 2014
Charge to other comprehensive income
Goodwill
AED'000
Cost
At 1 January 2015
1,262
66,869
79,572
147,703
74,497
-
1,572
76,069
Disposals
-
-
46,955
46,955
8,597
(7,860)
(298)
439
257,823
293,466
253,460
804,749
(13,970)
52,502
81,890
120,422
(133,657)
-
-
(133,657)
(11,720)
98,476
(38,017)
307,951
(19,357)
315,993
(69,094)
722,420
At 31 December 2015
(4,412)
(167,499)
-
(788,534)
(956,033)
(1,160,311)
(1,524,948)
(192,373)
(422,988)
(2,140,309)
16,727,362
18,700,999
2,033,606 4,022,693
24,757,298
Amortisation and impairment
At 1 January 2015
2,154,207
5,410,585
70,383
1,844,211
7,325,179
Charge for the year
-
820,342
94,246
902,529
1,817,117
Elimination on items reclassified as held for sale (Note 35)
-
(55,307)
-
(7,240)
(62,547)
Disposals
-
(91,712)
-
(661,900)
(753,612)
(10,075)
At 31 December 2015
(4,357)
(374,079)
(377,757)
(761,911)
2,149,850
5,709,829
154,554 1,699,843
7,564,226
14,577,512
12,991,170
1,879,052 2,322,850
17,193,072
Carrying amount
Unused tax losses
Total unused tax losses
of which deferred tax assets recognised for
of which no deferred tax asset recognised,
due to unpredictability of future taxable profit streams
of the unrecognized tax losses, losses that will expire in the next three years
2015
AED million
1,369
2014
AED million
1,554
1,147
1,272
221
1
252
30
At 31 December 2015
Others - net book values
IRU
Computer software
Customer relationships
Others
82
Annual Report 2015
2015
AED’000
2014
AED’000
526,212
564,917
713,175
890,352
568,859
1,099,868
514,604
317,788
2,322,850
2,872,925
Etisalat Group
83
9. Goodwill, other intangible assets, impairment and
9. Goodwill, other intangible assets, impairment and
other losses (continued)
other losses (continued)
Other intangible assets balance for 2014
included an amount of AED 10,729 million representing cost of assets acquired
through business combination in 2014
(refer to note30) which were classified
as licences, computer software, customer relationships, trade names and other
intangibles amounting to AED 6,292
million, AED 736 million, AED 1,123 mil-
lion, AED 2,218 and AED 360 million respectively.
There were no intangible assets acquired
through business combinations or internally generated in 2015.
loss in respect of the carrying amounts
of investments, goodwill, licenses and
property, plant and equipment are as
follows:
Maroc Telecom
a) Impairment and other losses
Maroc Telecom International Subsidiaries
The net impairment losses recognised in
Pakistan Telecommunication Company Limited (PTCL)
Pakistan Telecommunication Company Limited (PTCL)
of which relating to property, plant and equipment (Note 10)
Atlantique Telecom S.A (AT)
of which relating to goodwill
Others
of which relating to loans to related party
of which relating to available-for-sale financial assets (quoted equity instruments) (Note 28)
Total impairment and other losses for the year
Impairment losses were primarily driven
by increased discount rates as a result
of increase in inflation in the operating countries and challenging economic
and political conditions, as well as negative local currency fluctuation. Impairment losses of the Group’s investment
in available-for-sale financial assets was
triggered by a significant and prolonged
84
Annual Report 2015
Cash generating units (CGU) to which goodwill is allocated :
decline in the fair value of the quoted
investments.
b) Cash generating units
Goodwill acquired in a business combination is allocated, at acquisition, to the
CGUs that are expected to benefit from
that business combination. The Group
tests goodwill annually for impairment
2015
AED’000
2014
(Restated)
AED’000
5,627
-
5,627
-
40,318
923,339
-
540,328
276
-
40,042
383,011
949,385
8,624
-
651,310
295,964
2,111
995,330
6,818
1,806
931,963
or more frequently if there are indications that goodwill might be impaired.
The carrying amount of goodwill (all relating to operations within the Group’s
International reportable segment) is allocated to the following CGUs:
2015
2014
AED’000
8,425,822
AED’000
9,246,613
1,176,812
1,291,211
4,108,560
4,252,905
Atlantique Telecom, S.A. (AT)
636,173
667,224
Etisalat Misr (Etisalat) S.A.E.
24,023
26,306
Etisalat Lanka (Pvt) Limited (Etisalat Lanka)
206,122
206,123
14,577,512
15,690,382
Goodwill has been allocated to the respective segment based on the separately identifiable CGUs.
c) Key assumptions for the value in use
calculations:
The key assumptions for the value in use
calculations are those regarding the long
term forecast cash flows, working capital estimates, discount rates and capital
expenditure.
Long term cash flows and working capital estimates
The Group prepares cash flow forecasts
and working capital estimates derived
from the most recent annual business
plan approved by the Board of Directors
for the next five years. The business plans
take into account local market considerations such as the revenues and costs
associated with future customer growth,
the impact of local market competition
and consideration of the local macroeconomic and political trading environment. This rate does not exceed the
average long-term growth rate for the
relevan markets and it ranges between
1.8% to 6.5% (2014: 3.10% to 6.7%).
Discount rates
The discount rates applied to the cash
flows of each of the Group’s operations
are based on an internal study conducted by the management. The study utilized market data and information from
comparable listed mobile telecommunications companies and where available and appropriate, across a specific
territory. The pre-tax discount rates use
a forward looking equity market risk
premium and ranges between 7.01% to
17.7% (2014: 11.0% to 18.1%).
Capital expenditure
The cash flow forecasts for capital expenditure are based on past experience
and include the ongoing capital expenditure required to continue rolling out
networks in emerging markets, providing enhanced voice and data products
and services, and meeting the population coverage requirements of certain licenses of the Group. Capital expenditure
includes cash outflows for the purchase
of property, plant and equipment and
other intangible assets.
Etisalat Group
85
10. Property, plant and equipment
10. Property, plant and equipment (continued)
Land and buildings
AED’000
Cost
At 1 January 2014
Additions
Plant and
Motor vehicles,
equipment computer, furniture
AED’000
AED’000
Assets under
construction
AED’000
Total
AED’000
8,377,255
48,251,308
4,368,610
4,935,317
65,932,490
195,113
1,267,828
118,640
5,290,561
6,872,142
2,092,884
12,325,579
393,038
75,457
14,886,958
Transfers
154,711
4,591,962
790,718
(5,537,391)
-
Disposals
(95,811)
(739,352)
(186,530)
(28,258)
(1,049,951)
(14,032)
(499,415)
(55,271)
(78,138)
(646,856)
At 31 December 2014
(241,164)
(3,046,779)
(276,947)
(79,127)
(3,644,017)
10,468,956
62,151,131
5,152,258
4,578,421
82,350,766
2,687,337
28,830,292
3,035,933
59,767
34,613,329
186,961
4,195,564
778,490
-
5,161,015
-
-
6,818
-
6,818
(63,626)
(607,979)
(139,206)
-
(810,811)
The carrying amount of the Group’s
land and buildings includes a nominal
amount of AED 1 (2014: AED 1) in relation to land granted to the Group by the
Federal Government of the UAE. There
are no contingencies attached to this
grant and as such no additional amounts
have been included in the consolidated
statement of profit or loss or the consolidated statement of financial position
in relation to this.
the year.
An amount of AED 28.6 million (2014:
AED 26.5 million) is included in property, plant and equipment on account
of capitalisation of borrowing costs for
Investment property, which is property
held to earn rentals and/or for capital
appreciation, is stated at depreciated
Borrowings are secured against property,
plant and equipment with a net book
value of AED 3,190 million (2014: AED
3,195 million).
Assets under construction include buildings, multiplex equipment, line plant,
exchange and network equipment.
11. Investment property
Depreciation and impairment
At 1 January 2014
Charge for the year
Impairment losses
Disposals
Elimination on items
reclassified as held for sale (Note 35)
At 31 December 2014
Carrying amount
At 31 December 2014
(11,850)
(328,525)
(51,236)
-
(391,611)
(227,978)
(1,748,506)
(224,102)
-
(2,200,586)
2,570,844
30,340,846
3,406,697
59,767
36,378,154
31,810,285
1,745,561
4,518,654
45,972,612
Cost
At 1 January 2015
Additions
Transfer to Intangibles
10,468,956
62,151,131
5,152,258
4,578,421
82,350,766
250,299
1,789,362
93,036
6,773,730
8,906,427
-
-
-
(125,681)
(125,681)
Transfers
396,964
5,135,194
703,258
(6,235,416)
-
Disposals
(170)
(1,086,142)
(76,992)
(28,565)
(1,191,869)
(25,549)
(248,025)
(23,365)
381
(296,558)
(595,148)
(4,261,389)
(279,069)
(128,890)
(5,264,496)
10,495,352
63,480,131
5,569,126
4,833,980
84,378,589
2,570,844
30,340,846
3,406,697
59,767
36,378,154
221,132
4,926,138
648,808
-
5,796,078
-
8,014
-
-
8,014
(61)
(860,879)
(106,088)
-
(967,028)
(16,121)
(141,355)
(19,861)
-
(177,337)
At 31 December 2015
2015
AED’000
2014
AED’000
59,425
56,771
Cost
At 1 January
Additions
At 31 December
Depreciation
At 1 January
Additions
7,898,112
cost and included separately under noncurrent assets in the consolidated statement of financial position.
600
2,654
60,025
59,425
18,047
15,560
2,621
2,487
At 31 December
20,668
18,047
Carrying amount at 31 December
39,357
41,378
Fair value at 31 December
72,211
70,450
2015
AED million
7.9
2014
AED million
10.9
1.2
1.3
Investment property rental income and direct operating expenses
Property rental income
Direct operating expenses
The fair value of the Group’s investment property has been determined based on a Sales Comparable approach and with reference
to observable latest market prices for similar commercial properties in the neighbourhood. Accordingly, the fair value is classified
as level 3 of the fair value hierarchy.
Depreciation and impairment
At 1 January 2015
Charge for the year
Impairment losses
Disposals
Elimination on items reclassified
as held for sale (Note 35)
(158,129)
(2,562,792)
(208,352)
-
(2,929,273)
At 31 December 2015
2,617,665
31,709,972
3,721,204
59,767
38,108,608
Carrying amount
At 31 December 2015
7,877,687
31,770,159
1,847,922
4,774,213
46,269,981
86
Annual Report 2015
Etisalat Group
87
12. Subsidiaries
12. Subsidiaries (continued)
a) Disclosures relating to subsidiaries
a) The Group’s principal subsidiaries are as follows:
Country of
incorporation
Name
Emirates Telecommunications and Marine Services FZE
UAE
Emirates Cable TV and Multimedia LLC
UAE
Etisalat International Pakistan LLC
UAE
Principal activity
Telecommunications services
Cable television services
Holds investment in Pakistan
Telecommunication Co. Ltd
Percentage
shareholding
2015
2014
100%
100%
100%
100%
90%
90%
UAE
Submarine cable activities
100%
100%
Etisalat Services Holding LLC
UAE
Infrastructure services
100%
100%
Etisalat Software Solutions (Private) Limited
India
Technology solutions
100%
100%
E-Marine PJSC
Zanzibar Telecom Limited
Canar Telecommunications Co. Limited
Tanzania
-
85%
Republic of Sudan
90%
90%
Holds investment in Emerging Market
UAE
Telecommunications Services B.V.
(Netherlands)
Afghanistan
Etisalat International Nigeria Limited
Etisalat Afghanistan
Etisalat Misr S.A.E.
Atlantique Telecom S.A.
