wateen 1st qtr

QUARTER

July 01,Toseptember 30,

CONTENTS02. Corporate Information03. Director’s Report

Financial Information 04. Condensed Interim Balance Sheet06. CondensedInterimProfitandLossAccount07. Condensed Interim Statement of Comprehensive Income08. Condensed Interim Cash Flow Statement10. CondensedInterimStatementofChangesinEquity11. Condensed Interim Notes to and Forming Part of Financial Information

Consolidated Financial Information16. Condensed Consolidated Interim Balance Sheet18. CondensedConsolidatedInterimProfitandLossAccount19. Condensed Consolidated Interim Statement of Comprehensive Income20. Condensed Consolidated Interim Cash Flow and Statement22. CondensedConsolidatedInterimStatementofChangesinEquity23. Notes to and Forming Part of the Condensed Consolidated Interim Financial Information

BoArdofdIrECtorS

H.H.SheikhNahayanMabarakAlNahayanChairman of the Board

H.E.SheikhSaifBinMohammedButtiAlHamid

Mr.AhmeddarwishdagherAlMarar (uptill15/10/2010)

H.E.SultanKhalfanHudairemAlKtebi (15/10/2010onwards)

Mr.AbdullaKhalilMohdSameaAlMutawa

Mr.KhalidManaSaeedAhmedAlotaiba

Mr.BashirA.tahir

Mr.ParvezA.Shahid

Mr.MohamedAmersi

BANKErS

StandardCharteredBank(Pakistan)LimitedBankAlHabibLimitedHabibBankLimitedBankAlfalahLimitedNationalBankofPakistanLimitedPakLibyaHoldingCompany(Pvt.)LimitedSummitBankLimited(formerlyArifHabibBankLimited)AskariBankLimitedSoneriBankLimitedPakBruneiInvestmentCompanyLimitedtheBankofKhyber

AudItorS

A.f.ferguson&Co.CharteredAccountantsPIABuilding,3rdfloor,49,BlueArea,P.o.Box3021,Islamabad

rEgIStErEdoffICE

4thfloorNewAurigaComplex,MainBoulevard,gulbergII,Lahore

SHArErEgIStrAr

tHKAssociates(Pvt.)LimitedgroundfloorStateLifeBuildingNo.3,dr.Zia-ud-dinAhmedroadKarachitel:+9221111000322

CORPORATEINFORMATION

QUARTERLY REPORT waTEEn TELEcom LTd 20102

DIRECTORs’ REPORTThe Directors of Wateen Telecom Limited are pleased to present the financial information for the three months ended 30th September, 2010.

Financial thecompanypostedrevenuesofrs1,931millionforthethree months ended September 2010 representing anincreaseinrevenueof5%overlastquarter.Managementis focusing on more profitable revenue streams due towhichgrossmarginhasshownconsiderableimprovementincreasing to31% thisquartercompared to14% for thesameperiodlastyear.Atthesametime,throughvariouscostrationalizationandoperationsrestructuringinitiatives,managementhasconsistentlyimprovedEBItdAmargins;whereas EBItdA was negative 4% the same periodlast year, it increased to positive 12% last quarter andcontinued rising to positive 20% this quarter. Keepingin view the business requirements and to support thecompany,Sponsors’havealsocomeupwithasubstantialsupportofuSd14minthequarterthroughtheissuanceofSBLCtosettlecertainliabilities.furthersupportisalsocommittedbysponsorsinthe2ndquarter.

fuTuRE outlookWateen has undertaken a number of steps to buildshareholder value through various cost reduction andrationalization programs. By bringing in-house thedevelopment,deploymentandsupportofvariousbusiness-criticalBSSmodulessuchasCrM,tMS,customerself-care,BusinessIntelligence(MIS)andothers,WateenhasmadesignificantreductionsinoPEX.Similarly,bybringingvariousEngineeringoperationsin-house,Wateenhasnotonlybeenable to reduceoPEX further,butalsogaineddirect control over customer experience, as a result ofwhichconsiderableimprovementinoperationalKPI(KeyPerformanceindicators)hasbeenrealized.

