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Annual Report 2012 Global Connection

Independent Auditor Requests for Corporate Information Ernst & Young S.A.E. 2005A, Nile City Towers- South Tower Depository Bank Corniche El Nile- Ramlet Beaulac, 11221, Cairo, Bank of New York Mellon Investor Relations Ticker Symbol Mamdouh Abdel Wahab Egyptian Stock Exchange: GTHE.CA Head of Investor Relations London Stock Exchange: GLTD LI [email protected] +20 (2) 2461 5050/51 Contents

2 Financial Highlights and KPIs

ORASCOM TELECOM 6 Message from the Chairman and the CEO renamed to GLOBAL TELECOM 8 2012 Main Events The Company is pleased to announce that it has 10 Business Review changed its name to “Global Telecom Holding S.A.E.”. This gives effect to the decision of the shareholders at 26 Corporate Governance the Extraordinary General Assembly meeting held on 28 Investor Information November 12, 2012. 32 Corporate Social Responsibility

This name change has been effective since August 34 Financial Review 2013. Financial statements for the company for the year 2012 are published under the name Orascom Telecom. 102 Glossary of Terms Financial highlights

Countries & Strong performance 7 Brands across the board

“2012 proved to be an exceptional year for Global Telecom, in which we witnessed profitable organic growth in most of our operations.”

Jo Lunder, Chairman

Group Key Indicators

in US$ millions 2012 2011

SUBSCRIBERS REVENUE EBITDA Revenue 3,627 3,636

EBITDA 1,755 1,647

EBITDA margin (%) 48.4% 45.3%

Net income (205) 661

Earnings per share (0.04) 0.13

2011 2012 2011 2012 2011 2012 CAPEX 387 816

84m 3,627m 1,755m Net Debt 1 2,732 3,022

1. Net Debt is calculated as the sum of short term and long term debt, less cash and cash equivalents.

2 Financial Highlights Annual Report 2012 at a glance 7 Global Telecom serves a Countries & Brands Diverse population of 451 million with an markets average penetration of 56% 14,000 Employees worldwide 84m Subscribers 451m population Coverage

Central African Canada Republic

Population Population Population Population Population Population Population 34 million 37 million 5 million 13 million 10 million 190 million 161 million

Mobile penetration Mobile penetration Mobile penetration Mobile penetration Mobile penetration Mobile penetration Mobile penetration 72% 87% 20% 69% 22% 64% 60%

Subscribers Subscribers Subscribers Subscribers Subscribers Subscribers Subscribers 0.6 million 16.7 million 0.4 million 2.6 million 1.4 million 36.1 million 25.9 million

Market Position Market Position Market Position Market Position Market Position Market Position 1 1 2 1 1 2

4 At a glance Annual Report 2012 Message from the Chairman and CEO

“Organic EBITDA grew an impressive 7%, surpassing revenue growth, which was flat year-over-year.”

“2012 proved to be an exceptional “It was another exciting year for GTH with our highest level of efficiency and to be 3G-ready once the year for Global Telecom in which we operations achieving profitable growth for 2012. licenses are launched. witnessed profitable organic growth in Organic EBITDA grew an impressive 7%, surpassing most of our operations, with resilient revenue growth, which was flat year-over-year. In Bangladesh, the subscriber base increased 9%, market leadership in Algeria in spite while revenues grew 20% in 2012. Growth was driven of the ongoing restrictions, successful This organic EBITDA growth was driven by our broad by a higher level of VAS and data adoption, as well as cost saving initiatives in Pakistan operational excellence and cost savings initiatives, targeted start-up and reactivation promotions, offset and healthy subscribers’ growth leading to profitable growth. In Algeria, somewhat by the negative impact of the regulator momentum in Bangladesh despite the maintained its leadership position in the market, directives of disconnecting high value suspected regulatory changes. despite the continuous challenges faced by our Algerian VoIP customers on top line. EBITDA increased by subsidiary due to actions from a number of government 26% for the year, primarily as a result of savings on During my first year as Chairman, authorities. Revenues increased 6%, mainly driven commercial OPEX (lower SIM tax subsidy). we focused our efforts on increasing by growth in the subscriber base. EBITDA increased cash flows by driving profitable at a similar rate driven by top-line growth. Djezzy also Telecel Globe subscribers increased 42% primarily driven growth, operational excellence and celebrated its 10th anniversary in 2012. by a surge in the subscriber base in Zimbabwe as a capital efficiency across the board. result of increased penetration into rural areas, as well We have also increased our subscriber In Pakistan, the subscriber base grew 6%, despite as improved sales and distribution channel performance. base and our penetration in key the recently imposed regulatory restrictions on markets, while focusing on operational channel sales and on the back of good churn In Canada, our subscriber base increased 47% to efficiency. management. Revenues increased 8% for the year, approximately 590,000 in 2012, with the WIND driven by the increase in subscribers and the focus brand becoming one of the fastest growing mobile Moving forward, GTH is well on voice, data and VAS offerings. However this strong operators in the Canadian market, well positioned positioned to take advantage of data growth was negatively impacted during the fourth to become Canada’s fourth national operator. WIND growth opportunities in our operating quarter by the government enforced shutdown of Mobile continued its “Value Plus” strategy execution, markets as the Company is ready all cellular networks in major cities due to security adding primarily postpaid subscribers, while carefully to pursue 3G opportunities, while reasons. EBITDA increased 14%, reflecting the impact managing prepaid economics for both voice and mobile continuing to capture market positions.” of our profitable growth strategy and operational broadband customers.” efficiency initiatives coupled with revenue growth. Another exceptional Jo Lunder We also signed an agreement with leading vendors Ahmed Abou Doma Chairman for modernizing the nationwide mobile network with CEO year for Global Telecom Global Telecom Holding the latest state of the art technology to ensure the Global Telecom Holding

6 Message from the Chairman and CEO Annual Report 2012 2012 Main Events January April November Appointment of GTH’s new GTH submission of a formal GTH shareholders’ approval of Chairman, Mr. Jo Lunder Notice of Arbitration against Company name change, service Algeria agreement with VimpelCom Ltd. and GTH’s Board of Directors elected restructuring of WIND Mobile Canada Mr. Jo Lunder to the position of GTH submitted a formal Notice of Chairman, replacing Mr. Khaled Arbitration against the People’s In an EGM and OGM, the Company’s Bichara. Mr. Lunder will focus Democratic Republic of Algeria in shareholders approved changing the his efforts on the execution of respect of the unlawful actions Company’s name from “Orascom the operational strategy, which taken since 2008 by the Algerian Telecom Holding S.A.E.” to “Global will deliver profitable growth government against OTA. In the Telecom Holding S.A.E.” However, through operational excellence Notice of Arbitration, GTH asserted to date, the company is still awaiting and the efficient use of capital. Mr. that since 2008 its rights under the the approvals of the Egyptian Lunder has served as the CEO of Agreement on the Promotion and authorities to proceed with the VimpelCom Ltd. since July 2011. Reciprocal Protection of Investments name change and related actions between Egypt and Algeria have including new ticker symbols on the Conclusion of OTMT’s demerger been violated by actions taken by Egyptian Stock Exchange and the the Algerian government against London Stock Exchange. In addition, Trading resumed on GTH’s shares OTA, including the court judgment shareholders approved a mutual and GDRs post conclusion of the against OTA and its senior executive service agreement between the demerger of Orascom Telecom team, as well as the fines of USD 1.3 Company and VimpelCom Ltd., with Media and Technology Holding billion. the purpose of creating synergies and S.A.E. (“OTMT”) from GTH after operational efficiencies among the the Egyptian Financial Supervisory Group entities and managing costs. Authority (“EFSA”) granted its Furthermore, shareholders approved approval to conclude the demerger, May the restructuring plans for the as part of the merger agreement Confirmation of the Algerian Company’s investments in Globalive between VimpelCom Ltd. and WIND Court of Appeal on the judgment Investment Holding Corp. (“GIHC”), Telecom SPA. by the Algerian Court of first the parent company of WIND Canada 2012 instance and Globalive Canada, which included the restructuring of GTH’s shareholder The Algerian Court of Appeal March loans to the GIHC group and the Main Events confirmed the judgment handed cancellation of accrued interest. OTA appeal to the judgment down by the Algerian Court against by the Algerian Court of first OTA. The criminal custodial sentence Global Telecom signs an agreement instance ordered against a member of the with Huawei and Alcatel-Lucent for senior executive team is suspended; Orascom Telecom Algeria “OTA” modernizing the nationwide mobile however, OTA was ordered to pay appealed to the Algerian Court of network of , its Pakistani the whole amount of the fines. The first instance’s judgment against subsidiary lodging of the appeal provisionally GTH’s subsidiary in Algeria “OTA” suspended the judgment. The Company signed a five-year and a member of OTA’s team in agreement with Huawei and Alcatel- connection with the so-called “Bank Lucent to provide the design, purchase, of Algeria” case. October deployment, and maintenance of next- generation mobile network equipment The judgment consists of fines of Strategic review and valuation and supporting services from two of DZD 99 billion (approximately USD assessment of Sub-Saharan the world’s leading global providers. 1.3 billion), including a criminal operations With this investment, Mobilink expects sentence against a member of not only to further enhance the data OTA’s senior executive team. The GTH performed a strategic review and voice services it provides to its judgment relates to a previously and valuation assessment of its customers throughout Pakistan, but disclosed claim brought in 2010 by operations in Burundi, Zimbabwe also to pave the way for introducing 3G the Algerian authorities alleging and to services as soon as licenses are issued breaches of foreign exchange identify, examine and consider a in Pakistan. regulations. The lodging of the range of strategic alternatives, appeal provisionally suspended the including but not limited to a sale. Appointment of ’s new CEO judgment. Ziad Shatara was appointed to the position of Chief Executive Officer (“CEO”) of banglalink, reporting to GTH Group CEO, Ahmed Abou Doma.

8 2012 Main Events Annual Report 2012 Business review

The Year in Review

Algeria Our Brand OTA operates a GSM network in Algeria and provides a range of Company Strategy prepaid and postpaid products encompassing voice, data and Orascom Telecom Algeria S.p.A.’s (“OTA” or “the Company”) main focus during 2012 was on multimedia, using the corporate 37m maintaining the Company’s value through key strategic pillars, despite the extremely challenging brand “Orascom Telecom Algeria” Population operating conditions imposed by government authorities. OTA has focused on value segmentation, and the dual commercial brands, distribution control, operational excellence, new revenue streams, and asset monetization, control of “Djezzy” and “Allo”. OTA was regulatory risks, retaining key staff members and introducing new talent development programs. awarded the second GSM license in Algeria in 2001 and launched its operations in February 2002.

