mtn syria interim condensed financial statements ... · annual financial statements, and should be...

MTN SYRIA

INTERIM CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

30 June 2019

MTN Syria

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS As 30 June 2019

6

1 CORPORATE INFORMATION

MTN Syria (the "Company") is a public shareholding company registered and incorporated in the Syrian Arab

Republic and offers a range of voice and data cellular communication services. The Company is 72.98% owned

subsidiary of Investcom Mobile Communication Ltd. The Company operates in Syria, and its registered address

is Daria, Damascus Suburbs - Syria.

The ultimate parent company of Investcom Mobile Communication Ltd. is MTN Group Limited incorporated

and operating in Johannesburg, South Africa.

On 12 February 2001, Investcom Global Ltd (the "Contractor") and The Syrian Telecommunication Company

of the Syrian Arab Republic (STC) (formerly the Syrian Telecommunication Establishment) (the

“Management”) signed a Build - Operate - Transfer (BOT) Contract number 10/A under which the Contractor

undertakes to deliver and install the equipment required for building cellular communication network "GSM",

enabling the Company to put the project into operation and investment before 14 February 2001.

On 10 July 2014, an agreement was reached to provide a cellular telecommunication license in Syria and to

terminate the Build – Operate – Transfer (BOT) Contract number 10/A between STC, Invescom Global Ltd. and

MTN Syria. Accordingly, the termination agreement was signed on 30 October 2014. The license agreement

and termination agreement of BOT contract number 10/A was approved by the Council of Ministers in the Syrian

Arab Republic by decision No.20730/1 dated 31 December 2014.

On 1 January 2015, MTN Syria started operating under the license granted by the Syrian Telecommunications

Regulatory Authority (SyTRA) (as a representative of the Syrian government). The license is valid from 1

January 2015 to 31 December 2034. The license gives the Company the right to build, install, own, operate,

manage and earn revenues through operations and provide licensed services using the public cellular

telecommunication network (GSM). In addition, the frequency license gives the Company the right to

exclusively use allocated microwave frequency bands to operate its mobile network and provide related services.

According to the license granted by SyTRA, MTN Syria (the licensee) paid license fees amounting to Syrian

Pounds 25,000,000,000 during August 2014 and January 27015. The Company will also pay to the Syrian

Government through SyTRA revenue shares over the license period of 20 years as follows:

50% of revenues subject to revenue sharing form the date of the license commencement on 1 January 2015 to

31 December 2015.

30% of revenues subject to revenue sharing for the years 2016 and 2017.

20% of revenues subject to revenue sharing for the remaining years from 2018 to 2034.

In accordance with the decision of the Board of Directors of the Damascus Securities Exchange No. / 1237 /

dated 13 January 2019, the final approval for the listing of MTN shares in the Damascus Securities Exchange

has been issued, The Company’s shares are listed on the Damascus Securities Exchange starting from 19

February 2019.

MTN Syria


7

2 BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES

2.1 Basis of preparation

The interim condensed financial statements for the six-month period ended 30 June 2019 have been prepared in

accordance with IAS 34 Interim Financial Reporting.

The company have been prepared the financial statements as at 31 December 2018 in accordance with the

accounting policies adopted by the Company due to postponement the implementation of the IFRS 9 in

accordance with the requirements of the Accounting and Auditing Board.

Starting 1 January 2019, the Company implemented IFRS 9 and IFRS 16 for the first time, and decided to resume

the preparation of its financial statements in accordance with International Financial Reporting Standards and

restating the financial statements as a result. The Company has also presented the statement of financial position

as at 1 January 2018, as IFRS 9 was adopted retrospectively for the first time.

The interim condensed financial statements do not include all the information and disclosures required in the

annual financial statements, and should be read in conjunction with the Company’s annual financial statements

as at 31 December 2018. Results for the six-month period ended 30 June 2019 are not necessarily indicative of

the expected results for the financial year ending 31 December 2019.

The interim condensed financial statements are presented in Syrian Pounds (SP), which is the functional currency

of the Company.

2.2 Changes to accounting policies and interpretations

New and amended standards and interpretations

- The Company applied for the first time certain amendments to the standards and interpretations, which are

effective starting 1 January 2019.

- Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on

the interim condensed financial statements of the Company.

IFRS 9 "Financial Instruments"

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual

periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial

instruments: classification and measurement; impairment; and hedge accounting.

Based on the decision of the Accounting and Auditing Board at its 1st meeting of 2018, the Syrian Securities and

Exchange Commission issued Circular No. 13 dated 25 February 2018, which included the postponement of the

application of IFRS 9. Accordingly, the Company has adopted IFRS 9 for the first time from 1 January 2019

retroactively.

The impact of the adoption of IFRS 9 as at 1 January 2018 has been recognised in retained earnings. The standard

eliminates the use of the IAS 39 incurred loss impairment model approach, uses the revised hedge accounting

framework, and the revised guidance on the classification and measurement requirements.

Impairment

The adoption of IFRS 9 has fundamentally changed the Company’s accounting for impairment losses for

financial assets by replacing IAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL)

approach.

The Company has applied the simplified method of the Standard to record expected credit losses on all debt

instruments and to calculate expected credit losses over the entire life of the debt instruments. The Company has

prepared a study based on the historical experience of the credit loss taking into account the future factors of

debtors and the economic environment.

MTN Syria


8

2 BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES (continued)

2.2 Changes to accounting policies and interpretations (continued)

IFRS 9 "Financial Instruments" (continued)

The effect of adopting IFRS 9 is, as follows:

Impact on the statement of financial position (increase/ (decrease)) as at 1 January 2018:

As at 1 January

2018

Syrian pounds

Assets

Accounts receivable (13,025,659)

Total current assets (13,025,659)

Total assets (13,025,659)

Equity and liabilities

Equity (13,025,659)

Accumulated retained earnings (13,025,659)

Total equity (13,025,659)

Impact on the statement of financial position (increase/ (decrease)) as at 31 December 2018:

31 December 2018

(before adjustment)

Restatement 31 December 2018

(restated)

Syrian pounds Syrian pounds Syrian pounds

Assets

Current Assets

Accounts receivable 3,875,518,279 (13,025,659) 3,862,492,620

Total current assets 35,191,526,483 (13,025,659) 35,178,500,824

Total assets 146,152,936,288 (13,025,659) 146,139,910,629

Equity and liabilities

Equity

Accumulated retained earnings 6,135,463,935 (13,025,659) 6,122,438,276

Total equity 10,734,159,249 (13,025,659) 10,721,133,590

Total equity and liabilities 146,152,936,288 (13,025,659) 146,139,910,629

There is no material impact on the statement of cash flows and earnings per share.

MTN Syria


9



IFRS 16 Leases

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15

Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of

a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of

leases and requires lessees to account for all leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged under IAS 17. Lessors will continue to classify

leases as either operating or finance leases using similar principles as in IAS 17 and indicating two types of

lease: finance lease and operating lease.

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial

application of 1 January 2019. Under this method, the standard is applied retrospectively with the cumulative

effect of initially applying the standard recognised at the date of initial application. The Company elected to use

the transition practical expedient allowing the standard to be applied only to contracts that were previously

identified as leases applying IAS 17 and IFRIC 4 at the date of initial application.

a) Nature of the effect of adoption of IFRS 16

The effect of adoption IFRS 16 as at 1 January 2019 (increase/(decrease)) is as follows:

Syrian pounds

Assets

Right-of-use assets 15,010,489,587

Other current assets (675,151,802)

Current liabilities

Lease liabilities (3,352,646,928)

Non-current liabilities

Lease liabilities (10,982,690,857)

Total effect on equity -

The weighted average incremental borrowing rate in the date of initial application was 10.5%

The Company has lease contracts for various items of buildings, offices, network sites and information

transmission systems. Before the adoption of IFRS 16, the Company classified each of its leases (as lessee) at

the inception date as operating lease. In an operating lease, the leased property was not capitalized and the lease

payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Any

prepaid rent and accrued rent were recognised as prepayments and liabilities, respectively.