100%
100%
100%
100%
Egypt
66%
66%
Togo
100%
100%
Etisalat Lanka (Pvt.) Limited
Sri Lanka
100%
100%
Pakistan Telecommunication Company Limited
Pakistan
Holds investment Société de
Participation dans les
Télécommunications (SPT)
23%
23%
Etisalat Investment North Africa LLC
UAE
Société de Participation dans les
Télécommunications (SPT)
Kingdom of Morocco
Etisalat Al Maghrib S.A (Maroc Telecom)
Kingdom of Morocco
Etisalat Mauritius Private Limited
On 14 May 2014, the Group completed
the acquisition of Maroc Telecom at
a net adjusted price of EUR 4.1 billion
(AED 20.9 billion), which was primarily
financed through external borrowings.
This amount includes the cash value of
the 2012 dividend, amounting to EUR
0.3 billion (AED 1.5 billion).
On 3 June 2014, the directors approved a
plan to dispose of the Group’s interest in
Zanzibar Telecom Limited (Zantel), one of
the Group’s overseas subsidiary. The disposal is in line with the Group’s strategy
to optimise its returns on investments
in the international segment. On 4 June
2015, the Group signed a Share Purchase
Agreement with Millicom International
Cellular SA (“Millicom’’) for the sale of
the Group’s 85% interest in Zantel. Under the terms of the agreement, Group
88
Annual Report 2015
Holds investment in Maroc Telecom
91.3%
100%
91.3%
100%
Information relating to subsidiaries that have non-controlling interests that are material to the Group are provided below:
Maroc Telecom
consolidated
AED'000
PTCL
consolidated
Etisalat Misr
consolidated
2015
Information relating to non-controlling interests:
Non-controlling interest (shareholding %)
Profit
Total comprehensive loss
Dividends
Non-controlling interests as at 31 December
51.6%
76.6%
34%
1,112,165
28,367
149,254
(763,259)
(370,002)
(239,802)
(1,530,466)
(338,811)
(51,585)
7,397,153
5,891,136
2,577,070
6,613,092
2,757,637
1,919,962
Summarized information relating to subsidiares:
Current assets
Non-current assets
33,217,963
17,151,841
11,062,738
Current liabilities
12,588,260
5,420,384
3,924,046
4,299,232
5,390,308
1,441,883
2014
AED'000
Information relating to non-controlling interests:
Non-controlling interest (shareholding %)
Profit
Dividends
Non-controlling interests as at 31 December
51.6%
76.6%
34%
774,968
87,358
162,138
(1,213,005)
(281,547)
-
8,710,201
6,571,582
2,716,746
Summarized information relating to subsidiaries:
Mauritius
Holds investment in Etisalat DB
Telecom Private Limited
will receive cash consideration of USD 1
and Millicom will assumethe net liabilities in the books of Zantel. In addition,
Zantel will have up to USD 32 million in
net current liabilities at closing. On 22
October 2015, the Group completed the
sale of its 85% shareholdings in Zanzibar Telecom Limited (Zantel) to Millicom
after securing all regulatory approvals from the Tanzanian Communication
Regulatory Authority and the Fair Competition Commission (Note 35).
On 4 May 2014, the Group announced
the signing of an agreement with Maroc Telecom for the sale of the Group’s
shareholdingsn in its operations in Benin, CAR, Gabon, Cote d’Ivoire, Niger
and Togo to Maroc Telecom, for a total
consideration of EUR 474 million. The
transaction was closed on 26 January
48%
48%
Current assets
Non-current assets
100%
100%
6,210,368
2,761,653
1,561,629
33,159,577
18,106,693
12,165,580
Current liabilities
10,114,183
5,752,276
3,604,457
3,364,827
5,052,799
1,573,563
2015 and has been accounted for by the
Group as a transaction under common
control.
On 1 April 2015, PTCL acquired 100%
ownership of DVCOM Data. The entity
has Wireless Local Loop (WLL) License of
1900 MHz spectrum in nine telecom regions of Pakistan.
On 12 October 2015, PTCL incorporated
a wholly owned new entity, Smart Sky
as a private Limited comany to provide
Direct-to-Home (DTH) television service
through out the country under the license from the authorities. However the
said license is yet to be auctioned by the
authorities and the entity has not yet
started commercial operations.
Etisalat Group
89
12. Subsidiaries (continued)
14. Investment in associates and joint ventures
b) Movement in non-controlling interests
a) Associates
The movement in non-controlling interests is provided below:
Name
AED’000
2014
(Restated)
AED’000
17,994,120
9,060,552
2015
As at 1 January
Total comprehensive income:
Profit for the year
1,248,162
961,460
Remeasurement of defined benefit obligations - net of tax
(42,461)
(108,642)
Exchange differences on translation of foreign operations
(1,300,678)
(618,808)
(9,288)
6,936
Other movement in equity
16,362
356
Acquisition of a subsidiary
-
8,159,944
Disposal of a subsidiary
115,450
-
(Loss)/gain on revaluation of available-for-sale financial assets
Acquisition of non-controlling interests
Repayment contribution of equity contribution
to non-controlling interests for acquisition of a subsidiary
Dividends
As at 31 December
(5,664)
132,570
(209,094)
1,791,831
(1,920,861)
(1,392,078)
15,886,048
17,994,121
13. Share of results of associates and joint ventures
Associates excluding EMTS (Note 14 b)
Joint ventures (Note 14 f)
Total
During the previous year, the Group has
reassessed its accounting treatment for
share of results of one of its associates.
Consequently, the Group has discontinued the recognition of the share of results of that associate with effect from
1 January 2013. Accordingly, no share
of losses have been offset against loans
due from associates as the investment in
associate has already been fully written
down by prior year losses. The amount
receivable towards interest on loan to
the associate of AED 817 million (2014:
AED 718 million) has been impaired dur-
ing the year. The net unrecognised share
of losses in the associate for the year
ended 31 December 2015 amounts to
AED 779 million (2014: AED 1,689 million). The cumulative net unrecognised
share of losses as at 31 December 2015
amounts to AED 3,952 million (2014:
AED 3,173 million).
During the year, Etihad Etisalat Company
(Mobily) has restated its financial results
for 2014 and prior years. This restatement has resulted due to the change in
accounting policies for the recognition
2015
AED’000
2014
(Restated)
AED’000
(327,904)
(651,109)
11,975
11,936
(315,929)
(639,173)
of revenue from certain contracts and
the change in the practice of capitalisation of property, plant and equipment
and corresponding depreciation. Accordingly, the annual consolidated financial
statements for the year ended 31 December 2014 (including comparatives)
were reissued to reflect the impact of
such restatements (refer to Note 38).
Etihad Etisalat Company ("Mobily")
Country of
incorporation
Principal activity
Percentage
shareholding
Saudi Arabia
27%
UAE
Satellite communication services
28%
Nigeria
40%
Thuraya Telecommunications Company PJSC ("Thuraya")
Emerging Markets Telecommunications
Services Limited ("EMTS Nigeria")
b) Movement in investments in associates
Mobily
All Associates
Carrying amount at 1 January
2015
AED’000
4,720,161
2014
(Restated)
AED’000
6,224,993
2015
AED’000
4,898,798
2014
(Restated)
AED’000
6,430,745
Share of results (Note 13)
(293,914)
(623,955)
(327,904)
(651,109)
-
(68,900)
-
(68,901)
4,426,247
(35,446)
(776,531)
4,720,161
(226)
4,570,668
(35,405)
(776,531)
4,898,799
Other movements
Dividends
c) Reconciliation of the above summarised financial information to the net assets of the associates
Mobily
All Associates
Net Assets
Our share in net assets of associates *
Others **
Impairment
2015
2014
(Restated)
2015
2014
(Restated)
AED’000
AED’000
AED’000
AED’000
15,229,323
16,299,163
1,968,556
4,828,843
4,181,820
4,475,587
4,526,395
4,852,860
244,427
244,574
244,273
245,939
-
-
(200,000)
(200,000)
4,426,247
4,720,161
4,570,668
4,898,799
* Our share in the net assets of associates does not include the share of results of EMTS effective from 1 January 2013 (refer note 13)
** "Others" include an amount of AED 150 million (2014: AED 150 million) relating to premium paid on rights issue in the prior years.
d) Aggregated amounts relating to associates
Mobily
All Associates
AED’000
8,219,218
2014
(Restated)
AED’000
12,236,079
2015
AED’000
10,322,709
2014
(Restated)
AED’000
13,620,360
33,254,541
33,414,430
38,946,136
39,542,307
(26,009,691)
(29,155,683)
(29,410,616)
(32,577,701)
(234,745)
(195,663)
(17,889,673)
(15,756,123)
15,229,323
16,299,163
1,968,556
4,828,843
Revenue
14,112,564
13,704,679
18,811,004
18,566,650
Loss
(1,069,514)
(1,543,114)
(3,886,080)
(6,514,093)
Total comprehensive loss
(1,069,514)
(1,543,114)
(3,886,080)
(6,514,093)
-
776,531
-
776,531
2015
Current assets
Non-current assets
Current liabilities
Net assets
Dividends received
Contingent liabilities relating to the associates are disclosed in note 32.
90
Annual Report 2015
Borrowings amounting to AED 8,247 million classified as non current liabilities in the financial statements of Mobily have been
reclassified to current liabilities in the above table, to comply with the requirements of IFRS.
Etisalat Group
91
Current assets
245,962
Non-current assets
13,610
83,112
Current liabilities
(103,136)
(107,877)
Net assets
Revenue
156,436
140,487
185,294
157,277
23,949
27,157
Profit or Telecommunications
loss
Emirates
Group Company PJSC
Notes to the consolidated financial statements for the year ended 31 December 2015
165,252
The Group has not identified any contingent liabilities or capital commitments in relation to its interest in joint ventures.
14. Investment in associates and joint ventures (continued)
15. Other Investments
e) Market value of an associate
Fair value
through Profit
and loss
AED’000
The shares of one of the Group’s associates are quoted on public stock markets and it is classified as “Level-1” fair value. The
market value of the Group’s shareholding based on the quoted prices is as follows:
2015
Etihad Etisalat Company ("Mobily")
2014
AED’000
AED’000
4,920,891
9,082,335
At 1 January 2014
Additions
Available for sale Held to maturity
AED’000
AED’000
Total
AED’000
-
1,119,847
195,585
1,315,432
937
74,124
-
75,061
49,271
80,071
-
129,342
Disposal
-
(454,292)
(3,594)
(457,886)
The Group had recognized its share of results from Mobily in its published condensed consolidated interim financial information
during the year with a lag of one quarter. However, the share of results of Mobily recognised for the year ended 31 December
2015 represents the Group’s share of results for the full year results of Mobily for 2015.
Investment revaluation
-
(56,588)
-
(56,588)
Impairment
-
(3,061)
-
(3,061)
-
(3,570)
-
(3,570)
e) Joint ventures
(5,583)
(9,150)
-
(14,733)
At 31 December 2014
Additions
44,625
747,381
191,991
983,997
Name
Country of
incorporation
Ubiquitous Telecommunications Technology LLC
UAE
Smart Technology Services DWC – LLC
Principal activity
Percentage
shareholding
Disposal
-
30,671
13,428
44,099
(7,616)
(8,793)
(2,114)
(18,523)
Installation and management of
network systems
50%
-
(181,297)
-
(181,297)
ICT Services
50%
Impairment
-
(516)
-
(516)
UAE
(3,984)
(11,438)
-
(15,422)
At 31 December 2015
33,025
576,008
203,305
812,338
f) Movement in investment in joint ventures
2015
AED’000
70,245
2014
AED’000
60,309
11,975
11,936
Dividends
(4,000)
(2,000)
78,220
70,245
2015
AED’000
245,962
2014
AED’000
165,252
13,610
83,112
Current liabilities
(103,136)
(107,877)
Net assets
Revenue
156,436
140,487
185,294
157,277
23,949
27,157
Carrying amount at 1 January
Share of results
g) Aggregated amounts relating to joint ventures
Current assets
Non-current assets
Profit or loss
The held to maturity investment represents Sukuk which is the bond structured to conform with the principles of
Islamic Sharia law. At 31 December 2015,
the market value of the investment in
Sukuk was AED 203 million (2014: AED
194 million)
16. Related party transactions
Transactions between the Company and
its subsidiaries, which are related parties,
have been eliminated on consolidation
and are not disclosed in this note. Transactions between the Group and other
related parties are disclosed below.
a)Federal Government and state controlled entities
As stated in Note 1, in accordance with
Federal Law No. 267/10 for 2009, the
Federal Government of the UAE transferred its 60% holding in the Company
to the Emirates Investment Authority
with effect from 1 January 2008, which
is ultimately controlled by the UAE Federal Government. The Group provides
telecommunication services to the Federal Government (including Ministries
and local bodies). These transactions are
at normal commercial terms. The credit
period allowed to Government customers ranges from 90 to 120 days. Trade
receivables include an amount of AED
1,231 million (2014: AED 1,073 million),
which are net of allowance for doubtful
debts of AED 125 million (2014: AED 101
million), receivable from Federal Ministries and local bodies. See Note 5 for
disclosure of the royalty payable to the
Federal Government of the UAE.