OTA commenced its operations under the brand “Djezzy” and introduced a second prepaid brand Population “Allo” in August 2004. Despite Mobile having launched its GSM operation Regulatory environment 37 million penetration approximately three years after the Value Added Services OTA continues to face stringent OTA continued to distinguish itself launch by the incumbent, Algerian conditions imposed by the Algerian in the marketplace by launching 87% Mobile Network (“AMN” conducting regulator (ARPT) new products and improving the business under the brand name regarding promotions and products. performance of current top value “Mobilis”), OTA was able to rapidly The government has announced the added service. OTA distinguished grow into Algeria’s leading and launch of a 3G tender process, in itself in the marketplace through preferred which OTA intends to bid. During the launch of “Scoop Foot”, operator. 4Q12, OTA obtained the regulator´s information services regarding approval to introduce a new SIM the three Algerian soccer clubs In 2012, OTA celebrated its tenth price, which will allow it to be more currently sponsored by OTA (MCA, anniversary through extensive competitive. USMA and ESS). In addition, several radio, press, outdoor and TV handset and tablet related outdoor campaigns. Djezzy also received campaigns were launched during a prodigy award for the best the year, the last one being around audiovisual content in Algeria in the Leveraging Revenue the Samsung Galaxy Tab. year 2012. Streams Voice Opportunities for the Future Market Position Market share OTA launched promotions during OTA will focus its efforts on Subscribers During 2012, OTA maintained its the year with a strategic focus on maintaining Djezzy’s market 1 market leadership position despite subscriber acquisitions, without position and taking advantage 16.7 million the ongoing challenges due to creating peaks on the normal of the tremendous data growth unfair actions from a number network utilization and with efforts potential in Algeria, provided the of government authorities. In focused on both postpaid and governmental restrictions are lifted. particular, the bank of Algeria prepaid. On the postpaid side, Additionally, OTA will continue to Operational Data issued an unfounded decision Financial Data promotions focused on Djezzy adopt a balanced value pricing during 2Q10, instructing banks not card acquisitions by offering a strategy in order to achieve stable FY 2011 FY 2012 Change 4Q11 4Q12 Change to process any overseas foreign 1 50% discount on the SIM price. ARPU levels despite high market Revenues (USD th.) 1,859,804 1,841,486 (1.0%) Subscribers 16,172,625 16,711,502 3.3% currency transfers for OTA, which In prepaid, OTA launched a 15 growth. With regards to customer 1&2 has impacted OTA’s network and Revenues (DZD bln.) 135.6 143.3 5.7% Market Share 55.5% 54.0% (2.7%) day promotion offering a 50% service, OTA plans to enhance 1&3 reputation. Despite this, OTA was EBITDA (USD th.) 1,050,663 1,093,396 4.1% ARPU (USD) 9.3 9.2 (0.9%) recharge bonus. Moving forward, loyalty, while improving quality able to maintain a 54% market ARPU (DZD) 1&3 698 733 5.1% OTA’s subscriber growth is and control over the distribution EBITDA (DZD bln.) 76.6 85.2 8.6% share, controlling the largest 1&3 expected to witness slowdowns, channel. OTA intends to modernize EBITDA Margin 56.5% 59.4% 2.9% MOU 284 270 (4.8%) distribution network with 19,000 1&3 and the strategic focus may be the network once the ban on foreign Capex (USD th.) 40,010 54,763 36.9% Churn 6.5% 7.9% 22.6% Points Of Sale, offering SIM cards shifted towards maintaining or currency transfer is lifted. across all 48 provinces. OTA even improving ARPU, which ended the year with 16.7 million 1. As announced on July 1 2013, during an internal investigation with regards to Djezzy’s active subscribers, management found a technical bug that overstated historically continued to decline Djezzy’s subscriber base by 1.4 million customers. The subscribers’ base comparative figures were adjusted accordingly. This event does not impact historical subscribers. reported revenues or EBITDA, but positively affect MOU and ARPU. under intensifying price competition 2. Market share is calculated according to our data warehouse. 3. Figures for three month period. between the three major operators.

10 Business review - Algeria Annual Report 2012

Business review

Leveraging Revenue Pakistan Streams Voice The Voice segment, which is the Company Strategy major source of revenue for all the Pakistan Mobile Company Limited (PMCL) operates under the brand “Mobilink” and has established operators, remained an area of itself as a market leader amongst Pakistan’s GSM network operators, providing prepaid and postpaid intense competition. With multiple voice and data services to individuals and corporate clients across the country. Mobilink is focused on products and promotions, Mobilink retaining and strengthening its market share to achieve revenue growth, whilst continuing to reduce not only improved customers’ operational costs. perception, but also maintained its competitive portfolio. In 2012, 36.1m Mobilink strengthened its portfolio of voice offers to increase customer SUBSCRIBERS engagement and acquisitions by launching multiple nationwide and location based offers. Mobile penetration The Year in Review maintained its focus on voice, data, A ‘Bonus on Usage’ promotion was Population VAS, and customer acquisition launched offering bonus minutes 64% Our Brand offers along with brand building and SMS on a daily basis after 190 million PMCL was founded in 1990 and activities. By the end of 2012, surpassing the daily threshold. began operations in August, 1994. Mobilink served over 36 million Subscriber acquisition and Since that time, the Company’s customers, retaining its market reactivation promotions, offering flagship brand, Mobilink, has leadership in a five-player market hybrid products as incentive, established itself as a market leader with a 29.6% share. continued during the quarter to amongst Pakistan’s GSM network grow the subscriber base. operators, providing prepaid and Regulatory environment postpaid voice and data services The Pakistan Telecommunication Value Added Services to individuals and corporate clients Authority (PTA) serves as the Mobilink has continued to exhibit across Pakistan. Mobilink’s brand licensing and regulatory authority significant growth in the VAS portfolio includes Jazz and Jazba in Pakistan. During the first part segment, introducing several new for prepaid customers and Indigo of the year, major regulatory features and services during 2012. for postpaid customers, whereas developments took place, including New offerings include Sports Portal, broadband services are marketed the limitation on the number of SIM Youth Portal, Job Alerts Ring Back under the brand name of Infinity. cards to only five against each CNIC Tone Copy Feature, Mobitunes, and Jazz has established itself as a mass (national identity card), alongside Song Dedications, along with Other market brand, offering multiple the implementation of a new regime services. Entertainment services, packages, specially tailored to meet for registering and activating new such as Mobitunes Star, continued Market Position to gain popularity among the Subscribers the demands of a diverse customer SIM cards. 1 base. In 2012, Mobilink continued youth segment and showed high 36.1 million to appeal to the Pakistani youth, During the latter part of the year, engagement. upgrading Jazba from a package the Pakistani telecom market faced on Mobilink Jazz to its own brand. strict regulatory guidelines on Opportunities for the Future Jazba is endorsed by Atif Aslam, issues pertaining to the security PMCL’s goal going forward is to Financial Data Operational Data Pakistan’s biggest pop star. Based situation of the country. Upon increase voice revenues through on this demographics’ need for government request for security leveraging the large subscriber FY 2011 FY 2012 Change 4Q11 4Q12 Change mobile , Jazba promises to reasons, all cellular networks in base in Pakistan. Additionally, given the low internet penetration Revenues (USD th.) 1,133,704 1,132,917 (0.1%) Subscribers 1 34,213,552 36,141,241 5.6% be ‘the best connection for the data major cities were shut down a generation’. few times during the Eid holiday level, particularly though 3G, there Revenues (PKR bln.) 97.9 105.8 8.1% Market Share 1 30.7% 29.6% (0.8%) in October, Ashura and Other is significant potential to increase 2 EBITDA (USD th.) 402,406 489,300 21.6% ARPU (USD) 2.7 2.5 (7.4%) Market share occasions in November and PMCL’s mobile data presence. In 2 EBITDA (PKR bln.) 34.7 45% 11.0% ARPU (PKR) 235 243 3.4% During 2012, the cellular industry December, resulting in revenue order to meet these goals and get EBITDA Margin 35.5% 43.2% 7.7% MOU 2 209 215 2.9% remained very competitive in loss for all cellular operators. the most out of the Company’s Capex (USD th.) 261,259 175,604 32.8% Churn 2 7.2% 5.2% (2%) Pakistan, with all operators Furthermore, new regulatory resources PMCL will work to introducing aggressive customer guidelines were issued on retail modernize its network and increase infrastructure sharing. 1. Market share, as announced by the Regulator in Pakistan is based on information disclosed by the Other operators which use different subscriber recognition policies. engagement campaigns with heavy channel sales. Market share as at December 2012, as disclosed by PTA. advertising support. Mobilink 2. Figures for three month period.