onuSfSindh,Milestone1&2audithasbeensuccessfullyachievedwhereasMilestone3hasbeenofferedforaudit.onuSfBalochistan(packages1and3),Milestones1hasbeensuccessfullycompletedwhileMilestone2hasbeenofferedforaudit.Withmostofthegrowthininfrastructurecoming through a subsidy fromuSf (approximatelyrs.1.8 Billion),Wateen will have the second largest, if notthe largest,ofCnetwork inPakistan.the roll-outalongalmost all of the national highwayswillmake it an idealchoiceforoperatorstoshiftontodarkfibreforbackhaulingfrom the comparatively less reliable, existingmicrowavemedia.onuSfBroadband,firstmilestonesforftrandHtrregionshavebeencompletedandofferedforaudit.

Inlinewithourvisionofexceedingcustomerexpectations,Wateenhastakenanumberofstepstoimprovecustomerexperience. Self-care portal has been revamped withmanynewfeaturessuchasability tousesoftphoneviaportal,onlinebillpaymentthroughauto-debitauthorization,SMSandemailalerts for remindersandusage tracking,etc. New and innovative rechargemechanisms such aspayment throughAtMs,creditcardsandphonebankingwillalsobeintroducedtoenhancereachtothecustomer.Similarly, through direct peering with most popularcustomerwebsitessuchasgoogleandYoutube,Wateenwill significantly improve response times and increasecustomer loyalty. recent integration of oracle’s ErPwithinWateen’sinternaloperationshasautomatedalotofbusinessprocessesensuringquicker response times forourpartnersandcustomers.

tariqMalikChiefExecutiveofficer

ParvezA.ShahidDirector

waTEEn TELEcom LTd QUARTERLY REPORT 2010 3

CONDENSED INTERIM BALANCE SHEET (UNAUDITED)AS AT SEPTEMBER 30, 2010

(Un-Audited) (Audited) September 30, June 30, 2010 2010 Note (Rupees in thousand)

Share capital and reserves

Authorised capital 10,000,000 10,000,000

Issued, subscribed and paid-up capital 6,174,746 6,174,746General reserve 134,681 134,681Unappropriated (loss) (2,417,030) (2,099,760)

3,892,397 4,209,667

Non current liabilities

Long term finance- secured 6 508,830 -Long term finance from associated company - unsecured 7 550,000 -Long term finance from Sponsors - unsecured 8 1,206,800 -Cross currency swap - fair value 6.5 4,656 4,656Interest rate swap - fair value 6.5 134,397 134,397Obligations under finance leases 5,429 5,429Long term deposits 117,834 110,455

2,527,946 254,937

Deferred liabilities

Employees’ retirement benefits 41,305 43,690Deferred income tax liability - 74,593Deferred government grant 716,405 827,159

757,710 945,442

Current liabilities

Current portion of long term finance - secured 6 12,472,429 12,411,659Payable to supplier to be settled through long term finance 9 - 433,798Current portion of obligations under finance leases 1,223 1,556Finance from supplier - unsecured 77,668 77,668Short term running finance - secured 4,066,123 4,604,346Trade and other payables 4,770,762 5,922,431Interest / markup accrued 639,926 848,888

22,028,131 24,300,346CONTINGENCIES AND COMMITMENTS 10

29,206,184 29,710,392

The annexed notes 1-15 are an integral part of this condensed interim financial information.