In accordance with IAS 24 (revised 2009)
Related Party Disclosures the Group has
elected not to disclose transactions with
the UAE Federal Government and other
entities over which the Federal Government exerts control, joint control or
significant influence. The nature of the
transactions that the Group has with
such related parties is the provision of
telecommunication services.
The Group has not identified any contingent liabilities or capital commitments in relation to its interest in joint ventures.
15. Other investments
Fair value
through Profit
and loss
AED’000
At 1 January 2014
Additions
Disposal
Annual Report 2015
92
Impairment
Available for sale Held to maturity
AED’000
AED’000
-
1,119,847
195,585
Total
AED’000
1,315,432
937
74,124
-
75,061
49,271
80,071
-
129,342
-
(454,292)
(3,594)
(457,886)
-
(56,588)
-
(56,588)
-
(3,061)
-
(3,061)
-
(3,570)
-
(3,570)
Etisalat Group
93
16. Related party transactions (continued)
Short-term benefits
b) Joint ventures and associates
17. Inventories
Associates
2015
AED millions
Joint Ventures
2014
AED millions
2015
AED millions
2014
AED millions
Trading transactions
Telecommunication services – sales
76.8
136.8
-
-
Telecommunication services – purchases
93.5
99.6
-
-
Management and other services
219.7
272.9
7.3
7.3
Net amount due from related parties as at 31 December
562.9
451.5
2.9
8.4
-
-
Loans to a related party
Loans due from a related party as at 31 December, net
Sales to related parties comprise of the
provision of telecommunication products and services (primarily voice traffic
and leased circuits) by the Group based
on normal commercial terms. Purchases
relate exclusively to the provision of telecommunication products and services
by associates to the Group based on
normal commercial terms.
The net amount due from related parties are unsecured and will be settled in
cash. The loans due from a related party
is subordinated to external borrowings.
The principal management and other
services provided to the Group’s associates are set out below based on agreed
contractual terms and conditions.
Short-term benefits
1,232.9
i. Etihad Etisalat Company
Pursuant to the Communications and
Information Technology Commission’s
(CITC) licensing requirements, Mobily
(then under in Company) entered into
a management agreement (“the Agreement”) with the Company as its operator
from 23 December 2004. Amounts invoiced by the Company relate to annual
management fees, fees for staff secondments and other services provided under
the Agreement. The term of the Agreement is for a period of seven years and
can be automatically renewed for successive periods of five years unless the
Company serves a 12 month notice of
termination or Mobily serves a 6 month
notice of termination prior to the expiry
of the applicable period.
2,390.2
ii. Thuraya Telecommunications Company PJSC
The Company provides a primary gateway facility to Thuraya including maintenance and support services. The Corporation receives annual income from
Thuraya in respect of these services.
Subscriber equipment
2015
AED’000
16,790
2014
AED’000
17,272
2015
AED’000
470,500
2014
AED’000
444,321
Maintenance and consumables
340,040
224,188
Obsolescence allowances
(36,451)
(43,857)
774,089
624,652
Net Inventories
2015
2014
AED’000
AED’000
Movement in obsolescence allowances
At 1 January
Net decrease in obsolescence allowances
43,857
93,374
(4,065)
(51,143)
Foreign Exchange differences
(3,341)
1,626
At 31 December
36,451
43,857
2,152,393
2,190,424
Inventories recognised as an expense during the year in respect of continuing operations
18. Trade and other receivables
2015
2014
(Restated)
AED’000
9,366,038
AED’000
9,382,221
Allowance for doubtful debts
(1,954,616)
(1,646,120)
Net trade receivables
7,411,422
7,736,101
c) Remuneration of key management
personnel
Amounts due from other telecommunication operators/carriers
6,887,638
5,310,370
The remuneration of the Board of Directors, who are the key management personnel of the Group, is set out below in
aggregate for the category specified in
IAS 24 Related Party Disclosures.
566,460
666,822
Other receivables
iii. Emerging Markets Telecommunications Services B.V.
Amounts invoiced by the Company relate to annual management fees, fees
for staff secondments, interest on loan
and other services.
2015
AED’000
16,790
2014
AED’000
17,272
2015
AED’000
470,500
2014
AED’000
444,321
340,040
224,188
Amount receivable for services rendered
Prepayments
Accrued income
1,143,078
954,840
2,420,205
2,890,512
At 31 December
18,428,803
17,558,645
Total trade and other receivables
of which current trade and other receivables
18,428,803
18,215,158
17,558,645
17,318,579
213,645
240,066
of which non-current other receivables
The Group’s normal credit terms ranges between 30 and 120 days (2014: 30 and 120 days).
17. Inventories
Subscriber equipment
Maintenance and consumables
Obsolescence allowances
Net Inventories
Movement in obsolescence allowances
At 1 January
Net decrease in obsolescence allowances
Foreign Exchange differences
Annual Report 2015
94
At 31 December
(36,451)
(43,857)
774,089
624,652
2015
2014
AED’000
AED’000
43,857
93,374
(4,065)
(51,143)
(3,341)
1,626
36,451
43,857
Etisalat Group
95
18. Trade and other receivables (continued)
Ageing of net trade receivables, including amounts due from other telecommunication operators/carriers :
Upto 60 days
61-90 days
2015
AED’000
9,923,695
2014
(Restated)
AED’000
8,905,884
576,975
622,006
90-365 days
1,915,806
1,492,935
Over one year
1,882,584
2,025,646
14,299,060
13,046,471
2015
AED’000
1,646,120
2014
AED’000
1,550,560
319,011
122,931
8,205
(13,419)
(18,720)
(13,952)
1,954,616
1,646,120
Net trade receivables
Movement in allowance for doubtful debts :
At 1 January
Net increase in allowance for doubtful debts
Foreign Exchange difference
Reclassified as held for sale (Note 35)
At 31 December
No interest is charged on the trade receivable balances. With respect to the amounts receivable from the services rendered the
Group holds AED 424 million (2014: AED 299 million) of collateral in the form of cash deposits from customers. Amounts due from
other telecommunication operators/carriers include interconnect balances with related parties.
19. Cash and cash equivalents
Maintained locally
Maintained overseas, unrestricted in use
2015
AED’000
17,746,449
2014
AED’000
15,924,323
3,487,184
2,335,947
Maintained overseas, restricted in use
275,990
291,504
21,509,623
18,551,774
(87,269)
(8,915)
Cash and bank balances from continuing operations
Less: Deposits with maturities exceeding three months from the date of deposit
21,422,354
18,542,859
(15,956,323)
(12,498,851)
5,466,031
6,044,008
Cash and cash equivalents from continuing operations
Cash and cash equivalents comprise cash on hand and short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. These are denominated primarily in UAE Dirham, with financial institutions and banks. Interest is earned on these investments at prevailing market rates. The carrying amount
of these assets approximates to their fair value.
20. Trade and other payables
2015
AED’000
2014
(Restated)
AED’000
Current
Federal royalty
5,847,678
5,444,018
Trade payables
8,207,720
9,070,849
Amounts due to other telecommunication administrators
5,534,660
4,039,455
1,554,145
1,810,398
Deferred revenue
Other payables and accruals
At 31 December
Non-current
Other payables and accruals
At 31 December
11,541,510
10,406,132
32,685,713
30,770,852
1,533,176
1,075,481
1,533,176
1,075,481
21. Borrowings
Details of the Group’s bank and other borrowings are as follows:
Carrying Value
Fair Value
Bank borrowings
Bank overdrafts
Bank loans
Other borrowings
Bonds
Loans from non controlling interest
Vendor financing
Others
2015
AED’000
2014
AED’000
2015
AED’000
2014
AED’000
3,055,377
3,441,325
2,416,452
4,966,465
3,055,377
3,511,765
2,416,452
4,909,289
15,139,036
7,803
14,901,901
8,189
14,608,777
8,584
14,164,803
8,671
271,950
389,831
271,950
366,057
62,577
52,705
63,488
56,562
21,978,068
22,735,543
21,519,941
21,921,834
560,221
22,080,162
-
570,715
22,492,549
(263,379)
22,080,162
22,229,170
Advances from non controlling interest
Total Borrowings
Borrowings from continuing operations
of which due within 12 months
of which due after 12 months
Advances from non-controlling interest
represent advances paid by the minority
shareholder of Etisalat International Pakistan LLC (EIP) towards the Group’s acquisition of its 26% stake in PTCL, net of
repayments. The amount is interest free
and is not repayable within 12 months
from the statement of financial position
date and accordingly the full amount is
carried in non-current liabilities. The fair
value of advances is not equivalent to
its carrying value as it is interest-free.
However, as the repayment dates are
variable, a fair value cannot be reasonably determined.
External borrowings of AED 1,320 million (2014: AED 2,673 million) are secured by property, plant and equipment.
During the prior year, one of the Group’s
subsidiaries had breached the covenants
on the external borrowings facility of
CFA 42,637 million (AED 290 million) .
The carrying value of the above facility as at 31 December 2014 amounted
to CFA 7,954 million (AED 54 million).
The lender was notified regarding the
breach. The lender did not request for
accelerated repayment of the loan and
the terms of the loan were not rescheduled. The loan was repayable within 12
months.
4,199,637
3,609,711
17,880,525
18,619,459
On 28 April 2014, the Group had entered
into multi-currency facilities agreement
for EUR 3.15 billion (AED 15.9 billion)
with a syndicate of local and international banks for the purpose of financing the Maroc Telecom’s acquisition.
Financing consisted of two facilities:
Tranche A was a twelve months bridge
loan amounting to EUR 2.1 billion (AED
10.6 billion) at a price of Euribor plus
45 basis points for the first six months
increased by 15 basis points in each of
the following three months. Tranche B
was a three years term loan amounting
to EUR 1.05 billion (AED 5.3 billion) at
a price of Euribor plus 87 basis points.
Both these tranches have been settled in
June 2014 following issuance of bonds
as mentioned below.
On 11 June 2014, the Group issued the
inaugural bonds under the GMTN programme. The issued bonds were denominated in US Dollars and Euros and consisted of four tranches:
On 22 May 2014, the Group had completed the listing of USD 7 billion (AED
25.7 billion) Global Medium Term Note
(GMTN) programme which will be used
to meet medium to long-term funding requirements on the Irish Stock Exchange (“ISE”). Under the programme,
Etisalat can issue one or more series of
conventional bonds in any currency and
amount up to USD 7 billion. The listed
programme was rated Aa3 by Moody’s,
AA- by Standard & Poor’s and A+ by
Fitch.
The effective date for the bonds term
was 18 June 2014. Net proceeds from the
issuance of the bonds were used for repayment of outstanding facilities of EUR
3.15 billion, as above, utilized for the acquisition of Maroc Telecom.
a. 5 years tranche: USD 900 million
with coupon rate of 2.375% per annum
b. 7 years tranche: EUR 1,200 million
c. 10 years tranche: USD 500 million
d. 12 years tranche: EUR 1,200 million with coupon rate of 2.750% per
annum
In May 2015, the Group issued an additional bonds amounting to USD 400
million under the existing USD 5 years
tranches.