12 Business review - Pakistan Annual Report 2012 Business review

The Year in Review in the total subscribers of the services for business customers, market relative to earlier in the namely premium field force locator, Our Brand year. Moreover, the regulator has corporate SMS broadcast, and mobile Bangladesh Banglalink provides its services instructed all MNOs to disconnect all advertising to name a few examples. under two brand names: “banglalink bilateral connectivity and exchange Digital Communications Limited” traffic through ICXs, which has led In 2012, banglalink witnessed Company Strategy and “icon”. banglalink’s prepaid to increased interconnection costs. phenomenal growth in its non- brand, “banglalink desh”, is The government of Bangladesh is in voice revenues especially in the Banglalink Digital Communications Limited is a GSM telecommunications operator in Bangladesh considered the best prepaid the process of developing guidelines messaging (A2P) and Data (GPRS/ providing a wide range of voice and data services. banglalink’s marketing strategy focuses on package in the country with and awarding licenses for 3G. EDGE) business. The introduction targeting different consumer segments with specially designed products and services that are tailored innovative tariff and value for of the MT charging model allowed to the needs of those segments. banglalink aggressively enhanced its network since inception and has money features “banglalink subscribers to enjoy alert and consistently increased its infrastructure to build an efficient and dependable network. business”, “banglalink SME” and Leveraging Revenue notification services. GPRS/EDGE “banglalink PCO” cater to the needs Streams revenues more than doubled in of the business segment, including 2012 driven by successful marketing the thriving SME sector where Voice campaigns and without having banglalink has been the pioneer banglalink continued to launch any major network enhancement in the country. The premium attractive services and offers or investments during the year. brand ‘icon’ has already created to the market, including loyalty banglalink created a unique Population Mobile awareness and acceptability within programs, bonuses on usage, and positioning called “internet for penetration its target market. a reactivation promotion offering everyone” to build on its core 161 million bonus on recharge and appealing messaging of “making a difference 60% Market share tariffs. Under the flagship brand in people’s lives”. Additionally In Bangladesh, banglalink is one “banglalink desh”, prepaid products in 2012, banglalink successfully of the fastest growing operators have been introduced with new acquired key business accounts and with a strong focus on increasing features, while maintaining a value maintained a high retention level value. bangalink’s brand places retention strategy. Features include through its B2B VAS products, given second in a six-player market with a flat tariff, one second pulse and that attractive tariffs were no longer an innovative brand positioning long call benefit and FnF uses to a differentiator. among the youth segment. address different usage needs of banglalink continues to tap into the its 24.5 million prepaid consumers. During the year, banglalink also mobile data opportunity, providing The new offers were introduced introduced Inbound Roaming mobile financial services and for the prepaid segment, allowing Management System which helped Other value added services that more usage during the day, which to reduce signaling costs and serve continually offer new applications helped increase revenues without guest roamers better. The solution to customers. As of December increasing pick traffic. is helping to serve more guest 2012, banglalink served more than roamers and their retention. 25.8 million subscribers and had The postpaid segment continued a 26.8% market share of total to bring in new subscribers Opportunities for the Future Market Position mobile subscribers in Bangladesh. aggressively in 2012. “banglalink Looking ahead, we will work to Subscribers Growth over the past year has been inspire”, the product aimed unlock mass-market value potential 2 fuelled by innovative products and at professionals, had a new by leveraging Bangladesh’s large 25.9 million services, improvement of network segment added in 2012 – Finance population base. We will do this by quality, dedicated customer care, Professionals. A unique appealing to potential customers an extensive distribution network campaign was launched for through improvements in high-end, across the country and strong banglalink inspire and banglalink enterprise, and SME segments, as brand loyalty. business, which allowed both new well as by aggressive acquisition Financial Data Operational Data and existing customers to easily drive in mass market. In data, Regulatory environment pay for exclusive handset bundles we will tap into mobile data FY 2011 FY 2012 Change 4Q11 4Q12 Change Towards the end of 2012, through monthly installments. opportunities, given particularly low Revenues (USD th.) 511,291 554,301 8.4% Subscribers 1 23,753,552 25,882,698 9.0% the regulator enforced the penetration rates in Bangladesh, Revenues (BDT bln.) 37.9 45.4 19.8% Market Share 1 27.9% 26.8% (1.1%) implementation of a 10 second Value Added Services and we will focus on improving EBITDA (USD th.) 169,630 192,120 13.3% ARPU (USD) 2 1.8 1.7 (5.6%) pulse for all packages, including banglalink subscribers enjoy a wide quality by modernizing our network Interactive Voice Response (IVR) range of innovative and superior and increasing infrastructure EBITDA (BDT bln.) 12.6 15.7 24.6% ARPU (BDT) 2 140 138 (1.5%) services from September 2012 services, including caller ring-back sharing. Furthermore, we will 33.2% 34.7% 1.5% 2 207 191 (7.9%) EBITDA Margin MOU and a post-activation sales process tone, music station, voice portal, expand on our innovation in mobile 2 Capex (USD th.) 408,746 119,161 (70.8%) Churn 5.4% 7.4% 2% from October 2012 stopping sales voice chat, news alerts, and other integrated content in the fields of of pre-activated SIMs. The post services. In recent years, banglalink education, agriculture, healthcare 1. Market share, as announced by the Regulator in Bangladesh is based on information disclosed by the Other operators which use different sales activation process has slowed has been leading the industry and financial markets. subscriber recognition policies. 2. Figures for three month period. industry sales, resulting in a drop in offering new and enhanced

14 Business review - Bangladesh Annual Report 2012 Business review

The Year in Review Both brands stand for fun, youth and firmly believes that the future and friendliness, and both score belongs to the community as a Telecel Globe Our Brand the highest in their markets in whole. leo is now firmly entrenched Telecel Globe operates in Sub- terms of visibility and likability. in Burundi as the most preferred Saharan Africa through two brands: The Telecel brand identity is known telecommunications brand.. The Company Strategy Telecel in the Central African for trust, bonding, innovation and brand exemplifies social mobility, Telecel Globe’s overall strategy is to offer smart choices based on consumer insights and life situations Republic, Telecel CAR (TCAR) accessibility. The leo brand on success, and empowerment to to create the best value for subscribers through an innovative product offering, all while maintaining and Zimbabwe (TZIM), and leo in the other hand is a celebration of a variety of segments including simplicity in communications and customer engagement. Telecel Globe is committed to providing its Burundi (leo Burundi). the present moment. Today leo corporate, SME, mass market and customers with high-tech mobile phone products and services at an affordable cost. The red and white logo of Telecel is is an active and dynamic brand, the various sub segments such as very simple, with a plain red circle a brand that pushes industry the younger generation and their The Company currently serves a growing customer base and constantly demonstrates its core values and a small “t” inside and is very standards with innovative and telecommunication preferences, of simplicity, value for money. During 2012, Telecel Global focused its efforts on deriving profitability appealing to both cultures (Central efficient technology and product including social networking, games, by reaching critical mass in the underlying markets with very low penetration rates, as well as African Republic and Zimbabwe). offerings. leo is also a community, and promotions. maintaining value-driven pricing and capturing the data opportunity in the market.

Market Position Subscribers 1 4.5 million

Po28mpulation

Mobile Market share penetration Population The mobile industry in Zimbabwe 22% Burundi 37% 28 million has grown rapidly over the past couple of years. Subscriber Central African numbers have increased from fewer 20% Republic than 2 million at the end of 2008 Market to approximately 8.7 million at the Penetration 69% Zimbabwe Financial Data end of 2012. Unfulfilled demand, initially for voice and increasingly 4Q11 4Q12 Change for data services, is one of the Revenues (USD th.) 93,683 1 90,732 (3.2%) main drivers of growth for mobile 1.4 Burundi communications in Zimbabwe. At EBITDA (USD th.) 7,776 1 33,311 n.m. Central African end of 2012, TZIM held the second EBITDA Margin 8.3% 36.7% 342.3% 0.4 Republic position in the market with 29.8% Subscribers Capex (th.) 25,000 18,489 (26.5%) of market share, serving 2.6 million in millions 2.6 Zimbabwe 1. As per IFRS, revenues for FY2011 have not been restated to reflect the disposal of Powercom LTd. customers.

16 Business review - Telecel Globe Annual Report 2012 Business review

100/182 (1997). The Ministry of WIMAX. Telecel Zimbabwe was the to further stimulate the SMS usage Transport, Postal Services and first to offer 3G services, followed and revenues. Likewise, in Burundi, Telecommunications (“MoPT”) by Leo Burundi. Telecel Central Telecel was the first to launch RBT has authority over the sector and Africa currently provides mobile and advanced credit services in carries out its directives through the Internet using GPRS / EDGE but the market. During 2012, Telecel Agence de Régulation et de Contrôle will soon be joining its African sister witnessed the launch of our Mobile des Télécom (“ARCT”), which is companies offering 3G. Financial Service in Burundi. directly attached to the President’s office. The ARCT is currently 3G has proven to be extremely Opportunities for performing a review of the sector popular. Telecel Zimbabwe and Leo the Future and a new telecommunication law Burundi are seeing strong demand is being drafted. The law must be for their 3G offerings. During The opportunities for the Telecel approved by the council of ministers 2012, GTH continued to focus on brand are tremendous. Telecel and the parliament, and expected to capturing the data opportunity in will focus its efforts on taking be implemented during 2013. its markets. In Zimbabwe, GTH advantage of very low penetration revamped the pricing of our data levels in rural markets, while Leveraging Revenue bundles, as well as launching select capitalizing on its market leadership Streams price discount promotions to further in both voice and data. Telecel increase the uptake of our data will achieve this by increasing the Voice bundles and dongles. impact and differentiation of brand During 2012, Telecel Globe communications and advertising, continued to focus on acquisition On the VAS front, the activity deploying low capital-intensive sites through lowering entry barriers, continued to distinguish itself as suitable for rural environments, such as SIM price, and introducing well by launching new innovative and offering relevant products and lower denomination recharges products. In Zimbabwe, Telecel was services. In the near-term, Telecel 1 through further pushing E-top the first in the market to launch will maintain value-driven pricing Market Position up services. The Company also RBT (Ring Back Tone) and advanced to accelerate the profitable growth continued to accelerate profitable credit services. Additionally, Telecel of the voice market without diluting growth of the voice market without launched an SMS Trivia Mega Promo ARPU of existing base. diluting average revenue per user (ARPU) of our existing base. In Zimbabwe, Telecel Globe launched a bonus on recharge promotion The Central African Republic mobile undisputed market dominance, • Managing the National Numbering on higher denomination recharge telecommunications industry has driving mobile penetration in rural Plan for all telecommunication cards as well as conducted a rapidly grown over the past three to areas and maintaining strong services; couple of micro-segmented BTL four years as a result of increased leadership in the capital. • Monitoring and enforcing promotions to stimulate the usage coverage and a drop in the price of performance and delivery of during off-peak hours. In Burundi, handsets. While Telecel Globe sees Regulatory environment good quality service by licensed Telecel Globe conducted an ATL healthy demand in urban centers, Zimbabwe’s fixed line market operators; and usage stimulation promotion where increased growth in the usage of and licensing regime was • Establishing technical standards customers were awarded a bonus of telecommunication services in rural liberalised under the Postal and specifications for all double their weekday usage during areas has been largely hampered and Telecommunications Act telecommunications equipment in the weekend. In CAR, Telecel Globe by the limited purchasing power (“PATA”). Since 2009, the Ministry Zimbabwe. revamped the pricing of its daily of the population at large and the of Information Communication on-net bundle as well as introduced poor logistical infrastructure in the Technology (“MICT”) has been In CAR, the telecommunications a new on-net daily at a higher price country. At end of 2012, TCAR given the responsibility of sector which is governed by the point offering more benefits. continued to lead the market with a overseeing the policy relating to Telecommunications Law n07020 market share of 43.7%. the development of the ICT sector. and n07021 passed on 28 December Pursuant to the PATA, the Postal 2007, has been regulated by the Value Added Services At the end of 2012, leo Burundi was and Telecommunications Regulatory Agence Chargée de la Régulation Global Telecom’s three African the market leader with 61% market Authority (“POTRAZ”) operates des Télécommunications (“ART”) operators are key players in Mobile share in a highly competitive, five- as an independent regulator and since April 2004. the efforts to make mobile data penetration player market, capturing most of licensing body on behalf of the services available to the masses in the high-value subscribers and MICT. POTRAZ focuses on: Burundi’s telecoms market is the countries where GTH operates. corporate segment with a network • Technical evaluation of all governed by the Ordonnance In the Central African Republic and covering over 60% of the Burundi telecommunications license Ministérielle No. 199 (1999) Burundi, OTC was the first operator 37% population. Leo is known for its applications; and the Décret Présidentiel No. to offer high speed Internet using

18 Business review - Telecel Globe Annual Report 2012 Business review Canada 0.6m Company Strategy Subscribers

WIND Mobile continued to deliver on its “Value Plus” strategy during the year under review, adding primarily postpaid subscribers, while carefully managing prepaid economics for both phone and mobile broadband customers. WIND Mobile offers a variety of plans for phone, smartphone and mobile broadband users with both postpaid and prepaid options (including pay-as-you-go service for purely prepaid customers).