Upon adoption of IFRS 16, the Company applied a single recognition and measurement approach for all leases,

except for short-term leases and leases of low-value assets. The standard provides specific transition

requirements and practical expedients, which has been applied by the Company. The Company recognised right-

of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term

leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the

carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at

the date of initial application. In some leases, the right-of-use assets were recognised based on the amount equal

to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease

liabilities were recognised based on the present value of the remaining lease payments, discounted using the

incremental borrowing rate at the date of initial application.

The Company has elected to apply the following practical expedient:

- Apply one discount rate on a portfolio of leases with reasonably similar characteristics.

- Exclude direct costs from measuring the right-of-use assets at the date of initial application.

- Use hindsight, such as in determining the lease term if the contract contains options to extend or terminate

the lease.

- Exclude short-term leases which end within 12 months from the date of initial application.

MTN Syria


10



IFRS 16 Leases (continued)

b) Summary of new accounting policies

The Company accounting policy under IFRS 16 is as follows:

At the commencement date, the Company recognizes a right-of-use asset representing the Company right to use

the underlying asset and a lease liability representing the Company obligation to make lease payments.

At commencement date, the right-of-use asset is initially measured at cost (based on the initial amount of the

lease liability adjusted for any lease payments made at or before the commencement date less any lease

incentives received, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the

underlying asset or to restore the underlying asset or the site on which it is located, as per lease terms).

After the commencement date, the right-of-use asset is measured using the cost model (cost less any accumulated

depreciation and any accumulated impairment losses and adjusted for any remeasurement of the related lease

liability).

At commencement date, the lease liability is measured at the present value of the lease payments that are not

paid at the commencement date, discounted using the interest rate implicit in the lease, if that rate can be readily

determined; otherwise the Company incremental borrowing rate is used instead.

After the commencement date, the lease liability is measured by:

- Increasing the carrying amount to reflect interest on the lease liability.

- Reducing the carrying amount to reflect the lease payments made.

- Remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect revised in

substance fixed lease payments. The amount of the remeasurement of the lease liability is recorded as an

adjustment to the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to

zero and there is a further reduction in the measurement of the lease liability, then any remaining amount of

the remeasurement is recognized in profit or loss.

The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities

for short-term leases that have a lease term of 12 months or less. The lease payments associated with these leases

is recognized as an expense on a straight-line basis over the lease term.

- IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects

the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor

does it specifically include requirements relating to interest and penalties associated with uncertain tax

treatments. The Interpretation specifically addresses the following:

Whether an entity considers uncertain tax treatments separately

The assumptions an entity makes about the examination of tax treatments by taxation authorities

How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and

tax rates

How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or

more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to

be followed. This interpretations has no impact on the interim condensed financial statements of the Company.

MTN Syria


11



- Amendments to IFRS 9: Prepayment Features with Negative Compensation Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive

income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal

amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for

that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless

of an event or circumstance that causes the early termination of the contract and irrespective of which party pays

or receives reasonable compensation for the early termination of the contract. These amendments had no impact

on the interim condensed financial statements of the Company.

- Amendments to IAS 19: Plan Amendment, Curtailment or Settlement The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs

during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement

occurs during the annual reporting period, an entity is required to determine the current service cost for the

remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions

used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the

plan assets after that event. An entity is also required to determine the net interest for the remainder of the period

after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the

benefits offered under the plan and the plan assets after that event, and the discount rate used to remeasure that

net defined benefit liability (asset).

These amendments had no impact on the interim condensed financial statements of the Company. As it did not

have any plan amendments, curtailments, or settlements during the period.

- Amendments to IAS 28: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to

which the equity method is not applied but that, in substance, form part of the net investment in the associate or

joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss

model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the

associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net

investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint

Ventures. These amendments had no impact on the interim condensed financial statements of the Company.

Annual Improvements 2015-2017 Cycle

These improvements include:

- IFRS 3 Business Combinations

- IFRS 11 Joint Arrangements

- IAS 12 Income Taxes

- IAS 23 Borrowing Costs

MTN Syria


12


2.3 Significant accounting judgments, estimates and assumptions

The preparation of the Company’s interim condensed financial statements requires management to make

judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and

liabilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about the

assumptions and estimates could result in outcomes that could require a material adjustment to the carrying

amount of the asset or liability affected in the future.

The key estimates are listed below:

Going concern

The Company's management has made an assessment of the Company's ability to continue as a going concern.

Despite the current events that the Syrian Arab Republic is experiencing and the inherently uncertain future

outcomes of these events, the Company's management is satisfied that the Company has the adequate resources

to continue in business for the foreseeable future. Furthermore, the management is not aware of any material

uncertainties that may cast significant doubt on the Company’s ability to continue as going concern. Therefore,

the financial statements continue to be prepared on a going concern basis.

Revenue from contracts with customers

The Company applied the following judgements that significantly affect the determination of the amount and

timing of revenue from contracts with customers:

- Identifying performance obligations in a bundled sale

- Determining the stand alone price for each performance obligation separately

- Allocate the total of transaction price to all performance obligation referred to in these bundled

- In addition to determining the timing of fulfilment of each performance obligation

Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount,

which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation

is based on available data from binding sale transactions in arm’s length transaction of similar assets or

observable market price less incremental costs for disposing of the asset.

Impairment of inventories

Inventories are held at the lower of cost and net realizable value. When inventories become old or obsolete, an

estimate is made of their net realizable value. For individually significant amounts this estimation is performed

on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are

assessed collectively and a provision is applied according to the inventory type and the degree of ageing or

obsolescence, based on anticipated selling prices. Differences in the actual amounts realized and the amounts

expected in the future will be recognized in the interim statement of comprehensive income.

Provision for expected credit losses of trade receivables

The Company uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on

days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography,

product type, customer type and rating, and coverage by letters of credit and other forms of credit insurance).

The provision matrix is initially based on the Company’s historical observed default rates. The Company will

calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance,

if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which

can lead to an increased number of defaults in the sector, the historical default rates are adjusted. At every

reporting date, the historical observed default rates are updated and changes in the forward-looking estimates

are analysed.

The assessment of the correlation between historical observed default rates, forecast economic conditions and

ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast

economic conditions. The Company’s historical credit loss experience and forecast of economic conditions may

also not be representative of customer’s actual default in the future.

MTN Syria


13

3 REVENUE FROM CONRACTS WITH CUSTOMERS

For the six-month period ended 30 June

2018 2019

(Unaudited) (Unaudited)

Syrian Pounds Syrian Pounds

21,896,983,463 20,965,912,420 Prepaid Lines

7,164,788,912 7,863,771,611 Postpaid Lines

6,802,304,666 12,126,237,149 3G revenues

402,200,441 366,414,992 Visitors roaming revenues

166,727,344 170,760,150 Other services revenues

36,433,004,826 41,493,096,322

Timing of revenue recognition

3,998,316 4,512,600 3G modems and internet routers transferred at a point in time

36,429,006,510 41,488,583,722 Services transferred over time

36,433,004,826 41,493,096,322

4 SYRIAN GOVERNMENT/STC SHARE OF REVENUES

On 1 January 2015, MTN Syria started operating under the granted license. Accordingly, the Company will pay to the Syrian

Government through SyTRA its revenue share over the period of the license.

The revenue share for the year 2019 is 20% (2018: 20%). In addition, the Company has to pay the Syrian Government an

annual fee of 1.5% from the revenue subject to revenue sharing, which comprise of: annual license fees, use of telecom

infrastructure, and contribution to the comprehensive services fees.

