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CONTENTS
Wateen Telecom Ltd. Annual Report 201601
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11
Corporate InformationDirectors’ ReportAttendance of the Board MembersAuditors' Report to the Members
FINANCIAL STATEMENTS Statement of Financial PositionIncome StatementStatement of Comprehensive IncomeStatement of Cash FlowsStatement of Changes in EquityNotes to and forming part of the Financial Statements
CONSOLIDATED FINANCIAL STATEMENTS Auditors' Report to the MembersConsolidated Statement of Financial PositionConsolidated Income StatementConsolidated Statement of Comprehensive IncomeConsolidated Statement of Cash FlowsConsolidated Statement of Changes in EquityConsolidated Notes to and forming part of the Consolidated Financial Statements
ANNEXURESPattern of ShareholdingCategories of ShareholdingNotice of Annual General MeetingForm of Proxy
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16
18
19
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70
71
114
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127
CORPORATE INFORMATION
Board of Directors
List of Board of Directors as at June 30, 2016H.H. NAHAYAN MABARAK AL NAHAYANADEEL KHALID BAJWARIZWAN ALI TIWANAABID HASANKHWAJA AHMAD HOSAIN
MANAGEMENT TEAMManagement as of June 30, 2016
RIZWAN ALI TIWANACHIEF EXECUTIVE OFFICER
MUHAMMAD AQIB ZULFIQARCHIEF FINANCIAL OFFICER & COMPANY SECRETARY
HASSAN HAYAT QURESHIHEAD OF LEGAL
ZAFAR IQBAL CH.VICE PRESIDENT HR & ADMIN
TAHIR HAMEEDCHIEF COMMERCIAL OFFICER- BROADBAND & MEDIA BUSINESS
ZAFAR MASOODDIRECTOR PROGRAM MANAGEMENT OFFICE
MUHAMMAD BILAL CH.DIRECTOR NETWORK ENGINEERING
JAUHER ALIDIRECTOR FIELD ENGINEERING
JUNAID SHEIKHCHIEF COMMERCIAL OFFICER- CARRIER & ENTERPRISE BUSINESS
AUDITORSA.F. Ferguson & Co.Chartered AccountantsPIA Building, 3rd Floor,49 - Blue Area, P.O. Box 3021,Islamabad
REGISTERED OFFICEMain Walton Road, Opp. Bab-e-Pakistan, Walton Cantt., Lahore.
PRESENT PLACE OF BUSINESSMain Walton Road, Opp. Bab-e-Pakistan, Walton Cantt., Lahore.
SHARE REGISTRARTHK Associates (Pvt.) Limited,2nd Floor, State Life Building No.3,Dr. Zia-ud-Din Ahmed Road, Karachi.
Wateen Telecom Ltd. 03 Annual Report 2016
Wateen Telecom Ltd. 04
BANKERSStandard Chartered Bank PakistanHabib Bank LimitedBank Al Habib LimitedNational Bank of PakistanPak Libya Holding Company LimitedSummit Bank LimitedAskari Bank LimitedSoneri Bank LimitedPak Brunei Investment Company LimitedThe Bank of KhyberBank Alfalah Ltd.Allied Bank of PakistanTameer Micro Finance BankNIB Bank LimitedThe Bank of PunjabDubai Islamic Bank LimitedMeezan BankUnited Bank LimitedWaseela Microfinance Bank Limited
LEGAL ADVISORSIjaz Ahmed & Associates
Suite No. 425, 4th Floor, Siddique Trade Centre,
72 Main Boulevard, Gulberg, Lahore, Pakistan
Annual Report 2016
DIRECTORS' REPORT
The Directors' of Wateen Telecom Ltd (the 'Company') are pleased to present the audited financial statements of the Company for the year ended June 30, 2016.
INDUSTRY OUTLOOK
Tele-density remained at around 70% for the FY16 (Source: PTA), however the increased demand for data saw
subscribers move to the newly launched 3G/4G data services. Almost 15 million broadband customers were
added by the industry (Source: PTA), which required the mobile operators to upgrade their existing infrastructure
and hence enhance their reliance on organizations like Wateen, to fulfill the surge in these demands. With respect
to the telecom industry, the business consolidation between Mobilink and Warid was one of the most significant
developments of FY16, which should help to leverage the scalability of the merged businesses and greatly benefit
the consumers.
With its ever increasing fiber network now covering over 22,000 kms across Pakistan, the Company has been
ideally positioned as a carrier's-carrier to provide quality infrastructure services to the telecom operators. As of
now, the Company has commercial arrangements with all Mobile Network Operators in the market, offering
various services to them to cater to their respective needs. Telenor Pakistan and CMPAK's optic fiber IRU
agreements contributed majorly to the improvement of results for the year's Optic Fibre Cable (OFC) business.
The Company remains a major connectivity partner for the financial sector as it continues to add new VPN
connections, managed capacity and telehousing locations. Demand for more robust services are on the increase
as the banking industry is modernizing its infrastructure to take advantage of the uptake in the Mobile Financial
Services market.
LDI has continued to be major contributor towards the business, through restored operations, after the annulment
of the ICH regime in 2015. New operations for GPON services for residential and SOHO customers were
launched during the year, adding VPN locations and new customers' contributions towards the overall revenue.
FINANCIAL PERFORMANCE
As fully explained in note 2(iii) to the financial statements, FY16 saw Wateen improving its revenues to PKR 6,957
million, as compared to PKR 4,980 million in FY15. This growth can be attributed to the benefits of the 3G/4G
proliferation in the previous year, as well as the need for more robust and reliable networks in the financial sector.
The year, therefore, saw Wateen record its highest EBIDTA post 2009, amounting to PKR 1,581 million in FY16
compared to PKR 853 million in FY15 and a much-improved reliance on cash-flow from operations PKR 1,245
million in FY16 as compared to PKR 406 million in FY15.
A significant growth was witnessed in OFC revenue, which closed at PKR 2,608 million in FY16, compared to PKR 1,223 million in FY15. This was mainly attributable to the delivery of optical dark fibre projects during the financial year to mobile operators to fulfil their 3G/4G requirements. Managed capacity selling grew by Rs 120 million as compared to previous year. Tele housing revenue for the year also showed growth of PKR 55 million as compared to previous year.
Wateen Telecom Ltd. 05
FY 16 FY 15
Revenue (PKR million) 6,957 4,980
EBITDA (PKR million) 1,581 853
Cash flow from Operations
(PKR million)
(Loss) per share – PKR (3.18) (9.16)
4061,245
Annual Report 2016
Wateen Telecom Ltd. 06
LDI revenues were slightly higher for FY16 at PKR 2,075 million, compared to PKR 1,998 million in FY15. The Company managed to successfully restore its arrangement with International Operators for incoming traffic in the country after the termination of ICH regime during FY 15.
VSAT revenues closed at PKR 458 million as compared to PKR 401 million in FY 15, amounting to a growth of
14%.
SIGNIFICANT DISCLOSURES
DEBT RESTRUCTURING
As fully explained in note 7 to the financial statements, certain condition precedents (CP) to the Second
Amendatory Agreement (SAA) signed during year ended June 30, 2015 are not yet fulfilled; however the
management of the Company is taking necessary steps to fulfill such CPs. Once the CPs of the SAA has been
fulfilled, the banks will formally issue letter to the Company which will complete the restructuring process.
As part of further restructuring with the Company's international lenders, the Deutsche Bank AG facility will be
novated from the Company to Warid Telecom International (WTI) and the facility from ECGD will also be
restructured in the same manner. The management is of view that restructuring will further improve the financial
position of the Company.
EARNINGS PER SHARE
Earnings per share are PKR (3.18) for FY 2016 as compared to PKR (9.16) in FY 2015.
DIVIDENDDue to net loss, the Company has been unable to declare any dividends.
FUTURE OUTLOOK
Pakistan is currently at an inflection point for digital services and the burgeoning demand for 3G/4G services will
continue to rise as operators expand their footprint for these services in new areas. Banks are also experiencing a
new phase of development for its IT infrastructure, as improved and more secure services will be required to meet
the demands of the future.
New services, such as digital set-top boxes, will provide much needed improved entertainment services, helping
reduce churn in the broadband market in the longer run. Fixed broadband market may yet see consolidations and
collaborations in the coming years, as most existing players do not have the required financial muscle on their own
to serve the needs in the suburban and semi-urban areas. With a growing startup culture in the country,
businesses will also demand and expect improved service quality, although their ability to pay for high quality
services remains challenging. Improved regulation from the government and implementation of the telecom
policy will also marginalize the cottage suppliers and put the impetus on the larger players to fill this gap.
BOARD AUDIT COMMITTEE
The Board Audit Committee of the Company has been established with the purpose of assisting the Board of
Directors in fulfilling their oversight responsibilities relating to internal controls, financial and accounting matter,
compliance and risk management practices.
COMPOSITION OF BOARD AUDIT COMMITTEE MEETINGS ATTENDED
ABID HASAN (Independent Director) Chairman 2KHWAJA AHMAD HOSAIN (Independent Director) Member 2
Annual Report 2016
CONSOLIDATED FINANCIAL STATEMENTSConsolidated financial statements of the Company are also included as part of this annual report.
AUDITORSThe present Auditors M/s A.F.Ferguson & Co, Chartered Accountants have completed their assignment for the year ended June 30, 2016 and shall retire on the conclusion of the Annual General Meeting. Audit Committed and the Board of Directors considered and recommended the appointment of M/s EY Ford Rhodes Chartered Accountants as Auditors of the Company for the year ending June 30, 2017.
WEB PRESENCEAnnual financial statements of the Company are also available on the Wateen website www.wateen.com for information of the shareholders and others.
ACKNOWLEDGEMENTSOn behalf of the Board of Directors of the Company, we would like to thank all our customers, suppliers, contractors, service providers, sponsors and shareholders for their continued support. We would like to commend the diligent and dedicated efforts of our employees across the country which has enabled the Company to successfully face the challenges of a highly competitive telecom environment. We would also like to express our special thanks to the Government of Pakistan and the Dhabi Group for their continued support and encouragement.
ATTENDANCE OF THE BOARD MEMBERS
Wateen Telecom Ltd. 07
S. No. Name of Directors Board Meetings
Attendance during 2015-16
1. H.H. NAHAYAN MABARAK AL NAHAYAN NIL
2. ADEEL KHALID BAJWA 1
3. RIZWAN ALI TIWANA 1
4. ABID HASAN 1
5. KHWAJA AHMAD HOSAIN 1
Annual Report 2016
Wateen Telecom Ltd. 11
AUDITORS’ REPORT TO THE MEMBERS
We have audited the annexed statement of financial position of Wateen Telecom Limited (the Company) as at June 30, 2016 and the related income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984.
(b) in our opinion:
(i) the statement of financial position and income statement together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the Company's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;
(c) in our opinion and to the best of our information and according to explanations given to us, the statement of financial position, income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2016 and of the loss, total comprehensive loss, its cash flows and changes in equity for the year then ended; and
(d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
We draw attention to note 2 (iii) to the financial statements related to management's assessment of going concern. Our opinion is not qualified in respect of this matter.
Chartered AccountantsIslamabad: November 29, 2016Engagement Partner: JehanZeb Amin
Annual Report 2016
STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2016
Wateen Telecom Ltd. 12
The annexed notes 1- 47 form an integral part of these financial statements.
2016 2015Note
SHARE CAPITAL AND RESERVES
Authorised capital 5 10,000,000 10,000,000
Issued, subscribed and paid-up capital 5 6,174,746 6,174,746
General reserve 6 134,681
134,681
Accumulated loss (35,675,906)
(33,703,119)
(29,366,479)
(27,393,692)NON-CURRENT LIABILITIES
Long term finance - secured 7 -
-
Long term portion of deferred mark up 8 -
-
Long term finance from shareholders - unsecured 9 14,041,457
13,334,608
Medium term finance from an associated company - unsecured 10 600,000
600,000
Long term deposits 11 35,680
35,680
14,677,137 13,970,288
DEFERRED LIABILITIES
Deferred government grants 12 2,567,744
3,233,958
CURRENT LIABILITIES
Current portion of long term finance - secured 7 16,865,384
16,624,016
Current portion of deferred mark up 8 3,924,871
2,946,219
Short term running finance - secured 13 765,512
787,135
Trade and other payables 14 4,807,944
5,786,267
Interest / markup accrued 15 2,425,718
1,766,089
28,789,430
27,909,726
CONTINGENCIES AND COMMITMENTS 16
16,667,832 17,720,280
(Rupees in thousand)
Annual Report 2016
______________ __________
Chief Executive Director
STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2016
Wateen Telecom Ltd. 13
2016 2015Note
NON-CURRENT ASSETS
Property, plant and equipment
Operating assets 17 9,167,410
8,519,310
Capital work in progress 18 1,028,815
1,506,592
Intangible assets 19 15,212
22,488
10,211,437
10,048,390
LONG TERM INVESTMENT IN SUBSIDIARY COMPANIES 20 137,661
137,661
DEFERRED INCOME TAX ASSET 21 -
-
LONG TERM LOAN TO SUBSIDIARY COMPANY 22 -
-
LONG TERM DEPOSITS, PREPAYMENTS AND TRADE DEBTS
Long term deposits 23 479,760 468,647
Long term prepayments 24 40,116
56,127
Long term trade debts 25 634,447
523,325
1,154,323
1,048,099
CURRENT ASSETS
Trade debts 25 1,703,037
1,981,463
Contract work in progress 26 61,884
230,725
Stores, spares and loose tools 27 378,537
501,890
Advances, deposits, prepayments and other receivables 28 2,227,143
2,936,128
Income tax refundable 548,309 746,093
Cash and bank balances 29 245,501 89,831
5,164,411
6,486,130
16,667,832 17,720,280
(Rupees in thousand)
Annual Report 2016
_____________
DirectorChief Executive
INCOME STATEMENTFOR THE YEAR ENDED JUNE 30, 2016
Wateen Telecom Ltd. 14
2016 2015 Note
Revenue 30 6,956,578 4,979,589
Cost of sales (excluding depreciation and amortisation) 31 3,957,949
2,810,867
General and administration expenses 32 1,360,070
1,339,148
Advertisement and marketing expenses 21,188
18,350
Selling and distribution expenses 91
11,702
Provisions 33 557,380
545,266
Other income 34 (521,312)
(598,692)
Earnings before interest, taxation, impairment
depreciation and amortisation 1,581,212
852,948
Less: Depreciation and amortisation 699,489 612,628 Finance cost 35 2,428,743 2,170,106 Provision for long term loan to and impairment of
investment in subsidiary company 36 153,243
3,895,065
Finance income 37 (182,022)
(219,117)
Loss before taxation from continuing operations (1,518,242)
(5,605,734)
Taxation 38 442,737
52,590
Loss for the year from continuing operations (1,960,979)
(5,658,324)
Loss for the year from discontinued operations - net 39 -
(22,131)
Loss for the year (1,960,979) (5,680,455)
The annexed notes 1- 47 form an integral part of these financial statements.
(Rupees in thousand)
Annual Report 2016
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2016
_____________Chief Executive Director
Wateen Telecom Ltd. Annual Report 201615
Note 2016 2015
Loss for the year (1,960,979)
(5,680,455)
Other comprehensive income/ (loss)
Items that will not be reclassified to income statement:
Remeasurement loss on staff retirementbenefit plan 43.4 (11,808)
(6,862)
Total comprehensive loss for the year (1,972,787)
(5,687,317)
Attributable to:
- Continuing operations (1,972,787)
(5,665,186)- Discontinued operations -
(22,131)
(1,972,787)
(5,687,317)
The annexed notes 1- 47 form an integral part of these financial statements.
(Rupees in thousand)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201616
2016 2015
CASH FLOW FROM OPERATING ACTIVITIES
Loss before taxation including discontinued operations (1,518,242) (5,627,660)
Adjustment of non cash items:
Depreciation and amortisation 699,489 612,628
Finance cost 2,428,743
2,170,106
Loss / (profit) on sale of operating assets 115,075
(9,297)
Cost associated with IRU of optic fiber cable 273,007
154,090
Deferred USF grant recognised during the year (143,561)
(178,230)
Provisions 557,380
545,266
Provision for long term loan to and impairment of
investment in subsidiary company 153,243
3,895,065
Provision of markup on advances to associated companies 60,388
53,193
Remeasurement loss on staff retirement benefit plan (11,808)
(6,862)
Stores and spares written off 16,599
-
Write back of liability (493,876)
(407,799)
3,654,679
6,828,160
2,136,437
1,200,500
Changes in working capital:
(Increase)/ decrease in trade debts (238,677)
461,161
Decrease/(Increase) in contract work in progress 168,841
(209,267)
Decrease in stores, spares and loose tools 21,523
83,186
Increase in advances, deposits,
prepayments and other receivables (52,428)
(21,360)
Decrease in trade and other payables (545,353)
(868,947)
(646,094) (555,227)
Income taxes paid (244,953) (239,268)
Cash flow from operating activities 1,245,391
406,005
CASH FLOW FROM INVESTING ACTIVITIES
Property, plant and equipment additions (1,280,853)
(1,483,942)
Proceeds from sale of property, plant and equipment 30,236
13,371
Long term loan to subsidiary company (155,243)
(543,035)
Long term deposits receivable paid (11,113)
(219,534)
Long term prepayments received 16,011 9,444
Cash flow from investing activities (1,400,963) (2,223,696)
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201617
DirectorChief Executive
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2016 2016 2015
(Rupees in thousand)
Long term finance from shareholders - unsecured received 315,000
2,194,375
Increase in long term finance - secured net -
1,875,753
Long term finance repaid (8,934)
(1,032,125)
Deferred grants received 112,204
222,110
Obligations under finance leases repaid -
(1,090)
Long term deposits repaid -
(21,430)
Finance cost paid-net (85,404)
(529,468)
Cash flow from financing activities 332,866
2,708,125
INCREASE IN CASH AND CASH EQUIVALENTS 177,293
890,434
Cash and cash equivalents at beginning of the year (697,304) (1,587,738)
CASH AND CASH EQUIVALENTS AT END OF THE YEAR (520,011) (697,304)
CASH AND CASH EQUIVALENTS COMPRISE:
Cash and bank balances 245,501 89,831
Short term running finance - secured (765,512) (787,135)
(520,011) (697,304)
The annexed notes 1- 47 form an integral part of these financial statements.
CASH FLOW FROM FINANCING ACTIVITIES
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2016
______________Chief Executive
Wateen Telecom Ltd. Annual Report 201618
______________Director
Share General Accumulated
capital reserve (loss) Total
Balance at July 1, 2014 6,174,746
134,681
(28,015,802)
(21,706,375)
Total comprehensive loss
for the yearLoss for the year - - (5,680,455) (5,680,455)
Other comprehensive loss -
-
(6,862)
(6,862)-
-
(5,687,317)
(5,687,317)
Balance at June 30, 2015 6,174,746
134,681
(33,703,119)
(27,393,692)
Total comprehensive loss
for the yearLoss for the year -
-
(1,960,979)
(1,960,979)
Other comprehensive loss -
-
(11,808)
(11,808)- - (1,972,787) (1,972,787)
Balance at June 30, 2016 6,174,746 134,681 (35,675,906) (29,366,479)
The annexed notes 1- 47 form an integral part of these financial statements.
---------------(Rupees in thousand)-----------
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201619
1. Legal status and operations
1.1 Disposal group classified as held for sale and discontinued operations
2. Basis of preparation
(i) Statement of compliance
(ii) Accounting convention
(iii) Management's assessment of going concern
Wateen Telecom Limited (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 Company
transferred its WLL license to wholly owned subsidiary Wateen WiMAX(Private) Limited (WWL) during
the year ended June 30, 2015. The legal status of the Company was changed from "Private Limited" to
"Public Limited" with effect from October 19, 2009 and thereafter, the Company was listed on Karachi,
Lahore and Islamabad Stock Exchanges. Subsequently, the Karachi, Lahore and Islamabad Stock
Exchanges accepted the request for delisting of the Company and accordingly the Company stood
delisted from these stock exchanges with effect from February 17, 2014. The registered office of the
Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, United Arab Emirates (WTI).
These financial statements have been prepared in accordance with the approved accounting standards
as applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified
under the Companies Ordinance 1984, provisions of and directives issued under the Companies
Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
These financial statements have been prepared on the basis of 'historical cost convention' except as
otherwise stated in the respective accounting policies notes.
These financial statements are the separate financial statements of the Company. In addition to these
separate financial statements, the Company also prepares consolidated financial statements.
In assessing the going concern status of the Company, management has carefully assessed a number
of factors covering the operational performance of the business, the ability to implement a significant
debt restructuring of the Company’s existing debts and the appetite of majority shareholder to continue
financial support. Based on the analysis of these, management is comfortable that the Company will be
able to continue as a going concern in the foreseeable future. Set out below are the key areas of
evidence that management has considered.
The Company along its wholly owned subsidiary WWL entered into a Master Transaction Agreement
(MTA) with Augere Holdings (Netherlands) B.V (Augere Holdings) on December 4, 2013 for
consolidationof their respective WiMAX businesses in Pakistan. In furtherance of the terms of MTA, the
shareholders of the Company in their Extra-Ordinary General Meeting held on October 3, 2014 approved
transfer of WiMAXrelated net assets as at July 10, 2014 to WWL for consideration other than cash in
accordance with the terms of share issuance agreement dated September 9, 2014 between the
Company and WWL. During the year ended June 30, 2015, the Company transferred the assets and
liabilities envisaged in the agreement to WWL. As a result, the Company’s operationswere dividedinto
Continuing and Discontinued operations in accordance with the requirements of InternationalFinancial
Reporting Standard (IFRS) 5, ‘Non-current assets held for sale and Discontinued operations’. WiMAX
operations were classified as Discontinued operations. Continued operation included the operations
other than WiMAX.
However, the subsidiary company WWL served a termination notice in prior year under the MTA which
was acknowledged and accepted by Pakistan subsidiary of Augere Holdings without prejudice to any
accrued rights and interests in the matter and also mentioned in note 16.4.
Wateen Telecom Ltd. Annual Report 201620
Operational performance
Debt restructuring
Ongoing Shareholder Support
(iv) Critical accounting estimates and judgments
(i)
(ii) Impairment of DSL assets (note 18)
(iii) Impairment of investment in and loan to subsidiary company (note 20 and 22)
(iv) Provision for doubtful debts (note 25)
During the year ended June 30, 2016 Company incurred the net loss after taxation Rs 1,961 million
(June 30, 2015: Rs 5,680 million) and had net current liabilitiesas at June 30, 2016 of Rs 23,625 million
(2015: 21,423 million) of which Rs 12,212 million (2015: Rs 14,064 million) relate to loan installments
and deferred markup of Rs 3,925 million (2015: Rs 2,946 million), due for repayment after June 30, 2017
but classified as current liabilities as mentioned in notes 7 & 8 respectively. Net current liabilities also
include markup of Rs 1,358 million (2015: Rs 923 million) on account of subordinated loan from
shareholders of the Company. It is important to note that during the past five years, the majority
shareholder has provided financial support in the form of long term finance amounting to Rs 14,041
million to meet the capital requirements of the Company (un availed finance facility from shareholder
amounts to USD 75 million at June 30, 2016) and management expects the support to continue.
Company’s operating performance reflected improvement during the year ended June 30, 2016 by
posting the earnings before interest, taxation, depreciation and amortization (EBITDA) of Rs 1,581
million (June 30, 2015: Rs 853 million) as a highest EBITDA after financial year 2008 - 2009. Further,
during the year, the Company has been able to generate positive cashflows from operations for an
amount of Rs 1,245 million (2015: Rs 406 million).
The Company's majority shareholder WTI continues to providemanagement with comfort with regards
to its ongoing support and this is evident from further loan of USD 3 million extended to the Company
during the year ended June 30, 2016 (year ended June 30, 2015: USD 10 million) for the Company.
The preparation of financial statements in conformity with approved accounting standards requires the
use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. Estimates and judgments are continually
evaluatedand are based on historic experience, includingexpectationsof future events that are believed
to be reasonable under the circumstances. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the financial statements, are
as follows:
As part of further restructuring the Company is negotiating with lenders whereby it is proposed that
Deutsche Bank AG facility will be novated from company to WTI and facility from ECGD will also be
restructured. The management is of the view that above restructuring will further improve the financial
position of the Company.
Operating assets - estimated useful life of property, plant and equipment (note 17)
In addition, WTI guarantees the local Syndicate Finance Facility, and certain sponsors guarantees are
also provided to the foreign debt holders. The continued support of WTI including the guarantees and
financial assistance from WTI will enable the Company to continue its operations and fulfill its financial
obligations for a minimum period of twelve months from the year end. Further, the Board and
management is confident that WTI will continue to provide strong support to the Company.
Keeping in view the foregoing and other related operational facts, the management believes that the
Company is able to operate on a going concern basis in the foreseeable future and these financial
statements have been prepared reflecting this assumption.
Wateen Telecom Ltd. Annual Report 201621
(v) Provision for obsolete stores (note 27)
(vi) Provision for doubtful advances and other receivables (note 28)
(vii) Provision for current and deferred income tax (note 21)
(viii) Employees' retirement benefits (note 43)
(ix) Deferred government grants (note 12)
3. Adoption of new and revised standards and interpretations
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations (Amendments) January 1, 2016
IFRS 7 Financial Instruments: Disclosures (Amendments) January 1, 2016
IFRS 11 Joint Arrangements (Amendments) January 1, 2017
IFRS 14 Regulatory Deferral Accounts January 1, 2016
IFRS 15 Revenue from Contracts with Customers January 1, 2018
IFRS 16 Leases January 1, 2019
IAS 1 Presentation of Financial Statements (Amendments) January 1, 2016
IAS 7 Statement of Cash Flows (Amendments) January 1, 2017
IAS 12 Income Taxes (Amendments) January 1, 2017
IAS 16 Property, Plant and Equipment (Amendments) January 1, 2016
IAS 19 Employee Benefits (Amendments) January 1, 2016
IAS 27 Separate Financial Statements (Amendments) January 1, 2016
IAS 28 Investment in Associates and Joint Ventures (Amendments) January 1, 2016
IAS 34 Interim Financial Reporting (Amendments) January 1, 2016
IAS 38 Intangible Assets (Amendments) January 1, 2016
IAS 41 Agriculture (Amendments) January 1, 2016
IFRS 1 First-time adoption of International Financial Reporting Standards
IFRS 9 Financial instruments
IFRIC 4 Determining whether an arrangement contains lease
IFRIC 12 Service concession arrangements
Further, the following new standards and interpretations have been issued by the International
Accounting Standards Board (IASB), which have not been notifiedupto June 30, 2016 by the Securities
and Exchange Commission of Pakistan, for the purpose of their applicability in Pakistan:
Standards, amendments and interpretations to existing standards, that are not yet effective and have
not been early adopted by Company:
The following interpretations issued by the IASB have been waived off by SECP effective January 16,
2012:
The management anticipates that the adoptionof the above standards, amendments and interpretations
in future periods, will have no material impact on the financial statements other than in
presentation/disclosures.
Effective date (annual periods
beginning on or after)
Wateen Telecom Ltd. Annual Report 201622
4. Summary of significant accounting policies
4.1 Employees' retirement benefits
(i) Upto February28, 2015, the Company provided gratuity to all permanent employees in accordance with
the rules of the Company. Effective March 1, 2015, the benefit has been discontinuedand amount due
to employees as at February 28, 2015 will be payable at the time of final settlement. Actuarialvaluation
is conducted periodically using "Projected Unit Credit Method" and latest valuation was carried out at
June 30, 2016. The details of actuarial valuation are given in note 43.
(ii)
4.2 Taxation
Current
Deferred
4.3 Government grant
Contributory provident fund for all permanent employees of the Company is in place. Contribution for the
year amounted to Rs 28.421 million (2015: Rs 27.332 million) is charged to income for the year.
Government grants are recognized at their fair values and included in non-current liabilities, as deferred
income, when there is reasonable assurance that the grants will be received and the Company will be
able to comply with the conditions associated with the grants.
The tax expense for the year comprises of current and deferred income tax, and is recognized in
income for the year, except to the extent that it relates to items recognized directly in other
comprehensive income, in which case the related tax is also recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position. Management periodically evaluates positions
taken in tax returns, with respect to situations in which applicable tax regulation is subject to
interpretation,and establishes provisions, where appropriate, on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax liabilities are recognized for all taxable temporary differences and deferred tax
assets are recognized to the extent that it is probable that taxable profits will be availableagainst which
the deductible temporary differences, unused tax losses and tax credits can be utilized.
Deferred income tax is calculated at the rates that are expected to apply to the period when the
differences reverse, and the tax rates that have been enacted, or substantively enacted, at the date of
the statement of financial position.
Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary
differences arising between the carrying amounts of assets and liabilitiesin the financial statements and
the corresponding tax base used in the computation of taxable profit.
Actuarial gains and losses (remeasurement gains / losses) on employees’ retirement benefit plans are
recognised immediately in other comprehensive income and past service cost is recognized in profit
and loss when they occur. Calculation of gratuity requires assumptions to be made of future outcomes
which mainly includes increase in remuneration, expected long-term return on plan assets and the
discount rate used to convert future cash flows to current values. Calculations are sensitive to changes
in the underlying assumptions.
Grants that compensate the Company for expenses incurred, are recognized on a systematic basis in
the income for the year in which the related expenses are recognized. Grants that compensate the
Company for the cost of an asset are recognized in income on a systematic basis over the expected
useful life of the related asset.
Wateen Telecom Ltd. Annual Report 201623
4.4 Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortized cost; any difference between proceeds (net of transaction costs) and
the redemption value is recognised in the income statement over the period of the borrowings using
effective interest method.
Borrowing costs incurred that are directly attributable to the acquisition, construction or production of
qualifyingassets are capitalized as part of the cost of that asset. All other borrowing costs are charged
to income for the year. Qualifying assets are assets that necessarily takes substantial period of time to
get ready for their extended use.
4.5 Trade and other payables
4.6 Provisions
4.7 Contingent liabilities
4.8 Dividend distribution
4.9 Property, plant and equipment
Depreciationon operatingassets is calculated, using the straight line method, to allocate their cost over
their estimated useful lives, at the rates mentioned in note 17.
A contingent liability is disclosed when the Company has a possible obligation as a result of past events,
the existence of which will be confirmed only by the occurrence or non-occurrence, of one or more
uncertain future events, not wholly within the control of the Company; or when the Company has a
present legal or constructive obligation, that arises from past events, but it is not probable that an
outflow of resources embodying economic benefits will be required to settle the obligation, or the
amount of the obligation cannot be measured with sufficient reliability.
The distribution of the final dividend, to the Company’s shareholders, is recognized as a liability in the
financial statements in the period in which the dividend is approvedby the Company’s shareholders; the
distribution of the interim dividend is recognized in the period in which it is declared by the Board of
Directors.
Property, plant and equipment, except freehold land and capital work-in-progress, is stated at cost less
accumulated depreciation and any identified impairment losses; freehold land is stated at cost less
identified impairment losses, if any. Cost includes expenditure, related overheads, mark-up and
borrowing costs (note 4.4) that are directly attributable to the acquisition of the asset.
Subsequentcosts, if reliablymeasurable, are included in the asset’s carrying amount, or recognized as
a separate asset as appropriate,only when it is probable that future economic benefits associated with
the cost will flow to the Company. The carrying amount of any replaced parts as well as other repair and
maintenance costs, are charged to income during the period in which they are incurred.