CONDENSED INTERIM BALANCE SHEET (UNAUDITED)AS AT SEPTEMBER 30, 2010


Non-current assets

Property, plant and equipment

Operating assets 11 16,783,292 17,045,929 Capital work in progress 12 4,268,201 3,883,565

Intangible assets 199,045 204,726

21,250,538 21,134,220 Long term investment in subsidiary companies 57,061 57,061

Long term deposits and prepayments

Long term deposits 206,526 238,584 Long term prepayments 79,139 79,139

285,665 317,723

Current assets

Trade debts 3,685,353 3,097,982 Contract work in progress 55,206 18,782 Stores and stocks 923,659 847,528 Advances, deposits, prepayments and other receivables 2,464,159 2,001,340 Income tax refundable 253,363 238,841 Cash and bank balances 231,180 1,996,915

7,612,920 8,201,388

29,206,184 29,710,392

___________________ _______________ Chief Executive Director


CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended

September 30, September 30, 2010 2009 Note (Rupees in thousand)

Revenue 1,825,527 2,370,026

Cost of sales (excluding depreciation and amortisation) 1,230,518 2,049,791General and administration expenses 287,172 374,603Advertisement and marketing expenses 30,607 94,591Selling and distribution expenses 7,352 7,192Other income (305,442) (23,902)

Earnings/(loss) before finance cost,taxation, depreciation and amortisation 575,320 (132,249)

Less: Depreciation and amortisation 469,116 361,893 Finance cost 13 483,223 423,690 Finance income (3,410) (7,691)

Loss before taxation (373,609) (910,141)

Income tax charge (credit) (56,339) (290,185)

Loss for the period (317,270) (619,956)

Loss per share Rs (0.51) Rs (1.49)




CONDENSED INTERIM SATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended

September 30, September 30, 2010 2009 (Rupees in thousand)

Loss for the period (317,270) (619,956) Other comprehensive income - -

Total comprehensive income for the period (317,270) (619,956)




Three months ended


Cash flow from operating activities

Profit/(loss) before taxation (373,609) (910,141)

Adjustment of non cash items:

Depreciation & amortisation 469,116 361,893Finance cost 483,223 423,690Deferred income (110,754) -(Profit)/loss on sale of operating assets - 19,179Dividend income from subsidiary company (156,395) -Provision for doubtful debts - 4,925Provision for employees’ accumulated absences 17,161 18,228

702,351 827,915

328,742 (82,226)

Changes in working capital:

(Increase) in trade debts (587,371) (2,591,751)(Increase) in contract work in progress (36,424) (790)(Increase) in stores and stocks (76,131) (312,872)(Increase) in advances, deposits, prepayments and other receivables (462,819) (1,416,693)(Decrease)/ Increase in trade and other payable (1,151,669) 3,794,982

(2,314,414) (527,124)

Employees’ accumulated compensated absences paid (19,546) (14,901)Taxes paid (32,776) (7,274)

Cash flow from operating activities (2,037,994) (631,525)

Cash flow from investing activities

Tangible fixed assets additions (200,798) (790,143)Capital work in progress additions (including finance cost) (384,636) (662,060)Long term deposits (received/paid) 32,058 1,835Dividend income received 156,395 -

Cash flow from investing activities (396,981) (1,450,368)

CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010


CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended


Cash flow from financing activities

Long term finance received 2,326,400 3,309,163Long term finance repaid - (1,661,663)Long term payable to supplier (repaid) - (1,015)Short term borrowings (repaid) (1,680,165) -Payable to supplier to be settled through long term finance received/(repaid) (433,798) (309,866)Obligations under finance leases (repaid) (333) 8,345Long term deposits received 7,379 -Finance cost paid (692,185) (391,316)

Cash flow from financing activities (472,702) 953,648

(Decrease) in cash and cash equivalents (2,907,677) (1,128,245)Cash and cash equivalents at beginning of the period (927,266) (2,324,688)

Cash and cash equivalents at end of the period (3,834,943) (3,452,933)

Cash and cash equivalents comprise:Cash and bank balances 231,180 320,424Short term running finance (4,066,123) (3,773,357)

(3,834,943) (3,452,933)




CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Share General Unappropriated capital reserve profit/(loss) Total

(Rupees in thousand)

Balance at July 1, 2009 2,087,373 392,908 1,829,146 4,309,427 Total comprehensive income for the period

Loss for the period - - (619,956) (619,956) Other comprehensive income - - - -

- - (619,956) (619,956)