The table below shows the revenues subject to revenue sharing and the Syrian Government’s share from these revenues based

on the revenue share percentage:


2018 2019

(Unaudited)

(Unaudited)


Syrian

government

share

Revenues subject

to revenue

sharing

Syrian

government

share

Revenues

subject to

revenue sharing

Revenue subject to 20% + 1.5%

annual fees

4,563,093,095 21,223,688,816 4,379,515,495 20,369,839,512 Prepaid Lines

1,533,489,437 7,132,509,010 1,670,572,743 7,770,105,781 Postpaid Lines

1,462,330,584 6,801,537,601 2,612,003,266 12,148,852,400 3G revenues

85,282,942 396,664,842 77,799,980 361,860,372 Visitors roaming revenues

7,644,196,058 35,554,400,269 8,739,891,484 40,650,658,065

55,395,943 175,860,136 - -

Revenue subject to 30% + 1.5%

annual fees

7,699,592,001 35,730,260,405 8,739,891,484 40,650,658,065

MTN Syria


14

4 SYRIAN GOVERNMENT/STC SHARE OF REVENUES (continued)

The breakdown of the interconnect revenues with the Syrian Telecommunication Company are as follows:


2018

2019

(Unaudited)

(Unaudited)

Syrian Pounds

Syrian Pounds

Interconnect

Fees Interconnect

Revenues Interconnect

Fees Interconnect

Revenues

443,410,915 443,410,915 488,827,849 488,827,849 Prepaid Lines

64,542,941 64,542,941 58,785,523 58,785,523 Postpaid Lines

3,587,610 3,587,610 4,554,624 4,554,624 Visitors roaming revenues

511,541,466 511,541,466 552,167,996 552,167,996

5 OPERATING EXPENSES

For the six-month period ended 30

June

2018 2019



655,202,918 675,074,873 Dealer costs and other related expenses

7,265,251,239 10,865,928,255 Depreciation expense of network equipment (note 6)

- 615,277,263

Depreciation expense of the right-of-use frequencies, microwave links

and light and dark fiber optics and network sites (note 8)

757,838,369 757,838,369 License fees amortization and amortization of frequency license (note 7)

511,541,466 552,167,996 Interconnection costs with STC (note 4)

1,301,862,316 1,097,832,214 Microwave links, protection fees and other infrastructure costs

2,883,250,309 2,517,521,205 Network maintenance

749,224,454 378,637,646 Sites’ rents

2,941,537,095 3,100,892,270 Other sites’ costs

181,892,057 176,525,666 Roaming costs

94,553,257 265,618,190 Prepaid cards’ costs

480,257,330 886,147,409 Added value services costs

153,601,594 153,158,037 Other operating charges

58,903,782 6,976,487 3G service costs

18,034,916,186 22,049,595,880

MTN Syria


15

6 PROPERTY AND EQUIPMENT

Movement of property and equipment during the six-month period ended 30 June 2019 is as follows:

(*) This amount includes the cost of purchasing the land set to build the Company’s headquarter in Yafoor area.

(**) Capital work in progress represents the cost of equipment, motor vehicles, office furniture, and office fixtures purchased from foreign suppliers and their ownership has

been transferred to the Company during the period. However, custom clearance procedures have not been finalized by the end of the period.

- Property and equipment include fully depreciated assets at a total cost of Syrian Pounds 48,446,141,583 which are still used by the Company in its operating activities

at 30 June 2019 (30 June 2018: Syrian Pounds 40,789,017,846).

- Property and equipment include assets at a total cost of Syrian Pounds 6,318,936,824 which are not used by the Company as of 30 June 2019 and expected to be installed

and used within 2019 (30 June 2018: Syrian Pounds 12,417,902,696).

- Part of the projects under construction that consists of building the Company’s headquarter in Yafoor area and purchasing of network equipment and software licenses

have been financed by specific loans and facilities obtained from local banks. The amount of borrowing costs capitalised during the six-month period ended 30 June

2019 was Syrian pounds 212,090,131 (during the six-month period ended 30 June 2018: Syrian pounds 128,443,974). The interest rates used to determine and calculate

the capitalised borrowing costs are 10.5%, 11%, 12% and 6% which are the interest rates of the bank facilities granted to the Company.

Lands(*)

Network

equipment

Office

equipment Equipment Motor vehicles Office furniture

Capital work in

progress(**) Total

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2019 1,470,669,626 144,016,146,894 10,969,732,669 1,938,610,296 201,284,771 313,413,823 5,957,284,730 164,867,142,809

Additions - 8,865,916,119 229,153,499 25,020,329 - 4,504,351 502,103,580 9,626,697,878

Reclassification (note7) - - - - - - (379,336,466) (379,336,466)

Disposals - (261,284,051) (6,121,912) - - (6,800) - (267,412,763)

Transfers 73,273,474 2,997,794,429 166,997,863 24,819,244 - 9,755,420 (3,272,640,430) -

At 30 June 2019 1,543,943,100 155,618,573,391 11,359,762,119 1,988,449,869 201,284,771 327,666,794 2,807,411,414 173,847,091,458

Depreciation

At 1 January 2019 - 72,156,709,477 7,909,094,765 1,077,436,630 188,253,816 212,641,704 - 81,544,136,392

Depreciation charge for

the period -

10,865,928,255 758,433,527 121,937,067 3,553,551 13,674,242 - 11,763,526,642

Disposals - (211,862,146) (6,121,912) - - (6,800) - (217,990,858)

At 30 June 2019 - 82,810,775,586 8,661,406,380 1,199,373,697 191,807,367 226,309,146 - 93,089,672,176

Net Book Value

At 30 June 2019

(unaudited) 1,543,943,100

72,807,797,805 2,698,355,739 789,076,172 9,477,404 101,357,648 2,807,411,414 80,757,419,282

MTN Syria


16

6 PROPERTY AND EQUIPMENT (continued)

The movement of property and equipment during the year ended 31 December 2018 is as follows:

Lands

Network

equipment

Office

equipment Equipment Motor vehicles Office furniture

Capital work in

progress) Total

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2018 - 110,913,251,818 9,410,397,097 1,355,920,484 201,284,771 238,072,878 16,563,313,756 138,682,240,804

Additions 270,669,626 21,527,925,854 641,466,262 272,839,912 - 48,375,070 4,936,103,979 27,697,380,703

Reclassification (note 7) - - - - - - (1,322,026,518) (1,322,026,518)

Disposals - (177,256,788) (92,000) (11,965,960) - (1,137,432) - (190,452,180)

Transfers 1,200,000,000 11,752,226,010 917,961,310 321,815,860 - 28,103,307 (14,220,106,487) -

At 31 December 2018 1,470,669,626 144,016,146,894 10,969,732,669 1,938,610,296 201,284,771 313,413,823 5,957,284,730 164,867,142,809

Depreciation

At 1 January 2018 - 56,006,421,148 6,169,489,815 905,515,719 181,087,816 195,205,726 - 63,457,720,224

Depreciation charge

for the year -

16,310,351,675

1,739,696,950

183,320,932

7,166,000

18,557,893

-

18,259,093,450

Disposals - (160,063,346) (92,000) (11,400,021) - (1,121,915) - (172,677,282)

At 31 December 2018 - 72,156,709,477 7,909,094,765 1,077,436,630 188,253,816 212,641,704 - 81,544,136,392

Net Book Value

At 31 December 2018 1,470,669,626 71,859,437,417 3,060,637,904 861,173,666 13,030,955 100,772,119 5,957,284,730 83,323,006,417

MTN Syria


17

6 PROPERTY AND EQUIPMENT (continued)

Movement of property and equipment during the six-month period ended 30 June 2018 is as follows:

Network

equipment

Office

equipment

Equipment

Motor vehicles

Office

furniture

Capital work in

progress

Total

Syrian Pounds

Syrian

Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2018 110,913,251,818 9,410,397,097

1,355,920,484 201,284,771 238,072,878 16,563,313,756 138,682,240,804

Additions 2,686,975,140 51,481,950 49,763,138 - 13,399,500 498,312,600 3,299,932,328

Reclass (note 7) - - - - - (910,886,101) (910,886,101)

Disposals (1,305,230) - (11,965,960) - (446,546) - (13,717,736)

Transfers 11,726,323,762 359,171,190 77,062,682 - 21,915,099 (12,184,472,733) -

At 30 June 2018 125,325,245,490 9,821,050,237 1,470,780,344 201,284,771 272,940,931 3,966,267,522 141,057,569,295