Liabilities for creditors and other amounts payable including payable to related parties are carried at
cost, which is the fair value of the consideration to be paid in the future for the goods and / or services
received, whether or not billed to the Company.
Provisions are recognized when the Company has a present legal or constructive obligationas a result
of past events, it is probablethat an outflow of resources embodyingeconomic benefits will be required
to settle the obligationand a reliable estimate of the amount can be made. Provisions are reviewed at
each statement of financial position date and are adjusted to reflect the current best estimate.
Wateen Telecom Ltd. Annual Report 201624
The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and
the carrying amount of the asset, is recognized in profit or loss for the year.
Depreciation on additions to property, plant and equipment, is charged from the month in which the
relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the
asset is disposed off. Impairment loss, if any, or its reversal, is also charged to income for the year.
Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.
4.10 Intangible assets
(i) Licenses
(ii) Computer software
4.11 Impairment of non-financial assets
4.12 Non current assets/disposal group held for sale
The amortization on licenses acquired during the year, is charged from the month in which a license is
acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license.
The amortization on computer software acquired during the year is charged from the month in which the
software is acquired or capitalized,while no amortization is charged for the month in which the software
is disposed off.
These are carried at cost less accumulated amortization and any identified impairment losses.
Amortization is calculated using the straight line method from the date of commencement of
commercial operations, to allocate the cost of the license over its estimated useful life specified in note
19, and is charged to income for the year.
Assets that have an indefiniteuseful life, for example freehold land, are not subject to depreciationand
are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed
for impairment on the date of the statement of financial position, or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognized, equal to the amount by which the asset’s carrying amount exceeds its recoverableamount.
An asset’s recoverable amount is the higher of its fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows. Non financial assets that suffered an impairment, are reviewed for
possible reversal of the impairment at each statement of financial position date. Reversals of the
impairment loss are restricted to the extent that asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciationor amortization, if no impairment loss has
been recognized. An impairment loss, or the reversal of an impairment loss, are both recognized in the
income statement.
Non-currentassets are classified as assets held-for-salewhen their carrying amount is to be recovered
principally through a sale transaction and sale is considered highly probable. They are stated at the
lower of carrying amount and fair value less cost to sell.
These are carried at cost less accumulated amortisation and any identified impairment losses.
Amortisation is calculated using the straight line method, to allocate the cost of the software over its
estimated useful life, and is charged in income statement. Costs associated with maintainingcomputer
software, are recognised as an expense as and when incurred.
Wateen Telecom Ltd. Annual Report 201625
4.13 Investment in subsidiaries
4.14 Right of way charges
Right of way charges paid to local governments, concerned authorities and land owners for access of
land are carried at cost less amortisation. Amortisation is provided to write off the cost on straight line
basis over the period of right of way.
Investments in subsidiaries, where the Company has control or significant influence, are measured at
cost in the Company’s financial statements. The profits and losses of subsidiaries are carried in the
financial statements of the respective subsidiaries, and are not dealt within the financial statements of
the Company, except to the extent of dividends declared by these subsidiaries.
4.15 Trade debts and other receivables
4.16 Stores, spares and loose tools
4.17 Cash and cash equivalents
4.18 Revenue recognition
4.19 Functional and presentation currency
Stores, spares and loose tools are carried at cost less allowance for obsolescence. Cost is determined
on weighted average cost formula basis. Items in transit are valued at cost, comprising invoice values
and other related charges incurred up to the date of the statement of financial position.
Revenue from prepaid cards is recognised as credit is used, unutilised credit is carried in statement of
financial position as unearned revenue in trade and other payables.
Revenue is recognised as related services are rendered.
Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash
and cash equivalents comprise cash in hand and bank and short term highly liquid investments with
original maturities of three months or less, and that are readily convertible to known amounts of cash,
and subject to an insignificant risk of changes in value.
Revenue from granting of Indefeasible Right of Use (IRU) of dark fiber upto 20 years or more is
recognised at the time of delivery and acceptance by the customer.
Interest income is recognised using the effective yield method.
Dividend income is recognised when the right to receive payment is established.
Items included in the financial statements of the Company are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). These financial
statements are presented in Pakistan Rupees (Rs), which is the Company’s functional currency.
Trade debts and other receivables are carried at their original invoice amounts, less any estimates
made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are
written off when identified.
Revenue from sale of equipment is recognised when the significant risks and rewards of ownership are
transferred to the buyer.
Wateen Telecom Ltd. Annual Report 201626
4.20 Foreign currency transactions and translations
4.21 Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument and derecognized when the Company loses control of the contractual
rights that comprise the financial assets and in case of financial liabilities when the obligationspecified
in the contract is discharged, cancelled or expires. All financial assets and liabilities are initially
recognized at fair value plus transaction costs other than financial assets and liabilities carried at fair
value through profit or loss. Financial assets and liabilities carried at fair value through profit or loss are
initially recognized at fair value, and transaction costs are charged to income for the year. These are
subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on
derecognition of financial assets and financial liabilities is included in profit or loss for the year.
Foreign currency transactions are translated into the functional currency, using the exchange rates
prevailing on the date of the transaction. Monetary assets and liabilities, denominated in foreign
currencies, are translated into the functional currency using the exchange rate prevailingon the date of
the statement of financial position. Foreign exchange gains and losses resulting from the settlement of
such transactions, and from the translation of monetary items at year end exchangerates, are charged
to income for the year.
(a) Financial assets
Classification and subsequent measurement
(i) Fair value through profit and loss
(ii) Held to maturity
(iii) Loans and receivables
Financial assets at fair value through profit or loss are carried in the statement of financialposition
at their fair value, with changes therein recognized in the income for the year. Assets in this
category are classified as current assets.
Financial assets at fair value through profit or loss, include financial assets held for trading and
financial assets, designated upon initial recognition, at fair value through profit or loss.
Loans and receivables are non derivative financial assets with fixed or determinable payments, that
are not quoted in an active market. After initial measurement, these financialassets are measured
at amortized cost, using the effective interest rate method, less impairment, if any.
Non derivative financial assets with fixed or determinable payments and fixed maturities are
classified as held-to-maturity when the Company has the positive intentionand ability to hold these
assets to maturity. After initial measurement, held-to-maturity investments are measured at
amortized cost using the effective interest method, less impairment, if any.
The Company’s loans and receivables comprise 'Long term deposits', ‘Trade debts’, 'Contract
work in progress', ‘Advances, deposits and other receivables,' ‘Income tax refundable’and ‘Bank
balances’.
The Company classifies its financial assets in the following categories: fair value through profit or loss,
held-to-maturity investments, loans and receivables and available-for-sale financial assets. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financialassets at initial recognition. Regular purchases and sales of
financial assets are recognized on the trade date - the date on which the Company commits to
purchase or sell the asset.
Wateen Telecom Ltd. Annual Report 201627
(iv) Available for sale
Impairment
The Company assesses at the end of each reporting period whether there is an objective evidence that
a financialasset or group of financialassets is impaired as a result of one or more events that occurred
after the initial recognition of the asset (a ‘loss event’), and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
After initial measurement, available-for-sale financial assets are measured at fair value, with
unrealized gains or losses recognized as other comprehensive income, until the investment is
derecognized, at which time the cumulative gain or loss is recognized in income for the year.
Available-for-sale financial assets are non-derivatives, that are either designatedin this category, or
not classified in any of the other categories. These are included in non current assets, unless
management intends to dispose them off within twelve months of the date of the statement of
financial position.
(b) Financial liabilities
Initial recognition and measurement
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
(i)
(ii)
(c) Offsetting of financial assets and liabilities
4.22 Derivative financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position, when there is a legally enforceable right to set off the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Legally
enforceable right must not be contingenton future events and must be enforceable in normal course of
business and in the event of default, insolvency or bankruptcy of the Company or the counter party.
After initial recognition, other financial liabilities which are interest bearing are subsequently
measured at amortized cost, using the effective interest rate method.
Other financial liabilities
Derivates are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured at fair value. Changes in fair value of derivates that are designated and qualify
as fair value hedges are recorded in income statement togetherwith any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Financial liabilities at fair value through profit or loss, include financial liabilities held-for-trading and
financial liabilities designated upon initial recognition as being at fair value through profit or loss.
Financial liabilities at fair value through profit or loss are carried in the statement of financial
position at their fair value, with changes therein recognized in the income for the year.
The Company classifies its financial liabilities in the followingcategories: fair value through profit or loss
and other financial liabilities.The Company determines the classification of its financial liabilities at initial
recognition. All financial liabilities are recognized initiallyat fair value and, in the case of other financial
liabilities, also include directly attributable transaction costs.
Fair value through profit or loss
Wateen Telecom Ltd. Annual Report 201628
Number of Rs Number of Rs
5. Share capital Shares ( '000) Shares ( '000)
Authorised share capital:
Ordinary shares of Rs 10 each 1,000,000,000 10,000,000 1,000,000,000 10,000,000
Issued, subscribed and paid up
share capital:
Shares issued for cash
Ordinary shares of Rs 10 each 408,737,310
4,087,373
408,737,310
4,087,373
Shares issued as fully paid
bonus shares of Rs 10 each 208,737,310
2,087,373
208,737,310
2,087,373
617,474,620
6,174,746
617,474,620
6,174,746
5.1
6. General reserve
Note
2016 2015
7. Long term finance - secured
Syndicate of banks 7.1 7,789,921
7,796,452
Export Credit Guarantee Department (ECGD) 7.2 2,680,329
2,603,529
Dubai Islamic Bank (DIB) 7.3 335,224
335,627
Deutsche Bank AG 7.4 5,024,298
4,880,335
Loan guaranteed on behalf of WWL 7.5 1,109,000
1,111,000
Total 16,938,772
16,726,943
Unamortised transaction and other ancillary cost
Opening balance 102,927
105,435
Additions during the year -
50,200
Amortisation for the year (29,540) (52,708)
(73,387) (102,927)
16,865,384 16,624,016
Less: Amount shown as current liability
Amount payable within next twelve months (4,653,075) (2,560,463)
Amount due after June 30, 2017 (12,212,309) (14,063,553)
7.6 (16,865,384) (16,624,016)
The Company is to place at least 10% of the profits in the general reserve account till it reaches 50% of the
issued, subscribed and paid up capital of the company.
June 30, 2016 June 30, 2015
The parent company, Warid Telecom International LLC, U.A.Eheld 595,393,361 (2015: 588,577,066) ordinary
shares at year end.
(Rupees in thousand)
- -
Wateen Telecom Ltd. Annual Report 201629
7.1
7.2
7.3
The Company obtained long term finance facility amounting to USD 42 million (2015: USD 42 million) from
ECGD UK, of which USD 35 million (2015: USD 35 million) was availed till June 30, 2016. During the year
ended June 30, 2012, the Company and ECGD UK signed an agreement to restructure the terms of loan
agreement including repayment schedule. Amount outstanding at June 30, 2016 was USD 25.60 million
(2015: 25.60 million). The principal is repayable in ten semi annual installments. The first such installment
was due on July 1, 2014 and subsequentlyevery six months until January 1, 2019. The rate of mark-up is six
month LIBOR + 1.5% (interest rate) per annum till June 30, 2011 and six month LIBOR + 1.9% (interest rate)
for the remaining period. If the amount of installment payable and/or interest payable is not paid on the due
date, the Company shall pay interest on such amount the interest rate + 2% per annum.
The Company obtained Ijarah finance facility of Rs 530 million (2015: Rs 530 million) from DIB. During the
year ended June 30, 2015, the Company and DIB signed an agreement to restructure the terms of the Ijarah
finance facility. The principal is now repayable in twenty unequal six-monthly instalments. The first such
instalment was due on April 1, 2015 and subsequently every six months until October 1, 2024. The rate of
mark-up is 12% per annum from commencement date which shall stand deferred till payment of the final
installment of principal portion (deferred payment) as referred to in note 8.2. Earlier, principal was repayable
in ten unequalsemi annual installments with first such installment due on July 1, 2014 and it carried a markup
of 6 months KIBOR per annum till December 31, 2013 and 6 months KIBOR + 2.5% per annum for remaining
period.
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 and assets which are subject to lien in favour of USF), a mortgage by deposit of title deeds in respect of
immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and
personal guarantees by three Sponsors of the Company.
As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above finance
facility.
The Company obtained syndicate term finance facility from a syndicate of banks with Standard Chartered
Bank Limited (SCB), Habib Bank Limited (HBL), Bank AI-Habib Limited (BAHL)and National Bank of Pakistan
(NBP), being lead arrangers to finance the capital requirements of the Company. During the year ended June
30, 2015, the Company and the Syndicate of Banks signed second amendatory agreement to restructure
Syndicate term finance facility and the short term running finance from Bank Alfalah Limited (BAF) running
finance facility-I. All the finance facilities have been fully availed by the Company till June 30, 2016. The
principal is now repayable in twenty unequal six monthly instalments. The first such instalment was due on
April 1, 2015 and subsequently every six months until October 1, 2024. The Company is required to
mandatorily prepay the outstanding amount out of net cash proceeds from sale of WWL or any excess cash
generated by the Company after taking into account a minimum cash balance, capital expenditure and
working capital requirements in each financial year. The rate of mark-up is 12% per annum from July 1, 2013
which shall stand deferred till payment of the final installment of principal portion (deferred payment) as
referred to in note 8.1. Earlier, principal was repayable in ten unequal semi annual installments with first
installment due on July 1, 2014 and it carried a mark up of 6 months KIBOR per annum till December 31, 2013and 6 months KIBOR +2.5% per annum for remaining period.
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, a mortgage by deposit of title deeds in respect of
immoveable properties of the Company, pledge over fully paid ordinary shares (entire present and future)
owned by the Company in WWL and owned by WTI in the capital of the Company, a guarantee from WTI for
amounts payable under second amendatory agreement and undertaking from shareholders from WTI for
retaining the shareholding and control of WTI. Syndicate is entitledto designateone nominee to be appointed
as director in the Board of directors of the Company.
Certain conditions precedent to the second amendatory agreement are not yet fulfilled, management of the
Company is takingsteps to fulfill those conditions. Once conditions precedent to restructured agreements are
fulfilled, a formal letter shall be issued to the Company by the Syndicate of aforesaid Banks, which shall
complete the restructuring process.
Wateen Telecom Ltd. Annual Report 201630
7.4
7.5
7.6
The facility is secured by way of hypothecation over all present and future moveable assets (including all
current assets) and present and future current/ fixed assets (movable and immoveable), pledge over fully paid
ordinary shares (entire present and future) owned by the Company in WWL and owned by WTI in the capital
of the Company, a corporate guarantee from WTI and undertakingfrom shareholders from WTI for retaining
the shareholding and control of WTI.
The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari passu
with unsecured and unsubordinated creditors.
Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the Company
is taking steps to fulfill those conditions. Once conditions precedent to restructured agreement are fulfilled,
bank will formally issue letter to the Company which will complete the restructuring process.
The Company obtained term finance facility of USD 65 million (2015: USD 65 million) from MotorolaCredit
Corporation (MCC) of which USD 64 million (2015: USD 64 million) has been availed till June 30, 2016. On
August 19, 2011, MCC has transferred all of its rights, title benefits and interests in the original facility
agreement to Deutsche Bank AG as lender, effective August 19, 2011. During the year ended June 30, 2012,
the Company and Deutsche Bank AG signed an agreement to restructure the terms of loan agreement.
Amount outstanding at June 30, 2016 is USD 48 million (2015: USD 48 million). The principal is repayablein
ten semi annual installments commencing from July 1, 2014 until and including the final maturity date which is
December 31, 2019. The rate of mark-up is six month LIBOR + 1% per annum provided that rate shall be
capped at 2.5% per annum. If the Company fails to pay any amount payable on its due date, interest shall
accrue on the unpaid sum from the due date up to the date of actual payment at a rate which is 2% higher
than the rate of interest in effect thereon at the time of such default until the end of the then current interest
period. Thereafter, for each successive interest period, 2% above the six-month LIBOR plus margin provided
the Company is in breach of its payment obligations hereof.
The Company is required to make payments of loan installments and markup of long term finance on due
dates. The Company has not paid loan installments of ECGD amounting to USD 8.713 million and loan
installments of Deutsche Bank AG amounting to USD 16.334 million due till June 30, 2016. Further, the
Company was not able to make payments of markup to ECGD and Deutsche Bank AG of Rs 59.160 million
and Rs 91.81 million on due dates. Furthermore, certain applicable ratios specified in the above loan
agreements have not been maintained at June 30, 2016 and latest restructured loan agreements have also
not yet become effective as certain conditions precedent to the restructured agreements are not yet fulfilled
and the Company is obliged to prepay the outstanding amounts in certain events mentioned therein.
Accordingly, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and
payable. In terms of provisions of International Accounting Standard on Presentation of financial statements
(IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least
twelve months after the statement of financial position date, all liabilities under these loan agreements are
required to be classified as current liabilities. Based on above, loan installments for an amount of Rs 12,212
million due after June 30, 2017 have been shown as current liability.
As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above finance
facility.
As explained in note 7.1, the Company transferred a portion of outstanding principal amount under Syndicate
Term Finance Agreement to its wholly owned subsidiary WWL. Under the terms of agreement, the Company
guaranteed the amount on behalf of WWL and the amount guaranteed has been recognized by the Company
due to curtailed scale of operations of WWL, negative value in use of WWL, loss of the year, termination of
MTA and existence of no realistic basis of preparation of financial statements of WWL on a going concern
basis.
8.1
i)
ii)
iii)
iv)
8.2
i)
ii)
8.3
9. Long term finance from shareholders - unsecured
Note
2016 2015
Facility 1 9.1 2,515,418 2,443,343
Facility 2 9.2 11,526,040 10,891,265
14,041,457 13,334,608
Deferred payment of Rs 1,023 million pertainingto the period of January 1, 2011 till June 30, 2013
shall be paid in seven unequal six-monthly installments starting from April 1, 2025 and ending on
April 1, 2028;
Deferred payment at 8% per annum for the period from July 1, 2013 till March 31, 2014 shall be
paid in four unequal six-monthly installments starting from April 1, 2028 and endingon October 1,
2029;
Deferred payment at 5% per annum for the period from April 1, 2014 upto final due date under
second amendatory agreement shall be paid in two unequal installments due on October 1, 2029
and April 1, 2030; and
After payments of all amounts above, the deferred payment at 4% per annum for the period of July
1, 2013 till March 31, 2014 and at 7% per annum for the period from April 1, 2014 upto final date
under second amendatory agreement shall be payable as a bullet payment in the year 2030
subject to availability of the excess cash generated by the Company.
Markup calculated at 5%per annum for theperiod from commencement date till October 1, 2024
shall be paid in eleven six-monthly installments starting from April 1, 2025 and ending on April 1,
2030; and Markupat 7% per annum shall be paid as a bullet payment in the year 2030 subject to availability
of the excess cash generated by the Company.
(Rupees in thousand)
As explained in note 7.1, the markup (deferred payments) has been restructured under the second
amendatory agreement. The deferred payments are payable in following order of priority and
sequence:
As explained in note 7.3, the markup (deferred payments) has been restructured. The markup is
payable in the following sequence:
As explained in note 7.6, the entire amount has been shown as current liability.
8. Long term portion of deferred mark up
Note 2016 2015
Syndicate of banks 8.1 3,831,455 2,893,165
Dubai Islamic Bank (DIB) 8.2 93,416 53,054
Total 3,924,871 2,946,219
Less: Amount shown as current liability
Amount payable within next twelve months - -
Amount due after June 30, 2017 (3,924,871)
(2,946,219)
8.3 (3,924,871)
(2,946,219)
-
-
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201631
Wateen Telecom Ltd. Annual Report 201632
9.1 The Company obtained long term finance from a shareholder amounting to USD 24 million (2015:
USD 24 million). This loan is subordinated to all secured finance facilities availed by the Company.
This loan is repayable within 30 days of the expiry of a period of five years from the last date the lender
has disbursed the loans, which shall be on or about January 29, 2015. The rate of mark-up is 6
months LIBOR + 1.5% with 24 months payment grace period payable half yearly. Alternatively loans
may be converted into equity by way of issuance of the Company's ordinary shares at the option of
the lender at any time prior to, at or after the repayment date on the best possible terms but subject to
fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be
affected at such price per ordinary share of the Company as shall be calculated after taking into
account the average share price of the last 30 calendar days, counted backwards from the
conversion request date, provided that such conversion is permissible under the applicable laws of
Pakistan.
9.2 The Company obtained long term finance facility from a shareholder amounting to USD 185 million
(2015: USD 185 million) of which USD 110 million (2015: USD 107 million) has been availed at June
30, 2016. The rate of mark-up is 6 months LIBOR + 1.5% payable half yearly. The Company shall
repay the loan in full in five equal annual installments from June 30, 2014 with final maturity date of
June 30, 2018. Alternatively the lender shall also have the option to instruct the Company any time
during the term of this agreement to convert the remaining unpaidamount of the loan and the interest
in part or in its entirety into equity by way of issuance of ordinaryshares of the Company in favour of
the lender in compliance with all applicable laws of Pakistan.
Upon the request of the Company for conversion of the loan and the interest into equity, the lender and
the Company shall, with mutual consent, appoint an independent auditor to determine the fair market
value per share of the borrower prevailingat the time of such request. lf the lender agrees to the price
per share as determined by the independent auditor then the loan and the interest shall be converted
into equity at the rate per share decided by the independent auditor. In case the lender, in its sole
discretion, disagrees with the price per share as determined by the independent auditor then the
request for conversion shall stand revoked and the loan shall subsist.
This loan together with accrued interest will have at all times priority over all unsecured debts of the
Company except as providedunder Law. In the event the Company defaults on its financial loans or in
case Warid Telecom International LLC, Abu Dhabi, UAE, no longer remains the holding company of
the Company and sells its 100% shares to any other person or party or relinquishes the control of its
management then, unless otherwise agreed in writing by the lender, the entire loan together with the
accrued interest will become due and payable for with and shall be paid within 15 working days of the
event of default or decision of the Board of Directors of the Company accepting such a change in the
shareholding as the case may be, and until repaid in full, the loan shall immediately become part of
financial loans, rankingpari passu therewith subject to the consent of the Company's existing financial
loan providers. As the loan is subordinated to all secured finance facilities availed by the Company,
the entire amount of loan has been classified as non current liability.
The loan together with the interest shall have priority over all other unsecured debts of the Company.
Further, after the execution of this agreement, the Company shall not avail any other loan or funding
facility from any other source without prior written consent of the lender. The Company undertakes
that it shall not declare dividends,make any distributions or pay any other amount to its shareholders
unless the repayment of the loan and the interest in full to the lender. The rights of the lender in
respect of the loan are subordinated to any indebtedness of the Company to any secured lendingby
any financial institution in any way, both present and future notwithstanding whether such
indebtedness is recoverable by process of law or is conditional or unconditional.Furthermore, in the
event that insolvency proceedings are initiated against the Company or that it is unable to pay its
Financial Loans as they fall due or if the Company has proposed any composition, assignment or
arrangement with respect to its Financial Loans, the obligationto repay the outstanding amount of the
loan shall be subordinated to the Financial Loans but will have priorityover all other unsecured debts
of the Company. As the loan is subordinatedto all secured finance facilities availedby the Company,
the entire amount of loan has been classified as non current liability.
Wateen Telecom Ltd. Annual Report 201633
10. Medium term finance from an associated company - unsecured
The Company obtained an aggregate medium term finance facility of Rs 600 million from an
associated company Taavun (Pvt) Limited. As per the terms of loan agreement, this loan is
subordinated to all secured finance facilities availed by the Company. The principal was repayable
within 30 days of the expiry of twenty four months from the effective date i.e. September 30, 2010,
which was further extendableto twelve months. The rate of mark-up is six month KIBOR + 2.5% with
24 months grace period payablequarterly. As the loan is subordinated to all secured finance facilities
availed by the Company, the entire amount of loan has been classified as non current liability.
11. Long term deposits
12. Deferred grants
Movement during the year is as follows:Note 2016 2015
Balance at beginning of the year-
excluding amount receivable 2,599,101
2,555,221
Amount received during the year - net 112,204
222,110
Amount receivable at year end -
634,857
Amount recognised as income during the year 34 (143,561)
(178,230)Balance at end of the year 2,567,744
3,233,958
13. Short term running finance - secured
Balance as at June 30 13.1 765,512
787,135
13.1
This represents amount received and receivable from Universal Service Fund (USF) as subsidy to
assist in meeting the cost of deployment of USF Fiber Optic Network for providing USF Fiber Optic
Communication Services in Sindh, Baluchistan, Punjab and broad band services in Faisalabad
Telecom Region, Hazara Telecom Region and Gujranwala Telecom Region. USF Fiber Optic
Network and broad band network will be owned and operated by the Company. Total amount of USF
contracts is Rs 3,740 million (2015: Rs 4,022 million) payableby USF in five installments in contracts
with project implementation milestones.
(Rupees in thousand)
These represent security deposits received from customers. These are interest free and refundable
on termination of relationship with the Company.
The Company has a cash finance facility of Rs 790 million (2015: Rs 790 million) of which Rs 24.488
million (2015: Rs 2.865 million) was unutilised as at June 30, 2016. The facility is available till
December 31, 2016. Markup on the facility is to be serviced on quarterly basis. The rate of mark-up is
3 months KIBOR + 1% per annum.
This facility is secured by lien marked on an amount of USD 8.44 million held under the name "Dhabi
One Investment Services LLC" maintained at Bank Alfalah.
Wateen Telecom Ltd. Annual Report 201634
2016 2015Note
14. Trade and other payables
Creditors 14.1 491,437
406,615Due to related parties 14.2 188,959
187,327Due to international carriers 403,082 1,088,924Payable to Pakistan Telecommunication Authority 591,475 562,283Accrued liabilities 2,611,020 2,454,419Payable to provident fund 72,094 73,373
Sales tax payable 98,045 -Advance from customers 14.3 156,280 884,323Income tax deducted at source 195,552 129,003
4,807,944 5,786,267
(Rupees in thousand)
14.1 Trade creditors include following amounts due to related parties:
Wateen Solutions (Pvt) Limited
14.2 Due to associated companies
Wateen Satellite Services (Pvt) LimitedBank Alfalah Limited
Warid International LLC, UAE - Parent companyWarid Telecom (Pvt) Limited
14.3 Advance from customers
2016 2015Note
15. Interest / markup accrued
Long term finance from shareholders
Long term finance - secured
Medium term finance - unsecured 15.1
Short term running finance - secured 15.2
15.1
15.2
2016 2015
16. Contingencies and Commitments
16.1 Claims against the Company not acknowledged as debt 438,875 319,561
16.2 Performance guarantees issued by banks on behalf
of the Company 1,410,309 1,175,447
This includes advance of Rs Nil (2015: Rs 48.983 million) received from associated companies.
(Rupees in thousand)
This represents markup payable to an associated company Taavun (Private) Limited.
This includes markup payable to an associated company Bank Alfalah Limited amounting to Rs
13.197 million (2015: 17.032 million).
(Rupees in thousand)
221,457 218,309
146,232 145,94516,932 17,52124,563 23,861
1,232
-188,959
187,327
1,357,967 922,616
585,390
420,600
448,577
391,928
33,784
30,945
2,425,718
1,766,089
Wateen Telecom Ltd. Annual Report 201635
16.3
16.4
Under the Access Promotion Regulations, 2005, the Company is liable to make payments of Access
Promotion Charges (APC) for Universal Service Fund (USF) within 90 days of close of the month to
which such payment relates. The Company has disputed the APC Regulations,2005 and the case is
currently pending with High Court. The Company has not recorded the penalty on delayed payment of
APC for USF amounting to Rs 1,469 million as required by the Access Promotion Regulations,2005
as the management and legal advisor of the Company are of the view, that the Company has a strong
case and chances of success are very high.
WWL under the terms of the MTA served the termination notice to Augere Holdings and claimed
certain expenditures as reimbursable to WWL on account of business consolidation not successful
as per MTA. In response to Company’s termination notice, Augere Pakistan (Pvt) Limited served
notice to the Company as acknowledgement of termination of MTA and claimed certain charges.
WWL and the Company, being a party to MTA, is in process of initiating related proceedings for
settlement of its charges incurred under MTA. The management believes that no amount shall be
payable by the Company upon completion of related proceedings and accordingly, no provision is
carried in these financial statements in this respect.
likely to be decided in the favor of Company.
16.5
16.6
16.7
16.8
The Deputy Commissioner Inland Revenue(DCIR), Enforcement Unit IV, Large Taxpayers Unit (LTU),
Islamabad issued Order-in-Original based on the observations of Director General Intelligence and
Investigation and raised a demand of Rs 31.830 million to be paid along with penalty and default
surcharge and also issued recovery notice. The Commissioner Inland Revenue - Appeals [CIR (A)]
and Appellate Tribunal Inland Revenue (ATIR) upheld the order of the DCIR. The Company filed
reference before the Honorable High Court whereby the case has been remanded to ATIR. The
appeal is pending for adjudication with ATIR.
The Assistant Commissioner Inland Revenue (ACIR), Enforcement Unit IV, LTU, Islamabad, issued
show cause notices based on the observation that Company has not furnished sales tax and federal
excise returns for the periods from August 2009 to March 2010, November 2010 and December 2010.
In this respect, ACIR issued Order-in-Original and assessed demand of Rs 249.471 million
(calculated on the basis of allegedminimum liability)payable along with penaltyand default surcharge
and also issued recovery notice. The Company depositedprincipal amount of Rs 138.709 million and
default surcharge of Rs 26.231 million based on actual liabilityas per own working of the Company.
The ATIR, Islamabad remanded the case to the assessing officer with certain directions. The
Company submitted information in response to the related proceedings initiated by ACIR,
Enforcement-IV, LTU, Islamabad and proceedings are not yet concluded by the ACIR. As of now no
tax demand is in field and company foresees a favorable decision in reassessment proceedings.
The ACIR issued notice to the Company for the period of July 2010 to June 2011 and confronted to
charge sales tax on the difference of sales reported in auditedaccounts and sales reported in monthly
sales tax returns and passed ex-parte order with demand of Rs. 1,048 million by the Company. The
Company filed appeal before CIR (A) and same was rejected. An appeal has been filed by the
Company with the ATIR which is pending for adjudicationand management believes that the case is
The AdditionalCommissioner Inland Revenue, Audit - II, Large Taxpayers Unit, Islamabad (Add. CIR)
issued show cause notice dated June 6, 2014 whereby Add. CIR alleged the Company is claiming
inadmissible input tax, suppression of sale, non-paymentof sales tax on fixed asset, non-compliance
of sales tax special procedure withholding rules, penalty on late filing of sales tax and federal excise
returns and non-withholding of federal excise duty on advertisement services. The Company could not
furnish the requisite information to the Add. CIR because of fire effected records further; the
assessment was barred by time. The Add. CIR passed ex-parteorders and raised the demand of Rs
518 million along with penalty and default surcharge. The Company filed appeal before CIR (A) and
same was rejected. Being aggrieved with the order,appeal was filed before ATIR and ATIR confirmed
the order passed by CIR (A). Resultantly, the Company filed reference application before High Court
which is pending and management believes the same is likely to be decided in the favor of Company.