Amounts due to other telecommunication administrators include interconnect balances with related parties.
Federal royalty for the year ended 31 December 2015 is to be paid as soon as the consolidated financial statements have been
approved but not later than 4 months from the year ended 31 December 2015.
96
Annual Report 2015
Etisalat Group
97
21. Borrowings (continued)
As at 31 December 2015, the total amounts in issue under this programme split by currency are USD 1.4 billion (AED 5.14 billion)
and Euro 2.4 billion (AED 9.63 billion) as follows:
Nominal Value
Fair
Value
Carrying
Value
2015
AED’000
2015
AED’000
2015
AED’000
Bonds
2.375% US dollar 900 million notes due 2019
Bonds in net investment hedge relationship
3,306,600
1,837,000
3,294,696
1,859,595
3,306,574
1,815,817
1.750% Euro 1,200 million notes due 2021
4,816,800
4,901,576
4,761,356
4,816,800
5,083,169
4,725,030
14,777,200
15,139,036
At 31 December 2015
Nominal Value
Bonds
Fair
Value
14,608,777
- 14,608,777
Carrying
Value
2014
AED’000
2014
AED’000
2014
AED’000
1,837,000
1,837,000
1,841,225
1,879,618
1,824,285
1,812,709
Carrying Value
Year of maturity
EGP
Mid Corridor +1.4%
1,318,825
1,207,849
Secured bank loan
2014-2017
EURO
EURIBOR +0.8%
-
334,650
Unsecured Share holders Loans
2015-2018
EGP
Mid corridor + 1.4%
324,748
-
2014
USD
LIBOR +4.8%
-
263,379
2015-2016
USD Mid Corridor +0.75%
379,715
-
Secured bank loan
2012-2019
USD
3M SLIBOR+4%
188,407
206,176
Secured bank loan
2014-2015
EURO
EURIBOR +4.9%
-
54,107
Secured bank loan
2014-2022
PKR
735,000
549,000
Secured bank loan
2014-2019
USD
-
720,972
Secured bank loan
2014-2019
EUR
-
545,749
Secured bank loan
2014-2016
USD
0.75%
6 month LIBOR
+.1.52%
6 month
EURIBOR+.1.4%
3 months
LIBOR+3.5%
Mid corridor + 0.75%
-
19,099
Secured bank loan
Secured bank loan
2012-2018
EGP
Secured Bank Overdrafts
2012-2020
PKR month KIBOR + 30BP
2015-2016
MAD
5.45%
2,489,855
2,080,295
2017
USD
0%
53,185
29,316
Secured Bank Loans
2017
EUR
2%
233,959
-
2013-2015
EGP
10%
8,584
8,671
0
9.69%
57,387
-
CFA
8.0%
-
44,791
5,495,221
5,283,174
5,354,400
5,685,837
5,244,635
14,382,800
14,901,901
14,164,803
Secured Bank Loans
The terms and conditions of the Group’s bank and other borrowings are as follows:
Secured bank loan
2017
2014-2017
Other borrowings
Advances from non-controlling interests
N/A
USD
Interest free
560,221
570,715
2019
USD
2.375%
1,827,933
1,824,285
Bonds
2019
USD
2.375%
1,478,641
-
Bonds
2024
USD
3.500%
1,815,817
1,812,710
Bonds
2021
EUR
1.750%
4,761,356
5,283,174
Bonds
2026
EUR
2.750%
4,725,030
5,244,633
Others
Various
Various
Various
Bonds
Total Borrowings
Borrowings from continuing operations
98
Annual Report 2015
64,256
337,447
Secured Other Financing
5,354,400
14,164,803
43,957
271,950
Fixed interest borrowings
2014
AED’000
2010-2017
Unsecured loans from
non-controlling interests
-
2015
AED’000
Unsecured Share holders Loans
Unsecured bank overdrafts
Interest rate
Variable interest borrowings
Bonds in net investment hedge relationship
At 31 December 2015
Currency
805,592
1,291,275
22,080,162
22,492,549
-
(263,379)
22,080,162
22,229,170
Etisalat Group
99
23. Payables related to investments and licenses
a) Interest rates
The weighted average interest rate paid during the year on bank and other borrowings is set out below:
2015
2014
Bank borrowings
6.0%
5.1%
Other borrowings
2.7%
2.9%
At 31 December 2015, the Group had AED 4,832 million (2014: AED 2,000 million) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
During the prior year, Euro bonds issued (refer to note 21) and cross currency swaps have been designated as net investment
hedges. There was no material ineffectiveness of these hedges recorded as at the end of the reporting period.
2015
AED’000
2014
AED’000
1,255,830
1,301,869
As at the end of the reporting period the Group has cross currency USD-EUR swaps which are designated as hedges of net investment. The fair value of the cross currency swaps are calculated by discounting the future cash flows to net present value using
appropriate market interest and prevailing foreign currency rates. The fair value of swaps is as follows:
Fair value of swaps designated as net investment hedge (Derivative financial assets)
Fair value of swaps designated as net investment hedge (Derivative financial liabilities)
The fair value of bonds designated as hedge is disclosed in note 21.
Total
AED’000
2,936,653
-
2,936,653
11,022
-
11,022
265,472
693,661
959,133
3,213,147
693,661
3,906,808
2,936,653
-
2,936,653
11,022
-
11,022
24,828
-
24,828
At 31 December 2015
Licenses
At 31 December 2014
22. Net investment hedge relationships
Effective part directly recognised in other comprehensive income
Non-current
AED’000
Investments
b) Available facilities
Current
AED’000
2015
AED’000
2014
AED’000
675,412
293,584
(1,607)
-
Investments
Licenses
Republic of Benin
161,291
936,699
1,097,990
3,133,794
936,699
4,070,493
According to the terms of the share purchase agreement between Etisalat International Pakistan LLC and the Government of Pakistan (“GOP”)
payments of AED 6,612 million (2014: AED 6,612 million) have been made to GOP with the balance of AED 2,937 million (2014: AED 2,937 million) to be paid. The amounts payable are being withheld pending completion of certain conditions in the share purchase agreement related to
the transfer of certain assets to PTCL.
All amounts payable on acquisitions are financial liabilities measured at amortised cost and are mostly denominated in either USD, AED or PKR.
24. Finance lease obligations
Present value of minimum lease
payments
Minimum lease payments
Amounts payable under finance lease
Within one year
Between 2 and 5 years
Less: future finance charges
Present value of lease obligations
2015
AED’000
2014
(Restated)
AED’000
2015
AED’000
2014
(Restated)
AED’000
7,230
7,150
7,070
6,983
11,253
18,182
10,934
17,283
18,483
25,332
18,004
24,266
(479)
(1,066)
-
-
18,004
24,266
18,004
24,266
7,070
6,983
7,070
6,983
10,934
17,283
10,934
17,283
It is the Group policy to lease certain of its plant and machinery under finance leases. For the year ended 31 December 2015, the average effective
borrowing rate was 20% (2014: 25%). The fair value of the Group’s lease obligations is approximately equal to their carrying value.
100
Annual Report 2015
Etisalat Group 101
25. Provisions
26. Provision for end of service benefits
At 1 January 2014
Additional provision during the year
Utilization of provision
Release of provision
Adjustment for change in discount rate
Asset retirement
obligations
AED’000
Other
AED’000
Total
AED’000
19,721
1,353,654
1,373,375
20,718
850,908
871,626
-
197,061
197,061
(6)
(46,511)
(46,517)
(6,025)
(243,774)
(249,799)
(549)
(1,188)
(1,737)
The liabilities recognised in the consolidated statement of financial position are:
673
-
673
(426)
(41,116)
(41,542)
At 31 December 2014 (as restated)
Included in current liabilities
34,106
2,069,034
2,103,140
1,897
1,974,507
1,976,404
Included in non-current liabilities
32,209
94,527
126,736
At 1 January 2015 (as restated)
34,106
2,069,034
2,103,140
Additional provision during the year
4,151
963,593
967,744
(2,696)
-
(2,696)
-
(769,966)
(769,966)
Release of provision
(630)
(100,659)
(101,289)
Adjustment for change in discount rate
1,315
-
1,315
Utilization of provision
8
24
32
(2,933)
(68,695)
(71,628)
At 31 December 2015
33,321
2,093,331
2,126,652
530
1,918,314
1,918,844
32,791
175,017
207,808
33,321
2,093,331
2,126,652
Included in current liabilities
Included in non-current liabilities
At 31 December 2015
Asset retirement obligations relate to certain assets held by certain Group’s overseas subsidiaries that will require restoration at
a future date that has been approximated to be equal to the end of the useful economic life of the assets. There are no expected
reimbursements for these amounts.
“Other” includes provisions relating to certain indirect tax liabilities and other regulatory related items, including provisions relating to certain Group’s overseas subsidiaries.
:
Funded Plans
Present value of defined benefit obligations
Less: Fair value of plan assets
Unfunded Plans
Present value of defined benefit obligations and other employee benefits
Total
The movement in defined benefit obligations for funded and unfunded plans is as follows:
As at 1 January
Other Adjustments
2015
2014
AED’000
AED’000
3,686,056
3,541,336
(3,266,580)
(3,089,390)
419,476
451,946
1,491,004
1,592,594
1,910,480
2,044,540
2015
AED’000
2014
AED’000
5,133,930
4,467,509
-
162,946
-
(2,276)
Service cost
151,407
146,761
Interest cost
500,671
447,896
Actuarial (loss)/gain
(654)
11,754
33,715
210,071
Benefits paid
(436,562)
(472,943)
Exchange difference
(205,447)
162,212
As at 31 December
5,177,060
5,133,930
2015
AED’000
2014
AED’000
3,089,390
2,555,736
295,745
318,868
Remeasurements
The movement in the fair value of plan assets is as follows:
As at 1 January
Return on plan assets
Contributions received
257,586
458,295
Benefits paid
(239,247)
(371,355)
Exchange difference
(136,894)
127,846
3,266,580
3,089,390
2015
AED’000
2014
AED’000
Service cost
136,238
146,766
Interest cost
135,927
54,911
(1,501)
10,739
270,664
212,416
2015
2014
2.50%
2.80%
Pakistan
9.5%- 11.5%
11.25%- 12.5%
Morocco
4%
4.25%
As at 31 December
The amount recognised in statement of profit or loss is as follows:
Others
Following are the significant assumptions used relating to the major plans
Discount rate
UAE
Average annual rate of salary
102
Annual Report 2015
UAE
Pakistan
3.5% - 4%
7% - 10%
4.0%
Etisalat Group 103
7% - 11.5%
Exchange difference
(205,447)
162,212
As at 31 December
5,177,060
5,133,930
2015
AED’000
2014
AED’000
3,089,390
2,555,736
The movement in the fair value of plan assets is as follows:
As at 1 January
Return on
plan assets
Emirates
Telecommunications
Group Company PJSC
Contributions received
Benefits paid
26.
Provision
for end of service benefits (continued)
Exchange
difference
As at 31 December
The amount recognised in statement of profit or loss is as follows:
Service cost
Interest cost
Others
295,745
318,868
257,586
458,295
(239,247)
(371,355)
(136,894)
127,846
3,266,580
3,089,390
2015
AED’000
2014
AED’000
136,238
146,766
28. Reserves
The movement in the Reserves is provided below:
135,927
54,911
As at 1 January
(1,501)
10,739
Disposal of Subsidiary (Note 35)
270,664
212,416
Transfer from retained earnings
As at 31 December
Following are the significant assumptions used relating to the major plans
2015
2.50%
2.80%
Pakistan
9.5%- 11.5%
11.25%- 12.5%
Morocco
4%
4.25%
Average annual rate of salary
UAE
3.5% - 4%
4.0%
Pakistan
7% - 10%
7% - 11.5%
Morocco
3%-5%
3%-5%
2015
AED’000
2014
AED’000
Plan assets for funded plan are comprised as follows:
2,564,547
2,469,808
Cash and cash equivalents
424,297
477,771
Investment property
Debt instruments - unquoted
284,173
292,957
Fixed assets
242
175
Other assets
747
4,555
(7,426)
(155,876)
3,266,580
3,089,390
less: liabilities
2014
Restated
AED’000
27,440,371
28,266,980
(575,277)
(844,849)
(162,993)
-
881,313
18,240
27,583,414
27,440,371
2015
AED’000
2014
Restated
AED’000
(2,734,834)
(2,209,881)
(692,291)
(524,953)
2014
Discount rate
UAE
2015
AED’000
The expense recognised in profit or loss relating to contribution plan at the rate specified in the rules of the plans amounting to
AED 132 million (2014: AED 124 million).