Depreciation

At 1 January 2018 56,006,421,148 6,169,489,815 905,515,719 181,087,816 195,205,726 - 63,457,720,224

Depreciation charge for the

period

7,265,251,239

845,487,590

74,417,630

3,553,551

7,540,907

-

8,196,250,917

Disposals (1,304,412) - (11,400,021) - (431,029) - (13,135,462)

At 30 June 2018 63,270,367,975 7,014,977,405 968,533,328 184,641,367 202,315,604 - 71,640,835,679

Net Book Value

At 30 June 2018 (unaudited) 62,054,877,515 2,806,072,832 502,247,016 16,643,404 70,625,327 3,966,267,522 69,416,733,616

Depreciation charges of property and equipment are allocated in the interim statement of comprehensive income as follows:

30 June 2018 30 June 2019



7,265,251,239 10,865,928,255 Expenses allocated to operating expenses (note 5)

930,999,678 897,598,387 Expenses allocated to administrative expenses

8,196,250,917 11,763,526,642

MTN Syria


18

7 INTANGIBLE ASSETS

The movement of intangible assets during the six-month period ended 30 June 2019 is as follows:

Total Software licenses Frequency license License

Syrian Pounds Syrian Pounds (**) Syrian Pounds Syrian Pounds

Cost

38,390,258,334 8,284,258,334 5,106,000,000 25,000,000,000 Balance at 1 January 2019 (*)

199,097,052 199,097,052 - - Additions

379,336,466 379,336,466 - - Reclassification (note 6)

38,968,691,852 8,862,691,852 5,106,000,000 25,000,000,000 Balance at 30 June 2019

Amortization

10,751,854,946 5,097,161,890 654,693,056 5,000,000,000 Balance at 1 January 2019

1,563,779,326 805,940,957 137,975,355 619,863,014 Amortization charge for the period

12,315,634,272 5,903,102,847 792,668,411 5,619,863,014 Balance at 30 June 2019

Net Book Value

26,653,057,580 2,959,589,005 4,313,331,589 19,380,136,986 At 30 June 2019 (unaudited)

(*) Intangible assets include fully amortized assets at a total cost of Syrian Pounds 3,590,616,748 which are being used by the Company in its operating activities at 30 June

2019 (30 June 2018: Syrian Pounds 3,543,144,928).

(**) During the second quarter, the company decided to amend the accounting treatment for the updates of some of software licenses by considering them as operating

expenses instead of capitalizing them. The amount of amortization related to them for the three-month ended 31 March 2019 amounted to Syrian pounds 527,226,774.

MTN Syria


19

7 INTANGIBLE ASSETS (continued)

The movement of intangible assets during the year ended 31 December 2018 is as follows:

Total Software

Licenses

Frequency

License

License

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

36,002,924,144 5,896,924,144 5,106,000,000 25,000,000,000 Balance at 1 January 2018

1,523,876,420 1,523,876,420 - - Additions

1,322,026,518 1,322,026,518 - - Reclassification (note 6)

(458,568,748) (458,568,748) - - Disposals

38,390,258,334 8,284,258,334 5,106,000,000 25,000,000,000 Balance at 31 December 2018

Amortization


2,808,218,201 1,279,980,607 278,237,594 1,250,000,000 Amortization charge for the year

(458,568,748) (458,568,748) - - Disposals

10,751,854,946 5,097,161,890 654,693,056 5,000,000,000 Balance at 31 December 2018

Net Book Value

27,638,403,388 3,187,096,444 4,451,306,944 20,000,000,000 At 31 December 2018

MTN Syria


20

7 INTANGIBLE ASSETS (continued)

The movement of intangible assets during the six-month period ended 30 June 2018 is as follows:

Total

Software licenses

Frequency license

License

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

36,002,924,144 5,896,924,144 5,106,000,000 25,000,000,000 Balance at 1 January 2018

170,322,692 170,322,692 - - Additions

910,886,101 910,886,101 - - Reclass (note 6)

37,084,132,937 6,978,132,937 5,106,000,000 25,000,000,000 Balance at 30 June 2018

Amortization


1,348,188,222 590,349,853 137,975,355 619,863,014 Amortization charge for the period

9,750,393,715 4,866,099,884 514,430,817 4,369,863,014 Balance at 30 June 2018

Net Book Value

27,333,739,222 2,112,033,053 4,591,569,183 20,630,136,986 At 30 June 2018 (unaudited)

Amortization charges of intangible assets are allocated in the interim statement of comprehensive income as follows:

30 June 2018 30 June 2019



757,838,369 757,838,369 Expenses allocated to operating expenses (note 5)

590,349,853 805,940,957 Expenses allocated to administrative expenses

1,348,188,222 1,563,779,326

MTN Syria


21

8 RIGHT-OF-USE ASSETS

The carrying amount of the right to use assets and lease liabilities and movement during the period is as follows:

Depreciation charges of right-of-use assets are allocated in the interim statement of comprehensive income as follows:

30 June 2019

(Unaudited)

Syrian Pounds

615,277,263 Expenses allocated to operating expenses (note 5)

302,552,346 Expenses allocated to administrative expenses

917,829,609

9 DUE TO/FROM THE SYRIAN GOVERNMENT (SYTRA) AND STC

DUE FROM/TO THE SYRIAN GOVERNMENT (SYTRA)

31 December 2018

(Audited) 30 June 2019

(Unaudited)


(2,763,923,311) (2,399,772,169) Due to the Syrian Government

2,264,606,916 2,808,729,383 Prepayments to the Syrian Government

(499,316,395) 408,957,214

The balance due to the Syrian Government include its share of revenues which is 20% (2018: 20%) of revenues subject

to revenue sharing for May and June 2019.

The prepayment to the Syrian Government represents its share from the estimated monthly revenue share which is paid

during the first week of each month. The difference between the estimated and actual figures will be settled immediately

after the actual figures are provided by the Company within two months from the month under settlement.

Lease liabilities Right-of-use assets

Total Frequencies,

microwave

linkes and

light and dark

fiber optics

Network sites buildings and

offices

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

14,335,337,785 15,010,489,587 8,993,185,628 3,504,714,206 2,512,589,753 Balance as at 1 January 2019

370,132,870 370,132,870 - 305,695,895 64,436,975 Additions

- (917,829,609) (282,860,544) (332,416,719) (302,552,346) Depreciation expense

700,363,914 - - - - Interest expense

(2,008,067,821) - - - - Payments

13,397,766,748 848,792,462,14 8,710,325,084 382,993,477,3 382,474,274,2 Balance as at 30 June 2019

MTN Syria


22

9 DUE TO/FROM THE SYRIAN GOVERNMENT (SYTRA) AND STC (continued)

DUE FROM/TO THE SYRIAN TELECOMMUNICATION COMPANY OF THE SYRIAN ARAB REPUBLIC

(STC)

30 June 2019

(Unaudited)

31 December 2018

(Audited)


Due to STC (189,232,552) (123,291,823)

Due from STC 116,885,435 102,064,383

(72,347,117) (21,227,440)

Balance due to STC represents STC’s share of the Company's revenues of interconnection revenues. Balance due from

STC represents the Company's share of interconnection revenues.

10 CASH AND BANK DEPOSITS

31 December 2018

(Audited) 30 June 2019

(Unaudited)


7,507,177,545 7,549,508,293 Bank deposits

8,821,839,856 5,865,947,238 Cash on hand and current accounts with banks

16,329,017,401 13,415,455,531

Bank deposits at 30 June 2019 include an amount of Syrian Pounds 145,458,995 (31 December 2018: Syrian Pounds

145,458,995) which represents restricted cash for the benefit of Syrian Telecommunication Company related to the

settlement of the frequency protection fees cases and foregone revenues case based on the requirements of Appendix A/10

of the BOT termination contract which requires depositing half of the disputed amounts in special accounts (note 18).