Wateen Telecom Ltd. Annual Report 201636
16.9 The ACIR alleged that Company has not withheld tax from payments made to foreign telecom
operators during the tax years 2008, 2009, 2010 and 2011. Further the ACIR ordered the Company to
pay allegeddemand of Rs 477.767million representingprincipal amount and default surcharge for the
aforesaid tax years. The CIR (A) upheld the contentions of the assessing officer and directed the
assessing officer to recalculate the withholding tax by applying the rates as given in the Division II of
Part III of the First Schedule to the Income Tax Ordinance, 2001. The Company filed appeal before
ATIR, and same was rejected. The Company filed reference before the High Court and case was
remanded back for fresh proceedings. The proceedings were finalized by the assessing officer and a
demand of Rs 1,911 million was created. The Company preferred an appealbefore CIR (A) and CIR
(A) remanded the case to DCIR. The DCIR raised demand of Rs 1,131 million against which the
Company preferred appeal before CIR (A) who upheld the orders of DCIR. The Company preferred
appeal against the aforesaid appellate order in the ATIR, whereby ATIR up-held the decision of CIR (A)
regarding tax withholding on payments and has remanded the case to the officer for levy of
withholding tax on lower of treaty rates or the Ordinance rates. The Company is in process of filling
references before High Court on the premise that the payments made to foreign operators falls under
the ambit of business income and is exempt from withholding tax. Based on this company foresees a
favorable decision from higher appellate forums.
16.10
16.11
16.12
16.13
16.14
DCIR raised tax demand for Rs 55 million for tax year 2013 on account of allegednon deduction of tax
under section 152 of the Ordinance while making payments to foreign telecom operators. The
Company has filed an appeal before CIR (A). The CIR (A) and ATIR both upheld the action of DCIR.
The Company also filed Misc. Application in the ATIR against the Orders of the ATIR. The Company is
in process of filling references before High Court on the premise that the payments made to foreign
operators falls under the ambit of business income and is exempt from withholding tax. Based on this
the Company foresees a favorable decision at higher appellate forums.
DCIR raised tax demand for Rs 133 million in respect of tax year 2014 for allegednon deduction of tax
under section 152 of the Ordinance while making payments to foreign telecom operators. The
Company preferred appeal before the CIR (A) against the orders of the DCIR. The CIR (A) remanded
the case to the DCIR with the direction to charge the withholding on the actual payment and not on the
amount of expense but has confirmed the levy of withholding tax. No appeal effect notice has been
issued as yet. The Company also preferred appeal against the order of the CIR (A) in ATIR and the
same is pending. The payments made to foreign operators falls under the ambit of business income
and is exempt from withholding tax. Based on this company foresees a favorable decision at higher
appellate forums.
The Assistant Commissioner - I, Sindh RevenueBoard, disallowed input tax claim of the Company for
the months of March 2014 to June 2014 and raised a demand of Rs 66 million. The Company filed
appealbefore Commissioner Appealshowever, no appellate order is received to-date. Certain related
evidence has been provided by the company in support of its contention and company foresees a
favorable decision at appellate forums.
The OIR also levied minimum tax under section 113 of the Income Ordinance, 2001 for tax years
2010, 2011, 2012 & 2013 by rejecting the stance of Company of gross loss. The Company preferred
appeals against the aforesaid orders before CIR (A) and same were rejected by the CIR (A) for tax
year 2010 and 2012. The Company preferred appeal before the ATIR and same was also rejected.
As per Income Tax Ordinance 2001 the above mentioned section is not applicable in case of gross
loss of that particular year by the company. Company has filed reference applications before High
Court and is likely to be decided in the favor of Company.
The Officer Inland Revenue, Audit - V, Large Taxpayers Unit, Islamabad (OIR) issued orders and
raised income tax demand of Rs 163 million relating to tax years 2008, 2009, 2011, 2012 and 2013 by
holding that the taxes paid under section 148 (7) on imports of the Company are not adjustable
against the income tax liability as the Company is not covered under the definition of industrial
undertaking. The Company preferred appeal before CIR (A) who upheld the order of OIR,
consequently Company has filed appeal before ATIR. The ATIR has rejected Company's appeal for
tax year 2009 and 2013. The Company is in process of filling of references before High Court.
16.15
2016 2015
16.16 Outstanding commitments for capital expenditure 635,844 668,447
No provision on account of contingencies disclosed in note 16.3 - 16.15 above has been made in
these financial statements as the management and its advisors are of the view, that these matters will
eventually be settled in favor of the Company.
DCIR issued notice to the Company and required to provide the details of tax deduction while making
payment of finance cost for the year ended June 30, 2012. Subsequently, the DCIR raised a demand
of Rs 253 million on gross amount of finance cost paid. The Company contended that DCIR did not
consider the impact of exchange loss and bank charges. Appeal was filed before CIR (A) and
rectification application before DCIR. The CIR (A) remanded the case to DCIR for fresh proceedings.
As of now no tax demand is in field and likely to be concluded in favor of Company.
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201637
Wateen Telecom Ltd. Annual Report 201638
17.
Op
erat
ing
ass
ets
owne
dle
ased
At J
une
30, 2
014
Cos
t64
,829
934,
138
118,
240
4,29
9,91
84,
445,
043
129,
005
122,
000
783,
054
200,
021
119,
834
13,4
0811
,229
,490
Acc
umul
ated
dep
reci
atio
n-
(155
,617
)(4
5,94
7)(6
66,2
71)
(1,5
18,9
34)
(112
,369
)(5
6,88
1)(7
33,7
00)
(95,
774)
(106
,674
)(1
0,25
6)(3
,502
,423
)
Net
boo
k am
ount
64,8
2977
8,52
172
,293
3,63
3,64
72,
926,
109
16,6
3665
,119
49,3
5410
4,24
713
,160
3,15
27,
727,
067
Year
end
ed J
une
30, 2
015
Ope
ning
net
boo
k am
ount
64,8
2977
8,52
172
,293
3,63
3,64
72,
926,
109
16,6
3665
,119
49,3
5410
4,24
713
,160
3,15
27,
727,
067
Add
ition
s5,
714
-47
,202
1,11
2,13
026
5,70
123
,915
37,9
4716
,684
37,9
655,
515
-1,
552,
773
Dis
posa
ls/ t
rans
fer
- C
ost
--
-
(154
,090
)
(1,1
46)
-
(6,2
83)
(283
)
-(2
6,01
5)-
(187
,817
)
- Acc
umul
ated
dep
reci
atio
n-
--
-
603
-
4,94
8
99
-24
,003
-29
,653
- N
et b
ook
valu
e-
--
(154
,090
)
(543
)
-
(1,3
35)
(184
)
-(2
,012
)-
(158
,164
)
Dep
reci
atio
n ch
arge
-(2
3,35
3)(1
2,18
1)
(175
,208
)
(307
,853
)
(10,
618)
(11,
666)
(3
6,38
8)
(20,
116)
(4,9
67)
(16)
(602
,366
)
Clo
sing
net
boo
k am
ount
70,5
4375
5,16
810
7,31
4
4,41
6,47
9
2,88
3,41
4
29,9
33
90,0
65
29,4
66
122,
096
11,6
963,
136
8,51
9,31
0
At J
une
30, 2
015
Cos
t70
,543
934,
138
165,
442
5,25
7,95
8
4,70
9,59
8
152,
920
153,
664
799,
455
237,
986
99,3
3413
,408
12,5
94,4
46
Acc
umul
ated
dep
reci
atio
n-
(178
,970
)(5
8,12
8)
(841
,479
)
(1,8
26,1
84)
(122
,987
)
(63,
599)
(7
69,9
89)
(115
,890
)(8
7,63
8)(1
0,27
2)(4
,075
,136
)
Net
boo
k am
ount
70,5
4375
5,16
810
7,31
4
4,41
6,47
9
2,88
3,41
4
29,9
33
90,0
65
29,4
66
122,
096
11,6
963,
136
8,51
9,31
0
Year
end
ed J
une
30, 2
016
Ope
ning
net
boo
k am
ount
70,5
4375
5,16
810
7,31
4
4,
416,
479
2,88
3,41
4
29,9
33
90,0
65
29,4
66
122,
096
11,6
963,
136
8,51
9,31
0
Add
ition
s-
3,08
047
,889
1,
343,
363
255,
931
32,0
50
11,5
12
23,2
58
7,54
134
,006
-1,
758,
630
Dis
posa
ls/ t
rans
fer
- C
ost
--
-
(278
,200
)
(352
,431
)
-
(2,2
74) (4
2,10
2)
--
(13,
408)
(688
,415
)
- Acc
umul
ated
dep
reci
atio
n-
--
5,19
321
1,16
2-
1,36
842
,102
--
10,2
7227
0,09
7
- N
et b
ook
valu
e-
--
(273
,007
)(1
41,2
69)
-(9
06)
--
-(3
,136
)(4
18,3
18)
Dep
reci
atio
n ch
arge
-(2
3,33
9)(1
9,44
9)(2
31,3
59)
(329
,874
)(1
9,98
3)(1
5,42
2)(2
0,31
1)(2
3,88
3)(8
,592
)-
(692
,213
)
Clo
sing
net
boo
k am
ount
70,5
4373
4,90
913
5,75
45,
255,
476
2,66
8,20
242
,000
85,2
4932
,413
105,
754
37,1
10-
9,16
7,41
0
At J
une
30, 2
016
Cos
t70
,543
937,
218
213,
331
6,32
3,12
14,
613,
098
184,
970
162,
902
780,
611
245,
527
133,
340
-13
,664
,662
Acc
umul
ated
dep
reci
atio
n-
(202
,309
)(7
7,57
7)(1
,067
,645
)(1
,944
,896
)(1
42,9
70)
(77,
653)
(748
,198
)(1
39,7
73)
(96,
230)
-(4
,497
,251
)
Net
boo
k am
ount
70,5
4373
4,90
913
5,75
45,
255,
476
2,66
8,20
242
,000
85,2
4932
,413
105,
754
37,1
10-
9,16
7,41
0
Ann
ual r
ate
of d
epre
ciat
ion
%-
2.5
104
6.67
-20
33.3
310
33.3
310
2020
Mot
or V
ehic
les
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
--(R
upee
s in
thou
sand
) --
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
--
Fre
ehol
d
Land
Bui
ldin
gs
free
hold
Leas
e ho
ld
impr
ovem
ent
Line
and
wire
Net
wor
k
equi
pmen
t
Too
ls a
nd
gear
s
Offi
ce
equi
pmen
t
Com
pute
rs
and
Fur
nitu
re
and
fixtu
re
Tot
al
Ass
esso
ries
Wateen Telecom Ltd. Annual Report 201639
17.1
Note 2016 2015
18. Capital work in progress
Lease hold improvements 9,826
7,328
Line and wire 923,844
1,374,472
Network equipment (net of impairment of DSL assets
Rs 353.515 million) 95,145
124,792
1,028,815
1,506,592
18.1 Movement during the year
Balance as at July 1 1,506,592
1,548,633
Additions during the year 925,361
1,349,254
Capitalised during the year (1,403,138)
(1,391,295)
Balance as at June 30 1,028,815
1,506,592
19. Intangible assets
LDI license fee 19.1
Cost 28,934 28,934
Amortisation
Opening balance 15,795
14,348
Amortisation for the year 1,447
1,447
(17,242)
(15,795)
Net book value 11,692
13,139
Software license
Cost 84,417 84,417
Amortisation
Opening balance 75,068 66,253
Amortisation for the year 5,829 8,815
80,897 75,068
Net book value 3,520
9,349
Total net book value 15,212 22,488
19.1
19.2
(Rupees in thousand)
The cost of fully depreciated assets which are still in use as at June 30, 2016 is Rs 955
million (2015: Rs. 955 million).
Pakistan Telecommunication Authority (PTA) granted Long Distance International (LDI)
license for a period of 20 years from July 26, 2004.
Software license is amortised over a period of 5 years.
Wateen Telecom Ltd. Annual Report 201640
20.
%age Rs %age Rs
Unquoted Holding (000) Holding (000)
Wateen Solutions (Pvt) Limited
810,239 (2015: 413,212) fully paid ordinary shares of Rs 100 each 137,656 51 52,656
Nil (2015: 397,027) fully paid ordinary shares purchased (note 20.2) - - 49 85,000
100 137,656 51 137,656
Wateen Satellite Services (Pvt) Limited 100 5 100 5
500 fully paid ordinary shares of Rs 10 each
Netsonline Services (Pvt) Limited 100 4,400
100 4,400
4,000 fully paid ordinary shares of Rs 100 each
Wateen Telecom UK Limited
10,000 fully paid ordinary shares of GBP 1 each 100 1,390
100 1,390
(note 20.3)
Wateen WiMAX (Pvt) Limited (WWL)
212,916,590 (2015: 1,000) fully paid ordinary shares of Rs 10 each 100 2,129,250 100 10
Nil (2015: 212,916,590) shares acquired (note 20.4) -
2,129,240
2,272,701 2,272,701
Provision for impairment of investment in
Netsonline Services (Pvt) Limited (4,400) (4,400)
Wateen Telecom UK Limited (1,390) (1,390)
Wateen WiMAX (Pvt) Limited (note 20.5) (2,129,250) (2,129,250)
(2,135,040) (2,135,040)
137,661
137,661
20.1
20.2
20.3
20.4
20.5
-
-
-
-
All the companies are incorporated in Pakistan except for Wateen Telecom UK Limited which is incorporated in
United Kingdom (UK).
The Company acquired 49% shares (397,027 fully paid ordinary shares of Rs 100 each) of Wateen Solutions (Pvt)
Limited effective November 18, 2014 for Rs 85 million.
Approvalof State Bank of Pakistan for investing in equity abroad is in process and shares of Wateen Telecom UK
Limited will be issued to the Company after receipt of such approval.
As per the terms of share issuance agreement dated September 9, 2014 between the Company and WWL, WWL
issued 100% (212,916,590 fully paid ordinary shares of Rs 10 each) shares to the Company at par value for
consideration against transfer of assets and liabilities pertaining to the WiMAX operations.
Pursuant to the termination notice served by WWL upon Pakistan subsidiary of AugereHoldings under the MTA, as
referred to in note 1.1, the management reviewed the business performance of subsidiary company WWL,
considering it a cash generating unit. An assessment was made in respect of triggering events as specified by IAS
36 applicable to the impairment of investment in subsidiary relating to WiMAX business. Based on the following
indicators applicable to WiMAX business, an impairment test was carried out by management to determine the
impairment of WiMAX business:
Significant change in the technological and economic conditions;
Decrease in the economic performance of WiMAX business; and
Indications suggested that WiMAX business is likely to become idle and management plans to materially curtail
WiMAX business.
For the purpose of determining the value in use, the WiMAX subsidiary was considered as separate Cash
Generating Unit (CGU). The value in use was determined using discounted cash flow method. The financial
projections of the CGU for three years have been derived from a latest business plan approved by the Board of
Directors (BOD) of the Company based on curtailment strategy as discussed above. The value in use of WiMAX
CGU determined by a management is negative Rs 1,795 million (2015: negative Rs 1,595 million) using discount
rate of 12% (2015: 12%). The fair value is scrap value of the assets in the subsidiary,which is not determinable till the assets are sold to third
party as these assets have no active market. Keeping in view above, the management recognized an impairment
loss of Rs 2,129 million based on negative value in use, any consequential difference between scrap value and
carrying amount as recongnized above will be dealt in the financial statements of ensuing periods in which the
disposal or sale of these assets takes place.
Long term investment in subsidiary companies - at cost
Decline in the market value of WiMAX assets;
June 30, 2016 June 30, 2015
100
Wateen Telecom Ltd. Annual Report 201641
2016 2015
21. Deferred income tax asset
Taxable temporary differences between accounting
and tax depreciation (5,317,854) (5,022,735)
5,317,854 5,022,735
- -
Tax losses Tax Year Rs in million
2018 1,739
2019 508
2020 1,031
2021 808
2022 655
Tax Credit 2020 53
2021 271
Note 2016 2015
22. Long term loan to subsidiary company (fully provided)
Loan guaranteed on behalf of WWL 1,109,000 1,111,000
Long term loan to subsidiary company 810,058 654,815
1,919,058 1,765,815
Less: provision for long term loan 22.1 (1,919,058) (1,765,815)
- -
22.1
23. Long term deposits
24. Long term prepayments
2016 2015Note
25. Trade debts - unsecured
Considered good 25.1 2,337,484 2,504,788
Considered doubtful 1,431,754 1,025,773
3,769,238 3,530,561
Provision for doubtful debts 25.4 (1,431,754) (1,025,773)
2,337,484 2,504,788
Less: long term trade debts 25.2 (634,447) (523,325)
1,703,037 1,981,463
These includes long term portion of right of way charges paid to local governments and various land owners
for access of land.
The aggregate tax losses available to the Company for set off against future taxable profits at June 30, 2016
amounted to Rs 16,732 million. Of these, losses aggregating Rs 5,318 million have been recognized in the
financial statements against taxable temporary differences at June 30, 2016.
These mainly represent the security deposits paid to domestic interconnect operators and government
authorities on account of utilities and suppliers on account of rent, DPLC and satellite bandwidth.
(Rupees in thousand)
(Rupees in thousand)
This represents loan given to subsidiary company, WWL and is interest free. The amount has been provided
for during the year due to curtailed scale of operationsof WWL, negative value in use of WWL, substantial loss
of the year, termination of MTA and existence of no realistic basis of preparation of financial statements of
WWL on a going concern basis.
Unused tax losses - recognised to extent of taxable temporary differences
(Rupees in thousand)
Deferred tax asset, the potential tax benefit of which amounts to Rs 5,597 million has not been recognized on
balance representing business losses aggregating to Rs 4,741 million, tax depreciationlosses aggregatingRs
6,664 million, tax credits aggregating to Rs 324 million and deductible temporary differences on account of
provisions and share issue cost aggregating Rs 6,173 million as at June 30, 2016. Business losses / tax
credits expire as follows:
Wateen Telecom Ltd. Annual Report 201642
2016 2015
25.1 Trade debts include following balances due from related parties, past due but not impaired:
Warid Telecom (Pvt) Limited 289,903 128,892
Warid International LLC, UAE - Parent company - 101,500
Wateen Telecom UK Limited 391 21,412
Alfalah Insurance Company 13,292 10,289
Bank Alfalah Limited 121,821
27,904
425,407
289,997
25.2
2016Total future Unearned Present value
payments interest
income
Current portion
Not later than one year 135,815
100,164
35,650
Long term portion
Between one and five years 543,260
333,743
209,517
Later than five years 823,639
398,710
424,929
1,366,899 732,453 634,447
1,502,714 832,617 670,097
2015
Not later than one year 121,180 91,095 30,085
Between one and five years 484,718
307,909 176,809
Later than five years 665,286
318,770 346,516
1,150,004
626,679
523,325
1,271,184 717,774 553,410
25.3 Age analysis of trade debts from associated companies, past due but not impaired is as follows:
2016 2015
0 to 6 months 85,780 179,554
6 to 12 months 145,839 1,122
Above 12 months 193,789 109,321
425,407 289,997
(Rupees in thousand)
Trade debts include receivable under finance lease of optic fiber cable and telecom equipment as follows:
(Rupees in thousand)
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201643
Note 2016 2015
25.4 Provision for doubtful debts
Related parties
Opening balance - -
Provision made during the year - related parties 101,500 -
Closing balance 101,500 -
Other parties
Opening balance 1,025,773
922,062
Provision made during the year - other parties 304,481
103,711
Closing balance 25.4.1 1,330,254
1,025,773
1,431,754
1,025,773
25.4.1
26. Contract work in progress
Balance as at July 1 230,725
21,458
Additions during the year 54,961
312,767
Adjustments during the year (223,802) (103,500)
Balance as at June 30 26.1 61,884 230,725
26.1
27. Stores, spares and loose tools
571,126 592,649 Less:
Provision for obsolete stores 27.1 (175,990) (90,759)Store and spares written off 33 (16,599) -
378,537 501,890
27.1 Provision for obsolete stores
Opening balance 90,759 212,266
Provision for the year 85,231 -
Transfer to subsidiary company WWL - (121,507)
Closing balance 175,990 90,759
This includes balance amounting to Rs Nil (2015: Rs 227 million) pertaining to associated company.
- Balances 181 - 360 days past due - 50 %
These include Rs 1,281 million (2015: Rs 977 million) based on age analysis of the debts as follows:
- Balances over 360 days past due - 100 %
Cost
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201644
Note 2016 2015
28. Advances, deposits, prepayments and other receivables
Advances to suppliers and contractors - considered good 686,310 587,725
Advances to employees - considered good 10,295 40,520
Security deposits and earnest money 128,950 119,170
Margin held by bank against letters of guarantee 170,571 321,996
Prepayments 28.1 88,614
85,820
Sales tax refundable -
155,496
Due from associated companies 28.2 2,191,196
1,945,449
Receivable from gratuity fund 43 10,086
5,582
Accrued interest 9,768
9,673
Government grant receivable -
634,857
Others 152,276
124,206
3,448,065
4,030,494
Less:
28.3
Opening balance 522,047
468,854
Provision for the year - charged against finance income 60,388
53,193
Closing balance 582,435
522,047
Opening balance 572,319 130,764
Provision for the year 66,168 441,555
Closing balance 638,487
572,319
1,220,922
1,094,366
2,227,143
2,936,128
28.1
2016 2015
28.2 Due from associated companies
Wateen Solutions (Pvt) Limited 1,139,486
1,106,770
Wateen Telecom UK Limited 428,490
385,310
Wateen Telecom Inc. Malaysia 666
-
Wateen Multi Media (Pvt) Limited 228,263
207,555
Advance for construction of Warid Tower 68,916 68,916
Warid International LLC, UAE - Parent company 83,019 70,012
Raseen Technologies (Pvt) Limited 27,844 25,877
Warid Telecom Georgia Limited 23,459 21,820
Netsonline services (Pvt) Limited 8,351 8,351
Warid Telecom International - Bangladesh 8,504 7,909
Innov8 Limited 174,198 42,929
2,191,196 1,945,449
(Rupees in thousand)
(Rupees in thousand)
Provision for doubtful receivables - other parties
Provision for doubtful receivables - related parties
These include current portion of right of way charges of Rs 17.773 million (2015: Rs 17.036 million).
Wateen Telecom Ltd. Annual Report 201645
28.3
2016 2015
362,382 319,202
Advance for construction of Warid Tower 68,916 68,916
Warid International LLC, UAE - Parent company 83,019 70,012
27,844 25,877
23,459 21,820
8,311
8,311
8,504
7,909
582,435 522,047
2016 2015
29. Cash and bank balances
Balance with banks on
- current accounts 185,422
39,669
- collection accounts 27,728
17,378
- deposit accounts 31,997
32,534
Cash in hand 354
250
245,501
89,831
29.1
29.2
29.3
Note 2016 2015
30. Revenue
Gross revenue 30.1 7,384,877
5,386,301
Less: Sales tax / Federal excise duty 428,299
406,712
6,956,578
4,979,589
30.1
(Rupees in thousand)
Warid Telecom Georgia Limited
Wateen Telecom UK Limited
Provision for doubtful receivables includes provision for doubtful receivables from following related parties:
Raseen Technologies (Pvt) Limited
(Rupees in thousand)
Warid Telecom International Bangladesh
Netsonline Services (Pvt) Limited
This includes an amount of Rs. Nil million (2015: Rs. 560 million) representing the Company's share of gross
revenue from the incoming internationalvoice traffic, generated under the International Clearing House (ICH)
arrangement. In accordance with PTA's directive of August 23, 2012, an agreement was signed on August 30,
2012 amongst Long Distance International (LDI) operators operating in Pakistan to establish the ICH for
International incoming voice traffic terminating in Pakistan. Under the terms of the agreement, one operator
was selected as the international operator. The agreement was approved by the Ministry of Informationand
Technology (MoIT) and became operational with effect from October 1, 2012. Under the agreement, the
Company had a net share equal to its allocated percentage in total gross revenue of ICH, along with related
costs. On February 24, 2015, the Honorable Supreme Court of Pakistan ordered to cancel the ICH
arrangement. Accordingly, the operations of ICH were terminated with immediate effect by the Company.
Bank balances on deposit accounts carried interest at an average rate of 5% - 8 % per annum (2015: 5%-8%
per annum).
Provision for doubtful receivables other than NetsonlineServices (Pvt) Limited was approved by shareholders
of the Company in Extra Ordinary General Meetings held on December 31, 2011 and October 3, 2014.
Cash and bank balances include foreign currency balances aggregatingUSD 1.728 million (2015: USD 0.082
million).
Bank balances amounting to Rs 29.651 million were under lien with banks (2015: Rs 29.651 million).
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201646
Note 2016 2015
31. Cost of sales
LDI Interconnect cost 1,679,240 992,446
Leased circuit charges 146,007 106,668
Contribution to PTA Funds 89,529 65,881
PTA regulatory and spectrum fee 22,382 16,470
Cost associated with IRU of Optic Fibre Cable 273,007 154,090
Operational cost 741,589
679,514
Repair and maintenance 361,311
181,632
Bandwidth cost of VSAT services 221,187
268,759
LTE equipment 169,480
206,306
Others 254,217
139,101
3,957,949
2,810,867
32. General and administration expenses
Salaries, wages and benefits 32.1 1,046,623
929,984
Rent 81,894
92,101
Repairs and maintenance 5,750
8,745
Vehicle repairs and maintenance 6,087
11,012
Travel and conveyance 14,524
35,522
Postage and stationery 7,450
9,952
Auditor's remuneration 32.2 6,471
10,059
Legal and professional charges 44,169
48,577
Communication expenses 17,096 17,078
Employee training 3,276
3,361
Customer services charges 37,395
75,981
Fees and subscription 4,012
3,303
Insurance 30,563
37,908
Entertainment 10,098
12,947
General office expenses 44,662
42,618
1,360,070
1,339,148
32.1
Note 2016 2015
32.2 Auditor's remuneration
Annual audit 2,420
2,200
Audit of consolidated accounts and certification 330
300
Tax services 3,648 7,464
Out of pocket expenses 73 95
6,471 10,059
33. Provisions
Provision for doubtful trade debts 25.4 405,981 103,711
Provision for doubtful advances and other receivables 28 66,168 441,555
Provision for obsolete stores 27.1 85,231 -
557,380 545,266
(Rupees in thousand)
These include charges against employee's retirement benefits as referred to in note 43.
(Rupees in thousand)
38. Taxation
Current - for the year 38.1 442,737 52,590
Note 2016 2015
34. Other income
Income from non-financial assets:
(Loss) / Gain on sale of operating assets (115,075) 9,297
Government grant recognised 12 143,561 178,230
Write back of liability 493,876 407,799
Store and spares written off 27 (16,599) -
Others 15,549 3,366
521,312
598,692
35. Finance cost
Markup on long term and medium term finance 35.1 1,596,500
1,301,193
Amortization of ancillary cost of long term finance 29,540
52,708
Mark up on short term running finance 35.2 55,127
88,471
Finance cost of leased assets -
25
Bank charges, commission, fees and other charges 32,964
46,643
Late payment charges on other payables 70,937
1,967
Exchange (gain)/loss 643,676
574,209
Others 35.3 -
104,890
2,428,743
2,170,106
35.1
35.2
35.3
Note 2016 2015
36. Provision for long term loan to and impairment of
investment in subsidiary company
Impairment of investment in subsidiary company 20 -
2,129,250
Reversal of provision for loan guaranteed on behalf of WWL 7.5 (2,000)
1,111,000
Provision for long term loan to subsidiary company 22 155,243
654,815
153,243
3,895,065
37. Finance income
Finance income on lease 103,063 95,244
Markup on advance to associated companies 137,425 162,261
Provision of markup on advances to associated companies (60,388) (53,193)
77,037 109,068
Income on bank deposit accounts 1,922 14,805
182,022 219,117
This includes markup related to long term finance from shareholders of Rs. 303.257 million (2015: Rs
238.687 million), medium term finance from an associated company of Rs 56.649 million (2015: Rs
74.279 million) and markup related to associated company of Rs 163.274 million (2015: Rs 157.643
million).
This includes markup related to an associated company of Rs. 55.127 million (2015: Rs. 75.993
million).
(Rupees in thousand)
(Rupees in thousand)
These represented charges paid in relation to termination of USF CTR Project.
Wateen Telecom Ltd. Annual Report 201647
Wateen Telecom Ltd. Annual Report 201648
2016 2015
(Rupees in thousand)
38.1 Reconciliation of tax charge % %
Applicable tax rate 32 33
Tax effect of (income)/expense that are
not allowed for tax purpose (31) (1)
Deferred tax asset on unused tax losses not recognised (30) (33)
Average effective tax rate (29) (1)
39. Discontinued operations
39.1 Discontinued Operations
Revenue -
20,468
Operating expenses -
(42,394)
Loss before interest, taxation, impairment -
(21,926)
depreciation and amortisation
Less: -
-
- -
Loss before taxation and impairment -
(21,926)
Reversal of impairment of WiMAX assets -
-
Loss before taxation for the year from discontinued operations -
(21,926)
Taxation -
205
Loss for the year from discontinued operations -
(22,131)
Loss for the year -
(22,131)
Cash flows from discontinued operations
Cash flows from operating activities - (21,926)
Cash flows from investing activities - -
Cash flows from financing activities - -
Total cash flows - (21,926)
As more fully explained in note 1.1 to these financial statements, assets along with liabilities of WiMAX
operations were transferred to wholly owned subsidiary Company WWL effective July 10, 2014. The
disposal group comprised of the WiMAX operations. The assets and liabilities of disposal group are
separately classified as held for sale and the income statement for these operations had also been
separately presented as a discontinued operation.