The movement for each type of reserves is provided below:
Translation reserve
As at 1 January
Disposal of Subsidiary (Note 36)
As at 31 December
(162,993)
-
(3,590,118)
(2,734,834)
Investment revaluation reserve
(115,419)
204,477
(162,874)
(37,582)
financial assets disposed during the year
(16,076)
(282,314)
financial assets impaired during the year
295,964
-
1,595
(115,419)
7,850,000
7,850,000
8,166,000
8,166,000
As at 1 January
Loss on revaluation
As at 31 December
Development reserve
As at 1 January and 31 December
Asset replacement reserve
As at 1 January
27. Share capital
As at 31 December
2015
AED’000
Authorised:
10,000 million (2014: 8,000 million) ordinary shares of AED 1 each
10,000,000
2014
AED’000
8,000,000
24,286
-
8,190,286
8,166,000
Statutory reserve
As at 1 January
As at 31 December
189,657
165,077
849,862
24,580
1,039,519
189,657
14,084,967
14,091,307
Issued and fully paid up:
8,696.8 million (2014: 7,906.1 million) ordinary shares of AED 1 each
8,696,754
7,906,140
At the extraordinary general meeting held on 24 March 2015, the shareholders approved the increase of the authorised share capital of the Etisalat Group (formerly known as ‘’Corporation’’) to AED 10 billion. The Company has amended the articles of association
to reflect this increase. At the ordinary assembly meeting held on 24 March 2015, the shareholders approved the issue of one bonus
shares for every ten shares held.
104
Annual Report 2015
General reserve
As at 1 January
As at 31 December
7,165
(6,340)
14,092,132
14,084,967
Etisalat Group 105
28. Reserves (continued)
29. Financial instruments (continued)
a) Development reserve, asset replacement reserve and general reserve
of Association of some of the Group’s
subsidiaries, 10% of their respective annual profits should be transferred to a
non- distributable statutory reserve. The
Company’s share of the reserve has accordingly been disclosed in the consolidated statement of changes in equity.
These reserves are all distributable reserves and comprise amounts transferred from unappropriated profit at the
discretion of the Group to hold reserve
amounts for future activities including
the issuance of bonus shares.
c) Translation reserve
Categories of financial instruments
Cumulative foreign exchange differences arising on the translation of overseas
operations are taken to the translation
reserve.
The Group’s financial assets and liabilities consist of the following:
In accordance with the UAE Federal Law
No. 2 of 2015, and the respective Articles
Loans to/due from associates and joint ventures
Trade and other receivables, excluding prepayments
Available-for-sale financial assets (including other investments held for sale)
29. Financial instruments
Fair value through Profit or loss
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the bases of recognition of income and expenses) for each class of financial asset and financial liability are disclosed in
Note 2.
Held-to-maturity investments
Capital management
:
Bank borrowings
Bonds
Other borrowings
Net funds
Total equity
The Group monitors the balance be-
106
Annual Report 2015
1,798,688
2,850,049
17,862,343
16,891,823
19,661,031
19,741,872
576,008
747,381
33,025
44,625
203,305
191,991
21,422,354
18,542,859
675,412
293,584
42,571,135
39,562,312
Trade and other payables, excluding deferred revenue
32,664,744
30,035,935
Borrowings
22,080,162
22,492,549
3,906,808
4,070,493
18,004
24,266
58,669,718
56,623,243
Financial liabilities
Other financial liabilities held at amortised cost:
The Group’s capital structure is as follows:
The capital structure of the Group consists of bonds, bank and other borrowings, finance lease obligations, cash and
bank balances and total equity comprising share capital, reserves and retained
earnings.
2014
(Restated)
AED’000
Financial assets
Loans and receivables, held at amortised cost:
The profit for the year attributable to the
equity holders of the Company which is
available for distribution after transfer
of the statutory reserve amounts to AED
7,436 million.
b) Statutory reserve
2015
AED’000
tween equity and debt financing and establishes internal limits on the maximum
amount of debt relative to earnings.
The limits are assessed, and revised as
deemed appropriate, based on various
considerations including the anticipated
funding requirements of the Group and
2015
AED’000
2014
(Restated)
AED’000
(6,567,142)
(7,325,741)
(14,608,777)
(14,164,803)
(904,243)
(1,002,005)
(18,004)
(24,266)
21,422,354
18,542,859
(675,812)
(3,973,956)
59,375,099
60,214,472
the weighted average cost of capital.
The overall objective is to maximise returns to its shareholders and benefits for
other stakeholders and to maintain an
optimal capital structure to reduce the
cost of capital.
Financial risk management objectives
The Group’s corporate finance function
monitors the domestic and international
financial markets relevant to managing
the financial risks relating to the operations of the Group. Any significant decisions about whether to invest, borrow
funds or purchase derivative financial
instruments are approved by either the
Board of Directors or the relevant authority of either the Group or of the
individual subsidiary. The Group’s risk
includes market risk, credit risk and liquidity risk.
The Group takes into consideration several factors when determining its capital structure with the aim of ensuring
sustainability of the business and maximizing the value to shareholders. The
Group monitors its cost of capital with
a goal of optimizing its capital structure.
In order to do this, the Group monitors
the financial markets and updates to
standard industry approaches for calculating weighted average cost of capital, or WACC. The Group also monitors
a net financial debt ratio to obtain and
maintain the desired credit rating over
the medium term, and with which the
Group can match the potential cash
flow generation with the alternative
uses that could arise at all times. These
general principles are refined by other
considerations and the application of
specific variables, such as country risk
in the broadest sense, or the volatility in
cash flow generation, or the applicable
tax rules, when determining the Group’s
financial structure.
Etisalat Group 107
a) Market risk
Interest rate risk
The Group’s activities expose it primarily
to the financial risks of changes in foreign currency exchange rates, interest
rates and price risks on equity investments. From time to time, the Group
will use derivative financial instruments
to hedge its exposure to currency risk.
There has been no material change to
the Group’s exposure to market risks or
the manner in which it manages and
measures the risk during the year.
Foreign currency risk
The Company’s presentation/functional
currency is United Arab Emirates Dirham
(“AED”). Foreign currency risk arises from
transactions denominated in foreign
currencies and net investments in foreign operations.
The Group has foreign currency transactional exposure to exchange rate risk as
it enters into contracts in other than the
functional currency of the entity (mainly
USD and Euro). The Group entities also
enter into contract in it’s functional currencies including Nigerian Naira, Egyptian Pounds, Pakistani Rupee, Sri Lankan
Rupee, Afghani, Tanzanian Shilling CFA
Francs and Moroccan Dirham. Etisalat
UAE also enters into contracts in USD
which is pegged to AED. Atlantique Telecom Group enters into Euros contracts
as CFA is pegged to Euro and Maroc
Telecom also enters into Euro contracts
as Moroccan Dirham is 60% pegged to
Euro. The Group enters into a variety of
derivative financial instruments to manage its exposure to interest rate and
foreign exchange rate risk, including
forward foreign exchange contracts,
interest rate swaps and cross currency
swaps.
In addition to transactional foreign currency exposure, a foreign currency exposure arises from net investmentsin
the Group entities whose functional
currency differs from the Group’s presentation currency (AED). The risk is defined as the risk of fluctuation in spot
exchange rates between the functional
currency of the net investments and the
Group’s presentation currency. This will
cause the amount of the net investment
to vary. Such a risk may have a significant impact on the Group’s consolidated
financial statements.
This translation risk does not give rise to
a cash flow exposure. Its impact arises
only from the translation of the net investment into the group’s presentation
currency. This procedure is required in
preparing the Group’s consolidated financial statements as per the applicable
IFRS.
The cross currency swaps involve the exchange of principal and floating or fixed
interest receipts in the foreign currency
in which the issued bonds are denominated, for principal and floating or fixed
interest payments in the Company’s
functional currency.
The fair value of a cross currency is determined using standard methods to
value cross currency swaps and is the estimated amount that the swap contract
can be exchanged for or settled with
under normal market conditions. The key
inputs are the yield curves, basis curves
and foreign exchange rates. In accordance with the fair value hierarchy within
IFRS 7 Financial Instruments: Disclosure,
the fair value of cross currency swaps
represent Level 2 fair values.
Foreign currency sensitivity
The following table presents the Group’s
sensitivity to a 10 per cent change in the
Dirham against the Egyptian Pound, the
Euro, the Pakistani Rupees and Moroccan Dirham.
These four currencies account for a significant portion of the impact of net
profit, which is considered to materially occur through cash and borrowings
within the Group’s financial statements
in respect of subsidiaries and associates whose functional currency is not
the Dirham. The impact has been determined by assuming a weakening in the
foreign currency exchange of 10% upon
closing foreign exchange rates. A positive number indicates an increase in the
net cash and borrowings balance if the
AED/USD were to strengthen against the
foreign currency.
The Group is exposed to interest rate risk
as entities in the Group borrow funds at
both fixed and floating interest rates.
The Group monitors the market interest
rates in comparison to its current borrowing rates and determines whether
or not it believes it should take action
related to the current interest rates. This
includes a consideration of the current
cost of borrowing, the projected future
interest rates, the cost and availability
of derivate financial instruments that
could be used to alter the nature of the
interest and the term of the debt and, if
applicable, the period for which the interest rate is currently fixed.
Interest rate sensitivity
Based on the borrowings outstanding at
31 December 2015, if interest rates had
been 2% higher or lower during the year
and all other variables were held constant, the Group’s net profit and equity
would have decreased or increased by
AED 70 million (2014: AED 87 million).
This impact is primarily attributable to
the Group’s exposure to interest rates on
its variable rate borrowings.
The Group’s sensitivity to interest rate
has reduced significantly during the year
due to the fixed coupon bonds issued in
June 2014.
Other price risk
The Group is exposed to equity price
risks arising from its equity investments.
Equity investments are held for strategic
rather than trading purposes. The Group
does not actively trade these investments. See Note 15 for further details on
the carrying value of these investments.
If equity price had been 5% higher or
lower:
• profit for the year ended 31 December
2015 would increase/decrease by AED 19
million (2014: 15 million) due to loss/
profit realised on impairment/disposal of
investments in available-for-sale shares
• other comprehensive income for the
year ended 31 December 2015 would increase/decrease by AED 15 million (2014:
increase/decrease by AED 28 million) as
a result of the changes in fair value of
available-for-sale shares.
Group's bank balance
Investment in UAE
Investment outside of the UAE
b) Credit risk management
Credit risk refers to the risk that the
counterparty will default on its contractual obligations resulting in financial
loss to the Group and arises principally
from the Group’s bank balances and
trade and other receivables. The Group
has adopted a policy of only dealing
with creditworthy counterparties and
obtaining sufficient collateral, where
appropriate, as a means of mitigating
the risk of financial loss from defaults.
The Group’s exposure and the credit ratings of its counterparties are monitored
and the aggregate value of transactions
concluded is spread amongst approved
counterparties.
For its surplus cash investments, the
Group considers various factors in determining with which banks and /corporate to invest its money including
but not limited to the financial health,
Government ownership (if any), the rating of the bank by rating agencies The
assessment of the banks and the amount
to be invested in each bank is assessed
annually or when there are significant
changes in the marketplace.