Balance at September 30, 2009 2,087,373 392,908 1,209,190 3,689,471 Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) -

Issue of 200,000,000 shares for cash 2,000,000 - - 2,000,000 on April 20, 2010

Shares issue cost (net of tax benefit) - - (79,247) (79,247) Total comprehensive income for the period

Loss for the period - - (1,400,557) (1,400,557) Other comprehensive income - - - -

- - (1,400,557) (1,400,557)

Balance at June 30, 2010 6,174,746 134,681 (2,099,760) 4,209,667 Total comprehensive income for the period


- - (317,270) (317,270)

Balance at September 30, 2010 6,174,746 134,681 (2,417,030) 3,892,397 The annexed notes 1-15 are an integral part of this condensed interim financial information.



SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

1. Legal status and operations The Company was incorporated in Pakistan as a Private Limited Company under Companies Ordinance, 1984 on

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

2. Basis of preparation These condensed interim financial information are unaudited and are being submitted to shareholders in accordance

with the requirement of Section 245 of the Companies Ordinance, 1984 and International Accounting Standard (IAS 34) ‘Interim Financial Reporting’. These condensed interim financial information do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the published financial statements of the Company for the year ended June 30, 2010.

3. Accounting policies The accounting policies adopted in the preparation of this condensed interim financial information are the same as

those applied in preparation of audited annual published financial statements of the Company for the year ended June 30, 2010.

4. Use of estimates and judgements The preparation of these condensed interim financial information in conformity with approved accounting standards

requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Estimates and judgements made by the management in the preparation of this condensed financial information are the same as those used in the preparation of the preceding annual published financial statements of the Company for the year ending June 30, 2011.

5. Taxation The provision for taxation for the three months ended September 30, 2010 has been provided on estimation basis.

September 30, June 30, 2010 2010 Note (Rupees in thousand)

6. Long term finance - secured Syndicate of banks 6.1 4,766,000 4,766,000 Export Credit Guarantee Department - (ECGD) 6.2 2,467,479 2,450,304 Standard Chartered Bank 6.3 40,500 54,000 Dubai Islamic Bank 6.4 477,000 477,000 Motorola Credit Corporation (MCC) 6.5 4,998,613 4,963,819 Term finance facility 6.6 508,830 -

Total 13,258,422 12,711,123

Unamortized transaction and other ancillary cost

Opening balance 299,464 - Additions during the period - 400,862 Amortisation for the period (22,301) (101,398)

(277,163) (299,464)

12,981,259 12,411,659 Amount due within next twelve months shown as current liability (1,991,174) (1,991,174) Amount Due after September 30, 2011 (10,481,255) (10,420,485)

508,830 -


6.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till September 30, 2010. The tenor of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years.

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

6.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till September 30, 2010. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company.

6.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million.

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

6.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million has been availed till September 30, 2010. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola.

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 25.5 million at September 30, 2010 are hedged through cross currency swap contract with SCB. In consideration, the Company pays the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The fair value of the contract at June 30, 2010 was Rs 4.656 million in favour of the bank, as determined by an independent valuer using the ‘Forward Model’, which has been recognised as a liability.

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 58.5 million at September 30, 2010 are hedged through interest rate swap contract with SCB. In consideration, the company pays 3.05% on the notional amount. The fair value of the contract at June 30, 2010 was Rs 134.397 million in favour of the bank, as determined by an independent valuer using the ‘Forward Model’, which has been recognised as a liability.



6.6 During the period the Company has obtained long term finance facility from Standard Chartered bank amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010.The loan is repayable in June 30, 2013. The loan is secured by ranking charge over current and fixed assets amounting to Rs 1,000 million.

During the period the Company has obtained long term finance facility from Standard Chartered bank amounting to Rs 217 million against Cross currency and Interest rate swap agreements till June 30, 2010.The loan is repayable in June 30, 2013. The loan is secured by ranking charge over current and fixed assets amounting to Rs 500 million.