Monthly recurring plans target smartphone customers who are looking for value-rich, all inclusive plans, non-restricted usage and no fixed-term contracts, offering unlimited voice, text and data services. WIND also addresses the prepaid pay-as-you-go market with “Pay Your Way” prepaid service, as well as the multicultural new Canadian segment by offering attractive international long distance pricing. A number of add-ons are available for subscription including voicemail, premium data, US long distance, reduced international calling rates & texting (World Saver), and preferred roaming rates. The continuing success of the “Better Together Savings Program” led to a growing number of multiline activations and an increased number of referrals. Simplicity and transparency are the cornerstones of WIND Mobile’s value proposition, which has proven to be successful and a long standing differentiator in the Canadian market.

The Year in Review Regulatory environment data concept was introduced Several governmental decisions as an upgrade to our unlimited Our Brand occurred, including the decision smartphone data offering and Mobile WIND Mobile has distinguished to lift restrictions (under certain was met with enthusiasm by our penetration itself from struggling new entrants conditions) on non-Canadian customer base. 72% in Canada and is now considered ownership and control of one of the fastest growing mobile telecommunications companies Value Added Services operators in the Canadian market. operating in Canada. Furthermore, WIND Mobile increased its focus WIND Mobile continued to the government issued policy on international long distance strengthen brand awareness, regarding the upcoming auction calling and international roaming consideration and brand equity of 700MHz spectrum, which was addressing the important in Canada throughout 2012, as it updated during 2013 and the multicultural segments in our outgrew Other new entrants that decision on spectrum transfer rules markets. continued to stall at far lower levels. was announced. Opportunities for the Future Market share Additionally, the Code of The new CRTC mandated ‘Wireless WIND Mobile continued to grow Conduct was established in the first Code of Conduct’ is expected to increasing the subscriber base by 47% half of the year, implying new rules have great impact on the Canadian to 590,438 active customers by the for contract terms, subsidies, and competitive landscape. This could end of 2012. WIND Mobile embarked wireless services, which is expected potentially decrease subsidy levels on a tactical current network to be in effect during taking effect by incumbent players that have Subscribers Population densification and expansion program, in 4Q13. traditionally relied on the three- which grew the coverage footprint to year fixed term contracts with high 0.6 million 34 million 14 million Canadians and addressed subsidies, while simultaneously customer highlighted problematic Leveraging Revenue influencing the high-end areas. WIND Mobile completed an Streams smartphone market. In the long Operational Data additional 231 sites across the country term, a more competitive landscape and launched service in regions, Data is expected to emerge in Canada 2011 2012 Change including Windsor, Kingston, Barrie, WIND Mobile continued to provide with two-year contracts, contract- Subscribers 402,662 590.438 46.6% Woodstock, and Peterborough. WIND’s a variety of data services catering free offerings and more outright

ARPU (USD) 1 26.0 28.4 9% network improvement program was to significant smartphone demand handset purchases leading to more also focused on upgrading sites to and niche mobile broadband customers available for acquisition. ARPU (CAD) 1 26.4 28.1 6.4% support HSPA+. services. During 2012, a premium “1. Figures for three month period

20 Business review - Canada Annual Report 2012 Corporate Governance

Board of Directors Corporate The Board has the responsibility of working to enhance the value of the Company in the interest of the Company and its shareholders. In summary, the Board

Governance • Is engaged in active and continuous strategic • Monitors and approves the Company’s financial planning and approves corporate strategies, including reporting and dividend policies; the approval of transactions relating to acquisitions The Company is committed to achieving and maintaining the highest and divestments, and capital expenditure above • Appoints and has the authority to remove the Chief delegated authority limits; Executive Officer and approves the recommendations standards of corporate governance. The Company considers effective of Human Resources; • Reviews and approves the corporate plan for the corporate governance essential to enhancing shareholder value and forthcoming year and following two years, including • Ratifies the appointment and has the authority to protecting stakeholder interests. the capital expenditure and operating budget, and remove the Chief Financial Officer and Group General reviews performance against strategic objectives; Counsel and appoints the Company Corporate Secretary; and oversees succession planning for the Accordingly, the Board attributes a high priority to identifying and implementing appropriate corporate Assesses business opportunities and risks on an Chief Executive Officer and senior management. governance practices to ensure transparency, accountability and effective internal controls. The Board • ongoing basis and oversees the Company’s control continued to further its commitment to corporate governance through reviewing existing processes and accountability systems; and, where appropriate, developing new ones. The Company complies with the practices enunciated in the Egypt Code of Corporate Governance and will strive to comply with these and Other appropriate standers and governance guidelines. The Company’s key corporate governance principles and practices The Chairman and the Chief Executive Officer establish meeting agendas to ensure adequate coverage of key are as follows: issues during the year. In addition workshops and strategy meetings take place. Executives and Other senior people regularly attend Board meetings and are also available to be contacted by Directors between meetings.

3,627m REVENUE

The General Assembly The General Assembly (“GA”) of the Company is the ultimate governing body of the Company. In summary, the (“GA”):

• Includes all the shareholders of the Company; • The responsibilities of the GA are based on the • Takes its decision by voting among shares laws and Company statues; represented in the meeting. The voting rule is: • It appoints the Board, approves the financial 1 share = 1 vote for all shares indifferently; results, appoints the external auditors, and • Holds at least one ordinary meeting per year approves dividends distribution. and may have an extra-ordinary meeting as needed;

22 Corporate Governance Annual Report 2012 Corporate Governance Composition of the Board of Directors The Board Member classifications are based on the Egyptian Corporate Governance code. The latter did not specify the criteria for independent directors that would allow the Company to benchmark against, yet in our opinion and based on internationally recognized best practices, a number of our directors would qualify as independent directors bringing to the company the highest possible standing from both a personal and professional standpoint.

Chairman Committees The Committee System of the Company is one of the most important tools for the management and the operational integration of the Company. It has recently been revised to:

• Monitor the implementation of strategies and the the various functions involved in the technological, development of plans and results. business and support processes. • Ensure the overall coordination of business actions • Support the integrated development of the innovation Jo Lunder and the management of the relative cross-over processes of the Company. business issues. • In particular, the new Committee System of the • Build up the necessary operating synergies between Company includes: Board Members Board Committees Executive Committee Audit Committee Remuneration Committee The objective of the Executive The objective of the Audit The objective of the Remuneration Committee is to review and, where Committee is to assist the Board in Committee is to ensure that the appropriate, authorize corporate fulfilling its oversight responsibilities Company has a formal process Ahmed Khalid Henk action with respect to most matters by reviewing (i) proposed financial of considering management and Abuo Doma Elliacy Van Dalen concerning the Company’s interests, plans; (ii) the financial information directors remuneration that is, (Group CEO) (Executive- (Non-Executive - strategy and management of its provided to shareholders and executive directors should play Board Member) Board Member) business and subsidiaries during Others; (iii) systems of internal no part in decisions on their own intervals between meetings of the controls which management and the remuneration, there should be an Board of Directors, and generally Board of Directors have established; alignment of the remuneration perform such duties as may be and (iv) the audit process, including schemes and the performance directed by the Board of Directors both internal and external audits. objectives of the Company, from time to time. and the remuneration schemes The Audit Committee interacts should attract and retain talented Investment Committee directly with the independent individuals. The objective of the Investment auditor to ensure the independent Committee is to assist the Board auditor is ultimate accountability to The Company and its subsidiaries Jeffrey Alex Dr. Mohamed Elena in reviewing the Company’s the Board and the Committee, as have taken a number of steps Mc Ghie Shalaby Shaker Shmatova investment policies, strategies, representatives of the shareholders, in recent years and months to (Non-Executive- (Non-Executive- (Non-Executive- (Non-Executive- transactions and performance, and is directly responsible for employ transparent, quality Board Member) Board Member) Board Member) Board Member) and in overseeing the Company’s the appointment, compensation driven Corporate Governance. capital and financial resources. and oversight of the independent The Company understands that The Committee has resources and auditor. these structures and an attention Secretary to authority appropriate to discharge to values are the cornerstone of the Board its responsibilities, including the a successful, strategic application authority to retain experts or of international standards. This consultants. trend will persist as the Company continues to set the bar high in all areas of compliance.

David Dobbie

24 Corporate Governance Annual Report 2012 investor Information Investor Information

Global Telecom’s Executive Management and Investor Relations As at December 31st 2012, the company’s issued capital amounted to EGP 3,043 million divided into 5,245,690,620 shares each having a par value of EGP 0.58, and an authorized capital of EGP 14,000 department maintain an open dialogue with all capital market million. No dividends were distributed during 2012. The company’s free float stood at 48.08%, while participants utilizing various communication tools. the balance is held by its majority shareholder, VimpelCom Ltd., indirectly through Weather Capital S.P.1 and Weather Capital S.A.R.L., collectively owning 51.92%.

The company retains a high level of disclosure for all stakeholders through interim, quarterly and annual reports, an up to date corporate website, and electronic news releases to ensure that all stakeholders are always up to date with the latest development and changes. The company’s consolidated financial statements are prepared and issued in accordance with International Financial Reporting Standards (IFRS) and the Egyptian Accounting Standards (EAS).

Trading Information The company is dually listed with its primary listing on the mainboard of the Egyptian Stock Exchange (The EGX), and a secondary listing in the form of Global Depositary Receipts’ (GDRs) traded on the London Stock Exchange (The LSE).