2016 2015
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201649
40. Financial instruments by category
40.1 Financial assets and liabilities
2016Financial assetsMaturity up to one year
Trade debts-net of provision 1,703,037 1,703,037Contract work in progress 61,884 61,884Advances, deposits and other receivables 2,090,706 2,090,706Bank balances 245,147 245,147
4,100,774
4,100,774
Maturity after one yearLong term deposits 479,760
479,760Long term trade debts 634,447
634,4471,114,207
1,114,207
Financial liabilitiesMaturity up to one yearLong term finance - secured 4,653,075
4,653,075Short term running finance - secured 765,512
765,512Trade and other payables 4,651,663
4,651,663Interest/mark-up accrued 2,425,718
2,425,71812,495,968
12,495,968
Maturity after one yearLong term finance - secured 12,212,309
12,212,309
Long term portion of deferred mark up 3,924,871 3,924,871Long term finance from shareholders-unsecured 14,041,457
14,041,457
Medium term finance from an associated - company - unsecured 600,000
600,000Long term deposits 35,680
35,680
30,814,318
30,814,318
2015Financial assetsMaturity up to one yearTrade debts-net of provision 1,981,463
1,981,463Contract work in progress 230,725
230,725Advances, deposits and other receivables 2,262,583
2,262,583Bank balances 89,581
89,5814,564,352
4,564,352
Maturity after one yearLong term deposits 523,325
523,325Trade debts 468,647 468,647
991,972 991,972
Financial liabilitiesMaturity up to one yearLong term finance - secured 2,560,463 2,560,463Short term running finance - secured 787,135 787,135Trade and other payables 4,901,944 4,901,944Interest/mark-up accrued 1,766,089 1,766,089
10,015,631 10,015,631
(Rupees in thousand)
(Rupees in thousand)
Total
Other financial
liabilitiesTotal
(Rupees in thousand)
Loans and
receivablesTotal
Other financial
liabilitiesTotal
(Rupees in thousand)
Loans and
receivables
Wateen Telecom Ltd. Annual Report 201650
Maturity after one year
Long term finance - secured 14,063,553 14,063,553
Long term portion of deferred mark up 2,946,219 2,946,219
Long term finance from shareholders-unsecured 13,334,608 13,334,608
Medium term finance from an associated
company - unsecured 600,000 600,000
Long term deposits 35,680 35,680
30,980,060
30,980,060
40.2 Credit quality of financial assets
2016 2015
Rating Trade debts
A1+ 154,098
122,508
Counterparties with external credit rating A1 109
10,248
A2 290
-
A-1 3,320 4,052
A-1+ 13,330 73,771
A-2 247
1,339
P-2 140
26
Counterparties without external credit rating
425,407
289,997
1,740,543
2,002,8472,337,484
2,504,788
Advances, deposits and other receivables
Counterparties with external credit rating A1+ 41,565
1,740
A-1+ 2,551
4,577
A1 125,000
1,000
Counterparties without external credit rating
1,608,761
1,423,402
312,829
831,8642,090,706 2,262,583
Long term deposits479,760 468,647
Bank balances
A1+ 202,841 62,976
A-1+ 28,770 13,056
A-1 13,536 13,549
P-1 1 -245,147 89,581
(Rupees in thousand)
Other financial
liabilitiesTotal
Others
Due from related parties
Due from related parties
Others
Others
The credit quality of Company's financial assets assessed by reference to external credit ratings of counterparties
determined by The Pakistan Credit Rating Agency Limited (PACRA), JCR - VIS Credit Rating Company Limited (JCR-
VIS), Standard and Poor's and Moody's and other international credit rating agencies are as follows:
(Rupees in thousand)
41. Financial risk management
- Credit risk;
- Liquidity risk; and
- Market risk
The Company has exposure to the following risks from its use of financial instruments:
This note presents information about the Company's exposure to each of the above risks, the Company's objectives,
policies and processes for measuring and managing risk, and the Company's management of capital. Further,
quantitative disclosures are included throughout these financial statements.
Wateen Telecom Ltd. Annual Report 201651
41.1 Credit risk
2016 2015
Trade debts-net of provision 2,337,484
2,504,788Contract work in progress 61,884
230,725Advances, deposits and other receivables 2,090,706
2,262,583Bank balances 245,147
89,581
Long term deposits 479,760 468,647
Impairment losses
Gross Impairment Gross Impairment
Up to 3 months 1,018,152 - 487,892 - 3 to 6 months 330,687 - 252,737 - 6 to 9 months 390,654 99,977 257,489 153,494 Above 9 months 2,029,745 1,331,777 2,532,443 872,279
3,769,238 1,431,754 3,530,561 1,025,773
20152016
(Rupees in thousand)
The aging of these trade debts at the reporting date is as follows:
Company's exposure to credit risk is influenced mainly by the individual characteristics of each operator including the
default risk of the industry and country in which the operator works. Significant portion of the Company’s receivables is
attributable to operators. Company regularly monitors the status of receivables.
(Rupees in thousand)
The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management
framework. The Board is also responsible for developing and monitoring the Company's risk management policies.
Credit risk is the risk of financial loss to the Company if a counter party to financial instruments fails to meet its
contractual obligations, and arises principally from the Company's receivable from customers, deposits, contract work
in progress, advances, deposits and other receivables and bank balances. The Company assesses the credit qualityof
counterpartiesas satisfactory. The Company does not hold any collateral as security against any of its financialassets.
The Company limits its exposure to credit risk by investing only in liquid securities.
The Board of directors oversees how management monitors compliance with the Company's policies and procedures,
and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The
directors are assisted in their oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews
of risk management controls and procedures, the results of which are reported to the Board of Directors.
The Company's policies are established to identify and analyse the risks faced by the Company, to set appropriaterisk
limits and controls, and to monitor risks. Management's policies and systems are reviewed regularlyto reflect changes
in market conditions and the Company's activities. The Company, through its training and management standards and
procedures, aims to developa disciplined and constructive control environment in which all employees understand their
roles and obligations.
41.2 Liquidity risk
The Company has recorded an allowance for impairment in respect of advances, deposits and other receivables of Rs
1,221 million (2015: Rs 1,094 million).
Company ensures that it has sufficient cash on demand to meet expected cash outflows during its operating cycle.
This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural
disasters. The Company's treasury aims at maintaining flexibility in funding by keeping committed credit lines. Further
shareholders of the Company has provided financial support in the form of long term finance to meet capital
requirements of the Company. Management believes the same support will continue in future. Further, the Company
has restructured the long term finance facilities and short term borrowings which will facilitate the Company to greater
extent to meet its obligations/ covenants under loan agreements.
Liquidity risk is the risk that Company will not be able to meet its financial obligations as they fall due. Company's
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to Company’s reputation.
Wateen Telecom Ltd. Annual Report 201652
2016
Long term finance - secured 16,865,384 16,938,772 4,653,075 4,664,398 7,547,912
Long term portion of deferred mark up 3,924,871
3,924,871
-
-
3,924,871
Long term finance from shareholders-unsecured 14,041,457
21,884,998
-
-
14,041,457
Medium term finance from an associated
company - unsecured 600,000
600,000
-
-
600,000
Short term running finance - secured 765,512
790,000
765,512
-
-
Trade and other payables 4,651,663
4,651,663
4,651,663
-
-
Long term deposits 35,680
35,680
-
35,680
-
Interest/mark-up accrued 2,425,718
2,425,718
2,425,718
-
-
43,310,286
51,251,702
12,495,968
4,700,078
26,114,240
2015
Long term finance - secured 16,624,016
16,726,943
2,560,463
6,957,669
7,105,884
Long term portion of deferred mark up 2,946,219
2,946,219
-
-
2,946,219
Long term finance from shareholders-unsecured 13,334,608
21,255,300
-
-
13,334,608
Medium term finance from an associated
company - unsecured 600,000 600,000 - - 600,000
Short term running finance - secured 787,135 790,000 787,135 - -
Trade and other payables 4,901,944 4,901,944 4,901,944 - -
Long term deposits 35,680 35,680 - 35,680 -
Interest/mark-up accrued 1,766,089 1,766,089 1,766,089 - -
40,995,691 49,022,175 10,015,631 6,993,349 23,986,711
41.3 Market risk
Above 5
years
Less than 1
Year
Between 1 to
5 years
Market risk is the risk of changes in market prices, such as foreign exchangerates and interest rates. The objectiveof
market risk management is to manage and control market risk exposures within acceptable parameters, while
optimizing the return.
(Rupees in thousand)
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining
period at the statement of financialposition date to the maturity date. The amounts disclosed in the table are contractual
undiscounted cash flows except for employee's retirement benefit obligations.
Contractual
Cash flows
Carrying
amount
As June 30, 2016, the Company has financial assets of Rs 5,215 million (2015: Rs 5,556 million) and Rs 7,981 million
(2015: Rs 7,893 million) unavailed borrowing facilities from financial institution.
Carrying Amount
a) Interest rate risk
b) Currency Risk
At June 30, 2016, if the currency had weakened/strengthenedby 10% against US dollar with all other variables held
constant, net loss for the year would have been Rs 2,093 million (2015: Rs 1,906 million) higher/lower.
The Company is exposed to currency risk on long term finance, bank balance and receivables/payables which are
denominated in currency other than the functional currency of the Company. Financial assets include Rs 1,222 million
(2015: Rs 2,849 million) and financial liabilities include Rs 22,150 million (2015: Rs 21,908 million) in foreign currency
which were exposed to exchange risk.
At June 30, 2016, had interest rates been 1% higher/lowerwith all other variablesheld constant, loss for the year would
have been Rs 312 million (2015: Rs 305 million) higher/lower.
As the significant financial assets and liabilities carry variable interest rates, Company's operating cash flows are
dependent on changes in the market interest rates. Financial assets of Rs 1,129 million (2015: Rs 987 million) and
financial liabilities of Rs 32,346 million (2015: Rs 31,449 million) were subject to interest rate risk.
Wateen Telecom Ltd. Annual Report 201653
c) Fair value of financial instruments.
2016 2015
Financial assets - Loans and
Trade debts 2,337,484
2,504,788
Contract work in progress 61,884 230,725
Advances, deposits and other receivables 2,090,706
2,262,583
Bank balances 245,147
89,581
Long term deposits 479,760
468,647
5,214,981 5,556,324
Financial liabilities - Other financial liabilities
Long term finance - secured 16,865,384 16,624,016
Long term portion of deferred mark up 3,924,871 2,946,219
Long term finance from shareholders - unsecured 14,041,457 13,334,608
Medium term finance from an associated company - unsecured 600,000 600,000
Short term borrowings - secured 765,512 787,135
Trade and other payables 4,651,663 4,901,944
Long term deposits 35,680 35,680
Interest / markup accrued 2,425,718 1,766,089
43,310,286 40,995,691
d) Capital risk management
The Company manages the capital structure in the context of economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend to
shareholders, issue new shares or sell assets to reduce debts. The Company is required to maintain debt equity ratio
as specified in loan agreements and continuation of support from majority shareholder is vital for the Company's
operations.Under the terms of loan agreements, the Company can not declare dividends,make any distributions or pay
any other amount to its shareholders until the repayment of loan and the interest in full to the lenders. Further, the
Syndicate shall be entitled to designate one nominee to be appointed as director in the Board of directors of the
Company as referred in note 7.1.
The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern
and to maintain a capital base to support the sustained development of its businesses.
(Rupees in thousand)
The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values.
42. Offsetting of financial assets and financial liabilities
42.1 Financial assets subject to offsetting
As at June 30, 2016
Trade debts
Due from international carriers 1,113,738
781,294
332,444
1,113,738
781,294
332,444
As at June 30, 2015
Trade debts
Due from international carriers 3,165,672
518,947
2,646,725
Pakistan Telecommunication Authority 654,068
654,068
-
Other trade receivables 503,773
503,773
-
4,323,513 1,676,788 2,646,725
42.2 Financial liabilities subject to offsetting
As at June 30, 2016
Trade and other payables
Due to international carriers 1,184,376 781,294 403,082
Creditors 624,863
133,426
491,437
1,809,239 914,720 894,519
As at June 30, 2015
Trade and other payables
Due to international carriers 1,607,871 518,947 1,088,924
Pakistan Telecommunication Authority 654,068 654,068 -
Creditors 1,108,825 1,108,825 -
3,370,764 2,281,840 1,088,924
Gross
amounts of
recognized
financial
assets
Gross amounts of
recognized financial
liabilities set off in
the statement of
financial position
Net amounts of
financial assets
presented in the
statement of
financial position
----------------------Rupees in thousand----------------------
----------------------Rupees in thousand----------------------
Gross
amounts of
recognized
financial
liabilities
Gross amounts of
recognized financial
assets set off in the
statement of
financial position
Net amounts of
financial liabilities
presented in the
statement of
financial position
Wateen Telecom Ltd. Annual Report 201654
Wateen Telecom Ltd. Annual Report 201655
2016 2015
43. Employees' retirement benefits
43.1 Liability/(asset) for funded staff gratuity (10,086) (5,582)
The amounts recognised in the statement of financial position:
Present value of defined benefit obligation 101,724 108,187
Benefits due but not paid 4,835 4,616
Fair value of plan assets (116,645) (118,385)
Net liability / (asset) (10,086) (5,582)
43.2 The amounts recognised in the statement of financial position are as follows:
Opening liability / (asset) (5,582) 64,861
Expense recognised in income statement (1,544) (50,543)
Contributions made during the year (14,768) (26,762)
Remeasurement loss/(gain) recognised in statement of
comprehensive income 11,808 6,862
Closing liability / (asset) (10,086) (5,582)
43.3 The amounts recognised in income statement are as follows:
Current service cost - 27,764
Past service cost/(credit) - (84,516)
Interest cost 9,489 22,246
Expected return on plan assets (11,033) (16,037)
(1,544) (50,543)
43.4
Remeasurement loss/(gain) on obligations:
Experience loss / (gain) (5,727)
5,741
Actuarial loss / (gain) from changes in financial assumptions 11,722
-
5,995
5,741
Loss/(gain) due to remeasurement of investment return 5,813
1,121
11,808
6,862
43.5 Changes in the present value of defined benefit obligation are as follows:
Opening defined benefit obligation 108,187
198,837
Current service cost - 27,763
Past service cost/(credit) - (84,516)
Interest cost 9,489 22,246
Remeasurement loss 5,995 5,741
Benefits due but not paid (219) -
Benefits paid (21,728) (61,884)
Closing defined benefit obligation 101,724 108,187
(Rupees in thousand)
Remeasurements recognised in other comprehensive income (OCI) are as follows:
Wateen Telecom Ltd. Annual Report 201656
2016 2015
43.6 Changes in fair value of plan assets:
Opening fair value of plan assets 118,385 138,592
Remeasurement gain / (loss) (5,813) (1,121)
Contributions by employer 14,768
26,761
Benefits paid (21,728)
(61,884)
Expected return on plan assets 11,033
16,037
Closing fair value of plan assets 116,645
118,385
43.7 Break-up of category of assets in respect of staff gratuity:
Rupees %age Rupees %age
('000) ('000)
Cash and bank 14,670
13% 32,073
27%
Investments 101,975
87% 86,312
73%
116,645
100% 118,385
100%
43.8 Significant actuarial assumptions:
2016 2015
Valuation discount rate-p.a 7.25% 9.75%
Expected rate of return on plan assets-p.a 19% 19%
Average expected remaining working
life time of employees 6 years 8 years
43.9 Sensitivity Analysis
Increase (Decrease)
Discount rate (5,118) 5,812
43.10
The Projected Unit Credit Method using the following significant assumptions was used for the
valuation:
2016 2015
Effect of 1%
(Rupees in thousand)
(Rupees in thousand)
Actual return on plan assets for the year is Rs 22.246 million.
The calculation of the defined benefit obligation is sensitive to assumptions set out above. The
following table summarizes how the definedbenefit obligationat the end of reporting period would
have increased/ (decreased) as a result of change in respective assumptions by one percent.
Defined benefit obligation
During the next financial year, the expected refund to be paid to the gratuity fund by the Company
is Rs 23 million (2015: Rs 2.30 million).
The weighted average number of years of defined benefit obligation is 6 years as at June 30,
2016.
Wateen Telecom Ltd. Annual Report 201657
43.11
2016 2015
Provident fund 28,421
27,332
Gratuity fund (1,544)
(50,543)26,877
(23,211)
44. Defined contribution plan
Details of provident funds are as follows:
Staff provident fund 2016 2015
Net assets 207,375 203,954
Cost of investments made 96,654
96,580
Fair value of investments made 106,007
118,593
%age of investments made 51% 58%
Breakup of investment - at cost Rs '000 %age Rs '000 %age
Shares 23,756
25% 25,656
27%
Mutual Funds 40,000
41% 60,546
63%
Bank deposits 32,898
34% 10,378
10%
96,654 100% 96,580 100%
44.1 Investments out of provident funds have been made in accordance with the provisions of section
227 of the Companies Ordinance, 1984 and the rules formulated for the purpose.
20152016
(Rupees in thousand)
include amounts in respect of the following:
The Company contributes to gratuity fund on the advice of fund’s actuary. The contribution is
equal to current service cost with the adjustment for any deficit.
(Rupees in thousand)
Salaries, wages and benefits as appearing in note 32
45. General
45.1 Related party transactions
Aggregate transactions with related parties during the year were as follows:
2016 2015
Parent Company
Warid Telecom International LLC, UAE (WTI)
Markup charged to WTI 13,007
17,295
Shareholders
Long term finance received from shareholders 315,000
2,194,375
Markup on long term finance from shareholders 303,257
238,687
The Company's related parties comprise its subsidiaries, associated undertakings,employees'
retirement benefit plans and key management personnel. Amounts due from / (to) related
parties, are shown under receivables and payables. Remuneration of key management
personnel is disclosed in note 45.2.
(Rupees in thousand)
Subsidiary companies
Wateen Solutions (Pvt) Limited (WSPL)
Receipt of services 3,353 3,021 Markup charged to WSPL 63,471 88,187 Payments made by WSPL on behalf of Company 50,447
8,976
General and administrative expenses reimbursable
on behalf of WSPL 19,317
32,627
Wateen Satellite Services Private Limited
Payment made on behalf of Wateen Satellite 65 55
Payment made by Wateen Satellite on behalf of the Company 287 -
Wateen Telecom UK Limited (Wateen UK)
Sale of services 135,222 141
Markup charged to Wateen UK 43,180 30,313
Netsonline Services (Private) Limited (NOSPL)
Payments made by the Company on behalf of NOSPL 46
40
Wateen WiMAX (Pvt) Limited (WWL)
Transfer of assets - 3,524,764
Transfer of liabilities - 1,266,818
Payments made by the Company on behalf of WWL 155,243 524,013
Subscriptions for new ordinary shares by WTL against
consideration other than cash - 2,129,240
Impairment of investment in WWL - 2,129,250
Reversal / provision for loan guaranteed on behalf of WWL 2,000 1,111,000
Provision for long term loan to WWL 155,243 654,815
Wateen Telecom Ltd. Annual Report 201658
2016 2015
Associated companies:
Warid Telecom (Private) Limited (WTL)
Sale of services 1,259,444 1,289,650
Cost and expenses charged by WTL 398,042 316,539
Wateen Multimedia (Private) Limited (WMM) Markup charged to WMM 6,116
20,891
Payments made by the Company on behalf of WMM 39,008
-
Warid Telecom Georgia Limited
Markup charged on advances 1,639
2,180
Innov8 Limited
Sale of services 52,585
39,108
Cost and expenses charged by WTL 103,108
38,387
Receipt / (payment) by WTL on behalf of Company 24,424
4,541
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201659
Raseen Technology (Pvt) Limited
Markup charged on advances 1,967 2,616
Warid Telecom International - Bangladesh
Markup charged on advances 595
791
Wateen Malaysia Inc. (WM)
Payments made by the Company on behalf of WM 666
-
Bank Alfalah Limited (BAL) Sale of services 122,696
110,804
Markup charged by BAL on short term running finance 55,127 88,471
Markup charged by BAL on Long Term Loan 163,274 145,165
Markup charged on bank deposits with BAF 465 141
Taavun (Pvt) Limited
Markup on long term finance 56,649
74,279
Provident Fund Trust
Employer contribution to trust 28,421 27,332
Gratuity Fund
Employer contribution to fund 14,768 26,761
2016 2015
(Rupees in thousand)
45.2 Remuneration of Chief Executive, Directors and other Key Management Personnel
2016 2015 2016 2015 2016 2015 2016 2015
Managerial remuneration 15,755
15,484
17,434
6,476
287,868
309,650 321,057 331,610
Housing and utilities 8,665
8,516
-
-
158,328
170,308 166,993 178,824
Company's contribution to provident and gratuity funds 1,312
1,304
-
-
23,999
26,290 25,311 27,594
Leave fair assistance 1,313 1,304 - - 23,969 26,277 25,282 27,581
27,045 26,608 17,434 6,476 494,163 532,525 538,643 565,609
Number of persons 1 1 3 2 285 331 288 334
--------------------------------------------------(Rupees in thousand)------------------------------------------------------
Directors Key Management Personnel
The aggregate amount charged in the financial statements for remuneration, including all benefits, to Chief Executives,Directors and Key Management Personnel of the Company is as follows:
Chief Executive Total
Wateen Telecom Ltd. Annual Report 201660
45.3 Capacity
45.4 Number of employees 2016 2015
Total number of employees at end of the year 445 536
Average number of employees for the year 453 590
46. Corresponding figures
Trade debts Long term trade debts
47. Date of authorisation for issue
Considering the nature of the Company's business, information regarding capacity has norelevance.
These financial statements have been authorised for issue by the Board of Directors of theCompany on .November 29, 2016
Previous years figures have been reclassified to conform to current year's presentation asfollows:
Rupees in thousandsReclassified from Reclassified to
523,325
_________________ ______________
Chief Executive Director
AUDITORS’ REPORT TO THE MEMBERS
We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of Wateen Telecom Limited (Wateen) and its subsidiary companies, Wateen Solutions (Pvt) Limited, Wateen Satellite Services (Pvt) Limited, Wateen Telecom UK Limited, Netsonline Services (Pvt) Limited and Wateen WiMAX (Private) Limited as at June 30, 2016 and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinions on the financial statements of Wateen Telecom Limited, subsidiary companies Wateen Satellite Services (Pvt) Limited and Wateen WiMAX (Private) Limited. Financial statements of subsidiary companies, Wateen Solutions (Pvt) Limited, Netsonline Services (Pvt) Limited and Wateen Telecom UK Limited have been audited by other firms of Chartered Accountants and whose reports have been furnished to us. Our opinion in so far as it relates to the amounts included in respect of these subsidiary companies, is based solely on the reports of such other auditors. These financial statements are the responsibility of Wateen's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Our audit was conducted in accordance with the International Standards on Auditing as applicable in Pakistan and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements present fairly the financial position of Wateen Telecom Limited and its subsidiary companies as at June 30, 2016 and the result of their operations for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.
We draw attention to note 2 (iii) to the consolidated financial statements related to management's assessment of going concern. Our opinion is not qualified in respect of this matter.
Chartered AccountantsIslamabad: November 29, 2016
Engagement Partner: JehanZeb Amin
Wateen Telecom Ltd. Annual Report 201663
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201664
2016 2015Note
SHARE CAPITAL AND RESERVES
Authorised capital 5 10,000,000 10,000,000
Issued, subscribed and paid-up capital 5 6,174,746
6,174,746
General reserve 6 134,681
134,681
Accumulated loss (36,821,046)
(34,750,251)
Currency translation differences 37,807
(7,997)
(30,473,812)
(28,448,821)
NON CURRENT LIABILITIES
Long term finance - secured 7 -
-
Term finance from associated company - unsecured 8 - -
Long term portion of deferred mark up 9 -
-
Long term finance from shareholders - unsecured 10 14,041,457
13,334,608
Medium term finance from an associated company - unsecured 11 600,000
600,000
Long term deposits 12 35,680
35,680
14,677,137
13,970,288
DEFERRED LIABILITIES
Deferred government grants 13 2,567,744
3,233,958
CURRENT LIABILITIES
Current portion of long term finance - secured 7 16,865,384
16,624,016
Term finance from associated company - unsecured 8 314,100
305,100
Current portion of deferred mark up 9 4,069,768
3,017,066
Short term running finance - secured 14 765,512
787,135
Trade and other payables 15 5,169,120
6,179,124
Interest / markup accrued 16 2,425,718
1,766,089
29,609,602
28,678,530
CONTINGENCIES AND COMMITMENTS 17
16,380,671 17,433,955
The annexed notes 1- 45 form an integral part of these financial statements.
(Rupees in thousand)
Chief Executive Director
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201665
2016 2015Note
NON-CURRENT ASSETS
Property, plant and equipment
Operating assets 18 9,171,008
8,523,654
Capital work in progress 19 1,028,815
1,506,592
Intangible assets 20 109,563 116,839
10,309,386
10,147,085
DEFERRED INCOME TAX ASSET 21 22,947
8,254
LONG TERM DEPOSITS AND PREPAYMENTS
Long term deposits 22 479,760
468,647
Long term prepayments 23 40,116
56,127
Long term trade debts 24 634,447
523,325
1,154,323
1,048,099
CURRENT ASSETS
Trade debts 24 2,138,761
2,384,001
Contract work in progress 175,934
339,764
Stores, spares and loose tools 25 378,537
501,890
Stocks 26 8,713
11,631
Advances, deposits, prepayments and
other receivables 27 1,219,231 2,022,748
Income tax refundable 588,262 763,149
Cash and bank balances 28 384,577 207,334
4,894,016 6,230,517
16,380,671 17,433,955
(Rupees in thousand)
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 2016
_______________
Chief Executive
____________
Director
Wateen Telecom Ltd. Annual Report 201666
2016 2015Note
Revenue 29 7,567,818
6,109,147
Cost of sales (excluding depreciation and amortisation) 30 4,580,533
4,019,239
General and administration expenses 31 1,437,151
1,764,573
Advertisement and marketing expenses 23,052
30,644
Selling and distribution expenses 1,701
12,275
Provisions 32 503,559
810,230
Other income 33 (574,119)
(604,312)
Earnings before interest, taxation, impairment
depreciation and amortisation 1,595,941
76,498
Less: Depreciation and amortisation 700,240 996,739 Finance cost 34 2,523,774 2,253,857 Impairment/(reversal) of WiMAX assets 100,075
3,354,846
Finance income 35 (118,317)
(130,969)
Loss before taxation (1,609,831)
(6,397,975)
Income tax expense 36 (449,156)
(74,932)
Loss for the year (2,058,987)
(6,472,907)
Loss attributable to:
-owners of Wateen Telecom Limited (2,058,987)
(6,458,578)
-non-controlling interest - (14,329)
(2,058,987) (6,472,907)
The annexed notes 1- 45 form an integral part of these financial statements.
(Rupees in thousand)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2016
_______________ ___________
Chief Executive Director
Wateen Telecom Ltd. Annual Report 201667
Note 2016 2015
Loss for the year (2,058,987)
(6,472,907)
Other comprehensive income/ (loss)
Currency translation differences 45,804
22,894
Remeasurement loss on staff retirement
benefit plan 41.4 (11,808) (6,862) 33,996 16,032
Total comprehensive loss for the year (2,024,991)
(6,456,875)
Total comprehensive loss attributable to:
-owners of Wateen Telecom Limited (2,024,991)
(6,442,546)
-non-controlling interest -
(14,329)
(2,024,991)
(6,456,875)
The annexed notes 1- 45 form an integral part of these financial statements.
(Rupees in thousand)
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201668
Cash flow from investing activities (1,333,266) (2,061,540)
2016 2015
CASH FLOW FROM OPERATING ACTIVITIES
Loss before taxation (1,609,831) (6,397,975)
Adjustment of non cash items:
Depreciation and amortisation 700,240 996,739
Finance cost 2,523,774 2,253,857
(Profit)/loss on sale of operating assets 101,662 (10,934)
Impairment/(reversal) of WiMAX assets 100,075
3,354,846
Cost associated with IRU of optic fiber cable 273,007
154,090
Deferred USF grant recognised during the year (143,561)
(178,230)
Provisions 503,559
810,230
Provision of markup on advances to associated companies 17,208
22,880
Remeasurement loss on staff retirement benefit plan (11,808)
(6,862)
Stores and spares written off 16,599
-
Write back of liability (516,690)
(407,799)
3,564,065
6,988,817
1,954,234
590,842
Changes in working capital:
(Increase)/decrease in trade debts (327,027)
416,058
(Increase)/ decrease in contract work in progress 163,830
(291,839)
Decrease/ (Increase)in stores, spares and loose tools 121,598
(91,982)
(Increase)/ decrease in stocks (1,807)
3,848
Decrease in advances, deposits, prepayments and other receivables 74,892
28,559
Decrease in trade and other payables (484,302)
(333,027)
(452,816)
(268,383)
Income taxes paid (288,962)
(280,698)
Cash flow from operating activities 1,212,456
41,761
CASH FLOW FROM INVESTING ACTIVITIES
Property, plant and equipment additions (1,381,813)
(1,781,233)
Intangible assets additions -
(85,225)
Proceeds from sale of property, plant and equipment 43,649
15,008
Long term deposits receivable (paid) / received (11,113) (219,534)
Long term prepayments 16,011 9,444
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201669
DirectorChief Executive
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2016
2016 2015 (Rupees in thousand)
CASH FLOW FROM FINANCING ACTIVITIES
Term finance from associated company - unsecured 315,000
2,194,375
Increase in long term finance - secured -
1,926,953
Long term finance repaid (8,935)
(1,033,125)
Deferred grants received 112,204
222,110
Obligations under finance leases repaid -
(1,090)
Long term deposits (repaid) -
(21,430)
Finance cost paid (96,810) (585,431)
Cash flow from financing activities 321,459
2,702,362
INCREASE IN CASH AND CASH EQUIVALENTS 200,648
682,583
Effects of exchange rates on cash and cash equivalents (1,782) (726)
Cash and cash equivalents at beginning of the year (579,801) (1,261,658)
CASH AND CASH EQUIVALENTS AT END OF THE YEAR (380,935) (579,801)
CASH AND CASH EQUIVALENTS COMPRISE:
Cash and bank balances 384,577 207,334
Short term running finance - secured (765,512) (787,135)
(380,935) (579,801)
The annexed notes 1- 45 form an integral part of these financial statements.
CO
NS
OL
IDA
TE
D S
TA
TE
ME
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OF
CH
AN
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FO
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__
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__
__
_
__
__
__
__
__
_
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cto
r
Wateen Telecom Ltd. Annual Report 201670
Sh
are
Ge
ne
ral
Acc
um
ula
ted
Cu
rre
ncy
cap
ital
rese
rve
loss
tra
nsl
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tere
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lan
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0, 2
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(30
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(21
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(10
8,4
05
)(2
1,9
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l co
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reh
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for
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-
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(14
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22
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4
16
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-1
6,0
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-
-
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22
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4
(6,4
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(14
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(28
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-
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-
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Oth
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-
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45
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4
33
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6
-3
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45
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-
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30
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4,7
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37
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CONSOLIDATED NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2016
Wateen Telecom Ltd. Annual Report 201671
1. Legal status and operations
The consolidated financial statements include the financial statements of Wateen Telecom Limited (the
Company) and its subsidiary companies Wateen Solutions (Pvt) Limited (100% owned) , Wateen
SatelliteServices (Pvt) Limited (100% owned), Wateen Telecom UK Limited (100% owned), Netsonline
Services (Pvt) Limited (100% owned) and Wateen WiMAX (Pvt) Limited (100% owned). For the
purpose of these financial statements, Wateen and consolidated subsidiaries are referred to as the
Company.
The subsidiary company, Wateen Satellite Services (Pvt) Limited (WSS), is incorporated as a Private
Limited Company under the Companies Ordinance, 1984 and is engaged in providing back haul and
satellite data connectivity services in Pakistan. On March 1, 2009, WSS transferred all contracts for
providing back haul and satellite data connectivity services to the Company. Wateen acquired 100%
shares of WSS on July 1, 2008.
The subsidiary company, Netsonline Services (Private) Limited, is incorporated as a Private Limited
Company under the Companies Ordinance, 1984 and is engaged in providing internet and other
technology related services in Pakistan. Wateen acquired 100% shares of Netsonline Services
(Private) Limited on July 1, 2008.
The subsidiary company, Wateen Solutions (Pvt) Limited (WSPL), is incorporated under Companies
Ordinance, 1984 as a Private Limited Company on May 17, 2004. The principal activities of the
Company are to sell and deploy telecom equipmentand providerelated services. The registered office
of the Company is situated at Lahore. Wateen acquired 100 % interest in Wateen Solutions (Pvt)
Limited on August 2, 2006. Wateen sold 49% shares (397,027 fully paid ordinary shares of Rs 100
each) of Wateen Solutions (Pvt) Limited on July 1, 2008, and acquired back 49% shares (397,027fully
paid ordinary shares of Rs 100 each) on November 18, 2014 for Rs 85 million.
The Company was incorporated in Pakistan as a Private Limited Company under the Companies
Ordinance, 1984 on March 4, 2005 forproviding 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 "PrivateLimited" to "Public Limited" with effect from October 19, 2009 and thereafter, it was listed
on Karachi, Lahore and Islamabad Stock Exchanges. Subsequently, the Karachi, Lahore and
Islamabad Stock Exchanges accepted the request for delisting of the Company and accordingly it
stood delisted from these stock exchanges with effect from February 17, 2014. The registered office of
the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, United Arab Emirates (WTI).