6.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company was not able to make payment of MCC loan installment of Rs 428,000 thousand and interest of Rs 59,010 thousand due on June 30, 2010 and SCB loan installment of Rs 13,500 thousand and interest of Rs 3,775 thousand due on April 24, 2010. Further, certain ratios specified in the loan agreements have not been maintained at June 30, 2010. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments due as per loan agreements after September 30, 2011 amounting to Rs 10,481,255 thousand have been shown as current liability.

The Company is in the process of rescheduling of existing facilities, which would facilitate the Company to great extent in meeting its obligations/covenants under loan agreements. In addition, during the period Company has received USD 14 million from sponsors through Standby Letter of Credit (SBLC) to discharge its liabilities when due.

7. Long term finance from associated company - Unsecured

During the period the Company has obtained long term finance facility from associated Company Taavun (Pvt) Limited amounting to Rs 600 million of which Rs 550 million was availed till September 30, 2010. The tenure of the facility is two years. The rate of interest is six months KIBOR + 2.5% per annum.

8. Long term finance from Sponsors - Unsecured

During the period the Company has obtained loan from sponsors amounting to Rs 1.2 billion through Standby letter of Credit (SBLC). The rate of interest is six months LIBOR + 2.5% per annum.

9. Payable to supplier to be settled through long term finance

During the period the Company has repaid entire facility (June 30, 2009 Rs: 434 million). September 30, June 30, 2010 2010 (Rupees in thousand)

10. Contingencies and commitments

Claims against the Company not acknowledged as debt 264,038 264,038

Performance guarantees issued by banks in favour of the Company 1,476,816 1,476,816

Outstanding commitments for capital expenditure 1,799,824 1,799,824

Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 255,060 490,000



September 30, June 30, 2010 2010 (Rupees in thousand)

11. Operating assets

Opening net book value 17,045,929 14,050,553 Additions - owned 200,798 4,803,102 - leased - 9,293 Disposals at net book value - (191,184) Depreciation charge (463,435) (1,625,835)

Closing net book value 16,783,292 17,045,929

12. Capital work in progress

Leasehold improvements 25,243 23,334 Line and wire 1,502,019 1,319,762 Network equipment 2,740,939 2,540,469

4,268,201 3,883,565

13. This includes exchange loss amounting to Rs 57 million (September 2009: Rs Nil)

Three months ended


14. Related party transactions

Subsidiary Companies Payments made on behalf of subsidiary companies 304,272 - Payments made by subsidiary companies - 122,090 Cost and expenses charged by subsidiary companies 439 26,343 Dividend income received 156,395 -

Associated Companies Revenue from associated companies 479,594 592,789 Cost and expenses charged by associated companies 209,151 268,950 Payments made on behalf of associated companies 7,787 7,196 Contribution to Employees’ retirement funds 21,293 26,495

15. General

15.1 Date of authorisation

This condensed interim financial information has been authorised for circulation to the shareholders by the Board Of Directors of the Company on 21st October, 2010.




fiNANCiAlCONsOlIDATED

INFORMATION


CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)AS AT SEPTEMBER 30, 2010


Share capital and reserves

Authorised capital 10,000,000 10,000,000

Issued, subscribed and paid-up capital 6,174,746 6,174,746General reserve 134,681 134,681Unappropriated profit/(loss) (2,430,531) (1,794,123)

3,878,896 4,515,304Non controlling interest 189,453 206,999

4,068,349 4,722,303Non-current liabilities

Long term finance- secured 6 508,830 -Long term finance from associated company - unsecured 7 550,000 -Long term finance from Sponsors - unsecured 8 1,206,800 -Cross currency swap - fair value 6.5 4,656 4,656Interest rate swap - fair value 6.5 134,397 134,397Obligations under finance leases 5,429 5,429Long term deposits 117,834 110,455

2,527,946 254,937

Deferred liabilities

Employees’ retirement benefits 57,674 60,059Deferred income tax liability 704 76,807Deferred government grant 716,405 827,159