Share Information

Listing Cairo, Egypt

Number of Shares Listed 5,245,690,620

Currency Egyptian Pound

ISIN Code EGS74081C018 Ticker Code (Bloomberg) 2 GTHE:EY GDRs price performance in comparison to FTSE 1001 Ticker Code (Reuters) 2 GTHA:CA GLTD LI: USD 1.800 GLTD LI: USD 3.138 01/01/2012 - 31/12/2012 FTSE100: 5572.28 FTSE100: 5897.81 120%

GDRs Information 1 100%

80% +74% GLTD Listing London, United Kingdom LI Number of GDRs Listed 806,936,757 (Regulation S), 144,677 (144-A) 60%

Currency US Dollar 40% Conversion Ratio 5 Shares = 1 GDR 20% +6% FTSE ISIN Code US68554W2052 100 0% Ticker Code (Bloomberg) 2 OTLD:LI -20% Ticker Code (Reuters) 2 ORTEq.L 1/1/12 29/2/12 30/4/12 30/6/12 30/8/12 20/10/12 31/12/12

1 as at December 31st 2012 1 January 1st – December 31st 2012 2 effective September 23,2013 the EGX and the LSE updated the company’s ticker symbols on the trading screens

26 Investor Information Annual Report 2012 Analysts Coverage

Bank of America Merrill Lynch Citi Exane BNP PARIBAS Christian Kern: Alexandra Serova: Investor Relations Stephen Pettyfer: Dalibor Vavruska: Justine Dimovic: [email protected] [email protected] Contacts [email protected] [email protected] justine.dimovic@ exanebnpparibas.com Morgan Stanley Johan Snyman: Mamdouh Abdel Wahab Barclays Capital Dilya Ibragimova: Cesar Tiron: [email protected] Head of Investor Relations San Dhillon: [email protected] Goldman Sachs [email protected] Email: [email protected] [email protected] Alexander Balakhnin: UBS Website: www.gtelecom.com Deutsche Bank [email protected] Naeem Holding Alexander Wright: Tel: +202 2461 5120/21 Beltone Financials Carola Bardelli: Ahmed Adel: [email protected] : +202 2461 5055/54 Maria Samir: [email protected] Daria Fomina: [email protected] [email protected] [email protected] Ujwal Kumar: EFG-Hermes New Street Research [email protected] CI Capital Marise Ananian: JP Morgan Chris Hoare: Karim Khadr: [email protected] Herve Drouet: [email protected] VTB Capital [email protected] [email protected] Ivan Kim: Nadine Ghobrial: Renaissance Capital [email protected] Sarah Shabayek: [email protected] HSBC Alexander Kazbegi: [email protected] Jean- Charles Lemardeley: [email protected] Omar Maher: jean-charles.lemardeley@ [email protected] jpmorgan.com

28 Information on Shares Annual Report 2012 Corporate Social responsibility

Social Investment Global Global Telecom provides support to programmes and projects that contribute to the social development and improves the standard of living of several communities through direct financial donations, in kind, as well as employee donations and volunteering. Across our operating companies and through our products and social Telecom Holding investment program, we contribute to the achievement of the United Nations Millennium Development (MDG) Goals. Below are some examples:

Corporate Responsibility management at Global Telecom Holding is MDG Goal Country Example of our contribution designed to follow a stakeholder sensitive system that covers various aspects of our commitment to shareholders and investors, business Achieve universal Pakistan, In Pakistan, Zimbabwe, Burundi and Central African Republic we primary education Zimbabwe, support primary school education by providing bursary schemes and partners, communities, employees, and other stakeholders, in a rights Burundi and financial support to families who can’t afford to send their children to Central African school or students from under privileged communities. Special emphasis based approach. Republic has also been put on supporting the education of orphans and Other vulnerable children with disabilities (hearing impaired, blind and visually Corporate Responsibility issues can vary significantly across countries as diverse as Algeria, impaired, physically challenged, and children affected by the war). Zimbabwe, Canada and Bangladesh, and therefore we empower our respective management teams to design and deliver localized programmes. Our approach to Corporate Responsibility is based on decentralization, which has been a key element of our corporate culture and is also the basis for our Combat HIV/ Burundi leo Burundi continues providing direct financial donations to schools and success in implementing group recommended social, governance and environmental initiatives that are AIDS, malaria and orphanages. The target beneficiaries are children whose parents are tailored to meet local market needs. Other diseases HIV positive.

Pakistan Bangladesh Egypt Ensure Across the Across our operations, we reduce carbon emissions and energy Environmental Group consumptions by using alternative energy, such as solar power and sustainability energy. In addition, as a Company we take part in environmental cleanup initiatives like “International Coastal Cleanup” day in Bangladesh 28,000 450 and in Pakistan we recycle advertising material into school bags to be Flood victims in 5000 used by unprivileged students in various schools around Pakistan. flood hit Orphans global busi- regions ness leaders Eradicate Bangladesh, The launch of mobile-banking services in these countries help to easily extreme poverty Pakistan & access banking services anytime and anywhere, which in turn expands Zimbabwe the rural economy and national output by increasing commerce in villages in Bangladesh, Pakistan and Zimbabwe. Given the fact that all direct operations in various areas around the world are handled by our subsidiaries, our CSR division at GTH has developed a commitment to mobilize, motivate and support Improve Pakistan Mobilink increased the scale of its partnership with Pink Ribbon in 2012 GTH’s subsidiaries to further enhance their commitment to compliance based processes and impactful maternal health to mark October as ‘Pinktober - Breast Cancer Awareness Month’. social investment. To this end, the CSR division conducts trainings and networking sessions covering Mobilink and Pink Ribbon initiated a nationwide awareness drive with topics of interest, including best practices of CSR. the support of Higher Education Commission, aiming to reach out to 100,000 young girls. Mobilink Foundation supported the cause through There is a strong history of effective management of CSR across many of our markets and a number enabling SMS Donations from customers and sending informational of our businesses have world-class programmes. In 2012, our local operating companies received a material to customers through bill inserts, awareness literature at number of awards. Customer Care Centers and Public Service Messages (OOH). In commemoration of ‘Pinktober’, a national monument in Islamabad • Mobilink Foundation became the first and awarded the best Global Mobile Award 2013 was turned Pink with on-ground activation, the first of its kind. only telecom industry corporate responsibility in the category of ‘Best Mobile Education or function to be awarded certification by the Learning Product or Service’ at the GSMA Mobile Promoting gender Pakistan In partnership with UNESCO, Mobilink in Pakistan has been empowering Pakistan Center for Philanthropy (PCP) in World Congress in Barcelona. equality and women and young ladies through the provision of literacy to adolescent recognition of the Foundation’s excellence empower women girls using mobile phones. for large scale humanitarian and social • WIND Mobile won the Bronze 2012 Canadian Mobilink in Pakistan partnered with the Prime Minister Secretariat’s development initiatives across the country. Marketing Association Award for Community Reduce child mortality Pakistan Polio Control Cell for the National Polio Eradication Campaign in 2012. Further details on the PCP and the certification Engagement in recognition of the Company’s To back up the advocacy and sensitization drive, Mobilink supported process can be seen at www.pcp.org.pk. continuous efforts in fundraising events for local the awareness campaign through broadcasting informational messages charities. WIND Mobile employees are actively via SMS to customers across Pakistan. These messages highlighted the • Mobilink foundation, through the third phase of involved in these events and regularly volunteer dangers of polio, dates of the polio campaign, and support to parents to the ‘Mobile Based Literacy’ program, has been their time and expertise. get children vaccinated

30 CSR Annual Report 2012 Corporate Social responsibility Global Telecom Holding

Egypt- Global Telecom Holding Pakistan – Mobilink Global Telecom sponsors French University to compete in Enactus World Cup 2012 Mobile Based Literacy enabled new literates to receive lessons on their Global Telecom Holding, for the third consecutive year, proudly sponsored the Enactus Egypt team Mobilink has partnered with UNESCO to launch the mobile phones and has fostered the ability to read from the French University to compete in Enactus 2012 World Cup. The competition took place in third phase of the ‘Mobile Based Literacy’ program - and respond to these lessons. The program has been Washington D.C., USA in October of 2012 where 38 national championship university teams presented a broad based initiative that was launched in 2009. awarded the Global Mobile Awards 2013 in the category their countries’ civic engagement projects. The Egyptian team won second place in the World Cup. The program is a unique initiative that utilizes mobile of ‘Best Mobile Education or Learning Product or technology to improve literacy for female students, Service’. Once a year, the National Champion Enactus teams from around the world meet at the World Cup aged 15 to 25 years, in rural and deprived areas. where they present the results of their community outreach projects to a prestigious group of Flood Relief Efforts for 2012 international business leaders. Through a written annual report and live audio visual presentation, The third phase of ‘SMS Based Literacy’ program in teams are evaluated based on how successful they use business concepts to improve the quality of life collaboration with UNESCO was commissioned in Q2 Mobilink reached out to over 28,000 flood victims as and standard of living for people in need in their respective countries. More than 450 global business 2012. SMS Based Literacy is the first and the only part of its flood relief initiatives during the months leaders assembled at the event to evaluate the outreach projects of 38 national championship teams. service in Pakistan that utilizes Short Messaging of October and November 2012 by assisting those Service (text messages) to impart education. To affected in areas of Southern Punjab and Balochistan date it has reached out to 4,000 female learners and with ready to eat meals, potable water and Other basic 100 teachers living in rural areas of KPK and Punjab. necessities. As in previous years, the flood relief activity “We are entrepreneurial in spirit and well-resourced with Mobilink contributed GPRS-enabled connections to all was coordinated with the Pakistani naval forces and excellent technical and operational capability. The future learners with free SMS services. Mobilink Foundation the National Disaster Management Authority (NDMA). for Global Telecom is very bright.” also funded the development of web-based software Mobilink Foundation Torchbearers were also involved in for transmitting and evaluating info and Q/A messages. the distribution of flood relief items in some areas. This unique mobile based post literacy program has

Pakistan – Mobilink: Mr. Rashid Khan, CEO, Mobilink with the Global Mobile Zimbabwe – Telecel Zimbabwe: Jairos Jiri Children’s Bangladesh - banglalink: Cox’s Bazar Sea Mobilink Foundation organizes a clean-up drive Award in Barcelona February 2013, along with Mr John Hoffman, CEO, GSMA Centre in Waterfalls, Harare Beach Cleaning Project on Pakistan Day (far left)

In addition to the competition, events such as the culture fair provide an exhibit of the rich diversity of Bangladesh - banglalink Algeria – Djezzy cultures represented within Enactus. Multiple receptions, along with special activities such as the “Top to Top and Top” to “Future-Top” forums, as well as panel discussions, speakers and sessions provide Cox’s Bazar Sea Beach Cleaning Project FIKRA engagement and collaboration opportunities for participants. To watch Egypt team’s presentation Since 2005, banglalink has been cleaning the longest Djezzy organized a networking day “FIKRA” (Idea) please visit: http://enactus.org/world-cup-archive/2012/results/ sea beach of the world- Cox’s Bazar. Under this project, where ten start-ups were selected through various 26 female workers clean the beach 363 days a year in auditions in front of a panel, to receive one million Enactus is an international non-profit organization that brings together the leaders of today and alternating shifts. In order to support these efforts, Dinars (around 10,000 USD) and a special one- tomorrow to create a better, more sustainable world through the positive power of business. Founded banglalink has placed bins throughout the beach with on-one mentoring session by one of the Directors in 1975, Enactus has active programs on more than 1,500 college and university campuses in over 40 signage requesting people to discard waste in designated at Djezzy. These efforts help inspire the recent countries. Through Enactus, students around the world are discovering that “doing well” and “doing bins. Additionally, representatives communicate similar graduates by gaining experience in the information and good” can be accomplished simultaneously throughout college and during their career. messages through microphones. It is assumed that they communication technology field. collect approximately 300kg debris per day.