The subsidiary company, Wateen Telecom UK Limited, is incorporatedas a Private Limited Company
under the UK Companies Act, 2006 and is engaged in providing internet and other technology related
services in United Kingdom. Wateen held 51% shares in Wateen Telecom UK Limited since its
incorporation. Wateen acquired remaining shares of Wateen Telecom UK Limited on March 31, 2011.
The subsidiary company, Wateen WiMAX (Private) Limited (WWL), is incorporated as a Private Limited
Company under the Companies Ordinance, 1984 on December 6, 2012 to carry on business of WiMAX
telecommunications services. The shareholders of Wateen in their Extra Ordinary General Meeting
held during the year consented for the approval of transfer of WiMAXrelated net assets as at July 10,
2014 to the WWL for consideration other than cash in terms of the share issuance agreement dated
September 9, 2014 between WWL and the Company.
Subsidiaries are all entities over which the Company has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Company controls another entity. The Company also
assesses existence of control where it does not have more than 50% of the votingpower but is able to
Wateen Telecom Ltd. Annual Report 201672
govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in
circumstances where the size of the Company’s voting rights relative to the size and dispersion of
holdings of other shareholders give the Company the power to govern the financial and operating
policies, etc.
2. Basis of preparation
(i) Statement of compliance
When the Company ceases to have control any retained interest in the entity is re-measured to its fair
value at the date when control is lost, with the change in carrying amount recognized in profit or loss.
The fair value is the initialcarrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint ventureor financialasset. In addition, any amounts previouslyrecognized
in other comprehensive income in respect of that entity are accounted for as if the group had directly
disposed of the related assets or liabilities.This may mean that amounts previouslyrecognized in other
comprehensive income are reclassified to profit or loss.
Transactions with non-controlling interests that do not result in loss of control are accounted for as
equity transactions – that is, as transactions with the owners in their capacity as owners. The
difference between fair value of any consideration paid and the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-
controlling interests are also recorded in equity.
All significant inter-company transactions, balances, income and expenses on transactions between
group companies are eliminated.Profits and losses resulting from inter-company transactions that are
recognized in assets are also eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Company.
The Company applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the Company. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent
considerationarrangement. Identifiable assets acquired and liabilitiesand contingent liabilitiesassumed
in a business combination are measured initially at their fair values at the acquisition date. The
Company recognizes any non-controlling interest in the acquiree on an acquisition- by-acquisition
basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized
amounts of acquiree’s identifiable net assets.
These financial statements have been prepared in accordance with the approved accounting standards
as applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They
are deconsolidated from the date that control ceases.
Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages,
the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through income statement.
Any contingent consideration to be transferred by the Company is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to
be an asset or liabilityis recognized in accordance with IAS39 either in profit or loss or as a change to
other comprehensive income. Contingent consideration that is classified as equity is not remeasured,
and its subsequent settlement is accounted for within equity.
Goodwill is initiallymeasured as the excess of the aggregate of the consideration transferred and the
fair value of non-controlling interest over the net identifiableassets acquired and liabilities assumed. If
this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference
is recognized in income statement.
Wateen Telecom Ltd. Annual Report 201673
(ii) Accounting convention
These financial statements have been prepared on the basis of 'historical cost convention' except as
otherwise stated in the respective accounting policies notes.
under the Companies Ordinance 1984, provisions of and directives issued under the Companies
Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance,
1984 shall prevail.
(iii) Management's assessment of going concern
Operational Performance
Debt restructuring
Ongoing Shareholder Support
Keeping in view the foregoing and other related operational facts, the management believes that the
Company is able to operate on a going concern basis in the foreseeable future and these financial
statements have been prepared reflecting this assumption.
The Company's majority shareholderWTI continues to providemanagement with comfort with regards
to its ongoing support and this is evident from further loan of USD 3 million extended to the Company
during the year ended June 30, 2016 (year ended June 30, 2015: USD 10 million) for operations the
Company.
In addition, WTI guarantees the local Syndicate Finance Facility, and certain sponsors guaranteesare
also provided to the foreign debt holders. The continued support of WTI including the guarantees and
financial assistance from WTI will enable the Company to continue its operations and fulfill its financial
obligations for a minimum period of twelve months from the year end. Further, the Board and
management is confident that WTI will continue to provide strong support to the Company.
In assessing the going concern status of the Company, management has carefully assessed a number
of factors covering the operational performance of the business, the ability to implement a significant
debt restructuring of the Company’s existing debts and the appetiteof majority shareholder to continue
financial support. Based on the analysis of these, management is comfortable that the Company will be
able to continue as a going concern in the foreseeable future. Set out below are the key areas of
evidence that management has considered.
Company’s operating performance reflected remarkable improvement during the year ended June 30,
2016 by posting the earnings before interest, taxation, depreciation and amortization (EBITDA) of Rs
1,596 million (June 30, 2015: Rs 77 million) as a highest EBITDA after financial year 2008-2009.
Further, during the year, the Company has been able to generate positive cashflows from operations
for an amount of Rs 1,212 million (2015: Rs 42 million).
During the year ended June 30, 2016 Company incurred the net loss after taxation Rs 2,059 million
(June 30, 2015: Rs 6,473 million) and had net current liabilitiesas at June 30, 2016 of Rs 24,716 million
(2015: 22,448 million) of which Rs 12,212 million (2015: Rs 14,064 million) relate to loan installments
and deferred markup of Rs 4,070 million (2015: Rs 3,017 million), due for repayment after June 30,
2017 but classified as current liabilities as mentioned in notes 7 & 8 respectively. Net current liabilities
also include markup of Rs 1,358 million (2015: Rs 923 million) on account of subordinated loan from
shareholders of the Company. It is important to note that during the past five years, the majority
shareholder has provided financial support in the form of long term finance amounting to Rs 14,041
million to meet the capital requirements of the Company (un availed finance facility from shareholder
amounts to USD 75 million at June 30, 2016) and management expects the support to continue.
As part of further restructuring the Company is negotiating with lenders whereby it is proposed that
Deutsche Bank AG facility will be novated from company to WTI and facility from ECGD will also be
restructured. The management is of the view that above restructuring will further improve the financial
position of the Company.
Wateen Telecom Ltd. Annual Report 201674
The management anticipates that the adoption of the above standards, amendments andinterpretations in future periods, will have no material impact on the financial statements otherthan in presentation/disclosures.
Further, the following new standards and interpretations have been issued by the InternationalAccounting Standards Board (IASB), which have not been notified upto June 30, 2016 by theSecurities and Exchange Commission of Pakistan, for the purpose of their applicability inPakistan:
(iv) Critical accounting estimates and judgments
(i) Operating assets - estimated useful life of property, plant and equipment (note 18)
(ii) Impairment of DSL assets (note 19)
(iii) Impairment of intangible assets (note 20)
(iv) Provision for doubtful debts (note 24)
(v) Provision for obsolete stores (note 25)
(vi) Provision for obsolete stocks (note 26)
(vii) Provision for doubtful advances and other receivables (note 27)
(viii) Provision for current and deferred income tax (note 21)
(ix) Employees' retirement benefits (note 41)
(x) Deferred government grants (note 13)
3. Adoption of new and revised standards and interpretations
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations (Amendments) January 1, 2016
IFRS 7 Financial Instruments: Disclosures (Amendments) January 1, 2016
IFRS 11 Joint Arrangements (Amendments) January 1, 2017
IFRS 14 Regulatory Deferral Accounts January 1, 2016
IFRS 15 Revenue from Contracts with Customers January 1, 2018
IFRS 16 Leases January 1, 2019
IAS 1 Presentation of Financial Statements (Amendments) January 1, 2016
IAS 7 Statement of Cash Flows (Amendments) January 1, 2017
IAS 12 Income Taxes (Amendments) January 1, 2017
IAS 16 Property, Plant and Equipment (Amendments) January 1, 2016
IAS 19 Employee Benefits (Amendments) January 1, 2016
IAS 27 Separate Financial Statements (Amendments) January 1, 2016
IAS 28 Investment in Associates and Joint Ventures (Amendments) January 1, 2016
IAS 34 Interim Financial Reporting (Amendments) January 1, 2016
IAS 38 Intangible Assets (Amendments) January 1, 2016
IAS 41 Agriculture (Amendments) January 1, 2016
Effective date (annual periods beginning
on or after)
The preparation of financial statements in conformity with approved accounting standards requires the
use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. Estimates and judgments are continually
evaluated and are based on historic experience, including expectations of future events that are
believed to be reasonableunder the circumstances. The areas involvinga higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the financial statements, are
as follows:
Standards, amendments and interpretations to existing standards, that are not yet effective and have
not been early adopted by Company:
Wateen Telecom Ltd. Annual Report 201675
IFRS 1 First-time adoption of International Financial Reporting StandardsIFRS 9 Financial instruments
IFRIC 4 Determining whether an arrangement contains lease
IFRIC 12 Service concession arrangements
The following interpretations issued by the IASB have been waived off by SECP effective January 16,
2012:
4. Summary of significant accounting policies
4.1 Employees' retirement benefits
(i)
(ii)
4.2 Taxation
Current
Deferred
Deferred income tax is calculated at the rates that are expected to apply to the period when the
differences reverse, and the tax rates that have been enacted, or substantively enacted, at the date of
the statement of financial position.
Deferred income tax is accounted for using the balance sheet liability method in respect of all
temporary differences arising between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax base used in the computation of taxable profit.
Upto February28, 2015, the Company provided gratuity to all permanent employees in accordance with
the rules of the Company. Effective March 1, 2015, the benefit has been discontinuedand amount due
to employees as at February28, 2015 will be payable at the time of final settlement. Actuarialvaluation
is conducted periodically using "Projected Unit Credit Method"and latest valuation was carried out at
June 30, 2016. The details of actuarial valuation are given in note 41.
Actuarialgains and losses (remeasurement gains / losses) on employees’ retirement benefit plans are
recognised immediately in other comprehensive income and past service cost is recognized in profit
and loss when they occur. Calculation of gratuity requires assumptions to be made of future outcomes
which mainly includes increase in remuneration, expected long-term return on plan assets and the
discount rate used to convert future cash flows to current values. Calculations are sensitive to changes
in the underlying assumptions.
Contributory provident fund for all permanent employees of the Company is in place. Contribution for
the year amounted to Rs 29.567 million (2015: Rs 28.730 million) is charged to income for the year.
Deferred income tax liabilities are recognized for all taxable temporary differences and deferred tax
assets are recognized to the extent that it is probable that taxable profits will be availableagainst which
the deductible temporary differences, unused tax losses and tax credits can be utilized.
The tax expense for the year comprises of current and deferred income tax, and is recognized in
income for the year, except to the extent that it relates to items recognized directly in other
comprehensive income, in which case the related tax is also recognized in other comprehensive
income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position. Management periodicallyevaluatespositions
taken in tax returns, with respect to situations in which applicable tax regulation is subject to
interpretation,and establishes provisions, where appropriate,on the basis of amounts expected to be
paid to the tax authorities.
Wateen Telecom Ltd. Annual Report 201676
4.3 Government grant
Governmentgrants are recognized at their fair values and included in non-current liabilities, as deferred
income, when there is reasonable assurance that the grants will be received and the Company will be
able to comply with the conditions associated with the grants.
Grants that compensate the Company for expenses incurred, are recognized on a systematic basis in
the income for the year in which the related expenses are recognized. Grants that compensate the
Company for the cost of an asset are recognized in income on a systematic basis over the expected
useful life of the related asset.
4.4 Borrowings and borrowing costs
4.5 Trade and other payables
4.6 Provisions
4.7 Contingent liabilities
4.8 Property plant and equipment
Property, plant and equipment,except freehold land and capital work-in-progress, is stated at cost less
accumulated depreciation and any identified impairment losses; freehold land is stated at cost less
identified impairment losses, if any. Cost includes expenditure, related overheads, mark-up and
borrowing costs (note 4.4) that are directly attributable to the acquisition of the asset.
Subsequentcosts, if reliablymeasurable, are included in the asset’s carrying amount, or recognized as
a separate asset as appropriate,only when it is probable that future economic benefits associated with
the cost will flow to the Company. The carrying amount of any replaced parts as well as other repair
and maintenance costs, are charged to income during the period in which they are incurred.
Depreciation on operating assets is calculated, using the straight line method, to allocate their cost over
their estimated useful lives, at the rates mentioned in note 18.
Liabilities for creditors and other amounts payable including payable to related parties are carried at
cost, which is the fair value of the consideration to be paid in the future for the goods and / or services
received, whether or not billed to the Company.
Provisions are recognized when the Company has a present legal or constructive obligationas a result
of past events, it is probablethat an outflow of resources embodyingeconomic benefits will be required
to settle the obligationand a reliable estimate of the amount can be made. Provisions are reviewedat
each statement of financial position date and are adjusted to reflect the current best estimate.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequentlystated at amortized cost; any difference between proceeds (net of transaction costs) and
the redemption value is recognised in the income statement over the period of the borrowings using
effective interest method.
Borrowing costs incurred that are directly attributable to the acquisition, construction or production of
qualifyingassets are capitalized as part of the cost of that asset. All other borrowing costs are charged
to income for the year. Qualifyingassets are assets that necessarily takes substantial period of time to
get ready for their extended use.
A contingent liability is disclosed when the Company has a possible obligation as a result of past
events, the existence of which will be confirmed only by the occurrence or non-occurrence, of one or
more uncertain future events, not wholly within the control of the Company; or when the Company has
a present legal or constructive obligation, that arises from past events, but it is not probable that an
outflow of resources embodying economic benefits will be required to settle the obligation, or the
amount of the obligation cannot be measured with sufficient reliability.
Wateen Telecom Ltd. Annual Report 201677
The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and
the carrying amount of the asset, is recognized in profit or loss for the year.
Depreciation on additions to property, plant and equipment, is charged from the month in which the
relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the
asset is disposed off. Impairment loss, if any, or its reversal, is also charged to income for the year.
Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.
4.9 Intangible assets
(i) Licenses
(ii) Computer software
(iii)
(iv)
4.10 Impairment of non-financial assets
Assets that have an indefiniteuseful life, for example freehold land, are not subject to depreciationand
are tested annuallyfor impairment. Assets that are subject to depreciation or amortisation are reviewed
for impairment on the date of the statement of financial position, or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognized, equal to the amount by which the asset’s carrying amount exceeds its recoverable
amount. An asset’s recoverableamount is the higher of its fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows. Non financial assets that suffered an impairment, are reviewed for
possible reversal of the impairment at each statement of financial position date. Reversals of the
impairment loss are restricted to the extent that asset’s carrying amount does not exceed the carrying
amount that would have been determined,net of depreciationor amortization, if no impairment loss has
been recognized. An impairment loss, or the reversal of an impairment loss, are both recognized in the
income statement.
The amortization on computer software acquired during the year is charged from the month in which
the software is acquired or capitalized, while no amortization is charged for the month in which the
software is disposed off.
Non compete fee is stated at cost less accumulated amortization. Amortization is calculated using the
straight-line method to allocate the cost over its estimated useful life.
On acquisition of an entity, difference between the purchase consideration and the fair value of the
identifiableassets and liabilitiesacquired, is initially recognised as goodwill.Following initial recognition,
goodwill is measured at cost less accumulated impairment , if any.
These are carried at cost less accumulated amortization and any identified impairment losses.
Amortization is calculated using the straight line method from the date of commencement of
commercial operations, to allocate the cost of the license over its estimated useful life specified in note
20, and is charged to income for the year.
The amortization on licenses acquired during the year, is charged from the month in which a license is
acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license.
These are carried at cost less accumulated amortization and any identified impairment losses.
Amortization is calculated using the straight line method, to allocate the cost of the software over its
estimated useful life, and is charged in income statement. Costs associated with maintainingcomputer
software, are recognised as an expense as and when incurred.
Wateen Telecom Ltd. Annual Report 201678
4.11 Right of way charges
4.12 Trade debts and other receivables
Trade debts and other receivables are carried at their original invoice amounts, less any estimates
made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are
written off when identified.
Right of way charges paid to local governments, concerned authorities and land owners for access of
land are carried at cost less amortisation. Amortisation is provided to write off the cost on straight line
basis over the period of right of way.
4.13 Stores, spares and loose tools
4.14
4.15
4.16 Revenue recognition
4.17 Foreign currency translation
a) Functional and presentation currency
b) Foreign currency transactions and translations
Interest income is recognised using the effective yield method.
Stocks are valued at lower of cost and net realizable value. Cost is determined on weighted average
cost formula basis.
Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash
and cash equivalents comprise cash in hand and bank and short term highly liquid investments with
original maturities of three months or less, and that are readily convertible to known amounts of cash,
and subject to an insignificant risk of changes in value.
Cash and cash equivalents
Dividend income is recognised when the right to receive payment is established.
Revenue from sale of goods is recognised upon dispatch of goods to customers.
Foreign currency transactions are translated into the functional currency, using the exchange rates
prevailing on the date of the transaction. Monetary assets and liabilities, denominated in foreign
currencies, are translated into the functional currency using the exchange rate prevailingon the date of
the statement of financialposition. Foreign exchange gains and losses resulting from the settlement of
such transactions, and from the translationof monetary items at year end exchangerates, are charged
to income for the year.
Items included in the financial statements of the Company are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). These financial
statements are presented in Pakistan Rupees (Rs), which is the Company’s functional currency.
Revenue is recognised as related services are rendered.
Revenue from granting of Indefeasible Right of Use (IRU) of dark fiber upto 25 years or more is
recognised at the time of delivery and acceptance by the customer.
Revenue from prepaidcards is recognised as credit is used, unutilized credit is carried in Statement of
Financial Position balance sheet as unearned revenue in trade and other payables.
Revenue from sale of equipment is recognised when the significant risks and rewards of ownership are
transferred to the buyer.
Stocks
Stores, spares and loose tools are carried at cost less allowance for obsolescence. Cost is determined
on weighted average cost formula basis. Items in transit are valuedat cost, comprising invoice values
and other related charges incurred up to the date of the statement of financial position.
Wateen Telecom Ltd. Annual Report 201679
c) Foreign operations
(i)
(ii)
(iii)
income and expenses for each statement of comprehensive income are translated at
average exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailingon the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions), and
all resulting currency translation differences are recognised in the statement of
comprehensive income.
The results and financial position of all the Company that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
assets and liabilities for each statement of financial position presented are translated at the
closing rate at the date of that financial position;
4.18 Financial instruments
(a) Financial assets
Classification and subsequent measurement
(i) Fair value through profit and loss
On the disposal of a foreign operation (that is, a disposal of the Company’s entire interest in a foreign
operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation)all
of the exchange differences accumulated in equity in respect of that operation attributableto the equity
holders of the Company are reclassified to profit or loss.
The Company classifies its financialassets in the followingcategories: fair value through profit or loss,
held-to-maturity investments, loans and receivables and available-for-sale financial assets. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition. Regular purchases and sales of
financial assets are recognized on the trade date - the date on which the Company commits to
purchase or sell the asset.
In the case of a partial disposal that does not result in the Company losing control over a subsidiary that
includes a foreign operation, the proportionate share of accumulated exchange differences are re-
attributed to non-controlling interests and are not recognised in profit or loss.
Financial assets at fair value through profit or loss, include financial assets held for trading
and financial assets, designated upon initial recognition, at fair value through profit or loss.
Financial assets at fair value through profit or loss are carried in the statement of financial
position at their fair value,with changes therein recognized in the income for the year. Assets
in this category are classified as current assets.
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument and derecognized when the Company loses control of the contractual
rights that comprise the financialassets and in case of financial liabilities when the obligationspecified
in the contract is discharged, cancelled or expires. All financial assets and liabilities are initially
recognized at fair value plus transaction costs other than financial assets and liabilities carried at fair
value through profit or loss. Financial assets and liabilitiescarried at fair value through profit or loss are
initially recognized at fair value, and transaction costs are charged to income for the year. These are
subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on
derecognition of financial assets and financial liabilities is included in profit or loss for the year.
(ii) Held to maturity
Non derivative financial assets with fixed or determinable payments and fixed maturities are
classified as held-to-maturitywhen the Company has the positive intention and ability to hold
these assets to maturity. After initial measurement, held-to-maturity investments are
measured at amortized cost using the effective interest method, less impairment, if any.
Wateen Telecom Ltd. Annual Report 201680
(iii) Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable
payments, that are not quoted in an active market. After initial measurement, these financial
assets are measured at amortized cost, using the effective interest rate method, less
impairment, if any.
The Company’s loans and receivables comprise 'long term deposits', ‘trade debts’, 'contract
work in progress', ‘advances, deposits and other receivables,' ‘income tax refundable’and
‘bank balances’.
(iv) Available for sale
Impairment
(b) Financial liabilities
Initial recognition and measurement
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
(i)
(ii)
(c) Offsetting of financial assets and liabilities
Available-for-sale financial assets are non-derivatives, that are either designated in this
category, or not classified in any of the other categories. These are included in non current
assets, unless management intends to dispose them off within twelve months of the date of
the statement of financial position.
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position, when there is a legally enforceable right to set off the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Legally
enforceableright must not be contingenton future events and must be enforceable in normal course of
business and in the event of default, insolvency or bankruptcy of the Company or the counter party.
The Company classifies its financial liabilitiesin the followingcategories: fair value through profit or loss
and other financial liabilities. The Company determines the classification of its financial liabilities at initial
recognition. All financial liabilities are recognized initiallyat fair value and, in the case of other financial
liabilities, also include directly attributable transaction costs.
Fair value through profit or loss
Financial liabilities at fair value through profit or loss, include financial liabilities held-for-trading
and financial liabilities designated upon initial recognition as being at fair value through profit
or loss. Financial liabilities at fair value through profit or loss are carried in the statement of
financial position at their fair value, with changes therein recognized in the income for the
year.
Other financial liabilities
After initial measurement, available-for-salefinancial assets are measured at fair value, with
unrealized gains or losses recognized as other comprehensive income, until the investment
is derecognized, at which time the cumulative gain or loss is recognized in income for the
year.
After initial recognition, other financial liabilities which are interest bearing are subsequently
measured at amortized cost, using the effective interest rate method.
The Company assesses at the end of each reportingperiod whether there is an objective evidence that
a financial asset or group of financial assets is impaired as a result of one or more events that occurred
after the initial recognitionof the asset (a ‘loss event’), and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
Wateen Telecom Ltd. Annual Report 201681
4.19 Derivative financial instruments
Derivates are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured at fair value. Changes in fair value of derivates that are designated and
qualify as fair value hedges are recorded in income statement together with any changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk.
Number of Rs Number of Rs
Shares '000 Shares '000
5. Share capital
Authorised share capital:
Ordinary shares of Rs 10 each 1,000,000,000 10,000,000 1,000,000,000 10,000,000
Issued, subscribed and paid up
share capital:
Shares issued for cash
Ordinary shares of Rs 10 each 408,737,310
4,087,373
408,737,310
4,087,373
Shares issued as fully paid
bonus shares of Rs 10 each 208,737,310
2,087,373
208,737,310
2,087,373
617,474,620
6,174,746
617,474,620
6,174,746
5.1
6. General reserve
2016 2015
7. Long term finance - secured
Note
Syndicate of banks 7.1 8,853,175
8,861,625
Export Credit Guarantee Department - (ECGD) 7.2 2,680,329
2,603,529
Dubai Islamic Bank (DIB) 7.3 380,969 381,454
Deutsche Bank AG 7.4 5,024,298 4,880,335
Total 16,938,771
16,726,943
Unamortized transaction and other ancillary cost
Opening balance 102,927
105,435
Addition during the year -
50,200
Amortisation for the year (29,540)
(52,708)
(73,387)
(102,927)
16,865,384
16,624,016
Less: Amount shown as current liability
Amount payable within next twelve months (4,653,075)
(2,560,463)
Amount due after June 30, 2017 (12,212,309)
(14,063,553)
7.5 (16,865,384)
(16,624,016)
- -
7.1 7.1.1 7,789,921 7,796,452
7.1.2 1,063,255 1,065,173
8,853,175 8,861,625
June 30, 2015June 30, 2016
The Company is to place atleast 10% of the profits in the general reserve account till it reaches 50%
of the issued, subscribed and paid up capital of the company.
The parent company, Warid Telecom InternationalLLC, U.A.E held 595,393,361(2015: 588,577,066)
ordinary shares at year end.
(Rupees in thousand)
Facility 1
Facility 2
Wateen Telecom Ltd. Annual Report 201682
7.1.1 The Company obtained syndicate term finance facility from a syndicate of banks with Standard
Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank AI-Habib Limited (BAHL) and
National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the
Company. During the year ended June 30, 2015, the Company and the Syndicate of Banks signed
second amendatory agreement to restructure Syndicate term finance facility and the short term
running finance from Bank Alfalah Limited (BAF) running finance facility-I.All the finance facilities fully
availed by the Company till June 30, 2016. The principal is now repayable in twenty unequal six
monthly instalments. The first such instalment being due on April 1, 2015 and subsequently every six
months until October 1, 2024.
7.1.2
7.2 The Company obtainedlong term finance facility amounting to USD 42 million (2015: USD 42 million)
from ECGD UK, of which USD 35 million (2015: USD 35 million) was availed till June 30, 2016.
During the year ended June 30, 2012, the Company and ECGD UK signed an agreement to
restructure the terms of loan agreement including repayment schedule. Amount outstanding at June
30, 2016 was USD 25.60 million (2015: 25.60 million). The principal is repayable in ten semi annual
installments. The first such installment was due on July 1, 2014 and subsequentlyevery six months
until January 1, 2019. The rate of mark-up is six month LIBOR + 1.5% (interest rate) per annum till
Certain conditions precedent to the second amendatory agreement are not yet fulfilled,management
of the Company is taking steps to fulfill those conditions. Once conditions precedent to restructured
agreements are fulfilled, a formal letter shall be issue to the Company by the Syndicate of aforesaid
Banks, which shall complete the restructuring process.
The facility is secured by way of hypothecationover all present and future moveable assets (including
all current assets) and present and future current/ fixed assets, a mortgage by deposit of title deeds
in respect of immoveable properties of the Company, pledge over fully paid ordinary shares (entire
present and future) owned by the Company in Wateen WiMAX(Private) Limited and owned by WTI in
the capital of the Company, a guarantee from WTI for amounts payable under second amendatory
agreement and undertakingfrom shareholders from WTI for retainingthe shareholdingand control of
WTI. Syndicate is entitled to designate one nominee to be appointed as director in the Board of
directors of the Company.
During the year ended June 30, 2015, the Company transferred a portion of principal amount
outstanding under Syndicate Term Finance Agreement (STFA) to WWL. Accordingly, WWL entered
into an agreement with Syndicate of banks for transfer of loan amounting to Rs 1,066 million with
Standard Chartered Bank Limited (SCB), Bank Alfalah Limited (BAFL), Bank Al-HabibLimited (BAHL)
and Habib Bank Limited (HBL) being lead arrangers. Under the terms of the agreement between
WWL and Syndicate of banks, the principal is repayable by the Company in eight unequal semi-
annual installments. The first such installment was due on April 1, 2015 and subsequently every six
months until October 1, 2018. The rate of mark-up is 6% per annum. Entire markup shall be paid by
the Company on a date falling six months from the date of payment of last installment of principal
amount.
The Company is required to mandatorily prepay the outstanding amount out of net cash proceeds
from sale of WWL or any excess cash generated by the Company after taking into account a
minimum cash balance, capital expenditureand working capital requirements in each financialyear.
The rate of mark-up is 12% per annum from July 1, 2013 which shall stand deferred till payment of
the final installment of principal portion (deferred payment) as referred to in note 9.1. Earlier, pricipal
was repayablein ten unequalsemi annual installments with first installment due on July 1, 2014 and it
carried a mark up of 6 months KIBOR per annum till December 31, 2013 and 6 months KIBOR +
2.5% per annum for remaining period.
The facility is secured with a margin of 25% over the principal amount outstanding, by way of
hypothecation over all WiMAX assets, corporate guarantee from WTL and pledge over fully paid
ordinary shares (entire present and future shareholding) owned by the WTL in the capital of WWL.
Wateen Telecom Ltd. Annual Report 201683
June 30, 2011 and six month LIBOR + 1.9% (interest rate) for the remaining period. If the amount of
installment payable and/or interest payable is not paid on the due date, the Company shall pay
interest on such amount the interest rate + 2% per annum.
The facility is secured by way of hypothecationover 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 and assets which are subject to lien in favour of USF), a mortgage by deposit of
title deeds in respect of immoveable properties of the Company, lien over collection accounts and
Debt Service Reserve Account and personal guarantees by three Sponsors of the Company.
As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above
finance facility.
the capital of the Company.
2016 2015
7.3 7.3.1 335,224 335,627
7.3.2 45,745 45,827
380,969 381,454
7.3.1
7.3.2
Facility 1
Facility 2
During the year ended June 30, 2016, WTL transferred a portion of principal amount outstanding
under Ijara Finance Facility to WWL. Accordingly, WWL entered into an agreement with DIB for
transfer of loan amounting to Rs 45.9 million. Under the terms of agreement between DIB and the
Company, the principal is repayable by the Company in eight unequalsemi-annual installments. The
first such installment was due on April 1, 2015 and subsequently every six months until October 1,
2018. The rate of mark-up is 6% per annum. Payment of markup shall be deferred until the date of
payment of last installment of principal amount and aggregate of all such deferred amounts shall be
paid by the Company on April 1, 2019.
The facility is secured with a margin of 25% over the principal amount outstanding, by way of
hypothecation over all WiMAX assets, corporate guarantee from parent company and pledge over
fully paid ordinary shares (entire present and future shareholding) owned by the parent company in
The Company obtained Ijarah finance facility of Rs 530 million (2015: Rs 530 million) from DIB.
During the year ended June 30, 2016, the Company and DIB signed an agreement to restructure the
terms of the Ijarah finance facility. The principal is now repayable in twenty unequal six-monthly
instalments. The first such instalment was due on April 1, 2015 and subsequently every six months
until October 1, 2024. The rate of mark-up is 12% per annum from commencement date which shall
stand deferred till payment of the final installment of principal portion (deferred payment) as referred
to in note 9.2. Earlier, principal was repayablein ten unequal semi annual installments with first such
installment due on July 1, 2014 and it carried a markup of 6 months KIBOR per annum till December
31, 2013 and 6 months KIBOR + 2.5% per annum for remaining period.
Certain conditions precedent to the restructured agreement are not yet fulfilled, management of the
Company is taking steps to fulfill those conditions. Once conditions precedent to restructured
agreement are fulfilled, bank will formally issue letter to the Company which will complete the
restructuring process.
The facility is secured by way of hypothecationover all present and future moveable assets (including
all current assets) and present and future current/ fixed assets (movable and immoveable), pledge
over fully paid ordinary shares (entire present and future) owned by the Company in Wateen WiMAX
(Private) Limited and owned by WTI in the capital of the Company, a corporate guarantee from Warid
Telecom International LLC and undertaking from shareholders from WTI for retaining the
shareholding and control of WTI.