In addition, there are restricted cash margins at banks against letters of guarantee, bills of lading and other commitments amounting

to Syrian Pounds 4,281,642,621 as at 30 June 2019 (31 December 2018: Syrian Pounds 4,269,080,164) (note 18).

For the purpose of preparing the interim statement of cash flows, cash and cash equivalents comprise the following

amounts:

30 June 2019 30 June 2018



Bank deposits 7,549,508,293

9,077,964,562

Less: Restricted cash related to forgone returns case settlement with STC (145,458,995)

(145,458,995)

Less: restricted cash margins at banks against letters of guarantee, bills

of lading and other commitments (4,281,642,621)

(4,254,798,768)

Less: Long-term bank deposits (3,122,406,677)

(4,677,706,799)

Short term deposits – original maturities not exceeding three month -

-

Cash on hand and current accounts with banks 5,865,947,238 8,200,669,289

5,865,947,238 8,200,669,289

MTN Syria


23

11 SHARE CAPITAL

The Company’s authorized, subscribed and paid capital at 30 June 2019 and 31 December 2018 is Syrian Pounds

1,500,000,000 divided into 15,000,000 shares with par value of Syrian Pounds 100 each.

According to the Company's articles of association and the Syrian commercial law, the chairman and each member of

the board of directors must own a minimum of 1% and 0.5% respectively, of the Company's share capital. Such shares

are restricted from trading before the elapse of six month after the end of the related membership in the board.

12 DUE TO BANKS

During the period ended 30 June 2019 the Company has obtained loans and bank facilities from local banks, loan

guarantees for some of these facilities were secured.

As at 30 June 2019 these facilities were as follows:

Facility type Facility balance

30 June 2019 31 December 2018


Annual

interest rate

Last instalment

due date

Letters of Credit (*) 1,304,156,825 6 % 13 August 2019 1,870,703,376

Local bills financing (*) 905,560,497 11 % 23 December 2019 1,018,073,996

Local bills financing (*) 1,500,000,000 %10 22 August 2019 -

Loan 1,592,628,666 %10.5 30 June 2025 1,442,800,263

5,302,345,988 4,331,577,635

(*) These facilities are short-term and due during 120 and 180 days of obtaining.

These amounts due to banks were classified in the Statement of Financial Position as of 30 June 2019 and 31 December

2018 are as follows:

13 (LOSS) GAIN ON FOREIGN EXCHANGE

Foreign exchange gains and losses result from the Company’s activities with foreign suppliers, roaming partners’

transactions, related parties transactions and bank accounts and deposits in foreign currencies. Gains and losses are

considered to be realized when the Company’s transactions from operating activities in foreign currencies are settled or

collected during the fiscal year. Unrealized gains and losses on foreign exchange result from transactions that have not

been settled or collected by the date of the financial statements.

30 June 2019 31 December 2018 Syrian Pounds Syrian Pounds

Short-term portion 3,896,745,988 2,925,977,635

Long-term portion 1,405,600,000 1,405,600,000

5,302,345,988 4,331,577,635

MTN Syria


24

13 (LOSS) GAIN ON FOREIGN EXCHANGE (continued)

The sources of (losses) and gains from the revaluation of monetary items in foreign currency are as follows:

Unrealized Realized

30 June 2018 30 June 2019 30 June 2018

30 June 2019

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

591,298,128 (110,971,035) 136,761,920 (4,685,228)

(Loss) gain from revaluing

current assets

1,420,322,482 110,237,173 (1,673,011,448) (1,227,045,062)

Gain (loss) from revaluing

current liabilities

2,011,620,610 (733,862) (1,536,249,528) (1,231,730,290)

Changes on unrealized gains from foreign exchange are as follows:

30 June 2019 31 December 2018 30 June 2018

(Unaudited) (Audited) (Unaudited)

Syrian Pounds Syrian Pounds Syrian Pounds

Balance as at 1 January 2,348,695,314 364,716,204 364,716,204

Unrealized (loss) gain on foreign exchange

during the period/year (733,862) 1,983,979,110 2,011,620,610

Balance at period/ year end 2,347,961,452 2,348,695,314 2,376,336,814

Based on the requirements of the Syrian Commission on Financial Markets & Securities circular No. 12 dated 15

February 2015, the Company separated unrealized gains resulting from foreign exchange revaluation of monetary items

from the retained earnings in the statement of changes in equity.

14 RELATED PARTY TRANSACTIONS

DUE TO RELATED PARTIES

31 December 2018

(Audited)

30 June 2019

(Unaudited)


19,163,643,619 20,330,867,691 Due to Investcom Mobile Communication Ltd (IMC)

3,020,765,396 3,209,165,025 Due to Teleinvest

5,311,132,812 6,024,834,549 Due to other operators

27,495,541,827

29,564,867,265

MTN Syria


25

14 RELATED PARTY TRANSACTIONS (continued)

Balances with related parties are unsecured and have no fixed terms of repayment. These balances represent the balance

due to Investcom Mobile Communication Ltd (IMC) of Syrian Pounds 20,330,867,691 as of 30 June 2019 (31 December

2018: Syrian Pounds 19,163,643,619) and the balance due to Teleinvest of Syrian Pounds 3,209,165,025 as of 30 June

2019 (31 December 2018: Syrian Pounds 3,020,765,396).

Balances due from other operators amounted to Syrian Pounds 239,885,855 as of 30 June 2019 (31 December 2018:

Syrian Pounds 218,821,795) are included in other current assets balance in the interim statement of financial position.

Transactions included in the interim statement of comprehensive income, which have been entered into with related

parties are as follows:

30 June 2018

(Unaudited) 30 June 2019

(Unaudited) Syrian Pounds Syrian Pounds

1,092,839,942

1,247,860,829

Management fees to Investcom Mobile Communication Ltd

(IMC)

183,117,796 207,470,398 Management fees to Teleinvest

767,999,473 531,830,300 Management fees to MTN Dubai

126,732,352 66,126,259 Interest on credit balances to IMC and dividends

42,244,117 22,324,146 Interest on credit balances to Teleinvest and dividends

2,212,933,680 2,075,611,932

Compensation of key management personnel

The remuneration of directors and other members of key management during the six-month period ended 30 June was

as follows:

30 June 2018

(Unaudited) 30 June 2019

(Unaudited) Syrian Pounds Syrian Pounds

63,694,278 62,529,178 Basic salaries for key management personnel

1,171,718 3,435,708 Allowances for key management personnel

64,865,996 65,964,886

The compensation of executive managers and key management personnel consist of six main elements targeting the

balance between long and short term goals and they are: basic salaries, the annual performance-oriented bonuses, and

long term bonuses as payments based on shares. The last two elements are designed to encourage and compensate

superior performance, ensure the continuation of employees, and make the executive managers and key management

personnel interests match the interests of shareholders as much as possible. In addition to these main elements, the

Company provides the executive managers and key management personnel medical insurance and other benefits.