32 CSR Annual Report 2012 Financial review

- Consolidated balance sheet

- Consolidated income statement

- Consolidated statement of comprehensive income Financial Review - Consolidated statement of changes in equity - Consolidated statement of cash flows The following financial review for the company for the year 2012 is published under the name - Notes to the consolidated financial statements “Orascom Telecom Holding S.A.E.” - Appendix A - Liabilities to banks

- Appendix B – Bonds

- Appendix C - Scope of consolidation

34 Financial review Annual Report 2012 Financial review

Consolidated Consolidated balance sheet income statement

As of December 31, (in million of US$) Note 2012 2011 For the year ended December 31, (in million of US$) Note 2012 2011 Assets Continuing operations Property and equipment 20 2,494 2,902 Revenues 8 3,627 3,636 Intangible assets 21 1,449 1,558 Other income 40 30 Other non-current financial assets 22 781 1,024 Purchases and services 9 (1,536) (1,600) Deferred tax assets 23 76 65 Other expenses 10 (137) (175) Total non-current assets 4,800 5,549 Personnel costs 11 (239) (244) Inventories 29 33 Depreciation and amortization 12 (705) (773) Trade receivables 24 233 205 Impairment charges 13 (12) (10) Other current financial assets 22 145 230 Disposal of non current assets 14 (15) 58 Current income tax receivables 19 64 99 Operating income 1,023 922 Other current assets 25 827 825 Cash and cash equivalents 26 2,026 1,014 Financial income 15 77 80 Total current assets 3,324 2,406 Financial expense 15 (454) (536) Total assets 8,124 7,955 Foreign exchange loss 15 (74) (150) Net financing costs (451) (606) Equity and liabilities Share capital 27 598 598 Share of loss of associates 16 (103) (135) Reserves (241) (192) Impairment of financial assets 17 (344) (22) Retained earnings 1,198 1,450 Other non-operating costs 18 (77) - Equity attributable to owners of the Company 1,555 1,856 Profit before income tax 48 159 Non-controlling interest 75 57 Total equity 1,630 1,913 Income tax expense 19 (253) (243) Loss from continuing operations (205) (84) Liabilities Non-current borrowings 28 4,075 3,492 Discontinued operations Other non-current liabilities 29 110 167 Profit from discontinued operation (net of income tax) 7 - 745 Provisions 31 71 8 Profit/(loss) for the year (205) 661 Non-current income tax liabilities 19 2 9 Deferred tax liabilities 23 50 71 Attributable to: Total non-current liabilities 4,308 3,747 Owners of the Company (224) 628 Current borrowings 28 683 544 Non-controlling interest 19 33 Trade payables 30 710 738 Other current liabilities 29 574 592 Earnings/ (loss) per share - (in US$) 32 Current income tax liabilities 19 103 328 Basic and diluted earnings / (loss) per share: (0.04) 0.13 Provisions 31 116 93 From continuing operations: (0.04) (0.01) Total current liabilities 2,186 2,295 From discontinued operations: - 0.14 Total liabilities 6,494 6,042 Total equity and liabilities 8,124 7,955

Group CFO Khalid Ellaicy Group CEO Ahmed Abou Doma (Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)

36 Financial Review Annual Report 2012 Financial review

Consolidated statement Consolidated statement of comprehensive income of changes in equity

For the year ended December 31, 2012 2011 Attributable to (in million of US$) owners Share Treasury Other Retained Non- Total of the Company Note capital shares reserves earnings Total controlling equity (in million of US$) Interest Profit/(loss) for the year (205) 661 Other comprehensive income: Changes in fair value of available-for-sale financial assets 2 6 As of January 1, 2012 598 (1) (191) 1,450 1,856 57 1,913 Cash flow hedges reserve - 57 Comprehensive income Currency translation differences (80) 24 Loss for the year - - - (224) (224) 19 (205) Other comprehensive income for the year, net of tax (78) 87 Other comprehensive - - (77) - (77) (1) (78) Total comprehensive income for the year (283) 748 income Total comprehensive income - - (77) (224) (301) 18 (283) Attributable to: Transactions with owners Owners of the Company (301) 703 Increase in legal reserve - - 28 (28) - - - Non-controlling interest 18 45 Total transaction with Owners - - 28 (28) - - - As of December 31, 2012 598 (1) (240) 1,198 1,555 75 1,630

Attributable to owners Share Treasury Other Retained Non- Total of the Company Note capital shares reserves earnings Total controlling equity (in million of US$) Interest

As of January 1, 2011 1,031 (44) (235) 1,975 2,727 74 2,801 Comprehensive income Profit for the year - - - 628 628 33 661 Other comprehensive income - - 117 (42) 75 12 87 Total comprehensive income - - 117 586 703 45 748 Transactions with owners Demerger effect 2 (433) - (55) (1,106) (1,594) (57) (1,651) Dividends paid - - - - - (5) (5) Increase in legal reserve - - 5 (5) - - - Share based compensation 34 - 43 (23) - 20 - 20 Total transactions with owners (433) 43 (73) (1,111) (1,574) (62) (1,636) As of December 31, 2011 598 (1) (191) 1,450 1,856 57 1,913

(Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)

38 Financial Review Annual Report 2012 Financial review

Consolidated statement of cash flows

For the year ended December 31, (in million of US$) 2012 2012 For the year ended December 31, (in million of US$) 2012 2012

Cash flows from investing activities

Continuing operations Cash outflow for investments in:

Cash flows from operating activities - Property and equipment (312) (452)

Loss for the year (205) (84) - Intangible assets (100) (139)

- Consolidated subsidiaries - (57)

Adjustments for: - Financial assets (37) -

Depreciation, amortization and impairment charges 717 783 Proceeds from disposals of:

Income tax expense 253 243 - Property and equipment 20 12

Share-based compensation 4 3 - Financial assets - 14

Net financial charges 377 456 Advances and loans made to associate and Other parties (161) (203)

Currency translation differences 74 150 Dividends and interest received 10 15

(Gain)/loss on disposal of non-current assets 15 (58) Net cash used in investing activities (580) (810)

Share of loss of associates 103 135

Impairment of financial assets 344 22 Cash flows from financing activities

Other non-operating costs 77 - Proceeds from loans, banks' facilities and bonds 1,301 877

Change in assets carried as working capital 24 (189) Payments for loans, banks' facilities and bonds (961) (1,619)

Change in provisions and allowances 33 48 Net change in cash collateral 121 (129)

Change in Other liabilities carried as working capital (10) (53) Net cash generated by / (used in) financing activities 461 (871)

Income tax paid (501) (199)

Interest expense paid (115) (217) Net cash generated by / (used in) continuing operations 1,071 (641)

Net cash generated by operating activities 1,190 1,040 Net cash generated by operating activities - 90

Net cash generated by investing activities - 1,044

Net cash (used in)/ generated by financing activities - (9)

Net cash generated by discontinued operations - 1,125

Net increase in cash and cash equivalents 1,071 484

Cash included in assets held for sale and Spin-off Assets - (263)

Effect of exchange rate changes on cash and cash equivalents (59) (31)

Cash and cash equivalents at the beginning of the year 1,014 824

Cash and cash equivalents at the end of the year 2,026 1,014

(Notes 1 to 38 and appendices A to C are an integral part of these consolidated financial statements)

40 Financial Review Annual Report 2012 Financial review Notes to the consolidated financial statements

1. The Demerger was performed based on the book 3. value of the Spin-Off Assets, taking into consideration General information the terms and conditions of a separation agreement Significant entered into between the relevant parties, which accounting policies Orsacom Telecom Holding S.A.E. (“OTH” or the “Company”) is a joint stock company with its head office requires among Others, OTH to reimburse OTMT in Cairo, Egypt. The Company, through its subsidiaries (together the “Group”) is a leading provider of for certain revenue items pertaining to the Spin-Off mobile telecommunications in Africa, Asia and North America. The Company is listed on the Egyptian Stock Assets. The effect of the Demerger was a reduction of Exchange and has Global Depository Receipts (“GDR”) listed on the London Stock Exchange. The Company total equity of US$ 1,651 million, including a reduction 3.1 is a subsidiary of VimpelCom Ltd. (“VimpelCom”). of US$ 433 million in share capital. Basis of presentation The Consolidated Financial Statements of the Group, These consolidated financial statements as of and for the year ended December 31, 2012 (the The Demerger was effected through a reduction in as of and for the year ended December 31, 2012, “Consolidated Financial Statements”) was approved for issue by the Board of Directors on March 5th 2013. the issued capital of the Company. In particular, the have been prepared in accordance with International nominal value of the Company’s shares was reduced Financial Reporting Standards (IFRS) promulgated by from L.E. 1 to L.E. 0.58. As the Demerger took place the International Accounting Standards Board (IASB) before the balance sheet date, the Demerger, including and all interpretations of the International Financial Authority and in particular decree no. 124 of 2010 and the transfer of the Spin-Off Assets has already been Reporting Interpretations Committee (IFRIC) and the was completed in December 2011. The split of the OTH reflected in the consolidated balance sheet as of Standing Interpretations Committee (SIC). 2. shares by the way of the Demerger resulted in OTH December 31, 2011, whilst, for income statement shareholders holding the same percentage interest in purposes, the results of operations relating to the The consolidated financial statements have been VimpelCom OTMT as they held in the Company. The demerger plan Spin-Off Assets have been classified as “discontinued prepared under the historical cost basis except for the Transaction and was approved in shareholders meetings dated April operations” in 2011. following: 14, 2011 and October 23, 2011. Approval from the • derivative financial instruments are measured at fair the Demerger Egyptian Financial Supervisory Authority was received value; VimpelCom Ltd. (“VimpelCom”) and Weather in December 2011. 2.2 • financial instruments at fair value through profit or Investments II Sarl (“Weather II”) announced in loss are measured at fair value; and October 2010 that they had signed an agreement As a result of the Demerger, during November and Refinancing Plan • available-for-sale financial assets are measured at to combine VimpelCom and SpA (the December 2011, ownership of the following Spin-Off Certain of the Company’s financial liabilities included fair value “VimpelCom Transaction”). The VimpelCom Transaction Assets were transferred from the Company to OTMT: mandatory repayment clauses in the event of a change • Assets and liabilities held for sale (or disposal group) closed in April 2011 and as a result VimpelCom owns, in control. In particular, the Company’s senior secured are measured at the lower of their carrying amount through Wind Telecom SpA (“Wind Telecom”), 51.7% • 28.755% ownership stake in Mobinil for credit facility and equity linked notes became repayable and fair value less cost to sell. of the Company and 100% of Wind Telecomunicazioni Telecommunications S.A.E. as a result of the VimpelCom Transaction. S.p.A. (“Wind ”). • 20.00% ownership stake in the Egyptian Company For presentational purposes, the current/non-current for Mobile Services wAt an extraordinary general assembly meeting of distinction has been used for the balance sheet, while • 75% ownership stake in CHEO Technology Joint the Company held on April 14, 2011 (the “April 14 expenses are analyzed in the income statement using 2.1 Venture Company, together with all Other assets and EGM”), the shareholders approved a refinancing a classification based on their nature. The indirect businesses located in plan to refinance/repay the Company’s outstanding method has been selected to present the cash flow Demerger and Spin-Off Assets • 95% ownership in Orabank NK secured debt and unsecured high yield notes, together statement. Under the terms of the VimpelCom Transaction, • 100% direct and indirectly held ownership stake in with certain derivative transactions for an amount of VimpelCom, Weather II and OTH agreed a demerger Middle East and North Africa for Sea Cables approximately US$ 2.7 billion (the “Refinancing Plan”). The information in this document has been presented plan (the “Demerger”) pursuant to which the • 51% ownership stake in Trans World Associate in millions of United States Dollar (“US$”), except Company’s investments in certain telecom, media and (Private) Limited (Pakistan) Therefore, in May 2011 VimpelCom provided two earnings per share and unless Otherwise stated. technology assets (the “Spin-Off Assets”) which were • 100% ownership of Med Cable Limited (UK) shareholder loans to the Group to refinance such not intended to form part of the VimpelCom business • 99.99% ownership stake in Intouch Communications financial liabilities. These shareholder loans are going forward would be transferred to a new company, Services S.A.E. (a/k/a OT Ventures Internet repayable in May 2014 and bear a fixed interest rate of 3.2 Orascom Telecom Media and Technology Holding S.A.E. portals and Other ventures in Egypt including Link 9.5% which is payable in kind at maturity. (“OTMT”). Development, ARPU+ and LINKonLine) and Change in Accounting Polices • 1% ownership stake in ARPU for The Group has adopted the following new and amended The Demerger was performed in accordance with Telecommunications Services S.A.E. IFRSs and IFRIC Interpretations, as of January 1, 2012, the guidelines of the Egyptian Financial Supervisory with no material impact on these financial statements:

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• IFRS 7 (amendment), “Financial instruments: Financial Statements) in accordance with IFRS and • unrealized gains and losses on transactions carried 3.3.3 Disclosures”. This amendment promotes approved by the respective Boards of Directors. out between companies consolidated on a line- Joint ventures transparency in the reporting of transfer transactions by-line basis and the respective tax effects are and improves users’ understanding of the risk The consolidation procedures used are as follows: eliminated if material, as are corresponding balances Joint ventures are those entities over whose activities exposures relating to transfers of financial assets • The assets and liabilities and income and expenses for receivables and payables, income and expense, the Group has joint control, established by contractual and the effect of those risks on an entity’s financial of consolidated subsidiaries are included on a line- and finance income and expense; agreement and requiring unanimous consent for position, particularly those involving securitization of by-line basis, allocating to non-controlling interests, strategic financial and operating decisions. financial assets. where applicable, the share of equity and profit • Gains and losses arising from the sale of holdings in or loss for the year that is attributable to them. consolidated entities are recognized in the income Interests in joint ventures are consolidated using the • IAS 12 (amendment), “Income taxes”. This The resulting balances are presented separately in statement as the difference between the selling price proportionate method under which the assets and amendment introduces an exception to the existing consolidated equity and the consolidated income and the corresponding portion of consolidated equity sold. liabilities and income and expenses of the joint venture principle for the measurement of deferred tax statement; are consolidated on a line-by-line basis in proportion assets or liabilities arising on investment property 3.3.2 to the share held by the Group in the venture. The measured at fair value. • The purchase method of accounting is used to Associates carrying amount of the consolidated investment is account for business combinations in which the then eliminated against the respective portion of control of an entity is acquired. The cost of an Investments in companies where the Group exercises equity. Transactions, balances and any unrealized 3.3 acquisition is measured as the fair value of the a significant influence (hereafter “associates”), which is gains and losses on intercompany transactions are assets acquired, liabilities incurred or assumed and presumed to exist when the Group holds between 20% proportionately eliminated. Summary of main accounting equity instruments issued at the acquisition date, and 50%, are accounted for using the equity method. principles and policies plus all Other costs directly attributable to the Unrealized gains arising from transactions with acquisition. The equity method is as follows: associates (and jointly controlled entities) are The main accounting principles and policies adopted in • The Group’s share of the profit or loss of an investee eliminated to the extent of the Group’s interest in the preparing these Consolidated Financial Statements are The excess of the cost of acquisition over the is recognized in the income statement from the date enterprise. Unrealized gains resulting from transactions set out below. These policies have been consistently fair value of the assets, liabilities and contingent when significant influence begins up to the date with associates and joint ventures are eliminated applied to all periods in those consolidated financial liabilities acquired is recorded as goodwill. If the cost when that significant influence ceases. Investments against the investment in the associates or joint statements, and have been applied consistently by the of acquisition is less than the fair value of the net in associates with negative shareholders’ equity are venture. group entities. assets of the subsidiary acquired, the difference is impaired and a provision for its losses is accrued recognized immediately in the income statement; only if the Group has a legal or constructive Appendix C includes a list of the entities included in the 3.3.1 obligation to cover such losses. scope of consolidation. Basis of consolidation • Business combinations in which all of the combining entities or businesses are ultimately controlled by Equity changes in investees accounted for using 3.3.4 The Consolidated Financial Statements include the the same party or parties both before and after the equity method that do not result from profit or Foreign currency translation financial statements of the Company and those entities the business combination are considered business loss are recognized directly in consolidated equity over which the Company exercises control, both combinations involving entities under common reserves; Functional and presentation currency directly or indirectly, from the date of acquisition to the control. In the absence of an accounting standard The functional currency of each subsidiary is the local date when such control ceases. guiding the accounting treatment of these operations • Unrealized gains and losses generated from currency where that entity operates. The functional and in accordance with IAS 8, the Group consolidate transactions between the Company or its subsidiaries currency of OTH is the Egyptian Pound. In order to Control may be exercised through direct or indirect the book values of the entity transferred and report and its investees accounted for using the equity present financial information to international investors ownership of shares with majority voting rights, or by any gains arising from the transfer in goodwill; method are eliminated on consolidation for the the Group’s presentation currency is US$. exercising a dominant influence expressed as the direct portion pertaining to the Group; unrealized losses or indirect power, based on contractual agreements • The purchase of equity holdings from non-controlling are eliminated unless they represent impairment. Transactions and balances or statutory provisions, to determine the financial and holders in entities where control is already exercised Transactions in foreign currencies are translated into operational policies of the entity and obtain the related is considered a purchase. Therefore the difference • The license of the Group’s associated undertaking the functional currency of the relevant entity at the benefits, regardless of any equity relationships. The between the cost incurred for the acquisition and the in Canada, Globalive Wireless Management Corp, is exchange rate prevailing at the date of the transaction. existence of potential voting rights that are exercisable respective share of the accounting equity acquired is indefinite life assets. Although the spectrum licenses Monetary assets and liabilities denominated in foreign or convertible at the balance sheet date is also recognized in goodwill; have an initial term of 10 years, based on available currencies are translated, at the balance sheet date, considered when determining whether there is control information, the management believes that they are into the prevailing exchange rates at that date. or not. • any options to purchase non-controlling interests subject to perfunctory renewal and that renewal outstanding at the end of the year are treated as cost will not be significant. Accordingly, they are Foreign currency exchange differences arising on the The financial statements used in the consolidation exercised and are reported as a financial liability or not subject to amortization but are tested annually settlement of transactions and the translation of the process are those prepared by the individual Group in equity depending on whether the transaction is to for impairment, or when indicators exist that the balance sheet are recognized in the income statement. entities as of and for the year ended December 31, be settled in cash or through the exchange of equity carrying value is not recoverable. 2012 (the reporting date for these Consolidated instruments; Group companies The financial statements of the Group entities are

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translated into the presentation currency as follows: • goodwill and fair value adjustments arising on the • assets and liabilities are translated at the closing acquisition of a foreign entity are treated as assets The useful lives estimated by the Group for the various categories of prop- erty and equipment are as follows. Number of years exchange rate; and liabilities of the foreign entity and are translated • income and expenses are translated at the average at the closing exchange rate; and Buildings 50 exchange rate for the year; • in the preparation of the consolidated cash flow Cell Sites 8-15 • all resulting exchange differences are recognized as statement, the cash flows of foreign subsidiaries are Tools 5-10 a separate component of equity in the “translation translated at the average exchange rate for the year. reserve”; Computer equipment 3-5 Furniture and Fixtures 5-10 Vehicles 3-6 Leasehold improvements and renovations 3-8