(Rupees in thousand)
Note
Wateen Telecom Ltd. Annual Report 201684
7.4 The Company obtained term finance facility of USD 65 million (2015: USD 65 million) from Motorola
Credit Corporation (MCC) of which USD 64 million (2015: USD 64 million) has been availed till June
30, 2016. On August 19, 2011, MCC has transferred all of its rights, title benefits and interests in the
original facility agreement to Deutsche Bank AG as lender, effective August 19, 2011. During the year
ended June 30, 2012, the Company and Deutsche Bank AG signed an agreement to restructure the
terms of loan agreement. Amount outstanding at June 30, 2016 is USD 48 million (2015: USD 48
million). The principal is repayable in ten semi annual installments commencing from July 1, 2014
until and including the final maturity date which is December 31, 2019. The rate of mark-up is six
month LIBOR + 1% per annum provided that rate shall be capped at 2.5% per annum. If the
Company fails to pay any amount payable on its due date, interest shall accrue on the unpaid sum
from the due date up to the date of actual payment at a rate which is 2% higher than the rate of
interest in effect thereon at the time of such default until the end of the then current interest period.
Thereafter, for each successive interest period, 2% above the six-month LIBOR plus margin provided
the Company is in breach of its payment obligations hereof.
7.5
8.
The loan is secured through personal guarantee by one Sponsor of the Company and is ranked pari
passu with unsecured and unsubordinated creditors.
As explained in note 2(iii), the Company is in negotiation with the lenders to restructure the above
finance facility.
This represents long term finance provided by Dhabi One Investment Services LLC to fulfil
requirements of MTA and is a subordinatedloan to be repaid in twelve equal semi annual installments
commencing from March 1, 2018. The rate of mark-up is 6 months LIBOR + 1% payable on six
monthly basis. The interest shall be payablein arrears and no interest shall be payableuntil March 1,
2018, and till that date, interest shall be accumulated and thereafter be payable in cash accordingly.
Although the loan is subordinated to all secured finance facilities availed by WWL, yet the entire
amount has been classified as current liability as the financial statements of WWL are being
prepared on the management estimate that entity is a non- going concern.
The Company is required to make payments of loan installments and markup of long term finance on
due dates. The Company has not paid loan installments of ECGD amounting to USD 8.713 million
and loan installments of Deutsche Bank AG amounting to USD 16.334 million due till June 30, 2016.
Further, the Company was not able to make payments of markup to ECGD and Deutsche Bank AG
of Rs 59.160 million and Rs 91.81 million on due dates. Furthermore, certain applicable ratios
specified in the above loan agreements have not been maintained at June 30, 2016 and latest
restructured loan agreements have also not yet become effective as certain conditions precedent to
the restructured agreements are not yet fulfilled and the Company is obliged to prepay the
outstandingamounts in certain events mentioned therein.Accordingly, the lenders shall be entitledto
declare all outstanding amount of the loans immediately due and payable. In terms of provisions of
International Accounting Standard on Presentation of financial statements (IAS 1), since the
Company does not have an unconditional right to defer settlement of liabilities for at least twelve
months after the statement of financial position date, all liabilities under these loan agreements are
required to be classified as current liabilities. Based on above, loan installments for an amount of Rs
12,212 million due after June 30, 2017 have been shown as current liability.
Term finance from associated company - unsecured
Wateen Telecom Ltd. Annual Report 201685
Note 2016 2015
9. Long term portion of deferred mark up
Syndicate of banks 9.1 3,957,869
2,955,551
Dubai Islamic Bank (DIB) 9.2 98,854
55,738
Dhabi One Investment Services LLC (DOIS) 9.3 13,045
5,777
Total 4,069,768 3,017,066
Less: Amount shown as current liability
Amount payable within next twelve months - -
Amount due after June 30, 2017 (4,069,768) (3,017,066)
9.4 (4,069,768) (3,017,066)
- -
(Rupees in thousand)
9.1
i)
ii)
iii)
iv)
9.2
i)
ii)
9.3
As explained in note 7.1, the markup (deferred payments) has been restructured under the second
amendatory agreement. The deferred payments are payable in following order of priority and sequence:
Deferred payment of Rs 1,023 million pertaining to the period of January 1, 2011 till June 30,
2013 shall be paid in seven unequal six-monthly installments starting from April 1, 2025 and
ending on April 1, 2028;
Deferred payment at 8% per annum for the period from July 1, 2013 till March 31, 2014 shall be
paid in four unequalsix-monthly installments starting from April 1, 2028 and ending on October
1, 2029;
Deferred payment at 5% per annum for the period from April 1, 2014 upto final due date under
second amendatory agreement shall be paid in two unequal installments due on October 1,
2029 and April 1, 2030; and
After payments of all amounts above, the deferred payment at 4% per annum for the period of
July 1, 2013 till March 31, 2014 and at 7% per annum for the period from April 1, 2014 upto final
date under second amendatory agreement shall be payable as a bullet payment in the year
2030 subject to availability of the excess cash generated by the Company.
Markup calculated at 5% per annum for the period from commencement date till October 1,
2024 shall be paid in eleven six-monthly installments starting from April 1, 2025 and endingon
April 1, 2030; and
As explained in note 7.3, the markup (deferred payments) has been restructured. The markup is
payable in the following sequence:
Markup at 7% per annum shall be paid as a bullet payment in the year 2030 subject to
availability of the excess cash generated by the Company.
This amount is payable in six-monthly installments commencing from March 1, 2018. As the loan
associated with markup is classified as current liabilityas referred to in note 8, the entire amount has
been classified as current liability.
9.4 As explained in note 7.5, the entire amount has been shown as current liability.
Wateen Telecom Ltd. Annual Report 201686
10. Long term finance from shareholders - unsecured
Note 2016 2015
Facility 1 10.1 2,515,418 2,443,343
Facility 2 10.2 11,526,039 10,891,265
14,041,457 13,334,608
10.1
10.2
The Company obtained long term finance from a shareholder amounting to USD 24 million (2015:
USD 24 million). This loan is subordinated to all secured finance facilities availed by the Company.
This loan is repayablewithin 30 days of the expiryof a period of five years from the last date the lender
has disbursed the loans, which shall be on or about January 29, 2015. The rate of mark-up is 6
months LIBOR + 1.5% with 24 months payment grace period payable half yearly. Alternatively loans
may be converted into equity by way of issuance of the Company's ordinary shares at the option of the
lender at any time prior to, at or after the repayment date on the best possible terms but subject to
fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be
affected at such price per ordinary share of the Company as shall be calculated after taking into
account the average share price of the last 30 calendar days, counted backwards from the conversion
request date, provided that such conversion is permissible under the applicable laws of Pakistan.
This loan together with accrued interest will have at all times priority over all unsecured debts of the
Company except as providedunder Law. In the event the Company defaults on its financial loans or in
case Warid Telecom International LLC, Abu Dhabi, UAE, no longer remains the holding company of
the Company and sells its 100% shares to any other person or party or relinquishes the control of its
management then, unless otherwise agreed in writing by the lender, the entire loan together with the
accrued interest will become due and payable for with and shall be paid within 15 working days of the
event of default or decision of the Board of Directors of the Company accepting such a change in the
shareholding as the case may be, and until repaid in full, the loan shall immediately become part of
financial loans, rankingpari passu there with subject to the consent of the Company's existing financial
loan providers. As the loan is subordinated to all secured finance facilities availed by the Company,
the entire amount of loan has been classified as non current liability.
The Company has obtained long term finance facility from a shareholder amounting to USD 185
million (2015: USD 185 million) of which USD 110 million (2015: USD 107 million) has been availedat
June 30, 2016. The rate of mark-up is 6 months LIBOR + 1.5% payable half yearly. The Company
shall repay the loan in full in five equal annual installments from June 30, 2014 with final maturity date
of June 30, 2018. Alternatively the lender shall also have the option to instruct the Company any time
during the term of this agreement to convert the remaining unpaidamount of the loan and the interest
in part or in its entirety into equity by way of issuance of ordinary shares of the Company in favour of
the lender in compliance with all applicable laws of Pakistan.
(Rupees in thousand)
Upon the request of the Company for conversion of the loan and the interest into equity, the lender and
the Company shall, with mutual consent, appoint an independent auditor to determine the fair market
value per share of the borrower prevailingat the time of such request. lf the lender agrees to the price
per share as determined bythe independent auditor then the loan and the interest shall be converted
into equity at the rate per share decided by the independent auditor. In case the lender, in its sole
discretion, disagrees with the price per share as determined by the independent auditor then the
request for conversion shall stand revoked and the loan shall subsist.
The loan together with the interest shall have priority over all other unsecured debts of the Company.
Further, after the execution of this agreement, the Company shall not avail any other loan or funding
facility from any other source without prior written consent of the lender. The Company undertakes
that it shall not declare dividends,make any distributions or pay any other amount to its shareholders
unless the repayment of the loan and the interest in full to the lender. The rights of the lender in
respect of the loan are subordinated to any indebtedness of the Company to any secured lending by
any financial institution in any way, both present and future notwithstanding whether such
11. Medium term finance from an associated company - unsecured
12. Long term deposits
13. Deferred grants
Movement during the year is as follows:
Note 2016 2015
Balance at beginning of the year -
excluding amount receivable 2,599,101 2,555,221
Amount received during the year 112,204 222,110
Amount receivable at year end - net - 634,857
Amount recognised as income during the year 33 (143,561) (178,230)
Balance at end of the year 2,567,744 3,233,958
(Rupees in thousand)
This represents amount received and receivable from Universal Service Fund (USF) as subsidy to
assist in meeting the cost of deployment of USF Fiber Optic Network for providing USF Fiber Optic
Communication Services in Sindh, Baluchistan, Punjab and broad band services in Faisalabad
Telecom Region, Hazara Telecom Region and Gujranwala Telecom Region. USF Fiber Optic Network
and broad band network will be owned and operated by the Company. Total amount of USF contracts
is Rs 3,740 million (2015: Rs 4,022 million) payable by USF in five installments in contracts with
project implementation milestones.
The Company has obtained an aggregate medium term finance facility of Rs 600 million from an
associated company Taavun (Pvt) Limited. As per the terms of loan agreement, this loan is
subordinated to all secured finance facilities availed by the Company. The principal was repayable
within 30 days of the expiry of twenty four months from the effective date i.e. September 30, 2010,
which was further extendableto twelve months. The rate of mark-up is six month KIBOR + 2.5% with
24 months grace period payablequarterly. As the loan is subordinatedto all secured finance facilities
availed by the Company, the entire amount of loan has been classified as non current liability.
These represent security deposits received from customers. These are interest free and refundable
on termination of relationship with the Company.
indebtedness is recoverable by process of law or is conditional or unconditional.Furthermore, in the
event that insolvency proceedings are initiated against the Company or that it is unable to pay its
Financial Loans as they fall due or if the Company has proposed any composition, assignment or
arrangementwith respect to its Financial Loans, the obligationto repay the outstandingamount of the
loan shall be subordinated to the Financial Loans but will have priority over all other unsecured debts
of the Company. As the loan is subordinatedto all secured finance facilities availedby the Company,
the entire amount of loan has been classified as non current liability.
Wateen Telecom Ltd. Annual Report 201687
2016 2015
14. Short term running finance - secured
Facility - II 14.1 765,512 787,135
765,512 787,135
14.1 The Company has a cash finance facility of Rs 790 million (2015: Rs 790 million) of which Rs 24.488
million (2015: Rs 2.865 million) was unutilised as at June 30, 2016. The facility is available till
December 31, 2016. Markupon the facility is to be serviced on quarterly basis. The rate of mark-up is
3 months KIBOR + 1% per annum.
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201688
2016 2015Note
15. Trade and other payables
Creditors 647,185 617,038
Due to associated companies 15.1 42,727
41,382
Due to international carriers 403,082
1,088,924
Payable to Pakistan Telecommunication Authority 619,265
584,535
Accrued liabilities 2,827,055
2,661,259
Payable to provident fund 76,272
75,343
Unearned revenue 35,435
39,207
Advance from customers 15.2 194,099
907,087
Workers' Welfare Fund 569
794
Security deposits 14,676 20,786
Sales tax payable 98,045 -
Income tax deducted at source 210,712 138,306
Others -
4,463
5,169,120 6,179,124
15.1 Due to associated companies
Bank Alfalah Limited 16,932
17,521
Warid Telecom International LLC, UAE - Parent Company 24,563
23,861
Warid Telecom 1,232
-
42,727
41,382
15.2 Advance from customers
2016 2015Note
16. Interest / markup accrued
Long term finance from shareholders/ sponsors 1,357,967 922,616
Long term finance - secured 585,390 420,600
Long term finance - unsecured 8 - -
Medium term finance - unsecured 16.1 448,577 391,928
Short term running finance - secured 16.2 33,784 30,945
2,425,718 1,766,089
16.1
16.2
(Rupees in thousand)
This includes markup payable to an associated company Bank Alfalah Limited amounting to Rs
13.197 million (2015: Rs 17.032 million).
This represents markup payable to an associated company Taavun (Private) Limited.
This includes advance of Rs Nil (2015: Rs 48.983 million) received from associated companies.
(Rupees in thousand)
This facility is secured by lien marked on an amount of USD 8.44 million held under the name "Dhabi
One Investment Services LLC" maintained at Bank Alfalah.
17. Contingencies and Commitments
2016 2015
17.1 Claims against the Company not acknowledged as debt 478,665 355,157
17.2 Performance guarantees issued by banks on behalf
of the Company 1,410,309
1,261,677
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201689
17.3
17.4
17.5
Under the Access Promotion Regulations, 2005, the Company is liable to make payments of Access
Promotion Charges (APC) for Universal Service Fund (USF) within 90 days of close of the month to
which such payment relates. The Company has disputed the APC Regulations,2005 and the case is
currently pending with High Court. The Company has not recorded the penalty on delayed payment of
APC for USF amounting to Rs 1,469 million as required by the Access Promotion Regulations,2005
as the management and legal advisor of the Company are of the view, that the Company has a strong
case and chances of success are very high.
WWL under the terms of the MTA served the termination notice to Augere Holdings and claimed
certain expenditures as reimbursable to WWL on account of business consolidation not successful
as per MTA. In response to Company’s termination notice, Augere Pakistan (Pvt) Limited served
notice to WTL as acknowledgement of termination of MTA and claimed certain charges. WWL and
WTL, being a party to MTA, is in process of initiating arbitration proceedings for settlement of its
charges incurred under MTA.
Wateen along its wholly owned subsidiary Wateen WiMAX (Private) Limited (WWL) entered into a
Master Transaction Agreement (MTA) with Augere Holdings (Netherlands) B.V (Augere Holdings) on
December 4, 2013 for consolidationof their respective WiMAXbuisnesses in Pakistan. In furtherance
of the terms of MTA, the shareholders of Wateen in their Extra-Ordinary General Meeting held on
October 3, 2014 approved transfer of WiMAX related net assets as at July 10, 2014 to WWL for
consideration other than cash in accordance with the terms of share issuance agreement dated
September 9, 2014 between Wateen and WWL. During the year ended June 30, 2015, Wateen
transferred the assets and liabilities envisaged in the agreement to WWL.
However, during the year ended June 30, 2015, the subsidiary company WWL served a termination
notice under the MTA which has been acknowledged and accepted by a Pakistan subsidiary of Augere
Holdings without prejudice to any accrued rights and interests in the matter.
The management believes that no amount shall be payable by the Company upon completion of
related proceedings and accordingly, no provision is carried in these financial statements in this
respect.
The Deputy Commissioner InlandRevenue(DCIR), Enforcement Unit IV, Large Taxpayers Unit (LTU),
Islamabad issued Order-in-Original based on the observations of Director General Intelligence and
Investigation and raised a demand of Rs 31.830 million to be paid along with penalty and default
surcharge and also issued recovery notice. The Commissioner Inland Revenue - Appeals [CIR (A)]
and Appellate Tribunal Inland Revenue (ATIR) upheld the order of the DCIR. The Company filed
reference before the Honorable High Court whereby the case has been remanded to ATIR. The appeal
is pending for adjudication before the ATIR.
17.6 The Assistant Commissioner Inland Revenue (ACIR), Enforcement Unit IV, LTU, Islamabad, issued
show cause notices based on the observation that Company has not furnished sales tax and federal
excise returns for the periods from August 2009 to March 2010, November 2010 and December 2010.
In this respect, ACIR issued Order-in-Original and assessed demand of Rs 249.471 million
(calculated on the basis of allegedminimum liability)payable along with penaltyand default surcharge
and also issued recovery notice. The Company depositedprincipal amount of Rs 138.709 million and
default surcharge of Rs 26.231 million based on actual liabilityas per own working of the Company.
The ATIR, Islamabad remanded the case to the assessing officer with certain directions. The
Company submitted information in response to the related proceedings initiated by ACIR,
Enforcement-IV, LTU, Islamabad and proceedings are not yet concluded by the ACIR. As of now no
tax demand is in field and company foresees a favorable decision in reassessment proceedings.
17.7 The AdditionalCommissioner Inland Revenue, Audit - II, Large Taxpayers Unit, Islamabad (Add. CIR)
issued show cause notice dated June 6, 2014 whereby Add. CIR alleged the Company is claiming
inadmissible input tax, suppression of sale, non-paymentof sales tax on fixed asset, non-compliance
of sales tax special procedure withholding rules, penalty on late filing of sales tax and federal excise
Wateen Telecom Ltd. Annual Report 201690
17.8
17.9
17.10 DCIR raised tax demand for Rs 55 million for tax year 2013 on account of alleged non deduction of tax
under section 152 of the Ordinance while making payments to foreign telecom operators. The
Company has filed an appeal before CIR (A). The CIR (A) and ATIR both upheld the action of DCIR.
The Company also filed Misc. Applicationin the ATIR against the Orders of the ATIR. The Company is
in process of filling references before High Court on the premise that the payments made to foreign
operators falls under the ambit of business income and is exempt from withholding tax. Based on this
the Company foresees a favorable decision at higher appellate forums.
The ACIR issued notice to the Company for the period of July 2010 to June 2011 and confronted to
charge sales tax on the difference of sales reported in audited accounts and sales reported in monthly
sales tax returns and passed ex-parte order with demand of Rs. 1,048 million by the Company. The
Company filed appeal before CIR (A) and same was rejected. An appeal has been filed by the
Company with the ATIR which is pending for adjudicationand management believes that the case is
likely to be decided in the favor of Company.
The ACIR alleged that Company has not withheld tax from payments made to foreign telecom
operators during the tax years 2008, 2009, 2010 and 2011. Further the ACIR ordered the Company to
pay allegeddemand of Rs 477.767million representing principal amount and default surcharge for the
aforesaid tax years. The CIR (A) upheld the contentions of the assessing officer and directed the
assessing officer to recalculate the withholding tax by applying the rates as given in the Division II of
Part III of the First Schedule to the Income Tax Ordinance, 2001. The Company filed appeal before
ATIR, and same was rejected. The Company filed reference before the High Court and case was
remanded back for fresh proceedings. The proceedings were finalized by the assessing officer and a
demand of Rs 1,911 million was created. The Company preferred an appeal before CIR (A) and CIR
(A) remanded the case to DCIR. The DCIR raised demand of Rs 1,131 million against which the
Company preferred appeal before CIR (A) who upheld the orders of DCIR. The Company preferred
appealagainst the aforesaid appellateorder in the ATIR, whereby ATIR up-held the decision of CIR (A)
regarding tax withholding on payments and has remanded the case to the officer for levy of
withholding tax on lower of treaty rates or the Ordinance rates. The Company is in process of filling
references before High Court on the premise that the payments made to foreign operators falls under
the ambit of business income and is exempt from withholdingtax. Based on this company foresees a
favorable decision from higher appellate forums.
returns and non-withholdingof federal excise duty on advertisementservices. The Company could not
furnish the requisite information to the Add. CIR because of fire affected records further; the
assessment was barred by time. The Add. CIR passed ex-parteorders and raised the demand of Rs
518 million along with penalty and default surcharge. The Company filed appeal before CIR (A) and
same was rejected. Being aggrieved with the order, appealwas filed before ATIR and ATIR confirmed
the order passed by CIR (A). Resultantly, the Company filed reference application before High Court
which is pending and management believes the same is likely to be decided in the favor of Company.
17.11
17.12 The Assistant Commissioner - I, Sindh RevenueBoard, disallowed input tax claim of the Company for
the months of March 2014 to June 2014 and raised a demand of Rs 66 million. The Company filed
appeal before Commissioner Appeals however, no appellate order is received to-date. Certain related
evidence has been provided by the company in support of its contention and company foresees a
favorable decision at appellate forums.
DCIR raised tax demand for Rs 133 million in respect of tax year 2014 for alleged non deduction of tax
under section 152 of the Ordinance while making payments to foreign telecom operators. The
Company preferred appeal before the CIR (A) against the orders of the DCIR. The CIR (A) remanded
the case to the DCIR with the direction to charge the withholding on the actual payment and not on the
amount of expense but has confirmed the levy of withholding tax. No appeal effect notice has been
issued as yet. The Company also preferred appeal against the order of the CIR (A) in ATIR and the
same is pending. The payments made to foreign operators falls under the ambit of business income
and is exempt from withholding tax. Based on this company foresees a favorable decision at higher
appellate forums.
17.13
17.14
17.15
17.16
17.17
The OIR also levied minimum tax under section 113 of the Income Ordinance, 2001 for tax years
2010, 2011, 2012 & 2013 by rejecting the stance of Company of gross loss. The Company preferred
appeals against the aforesaid orders before CIR (A) and same were rejected by the CIR (A) for tax
year 2010 and 2012. The Company preferred appeal before the ATIR and same was also rejected. As
per Income Tax Ordinance 2001 the above mentioned section is not applicablein case of gross loss
of that particular year by the company. Company has filed reference applications before High Court
and is likely to be decided in the favor of Company.
DCIR issued notice to the Company and required to provide the details of tax deduction while making
payment of finance cost for the year ended June 30, 2012. Subsequently, the DCIR raised a demand
of Rs 253 million on gross amount of finance cost paid. The Company contended that DCIR did not
consider the impact of exchange loss and bank charges. Appeal was filed before CIR (A) and
rectification application before DCIR. The CIR (A) remanded the case to DCIR for fresh proceedings.
As of now no tax demand is in field and likely to be concluded in favor of Company.
In relation to financial years 2008 and 2009 of WSPL, FBR contended to levy sales tax and federal
excise duty of Rs. 113.30 million. WSPL paid Rs. 10.98 million under amnesty scheme against such
order. An appeal was filed before Commissioner Inland Revenue Appeals which upheld the demand
raised by the Department. WSPL preferred appeal before Appellate Tribunal Inland Revenue (ATIR)
and the ATIR vide its order vacated the demand and remanded back the issue to the assessing officer
with certain directions and the related proceedings are yet to be finalized.
In relation to financial year 2008 the Additional Commissioner Inland Revenue raised demand of Rs.
173.8 million by contending that exports of WSPL shall be taxed at the rate of 35% and also
disallowed certain provisions amounting Rs. 21.35 million. WSPL filed its reply and took the plea that
the notice dated 19, June 2014 is barred by time and also furnished the related information. WSPL
obtained stay from the High Court against the aforesaid demand and preferred an appeal before
Commissioner Inland Revenue Appeals. The appeal has been decided in the favor of WSPL and
Commissioner Inland Revenue has ordered OIR for calculation of time limitation in accordance with
the provision of section 122(2) from the date of filing of return.
The Officer Inland Revenue, Audit - V, Large Taxpayers Unit, Islamabad (OIR) issued orders and
raised income tax demand of Rs 163 million relating to tax years 2008, 2009, 2011, 2012 and 2013 by
holding that the taxes paid under section 148 (7) on imports of the Company are not adjustable
against the income tax liability as the Company is not covered under the definition of industrial
undertaking. The Company preferred appeal before CIR (A) who upheld the order of OIR,
consequently Company has filed appeal before ATIR. The ATIR has rejected Company's appeal for
tax year 2009 and 2013. The Company is in process of filling of references before High Court.
Wateen Telecom Ltd. Annual Report 201691
17.18
17.19 The Deputy Commissioner Inland Revenue (DCIR) issued show cause notice under section 161/205
of the income tax ordinance 2001 (the Ordinance) on account of short withholding tax for the tax year
2014 and raised demand of Rs 23.7 million. WSPL furnished the requisite information along with the
copies of CPR's as required in show cause notice. The DCIR did not pass any order in this respect
so far.
The Officer Inland Revenue,Audit - V, Large Taxpayers Unit, Islamabad issued show cause under the
provisions of section 122 (5) of the Ordinance for the amendment of assessment for tax year 2009 of
WSPL on account of non-withholding of taxes on salaries, services purchased and incorrect
apportionment of expenses. WSPL furnished the related information/details in response to show
cause notice. The OIR did not acceded to WSPL's submissions and raised the income tax demand of
Rs 43.322 million. WSPL preferred appeal before the CIR Appeals. WSPL also filed rectification
application under section 221 of the Ordinance on account of incorrect apportionment and restriction
of credit of taxes paid. The Commissioner Inland Revenue remanded the case to the OIR for denovo
consideration. No further proceedings were initiated by the OIR as yet.
Wateen Telecom Ltd. Annual Report 201692
17.20
17.21
2016 2015
(Rupees in thousand)
17.22 Outstanding commitments for capital expenditure 735,344 754,677
No provision on account of contingencies disclosed in note 17.3 - 17.21 above has been made in
these financial statements as the management and advisors of the Company are of the view, that
these matters will eventually be settled in favour of the Company.
WSS's case for tax year 2013 was selected for tax audit under section 214C of the Income Tax
Ordinance, 2001 through random computer ballot. The DCIR requested the Company to furnish
information and the Company providednecessary information/details.The DCIR after considering the
Company's submissions passed orders on December 31, 2014 and raised the income tax demand of
Rs 6,627,494.The Company filed the rectification application against the aforesaid orders by
contending that the adjustment of current tax year and prior period's tax losses were not allowed and
the DCIR has not allowed the credit of prior period tax refund. The DCIR while disposing off the
rectification application restricted the income tax demand to Rs 3,536,000 and adjusted the current
and prior period tax losses from the taxable income.The Company has preferred an appeal before the
CIR (Appeals) which is pending for adjudication.
The Deputy Commissioner Inland Revenue (DCIR), Large Taxpayers Unit (LTU), Lahore issued notice
under section 161/205 of the Income Tax Ordinance, 2001 (the Ordinance) and required WSS to
provide the related proof of withholding taxes. WSS contended that the jurisdiction of WSS rests with
Regional Tax Office, Islamabad and not with the LTU Lahore. The DCIR proceeded ex-parte and
levied the tax of Rs 57 million. WSS preferred appealbefore the CIR (Appeals)and after due hearings,
the CIR (Appeals), remanded the case back to the DCIR. The DCIR initiated the proceeding under
section 124 of the Ordinance on June 12, 2015 and fixed the compliance for June 19, 2015. WSS filed
request for extension in time for 15 days. The DCIR did not concur to WSS's request and proceeded
to pass an exparte order and again levied the demand of Rs 57 million. WSS has preferred appeal
before the Commissioner Appeals which is pending for adjudication.
Wateen Telecom Ltd. Annual Report 201693
18
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-
Wateen Telecom Ltd. Annual Report 201694
18.1
18.2
2016 201519. Capital work in progress
Note
Lease hold improvements 2,509
7,882
Line and wire 917,838
1,405,211
Network equipment (net of impairment of DSL assets
Rs 384.908 million) 108,468
93,499
1,028,815
1,506,592
19.1 Movement during the year
Balance as at July 1 1,506,592
1,548,633
Additions during the year 925,361
1,353,857
Reclassified from / (transferred) to disposal group
classified as held for sale -
26,790
Capitalised during the year (1,403,138)
(1,391,295)
1,028,815
1,537,985
Provision for impairment of capital work in progress 19.2 -
(31,393)Balance as at June 30 1,028,815
1,506,592
19.2 Provision for impairment of capital work in progress
Opening balance 384,908 353,515
Provision made during the year - 31,393Closing balance 384,908 384,908
(Rupees in thousand)
The cost of fully depreciated assets which are still in use as at June 30, 2016 is Rs 6,246 million
(2015: Rs. 6,246 million).
This includes assets amounting to Rs 284 million (2015: Rs. 284 million) which are under the use
of third party.
2016 2015Note
20. Intangible assets
LDI license fee 20.1
Cost 28,934 28,934
Amortisation
Opening balance 15,795
14,348
Amortisation for the year 1,447
1,447
(17,242)
(15,795)
Net book value 11,692
13,139
WLL license fee 20.2
Cost
Opening Balance 193,366 176,366
Additions during the year -
17,000
Closing Balance 193,366
193,366
Amortisation
Opening balance 83,295
64,586
Amortisation for the year -
18,709
(83,295)
(83,295)
Net book value 110,071
110,071
Less: Provision for impairment of WLL License (110,071) (110,071)
-
-
Software license 20.3
Cost
Opening Balance 151,671 84,417
Additions during the year - 67,254
Closing Balance 151,671 151,671
Amortisation
Opening balance 82,914 66,253
Amortisation for the year 5,829 16,661
(88,743) (82,914)
NBV - Software license 62,928
234,585
Less: Provision for impairment (59,408) (59,408)
Net book value 3,520
175,177
Goodwill
Goodwill arising on acquisition of
Netsonline Services (Pvt) Limited 20.4 5,766
5,766
Less: Provision for impairment of goodwill (5,766)
(5,766)
-
-
Goodwill arising on acquisition of
Wateen Solutions (Pvt) Limited 20.5 11,333 11,333
Goodwill arising on business acquisition
by the subsidiary company 20.6 83,018 83,018
94,351 94,351
Total net book value 109,563 392,738
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 201695
Wateen Telecom Ltd. Annual Report 201696
20.1
20.2 (i)
(ii)
(iii)
20.3
20.4
20.5
20.6 Goodwill
20.6.1
20.6.2
Revenue growth
Pakistan Telecommunication Authority (PTA) granted Long Distance International(LDI) license for
a period of 20 years from July 26, 2004.
PTA granted Wireless Local Loop (WLL) License for a period of 20 years from December 1,
2004 covering twelve telecom regions. This includes license granted by PTA for WLL for a
period of 20 years for Azad Jammu and Kashmir (AJK) region. Commercial operations of
AJK region have not yet commenced.
PTA granted WLL license for a period of 20 years to WSPL, from November 4, 2004. On
August 31, 2006 the license was transferred by WSPL to the Company covering four telecom
regions.
During the year ended June 30, 2015, Wireless Local Loop (WLL) License has been
transferred to wholly owned subsidiary WWL.
Impairment testing of goodwill
The goodwill resulting from acquisition of National Engineers (AOP) by WSPL as on January 1,
2007. The amount represents the excess of cost of acquisition over the fair value of identifiable
assets and liabilities of National Engineers (AOP) as at the date of acquisition.
Software license is amortised over a period of 5 years.
The goodwill resulting from acquisition of WSS by the Company effective August 2, 2006. The
amount represents the excess of cost of acquisition over the fair value of identifiable assets and
liabilities of WSPL as at the date of acquisition.
The Company acquired 49% shares (397,027 fully paid ordinaryshares of Rs 100 each) of WSPL
for Rs 85 million, effective November 14, 2014.
The goodwill resulting from acquisition of Netsonline Services (Pvt) Limited by Wateen Telecom
Limited effective July 1, 2008. The amount represents the excess of cost of acquisition over the
fair value of identifiableassets and liabilities of Netsonline services (Pvt) Limited as at the date of
acquisition, which was impaired in 2011.