MTN Syria


26

15 INCOME TAX

Income tax expense is calculated at 14% for the six-month period ended 30 June 2019 (14% for the six-month period

ended 30 June 2018). The movement in the accrued tax liabilities is as follows:

30 June 2019

(Unaudited)

31 December 2018

(Audited)


Balance at the beginning of the period / year 1,204,107,649 874,105,594

Income tax expense for the period / year 1,867,609 1,204,107,649

Income tax paid during the period / year (1,204,107,649) (874,105,594)

Balance at the end of the period / year 1,867,609 1,204,107,649

The reconciliation between the taxable profit and the accounting profit is detailed as follows:

30 June 2019 30 June 2018



Profit before tax 16,897,111 3,394,056,002

Non deductible expenses and revenues already taxed at source:

Provisions 182,278,457 16,541,685

Unrealized loss (gain) on foreign exchange 733,862 (2,011,620,610)

Interest income (88,450,405) (169,476,989)

Deductible tax deduction (****) (100,342,304) -

Taxable income 11,116,721 1,229,500,088

Effective income tax rate %14 %14

Income tax expense for the period 1,556,341 172,130,012

Local administrative tax 10% (**) 155,634 17,213,001

Reconstruction tax 10% (***) 155,634 17,213,001

Total income tax expense for the period (*) 1,867,609 206,556,014

Income tax expense related to deferred tax (assets) liabilities (102,741) 281,626,885

Income tax expense as per the Statement of comprehensive

income 1,764,868

488,182,899

(*) Income tax expense for the period ended 30 June 2019 comprises of income tax expense for the period of Syrian Pounds

1,556,341, local administrative tax of Syrian Pounds 155,634 and reconstruction tax of Syrian Pounds 155,634. (Income

tax expense for the period ended 30 June 2018 comprises of income tax expense for the period of Syrian Pounds

172,130,012, local administrative tax of Syrian Pounds 17,213,001, and reconstruction tax of Syrian Pounds

17,213,001). The recovered amount of income tax related to the deferred tax assets amounted to Syrian pounds 102,741

as the Company suffered unrealized losses for the six-month period ended 30 June 2019 (income tax expense related to

deferred tax liabilities amounted to Syrian pounds 281,626,885 on the unrealized gains during the six-month period

ended 30 June 2018)

(**) In accordance with legislative decree no 10 for year 2015, the Company included the local administrative tax which

represents 10% of the income tax expense.

(***) On 20 December 2017, Law No. 46 was issued to amend Article 1 of Legislative Decree No. 13 of 2013, extended by

Legislative Decree No. 3 on 18 January 2016 which amended the reconstruction tax to be 10% of the income tax expense

instead of 5% of income tax expense.

MTN Syria


27

15 INCOME TAX (continued)

(****) According to article 7 of tax law, paragraph no.6, tax and fees imposed in Syrian Arab Republic and paid during the

year (except income tax) considered tax deduction, which means the local administrative tax paid in 2018 as part of the

income tax of Syrian pounds 100,342,304 is considered tax deduction from profit of 2019.

Income tax paid, as reflected in the interim statement of cash flows, is detailed as follows:

30 June 2019 30 June 2018



Income tax for the years 2019 and 2018 1,204,107,649 874,105,594

Less: Income tax paid in advance during the years 2018 and 2017

(included in other current assets) (457,154,268) (542,950,258)

Net income tax paid for the years 2019 and 2018 746,953,381 331,155,336

Prepaid income tax for the years 2019 and 2018

(included in other current assets) 112,799,671 226,253,970

859,753,052 557,409,306

16 BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the period by the weighted average number of shares

outstanding during the period as follows:

For the six-month period ended 30

June

2019 (Unaudited)

2018 (Unaudited)

Net profit for the period (Syrian Pounds) 15,132,243 2,905,873,103

Weighted average number of shares outstanding during the period 15,000,000 15,000,000

Basic earnings per share from the profit of the period (Syrian Pounds) 1.01 193.72

Diluted earnings per share have the same figure as the basic earnings per share since the Company has not issued any

instruments which would have an impact on earnings per share when exercised.

17 NOTES TO THE INTERIM STATEMENT OF CASH FLOWS

- There are non-cash transactions included in the operating activities represented by an decrease in other current assets by

Syrian Pounds 760,229 against a increase in the interest received in the investing activities by the same amount for the

six-month period ended 30 June 2019 (an increase in other current assets against a decrease in interest received by Syrian

Pounds 18,796,875 for the six-month period ended 30 June 2018).

- There are non-cash transactions included in the financing activities represented by a decrease in the interest paid by

Syrian Pounds 88,450,405 against an increase in balances due to related parties by the same amount for the six-month

period ended 30 June 2019 (a decrease in interest paid by Syrian Pounds 168,976,470 against an increase in balances

due to related parties by the same amount for the six-month period ended 30 June 2018).

- During the period ended 30 June 2019, the shareholders’ ordinary general assembly declared distribution of profits for

the year 2018 of Syrian Pounds 6,135,463,935 which caused an increase in unpaid dividends and a decrease in retained

earnings by the same amount.

MTN Syria


28

18 COMMITMENTS AND CONTINGENT LIABILITIES

- At 30 June 2019, Company had cash margins amounting to Syrian Pounds 621,642,814,2 (31 December 2018:

Syrian Pounds 4,269,080,164) (note 10), consisting of: Syrian Pounds 702,608,162,4 against letters of guarantee

(31 December 2018: Syrian Pounds 4,150,292,645), and Syrian Pounds 199,033,911 against bills of lading and

other commitments (31 December 2018: Syrian Pounds 118,787,519).

- In 2010, the Syrian Telecommunication Company brought a number of cases against MTN Syria in relation to

forgone revenues from subscribers who used the cellular phone network to pass international calls illegally.

Therefore, the Syrian Telecommunication Company filed a lawsuit against MTN Syria for the amount of Syrian

Pounds 277,212,963 alleging that MTN Syria did not take sufficient steps to ensure the rights of the Syrian

Telecommunication Company. However, the external legal counsel of the Company and management are of the

view that the Company’s position will prevail. During the year ended 31 December 2015, and considering the

BOT 10/A termination agreement Appendix 1/A, the Company opened a new account and put an amount of half

of the value of the cases regarding foregone revenues that amounted to Syrian Pounds 145,458,995 for the benefit

of STC (note 10).

In addition to the above, in the normal course of its activities, the Company is exposed to legal claims. After

consulting with legal counsel, management believes that the total losses and obligations that the Company may

have on such cases will not have a material effect on the Company’s financial position.

- On 7 May 2007, the Finance Department of Countryside of Damascus conducted an assessment of the Company’s

income tax for the year 2001. The assessment exceeded the income tax amount estimated and recorded by the

Company for the same year by an amount of Syrian Pounds 224,167,547. On 5 June 2007 the Company filed a

petition at the specialized authorities on the income tax assessment. As a result, on 11 December 2007, the

Company received a second assessment by which the excess amount of the tax was decreased to Syrian Pounds

113,062,957. The Company paid a refundable amount of Syrian Pounds 108,540,439 to the Finance Department

to benefit from the 4% discount for early settlement. The Company’s management, based on its independent tax

and legal advisors’ opinions, is of the view that the Company will not bear any excess liability since the Company

is in compliance with the fiscal regulations and the tax liability for the fiscal year 2001 which was estimated in

accordance with the laws prevailing in the Syrian Arab Republic. Accordingly, the Company filed a new petition

to reject the assessment at the appeal committee. On 24 May 2017, the reconsideration committee have been met

to study the filed petition which was submitted by the company for the year 2001. No decision was made by the

Committee at the date of issuance of these interim condensed financial statements.

- Moreover, the Company received the temporary assessment of years 2002, 2003 and 2004 with excess demands

of Syrian Pounds 135,119,898, Syrian Pounds 236,046,382 and Syrian Pounds 426,905,035, respectively. The

Company filed an objection to the tax authorities. As a result it received a second assessment on 4 May 2009 by

which the excess amount of the taxes estimated was decreased to Syrian Pounds 35,514,097, Syrian Pounds

64,657,118 and Syrian Pounds 38,580,130. for the years 2002, 2003 and 2004, respectively. An amount of Syrian

Pounds 38,525,159 representing the interest embedded in the previous amounts will be deducted if the Company

paid the imposed tax before 31 October 2009. On 4 October 2009, the Company paid a refundable amount of

Syrian Pounds 100,226,186 and filed a new petition to reject the second assessment, however the Finance

Department has not yet issued its final decision. Accordingly, the excess amount of income tax the Company may

bear cannot be reliably estimated as of the issuance date of these interim condensed financial statements.

- On 26 May 2011, the Company received a temporary assessment for the amount of accrued income tax for 2005

with an increase of Syrian Pounds 315,509,720. The Company filed an objection to the tax authorities on 23 June

2011. On 8 July 2012, the Company received and paid a second assessment of the year 2005 with an excess amount

of Syrian Pounds 182,769,762. The Company paid this amount and filed an objection to the tax authorities on 2

August 2012, the result of which has not been announced as of 30 June 2019. Accordingly, the excess amount of

income tax that the Company may bear cannot be reliably estimated.