774,783 964,025

Current liabilities

Current portion of long term finance - secured 6 12,472,429 12,411,659Payable to supplier to be settled through long term finance 9 - 433,798Current portion of obligations under finance leases 1,223 1,556Finance from supplier - unsecured 77,668 77,668Short term running finance - secured 4,066,123 4,604,346Trade and other payables 4,853,777 6,030,371Interest / markup accrued 639,926 848,888

22,111,146 24,408,286

CONTINGENCIES AND COMMITMENTS 10

29,482,224 30,349,551



CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)AS AT SEPTEMBER 30, 2010


Non-current assets

Property, plant and equipment

Operating assets 11 16,789,903 17,053,114 Capital work in progress 12 4,268,201 3,883,565

Intangible assets 304,162 310,843

21,362,266 21,247,522

Long term deposits and prepayments

Long term deposits 207,417 239,474Long term prepayments 79,139 79,139

286,556 318,613 Current assets

Trade debts 4,602,582 4,060,687Contract work in progress 81,988 47,394Stores and stocks 933,701 855,619Advances, deposits, prepayments and other receivables 1,704,260 1,558,692Income tax refundable 265,994 246,298Cash and bank balances 244,877 2,014,726

7,833,402 8,783,416

29,482,224 30,349,551



CONDENSED CONSOLIDATED INTERIM PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended

September 30, September 30, 2010 2009 Note (Rupees in thousand)

Revenue 1,930,966 2,498,429

Cost of sales (excluding depreciation and amortisation) 1,332,459 2,148,465General and administration expenses 296,182 382,792Advertisement and marketing expenses 30,607 94,591Selling and distribution expenses 7,352 7,192Other income (118,523) (24,532)

Earnings/(loss) before finance cost,taxation, depreciation and amortisation 382,889 (110,079)

Less: Depreciation and amortisation 470,690 362,215 Finance cost 13 476,422 407,525 Finance income (3,414) (7,945)

Loss before taxation (560,809) (871,875)

Income tax charge (credit) (56,795) (287,634)


Non controlling interest in profit ofconsolidated subsidiary company 17,546 (17,501)


Loss per share Rs (0.79) Rs (1.44)




CONDENSED CONSOLIDATED INTERIM SATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended


Loss for the period (504,014) (584,240) Other comprehensive income - -

Total comprehensive income for the period (504,014) (584,240)




Three months ended


Cash flow from operating activities

Profit/(loss) before taxation (560,809) (871,875) Adjustment of non cash items:

Depreciation & amortisation 470,690 362,215 Finance cost 476,422 407,525 Deferred income (110,754) - (Profit)/loss on sale of operating assets - 19,179 Provision for doubtful debts - 4,925 Provision for employees’ accumulated absences 18,481 (19,459)

854,839 774,385

294,030 (97,490)

Changes in working capital:

(Increase) in trade debts (541,895) (2,590,752)(Increase) in contract work in progress (34,594) (3,405)(Increase) in stores and stocks (78,082) (316,579)(Increase) in advances, deposits, prepayments and other receivables (145,568) (1,330,374)(Decrease)/ Increase in trade and other payable (1,176,594) 3,684,431

(1,976,733) (556,679) Employees’ accumulated compensated absences paid (20,868) 23,977 Taxes paid (39,002) (14,083)

Cash flow from operating activities (1,742,573) (644,275)

Cash flow from investing activities

Tangible fixed assets additions (200,798) (787,663)Capital work in progress additions (including finance cost) (384,636) (662,084)Long term deposits (received/paid) 32,057 1,835 Dividend paid to non controlling interest by subsidiary company (149,940) -

Cash flow from investing activities (703,317) (1,447,912)

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010


CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Three months ended


Cash flow from financing activities

Long term finance received 2,326,400 3,309,163 Long term finance repaid - (1,661,663)Long term payable to supplier (repaid) - (1,015)Short term borrowings (repaid) (1,680,165) - Payable to supplier to be settled through long term finance received/(repaid) (433,798) (309,866)Obligations under finance leases (repaid) (333) 8,345 Long term deposits received 7,379 - Finance cost paid (685,384) (375,151)