2015
2014
83%
17%
86%
14%
Bank rating for Investment in UAE
2015
Increase in profit/(loss) and increase/(decrease) in equity
Egyptian pounds
Euros
Pakistani rupees
MAD
108
Annual Report 2015
2015
AED’000
2014
AED’000
41,507
112,074
970,526
1,164,144
(1,802)
12,187
195,230
156,556
By Fitch
By Moody's
By S&P
The Group’s trade receivables consist of a
large number of customers, spread across
diverse industries and geographical areas.
Ongoing credit evaluation is performed
on the financial condition of accounts
AED
5.2 billion
4.1 billion
3.0 billion
Rating
NA
NA
Baa1
A2
BBB+
receivable and, where appropriate, collateral is received from customers usually
in the form of a cash deposit The carrying amount of financial assets recorded
in the consolidated financial statements,
2014
AED
7.0 billion
1.7 billion
-
Rating
A+
A
NA
NA
NA
net of any allowances for losses, represents the Group’s maximum exposure to
credit risk without taking account of the
value of any collateral obtained.
Etisalat Group 109
d) Fair value measurement of financial assets and liabilities (continued)
c) Liquidity risk management
Ultimate responsibility for liquidity risk
management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the
management of the Group’s short, medium
and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial
assets and liabilities. The details of the
available undrawn facilities that the Group
has at its disposal at 31 December 2015 to
further reduce liquidity risk is included in
Note 21. The majority of the Group’s financial liabilities as detailed in the consolidated statement of financial position are due
within one year.
Financial liabilities are repayable as follows:
Trade and other
payables, excluding
deferred revenue
Borrowings
31,132,905
883,124
527,319
121,396
32,664,744
4,199,637
2,246,354
4,130,718
11,503,453
22,080,162
3,213,147
206,250
248,293
239,118
3,906,808
7,070
10,934
18,004
38,552,759
3,346,662
4,906,330
11,863,967
58,669,718
On demand or within one year
29,172,100
3,952,158
3,133,794
6,983
36,265,035
In the second year
1,533,229
1,034,817
936,699
17,283
3,522,028
AED’000
On demand or within one year
In the second year
In the third to fifth years inclusive
After the fifth year
As At 31 December 2015
In the third to fifth years inclusive
After the fifth year
As At 31 December 2014 (as restated)
Payables related to
Finance lease
investments and
obligations
licenses
licenses
Total
12,451
4,881,624
-
-
4,894,075
336
12,623,950
-
-
12,624,286
30,718,116
22,492,549
24,266
57,305,424
4,070,493
The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. The table includes both interest and principal cash flows.
Fair value hierarchy as at 31 December 2015
d) Fair value measurement of financial
Level 1
AED’000
Level 2
AED’000
Level 3
AED’000
Total
AED’000
-
675,412
-
675,412
578,556
-
233,784
812,340
578,556
675,412
233,784
1,487,752
Borrowings
-
21,978,068
-
21,978,068
Derivative financial liabilities
-
1,607
-
1,607
-
21,979,675
-
21,979,675
assets and liabilities
Financial assets
Derivative financial assets
Other Investments
Fair value hierarchy as at 31 December 2014
Level 1
Level 2
Level 3
Total
AED’000
AED’000
AED’000
AED’000
293,584
-
293,584
230,840
983,997
293,584
230,840
1,277,581
22,735,543
-
22,735,543
-
-
-
22,735,543
Level 1 classification comprises financial
instruments where fair value is determined by unadjusted quoted prices in
active markets for identical assets or liabilities. Level 2 classification comprises
items where fair value is determined
from inputs other than quoted prices
that are observable for the asset or liability, either directly or indirectly. Level
3 classification comprises unobservable
inputs.
Some of the Group’s financial assets and
liabilities are measured at fair value or
for which fair values are disclosed. Information on how these fair values are
determined are provided below:
• Borrowings are measured and recorded
in the consolidated statement of financial position at amortised cost and their
fair values are disclosed in Note 21.
• Derivative financial instrument fair
values are present values determined
from future cash flows discounted at
rates derived from market sourced data.
• Listed securities and Sukuk are classified as available for sale financial assets
and held to maturity investments respectively and their fair values are derived
from observable quoted market prices
for similar items. These represent Level
1 fair values. Unquoted equity securities
represent Level 3 fair values. Details are
included in note 15 “Other investments”.
The carrying amounts of the other financial assets and liabilities recorded in the
consolidated financial statements approximate their fair values
The fair value of the Group’s investment
property for an amount of AED 72.2 million (2014: AED 70.4 million) has been
determined based on a Sales Comparable
approach and with reference to observable latest market prices for similar commercial properties in the neighbourhood.
Accordingly, the fair value is classified
as level 3 of the fair value hierarchy. The
significant unobservable inputs used in
the fair value measurement are average
market rates used in the Sales Comparable method. Significantly lower market
rates in isolation would result in lower
fair value measurement.
parison with quoted prices of entities
similar to the investees. The significant
unobservable inputs include forecasted
earnings per share and adjusted market
multiple. Any significant change in these
inputs would change the fair value of
these investments
There have been no transfers between
Level 2 and 3 during the year.
The fair values of the financial assets and
financial liabilities included in the level 2
and level 3 categories above have been
determined in accordance with generally
accepted pricing models based on cash
flows discounted at rates derived from
market sourced data.
The fair value of other investments
amounting to AED 230 million are classified as Level 3 because the investments
are not listed and there are no recent
arm’s length transactions in the shares.
The valuation technique applied is market comparison technique based on com-
Reconciliation of Level 3
As at 1 January
Additions
Total
AED’000
230,840
29,991
Foreign exchange difference
(11,440)
Disposal
(16,409)
Other movement
As at 31 December
802
233,784
Financial assets
Derivative financial assets
Other Investments
753,157
753,157
-
Borrowings
-
Derivative financial liabilities
-
110
Annual Report 2015
22,735,543
Etisalat Group
111
30. Acquisition of Maroc Telecom
30. Acquisition of Maroc Telecom (continued)
On 4 November 2013, the Group signed
a share purchase agreement for the
acquisition of Vivendi’s stake in Maroc
Telecom. The acquition was in line with
the group’s strategy to reach out to new
customers and markets.
On 28 April 2014, the Group entered into a
multi-currency facilities agreement with
a syndicate of local and international
banks for the purpose of financing the
acquisition.
On 14 May 2014, the Group completed
the acquisition at a net adjusted price
of EUR 4.1 billion (AED 20.9 billion)
which was primarily financed through
external borrowings. This amount
included the cash value of the 2012
dividend, amounting to EUR 0.3 billion
(AED 1.5 billion). The transaction was
effected through the acquisition by
Etisalat International North Africa LLC
(“EINA”) of Vivendi’s 100% shareholding
in Société de Participation dans les
Télécommunications (“SPT”) established
in the Kingdom of Morocco, which
directly holds 53% of the shares in
Maroc Telecom. The effective interests in
the capital of EINA are Etisalat (91.33%)
and Abu Dhabi Fund for Development
(8.67%).
The application of acquisition accounting
under IFRS 3 requires that the total
purchase price to be allocated to the fair
value of the assets acquired and liabilities
assumed based on their fair values
at the acquisition date, with amount
exceeding the fair values being recorded
as goodwill. Accordingly, on 14th May
2014, the assets and liabilities of Maroc
Telecom have been appraised, based on
third party valuations, for inclusion in
the consolidated statement of financial
position.
The purchase price allocation process
(PPA) requires an analysis of acquired fixed
assets, licenses, customer relationships,
brands, contractual commitments and
contingencies to identify and record
the fair values of all assets acquired and
liabilities assumed. In valuing acquired
assets and liabilities assumed, fair
values were based on but not limited
to: future expected discounted cash
flows for customer relationships, current
replacement cost for similar capacity and
obsolescence for certain fixed assets,
comparable market rates for real estate
and appropriate discount rates and
growth rates.
The following table summarises the fair
values of the assets acquired, liabilities
assumed, related deferred taxes and
goodwill as of the acquisition date
further to the purchase price allocation
process (PPA).
Fair values based
on purchase price
allocation
AED’000
Intangible assets
10,729,232
14,886,958
Investments
Inventory
Deferred tax assets
129,342
191,419
2,261,948
(8,664,357)
Provision
(197,061)
Obligations under finance leases
(22,450)
Bank loans
(2,543,565)
(3,637,635)
Net identifiable assets acquired
17,321,184
Non-controlling interests in the acquiree
(8,159,944)
11,761,694
20,922,934
Net cash inflow arising on acquisition:
Cash and cash equivalents acquired
Net cash outflow on acquisition of Maroc Telecom
Consideration paid
Less: cash and cash equivalents acquired
Following the acquisition in May 2014,
the Group has received a dividend of AED
1,249.1 million (MAD 2,795.6 million)
business in North and Western Africa;
and
Goodwill resulting from the acquisition
has been assigned to Maroc Telecom and
Maroc Telecom’s international subsidiaries
as separate CGUs. Acquisition accounting
allows for recognition of deferred tax
liabilities on acquired intangibles (other
than goodwill) which is expected to
be reflected as a tax benefit on the
Group’s future consolidated statement of
profit or loss in proportion to and over
the amortization period of the related
intangible asset. There is no deferred tax
liability recorded for fair value adjustment
relating to land as this is not depreciated.
• Long-term ability to retain mobile
customers and maintain market share
in its key markets;
Goodwill arose in the acquisition of
Maroc Telecom because the cost of the
combination included:
Acquisition related costs amounting to
AED 621 million have been excluded
from the consideration transferred and
have been recognised as an expense in
profit and loss of the prior year.
• Limited competition of the fixed line
2,261,948
2014
AED’000
• Ability to participate in the
consolidation of telecommunications
industry in North Africa and Western
Africa; and
• Trained and skilled workforce.
These benefits are not recognised
separately from Goodwill because that
do not meet recognition criteria for
identifiable intangible assets.
31. Commitments
a) Capital commitments
The Group has approved future capital projects and investments commitments to the extent of AED 5,105 million (2014: AED 7,188
million).
b) Operating lease commitments
i) The Group as lessee
46,955
(162,946)
Fair value of investment
The receivable acquired in these
transactions are treated at their fair value
and had a gross contractual amount of
AED 5,167 million. Their best estimate
at acquisition date of the contractual
cash flows not expected to be collected
amounted to AED 2,777 million.
from Maroc Telecom relating to the year
2013.
4,303,344
Goodwill
Included in the profit for the prior year
was AED 796 million attributable to the
business generated by Maroc Telecom
Group. Revenue for the prior year includes
AED 7,934 million in respect of Maroc
Telecom. Had this business combination
been effected at 1 January 2014, the
restated revenue of the Group would
have been AED 52,826 million and the
restated profit for the prior year would
have been AED 9,674 million.
Minimum lease payments under operating leases recognised
as an expense in the year (Note 5)
2015
AED’000
2014
AED’000
304,917
225,035
At the end of the reporting period, the Group had outstanding commitments for future minimum lease payments under noncancellable operating leases, which fall due as follows:
Within one year
2015
AED’000
297,436
2014
AED’000
272,814
Between 2 to 5 years
1,104,972
1,040,687
After 5 years
1,019,504
1,159,391
2,421,912
2,472,892
Operating lease payments represent rentals payable by the Group for certain of its office and retail properties. Leases are negotiated
for an average term of five to ten years.
20,922,933
(2,261,948)
18,660,985
112
Annual Report 2015
Etisalat Group 113
31. Commitments (continued)
32. Contingent liabilities (continued)
c) Other contingent liabilities (continued)
b) Operating lease commitments (continued)
ii) The Group as lessor
Property rental income earned during the year was AED 16 million (2014: AED 11 million). All of the properties held have committed
tenants for the next 5 years.