- On 25 March 2012, the Company received assessments for 2006 and 2007 with excess demands of Syrian Pounds

196,220,554 and Syrian Pounds 154,448,301, respectively. The Company filed an objection to the tax authorities

on 23 April 2012. On 3 October 2012, the Company received a second assessment of the years 2006 and 2007

with the same excess demands as the first assessments of Syrian Pounds 196,220,554 and Syrian Pounds

154,448,301, respectively. The Company paid these amounts and filed two objections to the tax authorities on 24

October 2012, the result of which has not been announced as at the issuance date of these interim condensed

financial statements. Accordingly, the excess amount of income tax that the Company may bear cannot be reliably

estimated.

MTN Syria


29

18 COMMITMENTS AND CONTINGENT LIABILITIES (continued)

- On 18 August 2013, the Company received the first assessment of the year 2008 with an excess amount of Syrian

Pounds 168,288,495. The Company filed an objection to the tax authorities on 17 September 2013. On 22

September 2014, the Company received a second assessment of the year 2008 with an excess demand of Syrian

Pounds 168,288,495 similar to the first assessment. The Company paid this amount and filed an objection on the

second assessment on 21 October 2014, the result of which has not been announced as at the issuance date of these

interim condensed financial statements. Accordingly, the excess amount of income tax that the Company may bear

cannot be reliably estimated.

- On 5 November 2014, the Company received the first assessment of the year 2009 with an excess demand of

Syrian Pounds 190,066,920. The Company filed an objection to the tax authorities on 2 December 2014. On 1

October 2015 the Company received a second assessment of the year 2009 for Syrian Pounds 162,349,221. The

Company paid this amount and filed an objection on the second assessment. On 25 November 2015, the result of

which has not been announced as at the issuance date of these interim condensed financial statements. Accordingly,

the excess amount of income tax that the Company may bear cannot be reliably estimated.

- On 29 December 2015, the Company received a temporary assessment for the years 2010 and 2011 with excess

demands of Syrian Pounds 143,830,082 and Syrian Pounds 250,750,434, respectively. The Company filed an

objection to the tax authorities on 14 January 2016. On 7 June 2016, the Company requested to initiate an

experienced committee to study the objection submitted to the tax authorities related to the taxes of the years 2010

and 2011. On 11 September 2017 the Company received a second assessment of the years 2010 and 2011 for

Syrian Pounds 141,740,219 and Syrian Pounds 248,672,262, respectively. On 5 October 2017 the Company paid

this amounts and filed an objection on the second assessment, the result of which has not been announced as at the

issuance date of these interim condensed financial statements. Accordingly, the excess amount of income tax that

the Company may bear cannot be reliably estimated.

- On 29 October 2017, the Company received the temporary assessment for the years 2012 and 2013, with an excess

demands of Syrian pounds 118,442,651 and Syrian pounds 271,787,778, respectively. The Company filed an

objection to the tax authorities on 27 November 2017, on 24 April 2018 the Company received a second assessment

of the years 2012 and 2013 for Syrian Pounds 96,105,364 and Syrian Pounds 258,170,893, respectively. On 30

April 2018 the Company paid this amounts for Syrian Pounds 82,697,350 and 222,152,124, Taking advantage of

the 4% early payment discount in case payment before the end of April. The Company filed an objection to the

reconsideration committee On 23 May 2018 for the years 2012 and 2013, respectively. As at the date of issuance

of these interim condensed financial statements, the objection filed by the Company has not been considered.

- On 16 August 2018, the Company received the temporary assessment for the year 2014, with an excess demands

of Syrian pounds 169,695,541. The Company filed an objection to the tax authorities on 6 September 2018. On 8

October 2018 the Company received a second assessment of the year 2014 for Syrian Pounds 141,676,266. On 25

October 2018 the Company paid this amount and filed an objection on the second assessment for the year 2014.

As at the date of issuance of these financial statements, the objection filed by the Company has not been considered.

- On 31 January 2019, the Company received the temporary assessment for the years 2015 and 2016, with an excess

demands of Syrian pounds 5,043198,13 and Syrian pounds 9,082,825 respectively. The Company filed an

objection to the tax authorities on 28 February 2019. On 26 March 2019 the Company received the second

assessment for the years 2015 and 2016 for Syrian Pounds 198,135,043 and Syrian Pounds 9,082,825, respectively.

On16 April 2019 the Company paid these amounts without filing an objection to the review committee.

- On 13 May 2019, the Company received the tax notice of consumption tax fees fine for the years 2016 and 2017

for accrued amounts on consumption tax fees for Syrian Pounds 214,880,773 included the fines except delayed

payment fine. On 19 May 2019 the Company filed an objection to decision committee. On 18 June 2019 The

Company informed the decision of the judicial committee at the Ministry of Finance number /9/ A.N /1/2019

issued on June 13, 2019 which included rejection of Company objection and confirm the reported in consumption

tax fees fine notice for the years 2016 and 2017. On 24 June 2019 the Company filed an objection to Civil Court

of Appeal in Damascus. As at the date of issuance of these financial statements, the objection filed by the Company

has not been considered.

The Company’s tax returns remain subject to review by the tax authorities for the fiscal years 2017 and thereafter. The

outcome of such review cannot be determined at this stage.

MTN Syria


30

19 CAPITAL COMMITMENTS

As of 30 June 2019, the Company had capital commitments of Syrian Pounds 6,189,973,191 (31 December 2018: Syrian

Pounds 14,732,574,882) which includes: Syrian Pounds 1,503,110,470 related to information system development (31

December 2018: Syrian Pounds 1,152,148,817), Syrian Pounds 4,565,395,840 related to acquisition of network

equipment (31 December 2018: Syrian Pounds 13,530,494,950) and Syrian Pounds 121,466,881 related to other capital

commitments (31 December 2018: Syrian Pounds 49,931,115).

20 OPERATING SEGMENT INFORMATION

For management purposes, the Company is organized into business sectors based on their services and has five

reportable segments as follows:

- Prepaid services Prepaid airtime, SMS, roaming and other services

- Postpaid services Postpaid services, SMS, roaming and other services

- 3G services Third generation wireless mobile internet services

- Roaming Visitors roaming

- Other Other items

Management monitors the operating results of its business units separately for the purpose of making decisions on

resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss

which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the

interim condensed financial statements. The Company’s financing (including finance costs and finance revenues) is

managed at the corporate level and such costs and revenues not allocated to operating segments.

Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third

parties.

Segment assets include all operating assets used by a segment and consist primarily of property and equipment,

intangibles, inventories, accounts receivable, due from STC, due from SYTRA, other current assets and cash and bank

balances. Whilst the majority of the assets can be directly attributed to individual business segments, the carrying

amounts of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis.

Segment liabilities include all operating liabilities and consist primarily of accounts payable and accrued expenses.

Basically, all of the sales and profit of the Company are earned in the Syrian Arab Republic from the above business

segments.