Goodwillacquired through business combination has been tested for impairment. The recoverable
amount has been determinedbased on a value in use calculation using cash flow projections from
the financial budgets approved by the Board covering a five-yearperiod. The discount rate applied
to cash flow projections is 12% (2015: 13%) per annum, which is the expected rate of return
required by the Company.
Key assumptions used in value-in-use calculations
The calculation of value-in-use is most sensitive to the following assumptions:
Growth in revenues have been projected after taking into account order backlogs and follow on
orders and best estimates. The management believes that these assumptions are reasonable
considering the current market dynamics and their expectation of market conditions going forward.
Wateen Telecom Ltd. Annual Report 201697
21. Deferred income tax asset 2016 2015
Deductable temporary differences on account of provisions 22,947
8,254
Tax Year (Rupees in million)
2017 2
2018 1,739
2019 516
2020 1,037
2021 816
2022 789
Tax Credits
2020 53
2021 272
22. Long term deposits
Key business assumptions
Discount rates
These assumptions are important, as well as using industry data for growth rates, management
assesses how the position might change over the projected period and ready to trade off amongst
various revenue options to meet the desired results.
Managementbelieves that reasonable possible changes in other assumptions used to determine
the recoverable amounts will not result in an impairment of goodwill.
Sensitivity to changes in assumptions
The discount rate reflects management estimates of the rate of return required by the parent company.
These mainly represent the security deposits paid to domestic interconnect operators and
government authorities on account of utilities and suppliers on account of rent, DPLC and satellite
bandwidth.
The aggregatetax losses availableto the Company for set off against future taxableprofits at June
30, 2016 amounted to Rs 30,938 million. Of these, losses aggregating Rs 5,314 million have been
recognized in the financial statements against taxable temporary differences at June 30, 2016.
(Rupees in thousand)
Deferred tax asset, the potential tax benefit of which amounts to Rs 11,751 million has not been
recognized on balance representing business losses aggregating to Rs 4,899 million, tax
depreciation losses aggregating Rs 20,712 million, tax credit aggregating to Rs 325 million,
decelerated tax depreciation and amortisation on operating and intangible assets of Rs 2,813
million and deductible temporary differences on account of provisions and share issue cost
aggregating Rs 9,664 million as at June 30, 2016. Business losses expire as follows:
Wateen Telecom Ltd. Annual Report 201698
23. Long term prepayments
2016 2015Note
24. Trade debts - unsecured
Considered good 24.1 2,773,208 2,907,326
Considered doubtful 1,578,874 1,193,272
4,352,082
4,100,598
Provision for doubtful debts 24.4 (1,578,874)
(1,193,272)
Long term trade debts (634,447)
(523,325)
2,138,761
2,384,001
24.1 Trade debts include following balances due from associated companies:
Warid Telecom (Pvt) Limited 374,468
224,297
Warid International LLC, UAE - Parent company -
101,500
Bank Alfalah Limited 125,030
44,063
Alfalah Insurance Company 17,795
11,578
INOV8 Limited 5,231
2,131
522,524
383,569
24.2
2016
Total future Present value
payments
Current portion
Not later than one year 135,815 100,164 35,650
Long term portion
543,260
333,743
209,517
Later than five years 823,639
398,710
424,929
1,366,899
732,453
634,447
1,502,714 832,617 670,097
2015
Current portion
Not later than one year 121,180
91,095
30,085
Long term portion
Between one and five years 484,718
307,909
176,809
Later than five years 665,286
318,770
346,516
1,150,004
626,679
523,325
1,271,184
717,774
553,410
24.3 Age analysis of trade debts from associated companies, past due but not impaired is as follows.
2016 2015
0 to 6 months 88,313 219,1176 to 12 months 198,382 18,082Above 12 months 235,829 146,370
522,524 383,569
Between one and five years
(Rupees in thousand)
Unearned
Interest
(Rupees in thousand)
These mainly represent long term portion of right of way charges paid to local governments and
various land owners for access of land.
(Rupees in thousand)
Trade debts include receivable under finance lease of optic fiber cable and telecom equipment as
Wateen Telecom Ltd. Annual Report 201699
2016 2015
24.4 Provision for doubtful debts
Related parties
Opening balance - -
Provision made during the year - related parties 101,500 -
Closing balance 101,500
-
Other parties
Opening balance 1,193,272
1,046,692
Provision made during the year - other parties 335,618
Reversal of provision made during the year - other parties (51,516)
146,580
Closing balance 24.4.1 1,477,374
1,193,272
1,578,874
1,193,272
24.4.1
2016 2015
25. Stores, spares and loose tools Note
736,978 858,576
Less: Provision for obsolete stores 25.1 (341,842) (356,686)
Store & spares written off (16,599)
378,537 501,890
25.1 Provision for obsolete stores
Opening balance 356,686 212,266
Provision made during the year 85,231 144,420
(Reversal)/Provision for the year (100,075) - Closing balance 341,842 356,686
26. Stocks
23,208
25,144 Less: Provision for obsolete stocks 26.1 (14,495) (13,513)
8,713 11,631
26.1 Provision for obsolete stocks
Opening balance 13,513 12,116
Provision made during the year 4,725 1,397
Write-off during the year (3,743) -Closing balance 14,495 13,513
(Rupees in thousand)
- Balances over 360 days past due - 100 %
Cost
Cost
These include Rs 1,569 million (2015: Rs 1,285 million) based on age analysis of the debts as
follows:
- Balances 181 - 360 days past due - 50 %
(Rupees in thousand)
-
Wateen Telecom Ltd. Annual Report 2016100
2016 2015Note
27. Advances, deposits, prepayments and other receivables
Advances to suppliers and contractors - considered good 823,393 761,791Advances to employees - considered good 10,745 40,855Security deposits and earnest money 198,160 173,212
194,424 344,500Prepayments 27.1 88,910
88,562Sales tax refundable 71,765
254,635Due from associated companies 27.2 614,869
445,018Accrued interest 11,107
10,760Government grant receivable -
634,857Receivable from gratuity fund 10,086
5,582Others 152,303
125,7402,175,763
2,885,512Less: Provision for doubtful receivables - related parties 27.3Opening balance 194,534
171,654Provision for the year - charged against finance income 17,208
22,880Closing balance 211,742
194,534
Opening balance 668,230
150,397
Provision for the year 76,560
517,833Closing balance 744,790
668,230
956,532 862,764
1,219,231
2,022,748
27.1
2016 2015
27.2 Due from associated companies
Wateen Multi Media (Pvt) Limited 228,263
207,555Warid International LLC, UAE - Parent company 83,019
70,012Raseen Technologies (Pvt) Limited 27,844
25,877Warid Telecom Georgia Limited 23,459
21,820Warid Telecom International - Bangladesh 8,504
7,909Advance for construction of Warid Tower 68,916
68,916 INOV8 Limited 174,198
42,929 Wateen Malaysia 666
-
614,869
445,018
27.3
Advance for construction of Warid Tower 68,916 68,916
Warid International LLC, UAE - Parent company 83,019 70,01227,844 25,877
23,459 21,8208,504 7,909
211,742 194,534
Provision for doubtful receivables includes provision for doubtful
receivables from following related parties:
(Rupees in thousand)
Margin held by bank against letters of guarantee
Less: Provision for doubtful receivables - other parties
These include current portion of right of way charges of Rs 17.773 million (2015: Rs 17.036 million).
(Rupees in thousand)
Warid Telecom - International
Provision for doubtful receivables was approved by shareholders of Wateen in Extra Ordinary
General Meetings held on December 31, 2011 and October 3, 2014.
Raseen Technologies (Pvt) LimitedWarid Telecom - Georgia Limited
Wateen Telecom Ltd. Annual Report 2016101
2016 2015Note
28. Cash and bank balances
Balance with banks on
- current accounts 242,742 84,404
- collection accounts 27,728 17,378
- deposit accounts 113,753 105,299
Cash in hand 354 253384,577
207,334
28.1
28.2
28.3
2016 2015
Represented
29. Revenue
Gross revenue 29.1 8,065,448
6,611,040
Less: Sales tax / Federal excise duty 497,630
501,893
7,567,818
6,109,147
29.1
2016 2015
30. Cost of sales
LDI Interconnect cost 1,888,883
1,017,078
Leased circuit charges 146,007
142,159
Contribution to PTA Funds 91,256 65,887
PTA regulatory and spectrum fee 46,930 32,189
Cost associated with IRU of Optic Fibre Cable 273,007 154,090
Operational cost 1,242,735 1,558,540
Repair and maintenance 361,311 181,632
Bandwidth cost of VSAT services 221,187 268,759
LTE Equipment - 206,306
Others 309,217 392,5994,580,533 4,019,239
(Rupees in thousand)
This includes an amount of Rs. Nil million (2015: Rs. 560 million) representing the Company's share of
gross revenue from the incoming internationalvoice traffic, generated under the InternationalClearing
House (ICH) arrangement. In accordance with PTA's directive of August 23, 2012, an agreement was
signed on August 30, 2012 amongst Long Distance International(LDI) operators operating in Pakistan
to establish the ICH for Internationalincoming voice traffic terminating in Pakistan. Under the terms of
the agreement, one operator was selected as the internationaloperator. The agreement was approved
by the Ministry of Informationand Technology (MoIT)and became operationalwith effect from October
1, 2012. Under the agreement, the Company had a net share equal to its allocatedpercentage in total
gross revenueof ICH,along with related costs. On February24, 2015, the HonorableSupreme Court of
Pakistan ordered to cancel the ICH arrangement. Accordingly, the operations of ICH were terminated
with immediate effect by the Company.
(Rupees in thousand)
Cash and bank balances include foreign currency balances aggregatingUSD 2.376 million and GBP
0.091 million (2015: USD 0.082 million and GBP 0.088 million).
Bank balances on deposit accounts maintainedin Rupees carried interest at an averagerate of 5%-8%
per annum (2015: 5%-8% per annum).
Bank balances amounting to Rs 32.624 million were under lien with banks (2015: Rs 30.620million).
(Rupees in thousand)
Note
Wateen Telecom Ltd. Annual Report 2016102
2016 2015Note
31. General and administration expenses
Salaries, wages and benefits 31.1 1,104,553 1,189,236
Rent 82,845 97,610
Repairs and maintenance 6,481 9,456
Vehicle repairs and maintenance 6,087
20,007
Travel and conveyance 15,011
39,385
Postage and stationery 7,963
11,917
Auditor's remuneration 31.2 7,366
10,966
Legal and professional charges 49,466
59,596
Communication expenses 18,127
18,583
Employee training 3,276
3,399
Customer services charges 37,399
79,938
Fees and subscription 4,012
10,538
Insurance 36,898
40,206
Entertainment 10,264
13,710
Utilities -
48,966
General office expenses 44,793
104,042
Others 2,610
7,018
1,437,151
1,764,573
31.1
2016 2015
31.2 Auditor's remuneration
Note
Annual audit 3,373
2,560
Audit of consolidated accounts and review of half
yearly accounts 300
Tax services 3,898
7,994
Out of pocket expenses 95
112
7,366
10,966
32. Provisions
Provision for doubtful trade debts 24.4 437,118
146,580
Provision for doubtful advances and other receivables 27 76,560
517,833
(Reversal) / Provision for obsolete stores 25.1 (14,844)
144,420
Provision for obsolete stocks 26.1 4,725
1,397
503,559
810,230
33. Other income / (expenses)
Government grant recognised 13 143,561 178,230
(Loss)/Gain on sale of operating assets (101,662) 10,934
Write back of liability 516,690 407,799
Other income 34,516 8,143
Workers' Welfare Fund charge for the prior year (569) (794)
Other Expenses (1,818) -
Stores and spares write off (16,599) -574,119 604,312
These include charges against employee's retirement benefits as referred to in note 41.
(Rupees in thousand)
(Rupees in thousand)
-
Wateen Telecom Ltd. Annual Report 2016103
2016 2015Note
34. Finance cost
Markup on long term and medium term finance 34.1 1,670,032 1,372,007
Amortization of ancillary cost of long term finance 29,540 52,708
Mark up on short term borrowings 34.2 55,127 88,471
Finance cost of leased assets -
25
Bank charges, commission, fees and other charges 38,019
49,527
Late payment charges on other payables 70,937
1,967
Exchange loss 660,119
584,262
Others 34.3 -
104,8902,523,774
2,253,857
34.1
34.2
34.3 These represent charges paid in relation to termination of USF CTR Project.
2016 2015Note
35. Finance income
Finance income on lease 103,063
95,244
Markup on advance to associated companies 30,540
43,800
Provision of markup on advances to associated companies 27 (17,208)
(22,880)
13,332
20,920
Income on bank deposit accounts 1,922
14,805118,317
130,969
36. Income tax expense
Current
- prior year (4,394)
(622)
- for the year 468,244
83,808
Deferred tax
- prior year credit (14,694)
(8,254)449,156 74,932
37. Reconciliation of tax charge % %
Applicable tax rate 32 33
Tax effect of (income)/expense that are
not allowed for tax purpose (30) (1)
Deferred tax asset on unused tax loss not recognised (30) (33)Average effective tax rate (28) (1)
This includes markup related to an associated company of Rs 55.127 million (2015: Rs 75.993 million).
(Rupees in thousand)
(Rupees in thousand)
This includes markup related to long term finance from shareholders of Rs. 303.257million (2015: Rs.
238.687 million), medium term finance from an associated company of Rs 56.649 million (2015: Rs
74.279 million) and markup related to associated company of Rs 163.274 million (2015: Rs 157.643).
Wateen Telecom Ltd. Annual Report 2016104
38. Financial instruments by category
38.1 Financial assets and liabilities
Total
2016
Financial assets
Maturity up to one year
Trade debts-net of provision 2,138,761 2,138,761
Contract work in progress 175,934 175,934
Advances, deposits and other receivables 1,051,718 1,051,718
Bank balances 384,223 384,223
3,750,636 3,750,636
Maturity after one year
Long term deposits 479,760 479,760
Long term trade debts 634,447 634,447
1,114,207 1,114,207
Total
Financial liabilities
Maturity up to one year
Long term finance - secured 4,653,075 4,653,075
Short term running finance - secured 765,512 765,512
Trade and other payables 4,939,586 4,939,586
Interest/mark-up accrued 2,425,718 2,425,718
12,783,891 12,783,891
Maturity after one year
Long term finance - secured 12,212,309 12,212,309
Term finance from associated company - unsecured 314,100 314,100
Long term portion of deferred mark up 4,069,768 4,069,768
Long term finance from shareholders-unsecured 14,041,457 14,041,457
Medium term finance from an associated
company - unsecured 600,000 600,000
Long term deposits 35,680 35,680
31,273,314 31,273,314
Total
2015
Financial assets
Maturity up to one year
Trade debts-net of provision 2,384,001 2,384,001
Contract work in progress 339,764 339,764
Advances, deposits and other receivables 1,172,395 1,172,395
Bank balances 207,081 207,081
4,103,241 4,103,241
Maturity after one year
Long term deposits 468,647 468,647
Long term trade debts 523,325 523,325
991,972 991,972
Total
Financial liabilities
Maturity up to one year
Long term finance - secured 2,560,463 2,560,463
Short term running finance - secured 787,135 787,135
Trade and other payables 5,232,830 5,232,830
Interest/mark-up accrued 1,766,089 1,766,089
10,346,517 10,346,517
Maturity after one year
Long term finance - secured 14,063,553 14,063,553
Term finance from associated company - unsecured 305,100 305,100
Long term portion of deferred mark up 3,017,066 3,017,066
Long term finance from shareholders - unsecured 13,334,608 13,334,608
Medium term finance from an associated
company - unsecured 600,000 600,000
Long term deposits 35,680 35,680
31,356,007 31,356,007
(Rupees in thousand)
(Rupees in thousand)
(Rupees in thousand)
(Rupees in thousand)
Loans and
receivables
Other
financial
liabilities
Loans and
receivables
Other
financial
liabilities
Wateen Telecom Ltd. Annual Report 2016105
38.2 Credit quality of financial assets
2016 2015
Rating
Trade debts
A1+ 154,098 122,508
A1 109 10,248
A2 290 -
A-1 3,320 4,052
A-1+ 13,330 73,771
A-2 247 1,339
P-2 140 26
522,524 383,569
2,079,150 2,311,813
2,773,208 2,907,326
Advances, deposits and other receivables
Counterparties with external credit rating
A1+ 41,565 1,740
A-1+ 2,551 4,577
A1 125,000 1,000
A3 - -
Counterparties without external credit rating
420,335 273,364
462,267 891,237
1,051,718 1,171,918
Long term deposits
479,760 468,647
Bank balances
A1+ 330,744 151,985
A-1+ 36,975 14,659
A-1 16,530 26,396
P-1 1 14,041
384,249 207,081
39. Financial risk management
- Credit risk;
- Liquidity risk; and
- Market risk
Others
The Board of directors oversees how management monitors compliance with the Company's policies and procedures, and reviews the
adequacy of the risk management framework in relation to the risks faced by the Company. The directors are assisted in their oversight
role by InternalAudit. InternalAudit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results
of which are reported to the Board of Directors.
(Rupees in thousand)
This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk, and the Company's management of capital. Further, quantitativedisclosures are included
throughout these financial statements.
The credit quality of Company's financial assets assessed by reference to external credit ratings of counterparties determined by The
Pakistan Credit Rating AgencyLimited (PACRA), JCR - VIS Credit Rating Company Limited (JCR-VIS),Standard and Poor's and Moody's
and other international credit rating agencies are as follows:
The Company's policies are established to identifyand analyse the risks faced by the Company, to set appropriate risk limits and controls,
and to monitor risks. Management's policies and systems are reviewed regularly to reflect changes in market conditions and the
Company's activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their roles and obligations.
The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework. The
Board is also responsible for developing and monitoring the Company's risk management policies.
Counterparties without external credit rating
Due from related parties
Others
Due from related parties
The Company has exposure to the following risks from its use of financial instruments:
Others
Counterparties with external credit rating
39.1 Credit risk
2016 2015
Trade debts-net of provision 2,773,208 2,907,326
Contract work in progress 175,934 339,764
Advances, deposits and other receivables 1,051,718 1,172,395
Bank balances 384,223 207,081
Long term deposits 479,760 468,647
Impairment losses
2016 2015
Gross Impairment Gross Impairment
Up to 3 months 1,050,395
-
572,612 -
3 to 6 months 385,560
-
282,522 -
6 to 9 months 859,826
235,927
552,729 128,745
Above 9 months 2,056,300
1,342,946
2,692,735 1,064,527
4,352,081
1,578,873
4,100,598 1,193,272
39.2 Liquidity risk
2016
Long term finance - secured 16,865,384 16,938,771 4,653,075 4,664,398 7,547,911
Term Finance from associated company - unsecured 314,100 314,100 - 314,100 -
Long term portion of deferred mark up 4,069,768 4,069,768 - - 4,069,768
Long term finance from shareholders - unsecured 14,041,457 21,884,998 - - 14,041,457
Medium term finance from an associated
company - unsecured 600,000 600,000 - - 600,000
Long term deposits 35,680 35,680 - 35,680 -
Short term running finance - secured 765,512 765,512 765,512 - -
Trade and other payables 4,939,586 4,939,586 4,939,586 - -
Interest/mark-up accrued 2,425,718 2,425,718 2,425,718 - -
44,057,205 51,974,134 12,783,891 5,014,178
Company's exposure to credit risk is influenced mainly by the individualcharacteristics of each operator including the default risk of the
industry and country in which the operator works. Significant portion of the Company’s receivables is attributable to operators. Company
regularly monitors the status of receivables.
Credit risk is the risk of financial loss to the Company if a counter party to financial instruments fails to meet its contractual obligations,and
arises principally from the Company's receivable from customers, deposits, contract work in progress, advances, deposits and other
receivables and bank balances. The Company assesses the credit qualityof counterpartiesas satisfactory. The Company does not hold
any collateral as security against any of its financial assets. The Company limits its exposure to credit risk by investing only in liquid
securities.
(Rupees in thousand)
(Rupees in thousand)
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the
statement of financial position date to the maturity date. The amounts disclosed in the table are contractual undiscounted cash flows
except for employee's retirement benefit obligations.
As June 30, 2016, the Company has financial assets of Rs 4,865 million (2015: Rs 5,095 million) and Rs 7,981 million (2015: Rs 7,893
million) unavailed borrowing facilities from financial institution.
Company ensures that it has sufficient cash on demand to meet expected cash outflows during its operating cycle. This excludes the
potential impact of extreme circumstances that cannot reasonablybe predicted, such as natural disasters. The Company's treasury aims
at maintaining flexibilityin funding by keeping committed credit lines. Further shareholders of the Company has provided financial support
in the form of long term finance to meet capital requirements of the Company. Managementbelieves the same support will continue in
future. Further, the Company has restructured the long term finance facilities and short term borrowings which will facilitate the Company
to greater extent to meet its obligations/ covenants under loan agreements.
Liquidity risk is the risk that Company will not be able to meet its financialobligations as they fall due. Company's approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to Company’s reputation.
The Company has recorded an allowance for impairment in respect of advances, deposits and other receivables of Rs 957 million (2015:
Rs 863 million).
Above 5
years
(Rupees in thousand)
Carrying
amount
Contractual
Cashflows
Carrying Amount
Less than 1
Year
Between 1
to 5 years
The aging of these trade debts at the reporting date is as follows:
Wateen Telecom Ltd. Annual Report 2016106
26,259,136
Wateen Telecom Ltd. Annual Report 2016107
2015
Long term finance - secured 16,624,016 16,726,943 2,560,463 6,957,669 7,105,884Term Finance from associated company - unsecured 305,100 305,100 - 305,100Long term portion of deferred mark up 3,017,066 3,017,066 - - 3,017,066Long term finance from shareholders - unsecured 13,334,608 21,255,300 - - 13,334,608Medium term finance from an associated -company - unsecured 600,000 600,000 - - 600,000Long term deposits 35,680 35,680 35,680 -Short term running finance - secured 787,135 790,000 787,135 - -Trade and other payables 5,232,830 5,232,830 5,232,830 - -Interest/mark-up accrued 1,766,089 1,766,089 1,766,089 - -
41,702,524 49,729,008 10,346,517 7,298,449 24,057,558
39.3 Market risk
a) Interest rate risk
b) Currency Risk
c) Fair value of financial instruments.
2016 2015
Trade debts - net of provision 2,773,208 2,907,326 Contract work in progress 175,934 339,764 Advances, deposits and other receivables 306,928 1,172,395 Bank balances 384,223 207,081 Long term deposits 479,760 468,647
4,120,053 5,095,213
Financial liabilities - Other financial liabilities
Long term finance - secured 16,865,384 16,624,016Term finance from associated company - unsecured 314,100 305,100
Long term portion of deffered mark up 4,069,768 3,017,066
Finance from supplier - unsecured 14,041,457 13,334,608Medium term finance from an associated company - unsecured 600,000 600,000Long term deposits 35,680 35,680Short term running finance - secured 765,512 787,135Trade and other payables 4,939,586 5,232,830 Interest / markup accrued 2,425,718 1,766,089
44,057,205 41,702,524
d) Capital risk management
The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern and to maintain a
capital base to support the sustained development of its businesses.
Financial assets - Loans and receivable
The Company is exposed to currency risk on long term finance, bank balance and receivables / payables which are denominated in
currency other than the functional currency of the Company. Financial assets include Rs 1,618 million (2015: Rs 3,182 million) and
financial liabilities include Rs 22,847 million (2015: Rs 22,214 million) in foreign currency which were exposed to exchange risk.
At June 30, 2016, if the currency had weakened/strengthenedby 10% against US dollar with all other variablesheld constant, net loss for
the year would have been Rs 2,140 million (2015: Rs 1,903 million) higher/lower.
The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values.
As the significant financialassets and liabilitiescarry variableinterest rates, Company's operatingcash flows are dependentof changes in
the market interest rates. Financial assets of Rs 326 million (2015: Rs 318 million) and financial liabilities of Rs 32,660 million (2015: Rs
31,754 million) were subject to interest rate risk.
At June 30, 2016, had interest rates been 1% higher/lowerwith all other variablesheld constant, net loss for the year would have been Rs
323 million (2015: Rs 314 million) higher/lower.
Above 5 years
(Rupees in thousand)
The Company manages the capital structure in the context of economic conditions and the risk characteristics of the underlyingassets. In
order to maintain or adjust the capital structure, the Company may adjust the amount of dividendto shareholders, issue new shares or sell
assets to reduce debts. The Company is required to maintain debt equity ratio as specified in loan agreements and continuation of support
from majority shareholder is vital for the Company's operations. Under the terms of loan agreements, the Company can not declare
dividends, make any distributions or pay any other amount to its shareholders until the repayment of loan and the interest in full to the
lenders. Further, the Syndicate shall be entitled to designate one nominee to be appointed as director in the Board of directors of the
Company as referred in note 7.1.
(Rupees in thousand)
Market risk is the risk of changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
Carrying amount Contractual
CashflowsLess than 1 Year
Between 1 to
5 years
Carrying Amount
Wateen Telecom Ltd. Annual Report 2016108
40. Offsetting of financial assets and financial liabilities
40.1 Financial assets subject to offsetting
As at June 30, 2016
Trade debts
Due from international carriers 1,113,738 781,294 332,444
1,113,738 781,294 332,444
As at June 30, 2015
Trade debts
Due from international carriers 3,165,672
518,947
2,646,725
Pakistan Telecommunication Authority 654,068 654,068 - Other trade receivables 503,773 503,773 -
4,323,513 1,676,788 2,646,725
40.2 Financial liabilities subject to offsetting
As at June 30, 2016
Trade and other payables
Due to international carriers 1,184,376 781,294 403,082
Creditors 780,611 133,426
647,185
1,964,987 914,720 1,050,267
As at June 30, 2015
Trade and other payables
Due to international carriers 1,607,871 518,947 1,088,924
Pakistan Telecommunication Authority 654,068 654,068 -
Creditors 1,108,825 1,108,825 -
3,370,764 2,281,840 1,088,924
Net amounts of
financial liabilities
presented in the
statement of
financial position
Gross
amounts of
recognized
financial
assets
Gross amounts of
recognized
financial liabilities
set off in the
statement of
financial position
Net amounts of
financial assets
presented in the
statement of
financial position
----------------------Rupees in thousand----------------------
Gross amounts of
recognized
financial assets
set off in the
statement of
financial position
Gross
amounts of
recognized
financial
liabilities
Wateen Telecom Ltd. Annual Report 2016109
41. Employees' retirement benefits
2016 2015
41.1 Liability for funded staff gratuity (10,086) (5,582)
The amounts recognised in the statement of financial position are as follows:
Present value of defined benefit obligation 101,724 108,187
Benefits due but not paid 4,835 4,616
Fair value of plan assets (116,645) (118,385)
Net liability / (asset) (10,086) (5,582)
41.2 The amounts recognised in the statement of financial position are as follows:
Opening liability / (asset) (5,582) 64,861
Expense recognised in income statement (1,544) (50,543)
Contributions made during the year (14,768) (26,762)
Remeasurement loss/(gain) recognised in statement of
comprehensive income 11,808 6,862
Closing liability / (asset) (10,086) (5,582)
41.3 The amounts recognised in income statement are as follows:
Current service cost - 27,764
- (84,516)
Interest cost 9,489 22,246
Expected return on plan assets (11,033) (16,037)
(1,544)
(50,543)
41.4
Remeasurement loss/(gain) on obligations:
Experience loss (5,727)
5,741
Actuarial loss / (gain) from changes in financial assumptions 11,722
-
5,995
5,741
Loss/(gain) due to remeasurement of investment return 5,813
1,121
11,808
6,862
41.5 Changes in the present value of defined benefit obligation are as follows:
Opening defined benefit obligation 108,187
198,837
Current service cost -
27,763
Past service cost/(credit) - (84,516)
Interest cost 9,489 22,246
Remeasurement loss 5,995 5,741
Benefits due but not paid (219) -
Benefits paid (21,728) (61,884)
Closing defined benefit obligation 101,724 108,187
(Rupees in thousand)
Remeasurements recognised in other comprehensive income (OCI) are as follows:
Past service cost/(credit)
Wateen Telecom Ltd. Annual Report 2016110
2016 2015
41.6 Changes in fair value of plan assets:
Opening fair value of plan assets 118,385 138,592
Remeasurement gain / (loss) (5,813) (1,121)
Contributions by employer 14,768
26,761
Benefits paid (21,728)
(61,884)
Expected return on plan assets 11,033
16,037
Closing fair value of plan assets 116,645
118,385
41.7 Break-up of category of assets in respect of staff gratuity:
Rupees %age Rupees %age
('000) ('000)
Cash and bank 14,670
13% 32,073
46%
Investments 101,975
87% 86,312
54%
116,645
100% 118,385
100%
41.8 Significant actuarial assumptions:
2016 2015
Valuation discount rate-p.a 7.25% 9.75%
Expected rate of return on plan assets-p.a 19% 19%
Average expected remaining working
life time of employees 6 years 8 years
41.9 Sensitivity Analysis
Increase (Decrease)
Discount rate (5,118) 5,812
41.10
The calculation of the defined benefit obligation is sensitive to assumptions set out above.The
following table summarizes how the defined benefit obligation at the end of reporting period
would have increased/ (decreased) as a result of change in respective assumptions by one
percent.
Defined benefit obligation
Effect of 1%
(Rupees in thousand)
The weighted average number of years of defined benefit obligation is 6 years as at June 30,
2016.
A refund of Rs 23 million (2015: Rs 2.30 million), is expected to arise to the Company from
gratuity fund in the next financial year.
The Projected Unit Credit Methodusing the following significant assumptions was used for the
valuation:
Actual return on plan assets for the year is Rs 22.246 million.
2016 2015
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 2016111
41.11
2016 2015
Provident fund 28,421
27,332
Gratuity fund (1,544)
(50,543)
26,877
(23,211)
42. Defined contribution plan
Details of provident funds are as follows:
Staff provident fund 2016 2015
Net assets 207,375
203,954
Cost of investments made 96,654
96,580
Fair value of investments made 106,007
118,593
%age of investments made 51% 58%
Breakup of investment - at cost Rs '000 %age Rs '000 %age
Shares 23,756
25% 25,656
21%
Mutual Funds 40,000
41% 60,546
38%
Bank deposits 32,898
34% 10,378
41%
96,654 100% 96,580 100%
42.1 Investments out of provident funds have been made in accordance with the provisions of
section 227 of the Companies Ordinance, 1984 and the rules formulated for the purpose.
include amounts in respect of the following:
(Rupees in thousand)
2016 2015
Salaries, wages and benefits as appearing in note 33
The Company contributes to gratuity fund on the advice of fund’s actuary. The contribution is
equal to current service cost with the adjustment for any deficit.