At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:
2015
AED’000
2014
AED’000
Within one year
7,551
8,269
Between 2 to 5 years
7,400
8,224
14,951
16,493
32. Contingent liabilities
a) Bank guarantees
i) Performance bonds and guarantees in relation to contracts
Corporation Overseas investments
ii) Promissory notes and letter of credit
b) Foreign exchange regulations
On 23 July 2011, Etisalat DB Telecom Pvt
Limited (“Etisalat DB”) received a show
cause notice from the Directorate of
Enforcement (the ED) of India alleging
certain breaches of the Foreign Exchange
Management Act 1999 (FEMA), by
Etisalar DB and its Directors (at the time
of the alleged breach). Etisalat DB and
its Directors have filed their response(s)
to the notice and the cases of each of
the notices have been part heard by the
ED. Should there be an adverse finding
by the ED, the penalty for a breach of
FEMA carries a theoretical exposure in
excess of US$ 1.0 billion; however, there
is no clarity on how such a fine would be
apportioned between the respondents.
The proceedings of the case are ongoing
as at end of the reporting period.
c) Other contingent liabilities
I) The Group and its associates are
disputing certain charges from the
governmental and telecom regulatory
agencies and telecom operators in the
UAE and certain other jurisdictions but
do not expect any material adverse effect
on the Group’s financial position and
results from resolution of these.
114
Annual Report 2015
2015
2014
AED million
1,403.1
1,298.5
-
AED million
949.0
771.3
39.4
ii) With regard to the appeals filed by
PTCL, a subsidiary of the Group, before the
Honourable Supreme Court of Pakistan
against the orders passed by various High
Courts, the Honourable Supreme Court of
Pakistan dismissed such appeals through
announcement of the earlier-reserved
order on 12th June, 2015. Based on the
directives contained in the said order and
the pertinent legal provisions, the Group is
evaluating the extent of its responsibility
vis-à-vis such order. PTCL, the Pakistan
Telecommunication Employees Trust
(“PTET”) and the Federal Government of
Pakistan have filed Review Petitions before
the Apex Court in this regard. Under the
circumstances, the Group is of the view
that it is not possible at this stage to
ascertain the financial obligations, if any,
flowing from the Honourable Supreme
Court decision which could be disclosed in
these consolidated financial statements.
In the meanwhile, PTET has issued notices
to prospective beneficiaries for the
determination of their entitlements. A
full bench of the Honourable Supreme
Court headed by the Chief Justice has
started conducting hearings into this
Review Petition but no decision has been
made to date.
Etihad Company (Mobily) has received
several penalty resolutions from the
Communication Information Technology
Commission (CITC’s) Violation Committee
which Mobily has opposed in accordance
with the Telecom regulations.
iii)
Mobily received additional claims from
The
Group’s
associate,
Etisalat
Multiple lawsuits were filed by Mobily
against CITC at the Board of Grievances
to oppose such resolutions of the CITC’s
committee in accordance with the
Telecom regulations. The status of these
lawsuits as at 31 December 2015 was as
follows:
• There are 347 lawsuits filed by Mobily
against CITC amounting to Saudi Riyals
632 million (AED 618 million);
• The Board of Grievance has issued 170
preliminary verdicts in favor of the Group
voiding 170 resolutions of the CITC’s
violation committee with total penalties
amounting to Saudi Riyals 390 million
(AED 382 miilion); and
• Some of these preliminary verdicts
have become conclusive (after they were
affirmed by the appeal court) resulting
in cancellation of penalties with a total
amount of Saudi Riyals 155 million (AED
152 million).
CITC during 2015 for which it has provided
additional Saudi Riyals 171 million (AED
167 million) during the year ended 31
December 2015 believing that to be an
appropriate estimate of the amounts that
it may ultimately have to pay to settle
such claims.
Furthermore, subsequent to 31 December
2014, there were 166 lawsuits filed by a
number of shareholders against Mobily
before the Committee for the Resolutions
of Security Disputes and which are
currently being adjudicated by the said
committee. Mobily received final verdict
on 41 and preliminary judgments on
90 of these cases in its favour. Mobily
management and Directors believe that
the likelihood of additional material
liabilities arising from these lawsuits is
not probable.
In this context, the Group is aware that
24 shareholder claims have been made
against the 2013/2014 members of the
Board of Mobily and others, and these
have been filed with the CRSD . These
proceedings are in their infancy which
does not at this stage allow to qualify
their legal standing or quantify the
potential liability, if any, arising there
under.
Further, the Group notes that the Saudi
Capital Market Authority (“CMA”) has
launched claims against members of
the 2013/2014 Board of Mobily. These
proceedings are also in their infancy
which does not at this stage allow to
qualify their legal standing or quantify
the potential liability, if any, arising there
under.
iv) The Company is required to pay the
UAE Telecommunication Regulatory
Authority (TRA) 1% of its revenues
annually as regulatory expenses towards
ICT contributions.
The cumulative difference between
the amount being claimed by TRA and
the amount settled by the Company is
approximately around AED 1,309 million
as of 31 December 2015 (2014: AED 1,008
million).
v) In the prior years, Atlantique Telecom
SA, a subsidiary of the Group, has been
engaged in arbitration proceedings
against SARCI Sarl (“SARCI”), a minority
shareholder of one of its subsidiaries,
Telecel Benin. SARCI was seeking
compensation for alleged damages
caused to Telecel Benin during the period
from 2002 till 2007.
In November 2015, the Arbitral Tribunal
has ordered Atlantique Telecom SA to
pay damages to SARCI amounting to
approximately EURO 413 million (AED
1.6 billion). Certain local courts have
considered that this decision can be
enforced and Sarci has started execution
proceedings in Togo, Benin and Central
African Republic, however no exequatur
has been granted so far in Benin and
are challenged in other jurisdictions. .
Two previous arbitration proceedings on
the same issue had been cancelled upon
Atlantique Telecom’s request in 2008 and
2013. Atlantique Telecom has initiated
legal proceedings in order to obtain the
cancellation of the award of this third
arbitration process and the suspension of
any execution thereof. The proceedings
of the case are ongoing as at end of the
reporting period.
33. Dividends
Amounts recognised as distribution to equity holders:
AED’000
31 December 2014
Final dividend for the year ended 31 December 2013 of AED 0.35 per share
2,765,953
Interim dividend for the year ended 31 December 2014 of AED 0.35 per share
2,765,951
5,531,904
31 December 2015
Final dividend for the year ended 31 December 2014 of AED 0.35 per share
2,765,954
Interim dividend for the year ended 31 December 2015 of AED 0.40 per share
3,477,198
6,243,152
A final dividend of AED 0.35 per share was declared by the Board of Directors on 25 February 2015, bringing the total dividend
to AED 0.70 per share for the year ended 31 December 2014.
An interim dividend of AED 0.40 per share was declared by the Board of Directors on 28 July 2015 for the year ended 31 December 2015.
A final dividend of AED 0.40 per share was declared by the Board of Directors on 9 March 2016, bringing the total dividend to
AED 0.80 per share for the year ended 31 December 2015.
Etisalat Group 115
34. Earnings per share
35. Disposal Group held for sale/ Discontinued operations (continued)
Earnings (AED'000)
Earnings for the purposes of basic earnings per share being the profit
attributable to the equity holders of the Company
2015
2014
(Restated)
8,262,756
8,601,086
At 31 December 2015 the disposal group comprised the following assets and liabilities:
Number of shares ('000)
8,696,754
8,696,754
Earnings per share
AED 0.99
Inventories
The weighted average number of shares for the prior year was calculated by taking into consideration the bonus shares issued in
2015. The Group does not have potentially dilutive shares and accordingly, diluted earnings per share equals to basic earnings per
share.
35. Disposal Group held for sale/
Discontinued operations
Zantel will have up to USD 32 million
in net current liabilities at closing. On
22 October 2015, the Group completed
the sale of its 85% shareholdings in
Zantel to Millicom after securing all
regulatory approvals from the Tanzanian
Communication Regulatory Authority
and the Fair Competition Commission.
The calculation of the profit or loss on
disposal, are disclosed in note 36.
35.2 Plan to dispose one of it’s
subsidiary
During the year, the directors approved
a plan to dispose of the Group’s interest
in one of it’s subsidiary. The disposal
is in line with the Group’s strategy to
optimise its returns on investments in
Revenue
Operating expenses
Operating losses
Finance costs
Loss before tax
Taxation
Gain on disposal of operation including a cumulative exchange
gain reclassified from foreign translation reserve to profit or loss
Loss for the year from discontinued operations
Annual Report 2015
Liabilities classified as held for sale
Note
116
44,896
73,617
74,075
119,221
255,245
Other investments
AED 0.95
Basic and diluted
On 3 June 2014, the directors approved
a plan to dispose of the Group’s interest
in Zanzibar Telecom Limited (Zantel),
one of the Group’s overseas subsidiary.
The disposal is in line with the Group’s
strategy to optimise its returns on
investments in the international segment.
Further, on 4 June 2015, the Group
signed a Share Purchase Agreement
with Millicom International Cellular SA
(“Millicom’’) for the sale of the Group’s
85% interest in Zantel. Under the
terms of the agreement, the Group will
receive cash consideration of USD 1 and
Millicom will assume the net liabilities
in the books of Zantel. In addition,
-
Goodwill
Weighted average number of ordinary shares for the purposes of basic earnings per share
35.1 Disposal of Zanzibar Telecom
Limited (‘’Zantel’’)
AED’000
2014
(Restated)
AED’000
2015
36
the international segment. The Group
is currently in negotiation with some
potential buyers.
The results of operations included in the
profit for the year from discontinued
operations are set out below:
35.3 Analysis of loss for the year from
discontinued operations
The combined results of the discontinued
operations included in the profit for the
year are set out below. The comparative
loss and cash flows from discontinued
operations have been re-presented to
include those operations classified as
discontinued in the current year.
2014
(Restated)
AED’000
AED’000
466,397
548,249
(700,929)
(639,202)
(234,532)
(90,953)
(24,817)
10,317
(9,190)
(19,234)
(268,539)
(99,870)
(7,821)
(14,792)
(276,360)
(114,662)
39,029
-
(237,331)
(114,662)
3,570
11,374
330,861
134,682
87,269
8,915
612,230
532,757
2015
2014
(Restated)
AED’000
AED’000
288,455
239,130
-
263,379
Borrowings
-
2,276
2,697
-
Liabilities associated with assets classified as held for sale
291,152
504,785
Net assets classified as held for sale
321,078
27,972
Cash flows from discontinued operations
2015
AED’000
2014
AED’000
49,605
24,861
Provision
Net cash inflows from operating activities
Net cash outflows from investing activities
(20,742)
(309)
Net cash outflows from financing activities
(9,909)
(89,055)
Net cash inflows / (outflows)
18,954
(64,503)
-
-
Cumulative income or expense recognised in other comprehensive income
2015
1,262
There are no cumulative income or expenses recognised in other comprehensive income relating to the disposal group.
Etisalat Group 117
36. Disposal of a Subsidiary
37. Other significant event
On 22 October 2015, the Group disposed of Zanzibar Telecom Limited (Zantel) for a consideration of US$ 1.
In February 2012, the Supreme Court of
India cancelled all of Etisalat DB Telecom
Private Limited’s (“Etisalat DB”) licenses,
removing Etisalat DB’s ability to operate
its current mobile telecommunications
business. Following the cancellation, the
Board of Etisalat DB resolved to shut
down its telecommunications network
in India and gave the appropriate
notices to the Indian authorities.
Furthermore, the resignation of the
directors of the Etisalat DB appointed
by the majority shareholders without
replacement adversely affected the
ability of the Etisalat DB’s Board of
Directors to take decisions. Subsequently,
Etisalat Mauritius Limited (which is
wholly owned by the Company) filed
proceedings on 12 March 2012 for the
just and equitable winding up of the
Etisalat DB (the Etisalat DB Petition).
Etisalat DB Petition was admitted by the
Company Court by its judgment dated 18
November 2013. However, the decision
was appealed to the Appeal Court by
one of the Company’s shareholders but
dismissed by an order dated 8 April 2014.