MTN Syria


31

20 OPERATING SEGMENT INFORMATION (continued)

Total Other services Visitor Roaming 3G Postpaid services Prepaid Services

2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 six-month period ended 30

June (unaudited)

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

36,433,004,826 41,493,096,322 166,727,344 170,760,150 402,200,441 366,414,992 6,802,304,666 12,126,237,149 7,164,788,912 7,863,771,611 21,896,983,463 20,965,912,420 Gross revenues

(7,699,592,001) (8,739,891,484) - - (85,896,195) (77,799,980) (1,469,645,191) (2,612,003,266) (1,534,259,552) (1,670,572,743) (4,609,791,063) (4,379,515,495) Syrian Government/STC

Share of revenues

(18,034,916,186) (22,049,595,880) (82,174,369) (90,420,392) (198,990,728) (194,721,210) (3,375,290,424) (6,443,708,429) (3,544,815,993) (4,178,986,011) (10,833,644,672) (11,141,759,838) Operating expenses

10,698,496,639 10,703,608,958 84,552,975 80,339,758 117,313,518 93,893,802 1,957,369,051 3,070,525,454 2,085,713,367 2,014,212,857 6,453,547,728 5,444,637,087 Gross operating profit

(6,269,282,754)

(6,573,294,601)

(28,689,944)

(27,051,651)

(69,209,452)

(58,047,095)

(1,170,520,289)

(1,921,026,297)

(1,232,895,496)

(1,245,770,792)

(3,767,967,573)

(3,321,398,766) Administrative, marketing and

selling expenses

(1,521,349,531) (2,006,091,690) (6,962,110) (8,255,845) (16,794,867) (17,715,286) (284,046,925) (586,274,482) (299,183,345) (380,194,497) (914,362,284) (1,013,651,580) Depreciation and amortization

(2,361,851) (3,032,128) (10,808) (12,478) (26,074) (26,776) (440,975) (886,131) (464,473) (574,649) (1,419,521) (1,532,094) Bank charges

(16,541,685) (182,278,457) - - - - - (124,923,071) (16,541,685) (57,355,386) - - Allowance for doubtful debts

29,223,583 10,813,095 133,735 44,499 322,612 95,488 5,456,254 3,160,096 5,747,009 2,049,298 17,563,973 5,463,714 Other gains - net

169,476,989 88,450,405 169,476,989 88,450,405 - - - - - - - - Interest income

(168,976,470) (788,814,319) (168,976,470) (91,332,673) - (6,184,736) - (204,679,324) - (132,732,969) - (353,884,617) Finance costs

(1,536,249,528)

(1,231,730,290)

(7,030,296)

(5,069,047)

(16,959,354)

(10,877,097)

(286,828,863)

(359,969,608)

(302,113,527)

(233,437,524)

(923,317,488)

(622,377,014) Realized loss on foreign

exchange

2,011,620,610

(733,862)

9,205,723

(3,019)

22,207,191

(6,481)

375,584,071

(214,469)

395,598,362

(139,082)

1,209,025,263

(370,811)

Unrealized (loss) gain on

foreign exchange

(488,182,899) (1,764,868) 20,044,330 8,694,489 (5,569,600) (41,463) (89,707,796) 4,813,832 (98,526,764) (742,384) (314,423,069) (14,489,342) Income tax expense

2,905,873,103 15,132,243 71,744,124 45,804,438 31,283,974 1,090,356 506,864,528 (119,474,000) 537,333,448 (34,685,128) 1,758,647,029 122,396,577 Net profit for the period

31 December 2018 30 June 2019 31 December 2018 30 June 2019 31 December 2018 30 June 2019 31 December 2018 30 June 2019 31 December 2018 30 June 2019 31 December 2018 30 June 2019

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

146,139,910,629 156,504,829,824 696,014,299 709,221,224 2,478,725,770 1,924,996,383 30,915,031,404 44,563,907,309 30,794,185,926 31,161,976,417 81,255,953,230 78,144,728,491 Total assets

135,418,777,039 151,904,027,926 580,309,159 600,035,467 2,160,553,364 1,876,639,696 29,036,198,661 43,532,194,297 27,653,612,599 29,508,521,253 75,988,103,256 76,386,637,213 Total liabilities

29,221,257,123 9,825,794,930 129,931,105 40,436,949 367,699,361 86,769,099 6,346,064,935 2,871,560,092 5,895,864,382 1,862,184,654 16,481,697,340 4,964,844,136 Capital expenditure

MTN Syria


32

21 SHARE-BASED PAYMENT PLAN

Share Appreciation Rights

Senior management including executive management of the Company are granted share appreciation rights (SARs),

which can only be settled in cash, under a scheme initiated and managed by the ultimate parent “MTN Group Limited”.

The scheme is designed to retain and recognise the contributions of executive directors and eligible staff and to provide

additional incentives to contribute to the Company’s continuing growth.

The rights are granted in the form of notional share options. The fair value of the SARs is measured at each reporting

date with reference to the published share prices of the parent company for the globally aligned notional share options

“GAN” and the Company’s enterprise value measured by EBITDA multiple for the locally aligned notional share options

“LAN” since MTN Syria is an unquoted entity.

These SARs vest when specified conditions are met primarily relating to the age, minimum service period and grade of

the entitled staff. The vesting periods under the schemes are as follows: 0%, 20%, 40%, 70% and 100% on the anniversary

of the first, second, third, fourth, and fifth years respectively, after the grant date. On 1 April 2014 the vesting conditions

were amended after this date to be 100% after a period of three years. The strike price is determined as the closing market

price for MTN Group Limited shares on the day prior to the date of allocation for the GAN options and the price per

share calculated using EBITDA multiple on 1 April of the preceding financial year for LAN options.

If the options or appreciation rights remain unexercised after a period of 10 years from the date of grant and 5 years for

the options granted on and after 1 April 2014, they lapse. Furthermore, rights are forfeited if the employee leaves the

Company before they vest.

The carrying amount of the liability relating to the SARs at 30 June 2019 is Syrian Pounds 1,081,860,000 (31 December

2018: Syrian Pounds 876,000,000) and is detailed as follows:


(Unaudited) (Audited)


Balance at the beginning of the period / year 876,000,000 1,037,782,547

Charge for the period / year 217,527,448 35,055,216

Exercised during the period / year (11,667,448) (201,589,703)

Exchange difference - 4,751,940

Balance at the end of the period / year 1,081,860,000

876,000,000

There has been no modification or cancellation to the plan during the year ended 31 December 2018 or the period ended

30 June 2019.

Details of the share options (locally aligned options and globally aligned options) outstanding at period/year end are as

follows:


(Unaudited) (Audited)

Number of options Number of options

Number of options at the beginning of the period / year 333,360 360,800

Offered during the period / year 51,360 164,060

Cancelled during the period / year (1,360) (124,197)

Exercised during the period / year (17,090) (67,303)

Number of options at end of the period / year 366,270 333,360

As at 30 June 2019, the price of the GAN option is Syrian Pounds 3,268 (31 December 2018: Syrian Pounds 2,705) as

published in Johannesburg Stock Exchange and the fair value of the LAN option based on the EBITDA multiple, is

Syrian Pounds 6,466 (31 December 2018: Syrian Pounds 4,418). The remaining contractual life of the underlying SARs

is between 1-5 years.

MTN Syria


33

22 FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise of financial assets and financial liabilities.

The Company’s financial liabilities comprise accounts payable and balances due to related parties. The Company has

various financial assets such as accounts receivable and cash and bank deposits, which arise directly from its

operations.

The fair values of financial assets and liabilities are not materially different from their carrying values.

None of the Company’s financial assets or financial liabilities have been remeasured to fair value.

23 DIVIDENDS DECLARED

On 13 May 2019, the ordinary general assembly decided to distribute profits for 2018 amounted Syrian Pounds

6,135,463,935, where the shares count was 15,000,000 and the earning per share amounted Syrian Pound 409.03.

On 30 April 2018, the ordinary general assembly decided to distribute profits for 2017 amounted Syrian Pounds

5,799,580,318, where the shares count was 15,000,000 and the earning per share amounted Syrian Pound 386.64.

24 COMPARATIVE FIGURES

Some of the corresponding figures for 2018 have been reclassified in order to conform to the presentation for the

current period. Such reclassifications do not affect previously reported profit or shareholders' equity.

The table below summarizes the reclassified amounts:

Statement of Financial position

Presentation as at

31 December 2018

Presentation as at

31 December 2018 (restated)

Amount

Syrian Pounds

Description

Other current liabilities Accounts receivables 37,999,602 Allowance for expected credit losses

Statement of Comprehensive income

Presentation as at

30 June 2018

Presentation as at

30 June 2019

Amount

Syrian Pounds

Description

Other expense - net Income tax expense 281,626,885

Income tax expense related to deferred

tax liabilities

Other expense - net

Allowance for expected credit

losses (6,884,283) Allowance for expected credit losses

mtn syria interim condensed financial statements ... · annual financial statements, and should be...

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