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 2016112
43. General
43.1 Related party transactions
Aggregate transactions with related parties during the year were as follows:
2016 2015
Parent Company
Warid Telecom International LLC, UAE (WTI) Markup charged to WTI 13,007
17,295
Shareholders/ Sponsors
Long term finance received from shareholders 315,000
2,194,375Markup on long term finance from shareholders 303,257
238,687
Associated companies:
Warid Telecom (Pvt) Limited (WTL)
Sale of services 1,296,218
1,299,825 Sale of goods 7,073
90,576 Cost and expenses charged by WTL 398,042
316,539
Dhabi One Investment Services LLCMark up on long term finance - unsecured 6,719 5,744
Wateen Multimedia (Pvt) Limited (WMM) Markup charged to WMM 6,116
20,891
Payments made by the Company on behalf of WMM 39,008
-
Warid Telecom Georgia Limited Markup charged on advance 1,639
2,180
Raseen Technology (Pvt) Limited
Markup charged on advance 1,967 2,616
Warid Telecom International - Bangladesh
Markup charged on advance
595 791Wateen Malaysia Inc. (WM)
Payments made by the Company on behalf of WM
666 -
Innov8 Limited
Sale of services 57,816
39,108
Cost and expenses charged by WTL 103,108
38,387
Payments made by WTL on behalf of Company 24,424
4,541
Bank Alfalah Limited (BAL) Sale of services 137,996
122,204
Sale of goods 64,717 51,254
Markup charged 163,616 244,518 Markup charged on bank deposits with BAL 465 141
Alfalah Insurance Limited
Sale of Goods 2,762 -
Rendering of services 452 510
Taavun (Pvt) Limited Markup on long term finance 56,649 74,279
Provident Fund TrustEmployer contribution to trust 28,421 28,370
Gratuity FundEmployer contribution to fund 14,768 26,761
The Company's related parties comprise its subsidiaries, associated undertakings, employees'
retirement benefit plans and key management personnel. Amounts due from / (to) related parties, are
shown under receivables and payables. Remuneration of key management personnel is disclosed in
note 43.2.
(Rupees in thousand)
Wateen Telecom Ltd. Annual Report 2016113
43.2 Remuneration of Chief Executive, Directors and Key Management Personnel
2016 2015 2016 2015 2016 2015 2016 2015
Managerial remuneration 15,755
15,484
17,434
6,476
287,868
309,650 321,057 331,610
Housing and utilities 8,665 8,516 - - 158,328 170,308 166,993 178,824
Company's contribution to provident andgratuity funds
1,312
1,304
-
-
23,999
26,290 25,311 27,594
Leave fair assistance 1,313 1,304 - - 23,969 26,277 25,282 27,581
27,045 26,608 17,434 6,476 494,163 532,524 538,643 565,608
Number of persons 1 1 3 2 285 331 288 334
--------------------------------------------------(Rupees in thousand)------------------------------------------------------
The aggregate amount charged in the financial statements for remuneration, including all benefits, to Chief Executives,Directors and Key Management Personnel of the Company is as follows:
Chief Executive Directors TotalKey Management Personnel
43.3 Capacity
43.4 Number of employees 2016 2015
Total number of employees at end of the year 474 576
Average number of employees for the year 487 673
44. Corresponding figures
Trade debts Long term trade debts
45. Date of authorisation for issue
These financial statements have been authorised for issue by the Board of Directors of the
Company on .November 29, 2016
Considering the nature of the Company's business, information regarding capacity has no
relevance.
Previous years figures have been reclassified to conform to current year's presentation as
follows:
Reclassified from Reclassified to Rupees in thousands
523,325
_________________ ______________Chief Executive Director
Annual Report 2016
2016
<---------HAVING SHARES
NO. OF SHAREHOLDERS From To Balance Held Percentage
154 1 100 3996 0.0006
2508 101 500 1245741 0.2017
1615 501 1000 1612676 0.2612
1164 1001 5000 4608320 0.7463
421 5001 10000 4114898 0.6665
41 10001 15000 587388 0.0951
104 15001 20000 2076352 0.3363
14 20001 25000 346301 0.0561
25 25001 30000 746300 0.1209
5 30001 35000 170804 0.0277
5 35001 40000 200000 0.0324
1 40001 45000 45000 0.0073
53 45001 50000 2647300 0.4287
1 50001 55000 50196 0.0081
3 55001 60000 175055 0.0284
1 60001 65000 65000 0.0105
1 70001 75000 75000 0.0121
1 80001 85000 80932 0.0131
18 95001 100000 1800000 0.2915
1 100001 105000 102000 0.0165
1 145001 150000 150000 0.0243
3 195001 200000 600000 0.0972
1 675001 680000 680000 0.1101
1 96285001 96290000 96289940 15.5942
1 165705001 165710000 165705121 26.8359
1 333295001 333300000 333296300 53.9773
6144 Company Total 617474620 100.0000
<---------
114
Annual Report 2016
2016
Particulars No. of
Folio Balance
Share Percentage
DIRECTORS, CEO &
CHILDREN 5 1400 0.0002
ASSOCIATED COMPANIES 4 595393361 96.4239
GENERAL PUBLIC (LOCAL) 61 18 210 59319 3. 4106
GENERAL PUBLIC (FOREIGN) 3 682000 0. 1104
OTHERS 14 338540 0.0549
Company Total 6144 617474620 100.0000
115
Wateen Telecom Ltd. 116 Annual Report 2016
NOTICE OF ANNUAL GENERAL MEETING
thNotice is hereby given that 7 Annual General Meeting of WATEEN TELECOM LIMITED (the “Company”) shall be held at the registered office of the Company, situated at Main Walton Road, Opp. Bab-e-Pakistan, Walton Cantt, Lahore, Pakistan, on Monday, January 23, 2017 at 10:00 am, to transact the following business:
Ordinary Business
th1. To confirm the Minutes of the 6 Annual General Meeting held on November 30, 2015.
2. To receive, consider and adopt the Audited Financial Statements of the Company for the year
ended June 30, 2016 together with the Board of Directors’ Report and Auditors’ Report thereon.
3. To appoint EY Ford Rhodes, Chartered Accountants, as the Statutory Auditors of the Company
for the financial year 2016-2017 and to fix their remuneration.
Special Business
4. To consider and approve the transactions having been entered into by the Company with its
associated companies, detailed below, and for this purpose to consider and if deemed fit to
pass, with or without modification, addition, or deletion, the following resolution as special
resolution:
A) WATEEN MULTIMEDIA (PRIVATE) LIMITED (“WMM”)
“RESOLVED THAT, the finance facility up to a limit of PKR 320,688,597/- ('WMM Finance
Facility'), made available by the Company to WMM, for the period between October 04, 2015 till
October 03, 2016, on the terms and conditions (including markup) set forth in the Statement of
Material Facts under Section 160(1)(b) of the Companies Ordinance, 1984 (hereinafter the
“Section 160(1)(b) Statement”), be and are hereby ratified / approved for regularization under
Section 208 of the Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the WMM Finance Facility, made available by the Company to
WMM, for the period between October 04, 2016 till January 23, 2017, on the terms and
conditions (including markup) set forth in the Section 160(1)(b) Statement, be and are hereby
ratified / approved for regularization under Section 208 of the Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the renewal of term of the WMM Finance Facility, for a further
twelve months period, effective from the date of shareholders' approval, be and is hereby
approved, at the rate of 1% above the Company's borrowing cost and on the terms and
conditions set forth in the Section 160(1)(b) Statement, pursuant to Section 208 of the
Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, further finance facility up to PKR 50,000,000/- to be extended
by the Company to WMM, for a twelve months period effective from the date of shareholders'
approval, be and is hereby approved, at the rate of 1% above the Company's borrowing cost
and on the terms and conditions set forth in the Section 160(1)(b) Statement, pursuant to
Section 208 of the Companies Ordinance, 1984.”
B) WATEEN SOLUTIONS (PVT) LTD (“WSPL”)
“RESOLVED THAT, with effect from July 01, 2016, the revocation of mark-up on loans extended by the Company to WSPL and detailed in Section 160(1)(b) Statement, be and is hereby approved, pursuant to Section 208 of the Companies Ordinance, 1984.”
C) WARID TELECOM INTERNATIONAL LLC (“WTI”)
“RESOLVED THAT, the write-off of (i) an amount of PKR 42,018,461/- (including mark-up of
PKR 6,107,605/- up till December 31, 2011) representing the expenses incurred by the
Company on behalf of WTI, and (ii) the mark-up amount of PKR 13,739,134/-, accrued thereon
from January 01, 2012 to October 03, 2014, which were provisioned in the Company's EOGMs
held on December 31, 2011 and October 03, 2014 respectively, be and is hereby approved
under Section 208 of the Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the write-off of (i) trade debts of WTI amounting to US$
1,000,000/- and mark-up thereon amounting to PKR 18,465,248/- (up till December 31, 2011)
and (ii) the markup accrued on the trade debt amounting to PKR 37,748,337/- (for the period
between January 01, 2012 to October 03, 2014), which was regularized in the Company's
EOGM held on October 03, 2014, be and is hereby approved under Section 208 of the
Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the write-off of the mark-up amount of PKR 36,184,497/-
(accrued from October 04, 2014 till January 23, 2017) (i) over the expenses incurred by the
Company on behalf of WTI and (ii) in respect to the trade debt of WTI, be and is hereby
approved under Section 208 of the Companies Ordinance, 1984.”
D) WARID TELECOM GEORGIA LIMITED (“WGL”)
“RESOLVED THAT, the write-off of an amount of PKR 18,032,421/- (including mark-up of PKR
2,629,862/- up till December 31, 2011) representing the expenses incurred by the Company on
behalf of WGL, and the mark-up amount of PKR 6,282,138/-, accrued thereon from January 01,
2012 to January 23, 2017, be and is hereby approved under Section 208 of the Companies
Ordinance, 1984.”
E) RASEEN TECHNOLOGIES (PRIVATE) LIMITED (“Raseen”)
“RESOLVED THAT, the write-off of an amount of PKR 18,482,509/- (including mark-up of PKR
2,153,509/- up till December 31, 2011) representing the expenses incurred by the Company on
behalf of Raseen, and the mark-up amount of PKR 6,247,542/-, accrued thereon from January
01, 2012 till October 03, 2014, which were provisioned in the Company's EOGMs held on
December 31, 2011 and October 03, 2014 respectively, be and is hereby approved under
Section 208 of the Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the write-off of the mark-up amount of PKR 4,020,969/- accrued
from October 04, 2014 till January 23, 2017, over the expenses incurred by the Company on
behalf of Raseen, be and is hereby approved under Section 208 of the Companies Ordinance, 1984.”
Wateen Telecom Ltd. 117 Annual Report 2016
F) AGREEMENT WITH SASH CONSTRUCTIONS FOR LEASE – WARID TOWER PROJECT (“Sash Construction”)
“RESOLVED THAT, the write-off of an amount of PKR 80,863,161/-, representing the advance
rent paid to Sash Constructions, and which amount is considered irrecoverable by the
Company and was provisioned in the Company's EOGM held on December 31, 2011, be and is
hereby approved under Section 208 of the Companies Ordinance 1984 .”
G) AIRTEL BANGLADESH LIMITED (FORMERLY KNOWN AS WARID TELECOM INTERNATIONAL LIMITED, BANGLADESH) (“WBIL”)
“RESOLVED THAT, the write-off of an amount of PKR 6,540,653/- (including mark-up of PKR
953,894/- up till December 31, 2011) representing the expenses incurred by the Company on
behalf of WBIL, which amount was provisioned in the Company's EOGM held on December 31,
2011, be and is hereby approved under Section 208 of the Companies Ordinance, 1984.”
“FURTHER RESOLVED THAT, the write-off of the mark-up amount of PKR 2,273,672/- accrued
from October 04, 2014 till January 23, 2017, be and is hereby approved under Section 208 of
the Companies Ordinance, 1984.”
SIGNING AUTHORITY
“FURTHER RESOLVED THAT each of the Chief Executive Officer and the Chief Financial Officer of the Company, acting singly, be and is hereby authorized to act on behalf of the Company in signing all documents, and doing and performing all acts, matters, things and deeds, to implement and / or give effect to the foregoing resolutions.”
STATEMENT OF MATERIAL FACTS UNDER SECTION 160(1)(B) OF THE COMPANIES ORDINANCE, 1984, RELATING TO THE AFORESAID SPECIAL BUSINESS TO BE TRANSACTED AT THE ANNUAL GENERAL MEETING HAS BEEN DISPATCHED TO THE SHAREHOLDERS OF THE COMPANY ALONG WITH THE RELEVANT EXHIBITS IN RESPECT THERETO.
5. Other Business
To consider any other business that may be placed before the meeting with the permission of the Chair.
By the Order of the Board
Muhammad Aqib Zulfiqar(Company Secretary)
Lahore: January 02, 2017
Wateen Telecom Ltd. 118 Annual Report 2016
NOTES:
A. PARTICIPATION IN ANNUAL GENERAL MEETINGA member entitled to attend and vote at this meeting may appoint another person as his / her proxy to attend and vote for him / her.
Duly completed instrument of Proxy, and other authority under which it is signed, thereof, must be lodged with the Company Secretary at the registered office of the Company Wateen Telecom Limited, Main Walton Road, Opp. Bab-e-Pakistan, Walton Cantt, Lahore at least 48 hours before the time of the meeting.
B. CDC ACCOUNTS HOLDERSFor attending the meetingIn case of individuals, the account holder or the sub-account holder and / or the person whose securities are in group account and their registration details are uploaded as per CDC regulations, shall authenticate their identity by showing their original Computerized National Identity Cards (CNICs) or original passports at the time of attending the meeting.
In the case of corporate entities, the Board of Directors' resolution / power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the meeting.
For appointing proxies
(i) In case of individuals, the account holder or the sub-account holder and / or the person
whose securities are in group account and their registration details are uploaded as per
CDC regulations, shall submit the proxy form as per the above requirement.
(ii) The proxy form shall be witnessed by two persons whose names, addresses and CNIC
numbers shall be mentioned on the form.
(iii) Attested copies for CNICs or the passports of the beneficial owners and of the proxy shall be
furnished with the proxy form.
(iv) The proxies shall produce their original CNICs or original passports at the time of the
meeting.
(v) In case of corporate entities, the Board of Directors' resolution / power of attorney with the
specimen signature of the person nominated to represent and vote on behalf of the
corporate entity shall be submitted (unless it has been provided earlier) along with proxy
form to the Company.
C. CLOSURE OF SHARE TRANSFER BOOKSThe share transfer books of the Company will remain closed, and no transaction with respect to the sale / purchase of the Company's shares shall be accepted, from January 17, 2017 to January 23, 2017 (both days inclusive).
D. CHANGE IN ADDRESSMembers are requested to promptly notify any change in their address to the share registrar of the
ndCompany, THK Associates (Private) Limited, 2 Floor, State Life Building-3, Dr. Zia Uddin Ahmed Road, Karachi.
E. PROVISION OF COPY OF COMPUTERIZED NATIONAL IDENTITY CARD (CNIC)In order to comply with the requirement of SECP SRO 381(I)/2012 dated July 05, 2012 those shareholders who have not yet submitted attested copy of their valid CNICs are once again reminded to provide the same with their folio numbers to the Company's share registrar, THK Associates (Private) Limited.
Wateen Telecom Ltd. 119 Annual Report 2016
STATEMENT UNDER SECTION 160(1)(B) OF THE COMPANIES ORDINANCE, 1984
This statement is annexed to the Notice of the Annual General Meeting of Wateen Telecom Limited to be held on (the “Company”) Monday, January 23, 2017 at 10:00 am at registered office of the Company, located at Main Walton Road, Opp. Bab-e-Pakistan, Walton Cantt, Lahore, Pakistan, at which certain special business is to be transacted, and the purpose of this statement is to set out all material facts concerning such special business.
APPROVAL OF TRANSACTIONS WITH ASSOCIATED COMPANIES
A. WATEEN MULTIMEDIA (PRIVATE) LIMITED (“WMM”)
WMM is an associated concern of the Company on account of common directorship since Rizwan Ali Tiwana is a director for both the Company and WMM.
The Company made available a finance facility upto a limit of PKR 200,000,000/- (“Facility 1”), to WMM for the purposes of meeting its working capital and CAPEX requirements, which facility was duly approved by the members in the Extraordinary General Meeting (“EOGM”) dated December 31, 2011. Additionally, in the EOGM dated October 03, 2014, the members approved / ratified (A) the regularization of the Facility 1 and (B) a further finance facility of PKR 120,688,597/- ('Facility 2'), (The aggregation of the aforementioned finance facilities amounting to PRK 320,688,597/-, to be referred as 'WMM Finance Facility').
By facilitating WMM with its funding requirements, the Company has enabled WMM to sustain a positive EBITDA during the preceding years. Though, WMM has exhibited auspicious financial results, WMM's aggressive strategy to secure further growth in the business, necessitates additional funding to cater to its working capital and CAPEX requirements, which WMM is presently not in a position to entirely finance. On account of auspicious financial performance of WMM, the strategic benefit WMM continues to provide the Company for the purpose of providing triple play services to the Company's customers and to cater to its additional working capital and CAPEX requirements, the management of the Company deems (i) the term of the WMM Finance Facility be renewed for an additional period of twelve months (ii) a further facility upto PKR 50,000,000/- at the mark up and on the terms and conditions set out in Exhibit “B” be extended to the WMM.
Accordingly, for the purpose of Section 208 of the Companies Ordinance, 1984, approval / ratification of members is required to:
i) regularize the WMM Finance Facility, with respect to the period between October 04, 2015 to October 03, 2016, along with mark up at the rate of 3 months KIBOR+4% and on the terms and conditions set out as Exhibit “A” hereto.
ii) regularize the WMM Finance Facility, with respect to the period between October 04, 2016 to January 23, 2017, along with mark up at the rate of 3 months KIBOR+4% and on the terms and conditions set out as Exhibit “A” hereto.
iii) renew the term of the WMM Finance Facility, extended by the Company to WMM, for an additional twelve months period (i.e. for the period between January 24, 2017 to January 23, 2018), along with mark up at the rate of 1% above the Company's borrowing cost and on the terms and conditions set out in Exhibit “A” hereto.
iv) extend a further finance facility up to PKR 50,000,000/- along with mark up to be charged thereon to WMM, on the terms and conditions set out in Exhibit “B” hereto.
Wateen Telecom Ltd. 120 Annual Report 2016
B. WATEEN SOLUTIONS (PVT) LIMITED (“WSPL”)
In the EOGM dated October 03, 2014, members of the Company approved / ratified, pursuant to Section 208 of the Companies Ordinance, 1984, (A) the regularization of loans / advances amounting to PKR 850,000,000/-, extended by the Company to WSPL from 2006 to 2011 and (B) a further loan of PKR 362,290,398/- for a period of five (5) years from the date of shareholders' approval.
Till October, 2014 the Company owned 51% of WSPL's entire share capital.
With effect from November 18, 2014, the Company acquired the entire outstanding shareholding of WSPL, through the execution of Addendum No. 1 to the Share Purchase Agreement dated November 18, 2014 between the Company and Mr. Jahangir Ahmed.
As WSPL is now a wholly owned subsidiary of the Company, the provisions of Section 208 of the Companies Ordinance, 1984 are no longer applicable, however, since the members approved the regularization / extension of loans for a term of 5 years, the approval of the shareholders is required to revoke the application of mark-up , with effect from July 01, 2016 on the loans / finance facilities extended by the Company to WSPL.
C. WARID TELECOM INTERNATIONAL, LLC (“WTI”)
The Company and WTI are related parties by virtue of the Company being a subsidiary of WTI and on account of common directorship since H. H. Sheikh Nahayan Mabarak Al Nahayan is a director for both the Company and WTI.
In the Company's EOGM dated December 31, 2011, the shareholders approved (a) the regularization and provisioning of expenses amounting to PKR 42,018,461/- (“WTI Expenses”), (including mark-up of PKR 6,107,605/- up till December 31, 2011), incurred on behalf of WTI, and regularization of trade debts of WTI amounting to US$ 1,000,000/- along with mark-up thereon, and (b) in the Company's EOGM dated October 03, 2014, the shareholders approved the provisioning of the mark-up amount of PKR 13,739,134/- (accrued over the WTI Expenses), from January 01, 2012 to October 03, 2014.
The Company has been diligently pursuing the recovery of the provisioned amounts (and the mark-up thereon) by engaging into discussions and negotiations with WTI however despite the Company's best efforts to secure the recovery of the provisioned amounts, the Company has not managed to effect the recovery, and harbors no expectations for recovering the same in the future.
Pursuant to framework of international financial reporting standards, an outstanding amount is to be written off from an entity's books of accounts once the management deems that such an amount is not recoverable.
Accordingly, approval of the shareholders is required to write-off (i) PKR 55,757,595/- (representing the WTI Expenses and the mark-up thereon up till October 03, 2014) (ii) US$ 1,000,000/- (representing the trade debts) and the mark-up thereon up till October 03, 2014 and (iii) the mark-up amount of PKR 36,184,497/- accrued over the WTI Expenses and trade debts, for the period between October 04, 2014 to January 23, 2017 under Section 208 of the Companies Ordinance, 1984.
D. WARID TELECOM GEORGIA LIMITED (“WGL”)
WGL and the Company are related parties by virtue of common majority shareholding. The Company incurred certain operational expenses on behalf of WGL for the provision of GSM services in Georgia.
Wateen Telecom Ltd. 121 Annual Report 2016
In the Company's EOGM dated December 31, 2011, the shareholders approved the regularization and provisioning of expenses, amounting to PKR 18,032,421/- (including mark-up of PKR 2,629,862/- up till December 31, 2011) incurred by the Company on behalf of WGL and, in the Company's EOGM dated October 03, 2014, the shareholders approved the provisioning of the mark-up amount accrued over the expenses incurred on behalf of WGL, for the period between January 01, 2012 to October 03, 2014.
The Company has been diligently pursuing the recovery of the provisioned amounts (and the mark-up thereon) by engaging into discussions and negotiations with Warid Telecom International LLC (the majority shareholder of WGL, as WGL is no longer operational) however despite the Company's best efforts to secure the recovery of the provisioned amounts, the Company has not managed to effect the recovery, and harbors no expectations for recovering the same in the future.
Pursuant to framework of international financial reporting standards, an outstanding amount is to be written off from an entity's books of accounts once the management deems that such an amount is not recoverable.
Accordingly, approval of the shareholders is required to write-off the expenses incurred on behalf of WGL (including mark-up up till January 23, 2017) of PKR 24,314,559/-, under Section 208 of the Companies Ordinance, 1984.
E. RASEEN TECHNOLOGIES (PRIVATE) LIMITED (“Raseen”)
Raseen and the Company are related parties by virtue of common majority shareholding.
In the Company's EOGM dated December 31, 2011, the shareholders approved the regularization and provisioning of expenses, amounting to PKR 18,482,509/-, (including mark-up of PKR 2,153,509/- up till December 31, 2011) incurred by the Company on behalf of Raseen, and in the Company's EOGM dated October 03, 2014, the shareholders approved the provisioning of the mark-up amount of PKR 6,247,542/- (accrued over the expenses incurred on behalf of Raseen) for the period between January 01, 2012 to October 03, 2014.
The Company has been diligently pursuing the recovery of the provisioned amounts (and the mark-up thereon) by engaging into discussions and negotiations with Raseen / WTI however despite the Company's best efforts to secure the recovery of the provisioned amounts, the Company has not managed to effect the recovery, and harbors no expectations for recovering the same in the future.
Pursuant to framework of international financial reporting standards, an outstanding amount is to be written off from an entity's books of accounts once the management deems that such an amount is not recoverable.
Accordingly, approval of the shareholders is required to write-off (i) the provisioned amount (including mark-up up till October 03, 2014) of PKR 24,730,051/- and (ii) the mark-up amount of PKR 4,020,969/- accrued over the provisioned amount, for the period between October 04, 2014 to January 23, 2017 under Section 208 of the Companies Ordinance, 1984.
F. AGREEMENT WITH SASH CONSTRUCTIONS / EX-DIRECTORS FOR LEASE – WARID TOWER PROJECT (“Sash Construction”)
Warid Telecom (Pvt.) Ltd ('Warid') and the Company entered into a Lease Agreement dated May 11, 2007 (“Lease Agreement”) with family members of a certain previous management (“Lessors”) for leasing office space in a building proposed to be constructed by Warid and the Company (“Warid Tower Project”). In terms of the Lease Agreement, the Company made payment of PKR 68,916,266/- ('WTP Outstanding Amount') as advance rent to Sash Construction and Warid.
Wateen Telecom Ltd. 122 Annual Report 2016
Subsequently the Warid Tower Project was suspended and the Company was embroiled in a dispute with the Lessors and Sash Construction, therefore recovery of the WTP Outstanding Amount was deemed doubtful by the Company. In EOGM dated December 31, 2011, the Company submitted before the shareholders, the motion to approve the provisioning of the WTP Outstanding Amount along with imputed markup amounting to PKR 11,766,895/-, which was duly granted by the shareholders in pursuance of requirements of Section 208 of the Companies Ordinance, 1984.
To date, the Company has been unable to secure the recovery of the provisioned amount, and has no expectations of recovering the same.
Pursuant to framework of international financial reporting standards, an outstanding amount is to be written off from an entity's books of accounts once the management deems that such an amount is not recoverable. Accordingly, the Company's management, following extensive efforts, has now determined that there is no possibility of recovering the WTP Outstanding Amount.
Accordingly, approval of the shareholders is required to write-off the provisioned amount up till June 30, 2016) of PKR 80,683,161/- (including imputed markup), under Section 208 of the Companies Ordinance, 1984.
G. AIRTEL BANGLADESH LIMITED (FORMERLY KNOWN AS WARID TELECOM INTERNATIONAL LIMITED, BANGLADESH) (“WBIL”)
WBIL and the Company were related parties by virtue of common shareholding up till 2013. The Company primarily incurred operational expenses on behalf of WBIL for meeting working capital requirements.
In the Company's EOGM dated December 31, 2011, the shareholders approved the regularization and provisioning of expenses, amounting to PKR 6,540,653/-, (“WTI Expenses”), (including mark-up of PKR 953,894/- up till December 31, 2011) incurred by the Company on behalf of WBIL.
The Company has been diligently pursuing the recovery of the provisioned amounts (and the mark-up thereon) by engaging into discussions and negotiations with WBIL, however despite the Company's best efforts to secure the recovery of the provisioned amounts, the Company has not managed to effect the recovery, and harbors no expectations for recovering the same in the future.
Pursuant to framework of international financial reporting standards, an outstanding amount is to be written off from an entity's books of accounts once the management deems that such an amount is not recoverable.
Accordingly, approval of the shareholders is required to write-off (i) the provisioned amount (including mark-up) of PKR 6,540,653/- and (ii) the mark-up amount of PKR 2,273,672/- accrued over the provisioned amount, for the period between October 04, 2014 to January 23, 2016, under Section 208 of the Companies Ordinance, 1984.
INTEREST OF DIRECTORS
In respect of the resolutions pertaining to the transactions entered into by the Company with its associated companies or undertakings, the following Directors are concerned or interested by virtue of them also being Directors and / or shareholders in the following companies:
Wateen Telecom Ltd. 123 Annual Report 2016
WARID TELECOM INTERNATIONAL LLC
WATEEN SOLUTIONS (PRIVATE) LIMITED
WATEEN MULTIMEDIA (PRIVATE) LIMITED
The abovementioned directors adequately disclosed their interests in accordance with Section 214 and Section 216 of the Companies Ordinance, 1984, and abstained from voting in any matter pertaining to the approval or regularization of the transactions with the above-mentioned associated companies.
Except for the above-mentioned interested directors, the Directors of the Company have no interest, whether directly or indirectly, in the transactions being approved in this AGM except to the extent of shareholding held by them in the Company. The shares and percentage of personal shareholdings by the Directors of the Company in proportion to the paid up capital of the Company are as under:
S. N O. N AME OF D IRECTOR AND SHAREHOLDER
1. H. H . Sheikh Nahayan Mabarak Al Nahayan
S. N O. N AME OF D IRECTOR
1. Rizwan Ali Tiwana
S. N O. N AME OF D IRECTOR
1. Rizwan Ali Tiwana
S. NO. NAME OF DIRECTORS NO. OF
SHARES
HELD
(%)
SHAREHOLDING
1. H. H. Sheikh Nahayan Mabarak Al Nahayan 1,000 0.000162
2. Adeel Khalid Bajwa 100 0.000002
3. Rizwan Ali Tiwana 100 0.000002
4. Abid Hasan 100 0.000002
5. Khwaja Ahmad Hosain 100 0.000002
Wateen Telecom Ltd. 124 Annual Report 2016
(EXHIBIT – A)Wateen Multimedia (Pvt) LimitedTerms and Conditions of Advances
1. Name of the Investee CompanyWateen Multimedia (Pvt) Limited
2. Purpose of advancesTo meet the working capital & capital expenditure requirements.
3. Details of advances already provided or written offNot Applicable
4. Limit approvedPKR 321 million
5. Outstanding balancePKR 209 million (Inclusive of markup) as at November 30, 2016
6. Rate of mark up3 Months KIBOR + 4% for the period from October 04, 2014 to January 23, 20171% above the borrowing cost of Wateen Telecom Limited from January 24, 2017
7. Details of collateral securityCorporate guarantee by the investee Company
8. Latest approval obtained from shareholdersIn an Extraordinary General Meeting of the Company held on October 03, 2014
9. TenorRenewal for the period of twelve months from January 24, 2017 to January 23, 2018, to comply with requirements of The Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012.
10. Financial Position of Investee Company – (YE June 30, 2015) Audited
PKR'm
Fixed Assets 2.3
Current Assets 62
Current Liabilities** 305
Revenue 150
EBITDA 34
Profit for the year 10
** This includes payable to associated Company Wateen Telecom Limited PKR 208 million
Wateen Telecom Ltd. 125 Annual Report 2016
Exhibit B – Loans to Associated CompanyADVANCES TO ASSOCIATED COMPANY (NEW)
REF NAME OF INVESTEE
COMPANY
AMOUNT OF THE LOAN/ADVANCES RATE OF MARK-UP TENOR PURPOSE OF
LOAN/ADVANCE/TRADE
DEBTS
DETAILS OF LOAN/ADVANCE ALREADY PROVIDED
FOR OR WRITTEN OFF TO THE SAID INVESTEE
COMPANY
(a) Wateen Multimedia (Pvt) Limited
PKR 50,000,000 1% above the borrowing cost
12 months from the date of Shareholder’s approval
To meet working capital/ Capex requirements
Not applicable
Wateen Telecom Ltd. 126 Annual Report 2016
FORM OF PROXYth ANNUAL GENERAL MEETING
TKH Associates (Pvt) Limited
(Acting as Share Registrar’s Office for Wateen Telecom Limited)nd
2 Floor, State Life Building No. 3, Dr. Ziauddin Ahmed Road, Karachi,Pakistan.
I/We ___________________________ of ___________________________ being member(s) of Wateen
Telecom Limited holding ___________________________ ordinary shares hereby appoint
___________________________ of ____________________________(the “Appointee”) and in case of failure
of the Appointee to act as my/our proxy, I/we hereby appoint ___________________________ of
___________________________ who is/are also member(s) of Wateen Telecom Limited as my/our proxy in
my/our absence to attend and vote for me/ us and on my/our behalf at the Annual General Meeting of the
Company to be held on Monday, January 23, 2017, at registered office of the Company, located at Main Walton Road, Opp. Bab-e-Pakistan, Walton Cantt, Lahore, Pakistan at 10:00 AM, and / or any
adjournment thereof.
As witness my/our hand/seal this ________ day of ______________________, 2017.
Witnesses
1.______________________
2.______________________
Signature on Five Rupees Revenue Stamp.
The signature should match with the
specimen registered with the Company
Wateen Telecom Ltd. 127 Annual Report 2016
7
Shareholder Folio No.
Or
CDC Participant I.D. No.
&
Sub Account No.
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