The decision of the Appeal Court was
further appealed to the Supreme Court
36.1 Consideration received
2015
AED’000
Total Consideration received
-
36.2 Analysis of assets and liabilities over which control was lost
2015
Assets
AED’000
Goodwill
44,896
60,385
169,833
Other investments
2,890
Inventories
6,799
83,542
12,149
380,494
2015
Liabilities
AED’000
227,973
Borrowings
211,950
but finally dismissed by an order dated
14 July 2014. The Company Petition was
finally admitted by the Bombay High
Court on 22 February 2015. The Official
Liquidator has been appointed by the
Bombay High Court and the reports of
the Official Liquidator continue to be
heard as at the end of the reporting
period.
38. Restatement and reclassification
of comparative figures
2014 (including comparatives) were
reissued to reflect the impact of
such restatements, and the Group’s
consolidated financial statements for
the year ended 31 December 2014 have
been restated.
Also, other reclassifications/adjustments
were made to the prior year reported
figures to conform with current year
presentation.
On 27 June 2015, Mobily (an associate of
Etisalat Group) made an announcement
on Saudi Stock Exchange (“Tadawul”)
regarding the restatement of its
financial results for 2014 and prior
years. This restatement has resulted due
to the change in accounting policies
for the recognition of revenue from
certain contracts and the change in the
practice of capitalisation of property,
plant and equipment and corresponding
depreciation. Accordingly, the annual
consolidated financial statements of
Mobily for the year ended 31 December
1,748
441,671
Net liabilities
36.3 Gain on disposal of subsidiary
61,177
2015
AED’000
Consideration received
Other cost
Net liabilities disposed of
Non controlling Interest
Cumulative exchange gain in respect of the net assets of the subsidiary
reclassified from equity to profit or loss on loss of control of subsidiary
Gain on disposal
118
Annual Report 2015
(69,691)
61,177
(115,450)
162,993
39,029
Etisalat Group 119
(1,736,511)
223
-
-
(1,736,288)
Profit before tax
11,125,163
(18,238)
(181,225)
(83,167)
10,842,533
Taxation
(1,153,576)
14,792
8,905
(35,446)
(1,165,325)
Profit for the year from
continuing operations
9,971,587
(3,446)
(172,320)
(118,613)
9,677,208
3,446
-
-
(114,662)
38. Restatement and reclassification of comparative figures (continued)
38. Restatement and reclassification of comparative figures (continued)
9,853,479
-
(172,320)
(118,613)
9,562,546
(118,613)
Others
(118,613)
AED '000
8,601,086
961,460
As
restated
9,562,546
AED '000
(104,345)(113,838)
48,508,398
4,969,044
(31,705,838)
As previously
reported
AED '000
Adj for a
subsidiary
classified as
held for sale
AED '000
Mobily
Restatement
AED '000
Others
AED '000
As restated
AED '000
Consolidated statement of profit
or loss for the year ended
31 December 2014
Revenue
48,766,875
(258,477)
-
-
48,508,398
Operating expenses
(31,832,583)
240,583
-
(113,838)
(31,705,838)
(931,963)
-
-
-
(931,963)
(461,065)
-
(178,108)
-
(639,173)
Operating profit before
federal royalty
15,541,264
(17,894)
(178,108)
(113,838)
15,231,424
Federal royalty
(5,333,084)
-
(3,117)
30,671
(5,305,530)
Operating profit
10,208,180
(17,894)
(181,225)
(83,167)
9,925,894
Share of results of associates
and joint ventures
2,653,494
(567)
-
-
(1,736,511)
223
-
-
(1,736,288)
Profit before tax
11,125,163
(18,238)
(181,225)
(83,167)
10,842,533
Taxation
(1,153,576)
14,792
8,905
(35,446)
(1,165,325)
Profit for the year from
continuing operations
9,971,587
(3,446)
(172,320)
(118,613)
9,677,208
(118,108)
2,652,927
8,892,019
As previously
961,460
reported
9,853,479
AED '000
Consolidated statement of
Consolidated
statement
of profit
financial
position
as
or
loss
for
the
year
ended
at 31 December 2014
31 December 2014
Investments
in associates
Revenue
and joint ventures
Operating expenses
Liabilities directly associated
with the assets classified as
Sharefor
ofsale
results of associates
held
and joint ventures
Adj for a
subsidiary
classified as
held for sale
AED '000
(172,320)
Mobily
Restatement
(172,320)
AED '000
48,766,875
5,822,453
(31,832,583)
(258,477)240,583
(749,064)-
(931,963)
-
-
-
(931,963)
1,126,517
(461,065)
17,376,549
--
(178,108)-
(621,732)
(57,970)-
504,785
(639,173)
17,318,579
Operating
profit before
Other
receivables
- non current
federal
royalty
803,828
15,541,264
4,740,292
(17,894)-
(178,108)
(37,453)
(563,762)
(113,838)-
240,066
15,231,424
4,702,839
Trade
other payables
Federaland
royalty
Provision
Operating profit
30,988,248
(5,333,084)
1,862,566
10,208,180
-
(30,670)
30,671
113,838
(83,167)
30,770,852
(5,305,530)
1,976,404
9,925,894
Non-controlling
interests
Finance and other
income
Reserves
Retained earnings
Profit before tax
18,650,688
2,653,494
26,852,704
(1,736,511)
7,517,339
11,125,163
(17,894)(567)
223
(18,238)
(186,726)
(3,117)
(181,225)-(524,885)
(181,225)
(656,568)587,667
(118,613)
(83,167)
17,994,120
2,652,927
27,440,371
(1,736,288)
6,873,841
10,842,533
(1,153,576)
14,792
8,905
(35,446)
(1,165,325)
9,971,587
(3,446)
(172,320)
(118,613)
9,677,208
7,062,009
(118,108)
1,749,839
3,446
-
(570,956)
(28,548)
-
6,491,053
(114,662)
1,721,291
Taxation
financial
Profit forposition
the yearas
from
at
31 December
2013
continuing
operations
Investments in associates
and joint ventures
(118,108)
3,446
-
-
(114,662)
9,853,479
-
(172,320)
(118,613)
9,562,546
Trade
other
payables
for the
year
Profit and
Retained
earnings to:
Profit attributable
21,164,411
9,853,479
4,359,024
--
(189,843)
(172,320)
(352,565)
(118,613)-
20,974,568
9,562,546
4,006,459
8,892,019
-
(172,320)
8,601,086
8,892,019
-
(172,320)
961,460
9,853,479
-
(172,320)
961,460
9,562,546
961,460
9,853,479
-
(172,320)
(118,613)
-
8,601,086
(118,613)
-
(118,613)
961,460
9,562,546
(749,064)
(104,345)
4,969,044
-
(621,732)
504,785
(118,613)
financial position as
at 31 December 2014
and joint ventures
held for sale
Other receivables - non current
Provision
Annual Report 2015
120Reserves
Retained earnings
financial position as
at 31 December 2014
5,822,453
1,126,517
-
-
(749,064)
-
(104,345)
(621,732)
4,969,044
504,785
17,376,549
-
-
(57,970)
17,318,579
803,828
-
-
(563,762)
240,066
4,740,292
-
(37,453)
-
4,702,839
30,988,248
-
(186,726)
(30,670)
30,770,852
and joint ventures
held for sale
Other receivables - non current
Provision
5,822,453
1,126,517
-
-
17,376,549
-
-
(57,970)
17,318,579
803,828
-
-
(563,762)
240,066
4,740,292
-
(37,453)
-
4,702,839
30,988,248
-
(186,726)
(30,670)
30,770,852
1,862,566
-
-
113,838
1,976,404
1,862,566
-
-
113,838
1,976,404
18,650,688
-
-
(656,568)
17,994,120
18,650,688
-
-
(656,568)
26,852,704
-
-
587,667
27,440,371
Reserves
26,852,704
-
-
17,994,120
Group
121
27,440,371
7,517,339
-
(524,885)
(118,613)
6,873,841
7,517,339
-
(524,885)
(118,613)
6,873,841
Retained earnings
Etisalat
587,667
Notice of General Shareholders Meeting
The Board of Directors of Emirates Telecommunications Group
Company PJSC –Etisalat Group- has the pleasure to invite the
esteemed shareholders to attend the Annual General Assembly
Meeting to be held at 4:30 p.m. on Sunday 27th March 2016 at
Etisalat Group’s Head Office building located at the intersection
of Shiekh Zayed II Street and Sheikh Rashid bin Saeed Al
Maktoum Road in Abu Dhabi, where the following meeting
agenda will be discussed:
1. To hear and approve the report of the Board of Directors
on the Company’s activities and its financial position for
the financial year ended 31st December 2015.
2. To hear and approve the External Auditors’ report for the
financial year ended 31st December 2015.
3. To discuss and approve the Company’s consolidated
statements of financial position and profit & loss for
4. To consider the Board of Directors’ recommendations on
the distribution of dividends in the amount of 40 fils
per share for the second half of the year 2015, bringing
the full dividend paid out for the financial year ended
31st December 2015 to 80 fils per share (80% of share
nominal value).
5. To absolve the Members of the Board of Directors of
liability in respect of the financial year ended 31st
December 2015.
6. To absolve the External Auditors of liability in respect of
7. To appoint the External Auditors for the year 2016 and to
determine their fees.
8. To approve the payment of the remunerations of the
Members of the Board of Directors for the financial year
ended 31st December 2015.
Notes:
1. Each shareholder is entitled to attend or to delegate
a proxy who is not a Board Member to attend at the
Annual General Assembly Meeting on his/her behalf by
virtue of a written special authorization made pursuant
to the delegation form attached with the invitation
dispatched by mail. All delegation forms shall be
submitted to the Securities Department of the National
Bank of Abu Dhabi, P.O. Box 6865-Abu Dhabi, latest by
23rd March 2016. Only original delegation forms will be
accepted. Proxy holders representing the shareholders
who are countable in quorum of the Annual General
Assembly Meeting (except for Government Shareholder)
may not represent, in this capacity, more than 5% of the
Company’s share capital. Minors and those who have
no legal capacity shall be represented by their legal
representatives.
122
Annual Report 2015
2. Natural shareholders should submit original passport or
UAE I.D or Khulasat Al Qaid. The corporate shareholders
shall submit official documents issued by competent
authorities to prove the identity and nationality of their
owners.
3. The corporate shareholder may delegate one of its
representatives or management members by virtue of a
resolution passed by its Board of Directors (or whoever
carries out the duties of the Board of Directors) to
represent him in the General Assembly Meeting.
4. Only the holders of the Company’s shares as on Thursday,
24th March 2016 shall be entitled to vote in the Annual
General Assembly Meeting.
5. Notwithstanding item 4 above and for the purposes
of voting in the General Assembly, the votes of the
Associated Persons (as defined in Article 1 of Etisalat’s
Articles of Association “AoA”) shall be counted to the
extent that they do not reach 5% of the ordinary shares
represented in the meeting.
6. The restricted shares owned by foreign shareholders
(categories of shareholders not mentioned in Article 7
of AoA) shall not be counted for the quorum nor shall
their holders be eligible for voting or participating in
the deliberations.
7. The owners of the shares as on Wednesday, 6th April
2016, shall be entitled to shares’ dividends.
8. The shareholders can review the Company’s financial
statements and Governance Report on the website of
Abu Dhabi Securities Exchange (ADX).
9. The convention of the General Assembly meeting shall
only be valid if attended by Shareholders representing,
in person or by proxy, at least 66% of the Company’s
ordinary shares. If the quorum is not achieved at the first
meeting, a second meeting for General Assembly should
be held on Sunday, 3rd April 2016, in the same time and
venue. The postponed meeting shall be considered duly
held regardless of the number of attendees.
10.Attendance record shall be closed upon announcing the
quorum of the meeting and no shareholder or proxy
may register his attendance in the meeting, and neither
his votes nor views shall be counted for in respect of the
matters addressed during the meeting.
11. The Shareholders should update their own contacts and
addresses at ADX.
www.etisalat.com
124
Annual Report 2015

Etisalat Annual Report 2015

Transcription

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