Cash flow from financing activities (465,901) 969,813

(Decrease) in cash and cash equivalents (2,911,791) (1,122,374)Cash and cash equivalents at beginning of the period (909,455) (2,261,348)

Cash and cash equivalents at end of the period (3,821,246) (3,383,722)

Cash and cash equivalents comprise: Cash and bank balances 244,877 482,292 Short term running finance (4,066,123) (3,866,014)

(3,821,246) (3,383,722)




CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Share General Unappropriated capital reserve profit/(loss) Total

(Rupees in thousand)

Balance at July 1, 2009 2,087,373 392,908 2,107,630 4,587,911

Total comprehensive income for the period


- - (601,741) (601,741)

Balance at September 30, 2009 2,087,373 392,908 1,505,889 3,986,170

Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) -

Issue of 200,000,000 shares for cash 2,000,000 - - 2,000,000 on April 20, 2010

Shares issue cost (net of tax benefit) - - (79,247) (79,247)


Loss for the period - - (1,391,619) (1,391,619) Other comprehensive income - - - -

- - (1,391,619) (1,391,619)

Balance at June 30, 2010 6,174,746 134,681 (1,794,123) 4,515,304



- - (486,468) (486,468) Dividend paid to non controlling interest by a subsidiary company - - (149,940) (149,940)

Balance at September 30, 2010 6,174,746 134,681 (2,430,531) 3,878,896




SELECTED NOTES TO AND FORMING PART OF THE CONDENSEDCONSOLIDATED INTERIM FINANCIAL INFORMATION (UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

1. Legal status and operations The consolidated financial information include the financial information of Wateen Telecom Limited and its subsidiary

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

2. Basis of preparation These condensed interim financial information are unaudited and are being submitted to shareholders in accordance

with the requirement of Section 245 of the Companies Ordinance, 1984 and International Accounting Standard (IAS 34) ‘Interim Financial Reporting’. These condensed interim financial information do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the published financial statements of the Company for the year ended June 30, 2010.

3. Accounting policies The accounting policies adopted in the preparation of this condensed interim financial information are the same as

those applied in preparation of audited annual published financial statements of the Company for the year ended June 30, 2010.

4. Use of estimates and judgements The preparation of these condensed interim financial information in conformity with approved accounting standards

requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Estimates and judgements made by the management in the preparation of this condensed financial information are the same as those used in the preparation of the preceding annual published financial statements of the Company for the year ending June 30, 2011.

5. Taxation The provision for taxation for the three months ended September 30, 2010 has been provided on estimation basis.

September 30, June 30, 2010 2010 Note (Rupees in thousand)

6. Long term finance - secured Syndicate of banks 6.1 4,766,000 4,766,000 Export Credit Guarantee Department - (ECGD) 6.2 2,467,479 2,450,304 Standard Chartered Bank 6.3 40,500 54,000 Dubai Islamic Bank 6.4 477,000 477,000 Motorola Credit Corporation (MCC) 6.5 4,998,613 4,963,819 Term finance facility 6.6 508,830 -

Total 13,258,422 12,711,123

Unamortized transaction and other ancillary cost

Opening balance 299,464 - Additions during the period - 400,862 Amortisation for the period (22,301) (101,398)

(277,163) (299,464)

12,981,258 12,411,659 Amount due within next twelve months shown as current liability (1,991,174) (1,991,174) Amount Due after September 30, 2011 (10,481,255) (10,420,485)

508,830 -


6.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till September 30, 2010. The tenor of the facility is 5 years commencing from November 4, 2009. The principal is repayable in six unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, 2014. The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years.

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

6.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till September 30, 2010. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, 2009. The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company.

6.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, 2007. The rate of interest is six month average KIBOR + 1.25%.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million.

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

6.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million has been availed till September 30, 2010. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, 2014. The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola.

Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 25.5 million at September 30, 2010 are hedged through cross currency swap contract with SCB. In consideration, the Company pays the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The fair value of the contract at June 30, 2010 was Rs 4.656 million in favour of the bank, as determined by an independent valuer using the ‘Forward Model’, which has been recognised as a liability.

The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 58.5 million at September 30, 2010 are hedged through interest rate swap contract with SCB. In consideration, the company pays 3.05% on the notional amount. The fair value of the contract at June 30, 2010 was Rs 134.397 million in favour of the bank, as determined by an independent valuer using the ‘Forward Model’, which has been recognised as a liability.



6.6 During the period the Company has obtained long term finance facility from Standard Chartered bank amounting to Rs 291 million against letter of credit facilities availed till June 30, 2010.The loan is repayable in June 30, 2013. The loan is secured by ranking charge over current and fixed assets amounting to Rs 1,000 million.

During the period the Company has obtained long term finance facility from Standard Chartered bank amounting to Rs 217 million against Cross currency and Interest rate swap agreements till June 30, 2010.The loan is repayable in June 30, 2013. The loan is secured by ranking charge over current and fixed assets amounting to Rs 500 million.

6.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company was not able to make payment of MCC loan installment of Rs 428,000 thousand and interest of Rs 59,010 thousand due on June 30, 2010 and SCB loan installment of Rs 13,500 thousand and interest of Rs 3,775 thousand due on April 24, 2010. Further, certain ratios specified in the loan agreements have not been maintained at June 30, 2010. As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan instalments due as per loan agreements after September 30, 2011 amounting to Rs 10,481,255 thousand have been shown as current liability.

The Company is in the process of rescheduling of existing facilities, which would facilitate the Company to great extent in meeting its obligations/covenants under loan agreements. In addition, during the period Company has received USD 14 million from sponsors through Standby Letter of Credit (SBLC) to discharge its liabilities when due.

7. Long term finance from associated company - Unsecured

During the period the Company has obtained long term finance facility from associated Company Taavun (Pvt) Limited amounting to Rs 600 million of which Rs 550 million was availed till September 30, 2010. The tenure of the facility is two years. The rate of interest is six months KIBOR + 2.5% per annum.

8. Long term finance from Sponsors - Unsecured

During the period the Company has obtained loan from sponsors amounting to Rs 1.2 billion through Standby letter of Credit (SBLC). The rate of interest is six months LIBOR + 2.5% per annum.

9. Payable to supplier to be settled through long term finance

During the period the Company has repaid entire facility (June 30, 2009 Rs: 434 million). September 30, June 30, 2010 2010 (Rupees in thousand)

10. Contingencies and commitments

Claims against the Company not acknowledged as debt 264,038 264,038

Performance guarantees issued by banks in favour of the Company 1,476,816 1,476,816

Outstanding commitments for capital expenditure 1,799,824 1,799,824

Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 255,060 490,000




September 30, June 30, 2010 2010 (Rupees in thousand)

11. Operating assets

Opening net book value 17,053,114 14,062,017 Additions - owned 200,798 4,813,453 Disposals at net book value - (191,532) Depreciation charge (464,009) (1,630,824)

Closing net book value 16,789,903 17,053,114

12. Capital work in progress

Leasehold improvements 25,243 23,334 Line and wire 1,502,019 1,319,762 Network equipment 2,740,939 2,540,469

4,268,201 3,883,565

13. This includes exchange loss amounting to Rs 57 million (September 2009: Rs Nil) .

Three months ended


14. Related party transactions

Associated Companies Revenue from associated companies 479,594 592,789 Cost and expenses charged by associated companies 209,151 268,950 Payments made on behalf of associated companies 7,787 7,196 Contribution to Employees’ retirement funds 21,293 26,495

15. General

15.1 Date of authorisation

This condensed interim financial information has been authorised for circulation to the shareholders by the Board Of Directors of the Company on 21st October, 2010.



NOTES


wateen 1st qtr

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