Finance leases are leases that substantially transfer of its expected use and the term of the underlying Average for year ended Closing rate as of December 31, The exchange rates applied December 31, all the risks and rewards incidental to the ownership agreement, starting from the date on which the in relation to the US$ are as of assets to the Group. Property and equipment acquired license may be exercised. follows: 2012 2011 2012 2011 acquired under finance lease are recognized as assets at their fair value or, if lower, at the present value of Goodwill the minimum lease payments, including any amounts Goodwill represents the excess of the cost of an Egyptian Pound (LE) 0.1647 0.1682 0.1571 0.1658 to be paid for exercising a purchase option. The acquisition over the interest acquired in the net Algerian Dinar (DZD) 0.0128 0.0137 0.0127 0.0133 corresponding liability due to the lessor is recognized fair value at the acquisition date of the assets and Tunisian (TND) 0.6402 0.7114 0.6440 0.6685 as part of financial liabilities. An asset acquired under liabilities of the entity or business acquired. Goodwill a finance lease is depreciated over the shorter of the relating to investments accounted for using the equity Pakistan Rupee (PKR) 0.0107 0.0116 0.0103 0.0111 lease term and its useful life.Lease arrangements in method is included in the carrying amount of the Bangladeshi Taka (BDT) 0.0122 0.0135 0.0125 0.0122 which the lessor substantially retains the risks and investment. Goodwill is not systematically amortized Canadian Dollar (CAD) 1.0004 1.0115 1.0080 0.9791 rewards incidental to ownership of the assets are but is rather subject to periodic tests to ensure that (EUR) 1.2852 1.3920 1.3193 1.2939 classified as operating leases. Lease payments under the carrying amount in the balance sheet is adequate operating leases are recognized as an expense in the (“impairment testing”). Impairment testing is carried income statement on a straight-line basis over the out annually or more frequently when events or lease term. changes in circumstances occur that could lead to an impairment of the cash generating units (“CGUs”) to 3.3.5 an asset or part of an asset, in accordance with the 3.3.6 which the goodwill has been allocated. An impairment Property and equipment “component approach”. Under this approach each Intangible assets loss is recognized whenever the recoverable amount asset is treated separately if it has an autonomously of goodwill is lower than its carrying amount. The Property and equipment are stated at purchase cost determinable useful life and value. Depreciation is Intangible assets are identifiable non-monetary assets recoverable amount is the higher of the fair value of or production cost, net of accumulated depreciation charged at rates calculated to write off the costs over without physical substance which can be controlled the CGU less costs to sell and its value in use, which and any impairment losses. Cost includes expenditure their estimated useful lives on a straight-line basis from and which are capable of generating future economic is represented by the present value of the cash flows directly attributable to bringing the asset to the the date the asset is available and ready for use. benefits. Intangible assets are stated at purchase expected to be derived from the CGU during operations location and condition necessary for use and any and/or production cost including any expenses that and from its retirement at the end of its useful life. dismantling and removal costs which may be incurred The useful lives of property and equipment and their are directly attributable to preparing the asset for The method for calculating value in use is described as a result of contractual obligations which require the residual values are reviewed and updated, where its intended use, net of accumulated amortization in the paragraph below “Impairment of assets”. Once asset to be returned to its original state and condition. necessary, at least at each year end. Land is not and impairment losses, if applicable. Borrowing costs an impairment loss has been recognized for goodwill it Borrowing costs directly associated with the purchase depreciated. When a depreciable asset is composed of accruing during and for the development of the asset cannot be reversed. or construction of property and equipment are identifiable separate components whose useful lives are capitalized as incurred. Amortization begins when capitalized as incurred together with the asset to which vary significantly from those of Other components an asset becomes available for use and is charged Whenever an impairment loss resulting from the above they relate. of the asset, depreciation is calculated for each systematically on the basis of the residual possibility testing exceeds the carrying amount of the goodwill component separately, applying the “component of utilization of the asset, meaning on the basis of its allocated to a specific CGU, the residual loss is allocated Costs incurred for ordinary and cyclical repairs and approach”. Gains or losses arising from the sale or estimated useful life. to the assets of that particular CGU in proportion to maintenance are charged directly to the income retirement of assets are determined as the difference their carrying amounts. The carrying amount of an statement in the year in which they are incurred. between the net disposal proceeds and the net carrying Licenses asset under this allocation is not reduced below the Costs incurred for the expansion, modernization or amount of the asset sold or retired and are recognized Costs for the purchase of telecommunication licenses higher of its fair value less costs to sell and its value in improvement of the structural elements of owned or in the income statement in the period incurred under are capitalized. Amortization is charged on a straight- use as described above. leased assets are capitalized to the extent that they “Disposal of non-current assets”. line basis such as to write off the cost incurred for the have the requisites to be separately identified as acquisition of a right over the shorter of the period

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Software use the estimated future cash flows are discounted date. Financial assets are derecognized when the right The impairment loss is recognized in the income Acquired software licenses are capitalized on the using a pre-tax rate that reflects the market’s current to receive cash flows from them ceases and the Group statement. If in future years the factors which caused basis of the costs incurred to acquire and bring to assessment of the cost of money for the investment has effectively transferred all risks and rewards related the impairment cease to exist, the carrying amount use the specific software. Software licenses are period and the specific risk profile of the asset. If an to the instrument and its control. of the asset is reinstated up to the amount that would amortized on a straight-line basis over their useful life asset does not generate independent cash flows its have been obtained had amortized cost been applied. (between 3 to 8 years), while software maintenance recoverable amount is determined in relation to the The fair values of quoted investments are based on costs are expensed in the income statement in the cash-generating unit (CGU) to which it belongs. An current bid prices. If the market for a financial asset Financial assets available-for-sale period in which they are incurred. Costs incurred on impairment loss is recognized in the income statement is not active (and for unlisted securities), the Group Financial assets available for sale are non-derivative development of software products are recognized as when the carrying amount of an asset or the CGU to establishes fair value by reference to prices supplied financial instruments which are either designated intangible assets when the Group has intentions to which it is allocated exceeds its recoverable amount. by third-party operators and by using valuation models in this category or not classified in any of the Other complete and use or sell the assets arising from the based primarily on objective financial variables and, categories. Available for sale financial assets are project, considering the existence of a market for the If the reasons for previously recognizing an impairment where possible, prices in recent transactions and measured at fair value. Changes in the fair value of asset, its commercial and technological feasibility, its loss cease to exist, the carrying amount of an asset market prices for similar financial instruments. monetary securities denominated in a foreign currency costs can be measured reliably and there are adequate Other than goodwill are increased to the net carrying and classified as available for sale are analyzed financial resources to complete the development of the amount of the asset that would have been determined Financial Assets between translation differences resulting from changes asset. Other development expenditures are recognized (net of amortization or depreciation) had no impairment Financial assets are initially recognized at fair value and in amortized cost of the security and Other changes in in the income statement in the period in which they are loss been recognized for the asset, with the reversal classified in one of the following four categories and the carrying amount of the security. The translation incurred. being recognized in the income statement. subsequently measured as described: differences on monetary securities are recognized in profit or loss; translation differences on non-monetary Directly attributable costs that are capitalized as part Financial assets at fair value through profit or loss securities are recognized in equity. Changes in the of a software product include software development 3.3.8 Financial assets at fair value through profit or loss fair value of monetary and non-monetary securities employee costs and an appropriate portion of relevant Investments includes financial assets purchased primarily for sale classified as available for sale are recognized in equity. overheads. Other development expenditures that do in the short term, (held for trading) and derivative not meet these criteria are recognized as an expense Investments in companies Other than those classified financial instruments, except for the effective portion When securities classified as available for sale are sold as incurred. Development costs previously recognized as available for sale are measured at fair value with any of those designated as cash flow hedges. These or impaired, the accumulated fair value adjustments as an expense are not recognized as an asset in a changes in fair value being recognized in the income assets are measured at fair value; any change in the recognized in equity are included in the income subsequent period. statement. (The accounting treatment of financial year is recognized in the income statement. Financial statement. assets available for sale is discussed in “Financial instruments included in this category are classified as Customer List assets available for sale”). If fair value cannot be current assets if they are held for trading or expected The classification of an asset as current or non-current The customer list as an intangible asset consists of reliably determined, an investment is measured at cost. to be disposed of within twelve months from the is the consequence of strategic decisions regarding the list of customers identified when allocating the Cost is adjusted for impairment losses if necessary, as balance sheet date. the estimated period of ownership of the asset and its purchase price in acquisitions carried out by the Group. described in the paragraph “Impairment of financial effective marketability, with those which are expected Amortization is charged on the basis of the respective assets”. If the reasons for an impairment loss no Derivatives are treated as assets or liabilities to be realized within twelve months from the balance estimated useful lives which range from 5 to 10 years. longer exist, the carrying amount of the investment is depending on whether their fair value is positive or sheet date being classified as current assets. increased up to the extent of the loss with the related negative; positive and negative fair values arising from effect recognized in the income statement. transactions with the same counterparty are offset if Financial assets held to maturity 3.3.7 this is contractually provided for. Fair value gains and These are non-derivative assets with fixed maturities Impairment of non-financial assets Any risk arising from losses exceeding the carrying losses from foreign currency swaps are recognized that the Group has the intention and ability to hold to amount of the investment is accrued in a specific in foreign currency gains and losses in the income maturity. Those maturing within 12 months are carried At each balance sheet date, property and equipment provision to the extent of the Group’s legal or statement. as current assets. These financial assets are measured and intangible assets with finite lives are assessed constructive obligations on behalf of the associate. at amortized cost using the effective interest method. to determine whether there is any indication that an Investments held for sale or to be wound up in the Financial receivables asset may be impaired. If any such indication exists, short term are classified as current assets and stated Financial receivables are non-derivative financial 3.3.10 the recoverable amount of the asset concerned is at the lower of their carrying amount and fair value less instruments which are not traded on an active estimated and any impairment loss is recognized in the costs to sell. market and which are expected to generate fixed or Impairment of financial assets income statement. Intangible assets with an indefinite determinable repayments. They are included as current Individually significant financial assets are tested for useful life are tested for impairment annually or more 3.3.9 assets unless they are contractually due more than impairment on an individual basis. The remaining frequently when events or changes in circumstances Financial instruments twelve months after the balance sheet date in which financial assets are assessed collectively in groups that occur that could lead to an impairment loss. case they are classified as non-current assets. These share similar credit risk characteristics. In the case Financial instruments consist of financial assets and assets are measured at amortized cost using the of equity securities classified as available for sale, a The recoverable amount of an asset is the higher of its liabilities whose classification is determined on their effective interest method. If there is objective evidence significant or prolonged decline in the fair value of the fair value less costs to sell and its value in use, which initial recognition and on the basis of the purpose for of factors which indicate impairment, the asset is security below its cost is considered as an indicator is represented by the present value of its estimated which they were purchased. Purchases and sales of reduced to the present value of future cash flows. that the securities are impaired. future cash flows. In determining an asset’s value in financial instruments are recognized at their settlement

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If any such evidence exists for available for sale months. Derivatives which do not qualify for hedge on the weighted average method. Net realizable value tax charge is calculated on the basis of the tax laws financial assets, the cumulative loss – measured accounting are classified as a financial asset at fair is the estimated selling price in the ordinary course enacted or substantively enacted at the balance sheet as the difference between the acquisition cost and value through profit or loss. of business, less the estimated costs of completion date in the countries where the Group’s subsidiaries, the current fair value, less any impairment loss on and selling expenses. When necessary, obsolescence associates and joint venture operate and generate that financial asset previously recognized in profit or Fair value hedge allowances are made for slow-moving and obsolete taxable income. Management periodically evaluates loss – is removed from equity and recognized in the Changes in the fair value of derivatives that are inventories. Inventories mainly comprise handsets positions taken in tax returns with respect to income statement. Impairment losses recognized in designated and qualify as fair value hedges are and SIM cards. situations in which applicable tax regulation is subject the income statement on equity instruments are not recorded in the income statement, together with any to interpretation. It establishes provisions where reversed through the income statement. changes in the fair value of the hedged asset or liability 3.3.14 appropriate on the basis of amounts expected to be that are attributable to the hedged risk. If the hedge Cash and cash equivalents paid to the tax authorities. 3.3.11 is not fully effective, meaning that these changes are different, the non-effective portion is treated as part Cash and cash equivalents include cash in hand, Deferred income tax is recognized, using the balance Financial liabilities of the net financing cost for the year in the income deposits held at call with banks and Other short-term sheet liability method, on temporary differences arising Financial liabilities consisting of borrowings, trade statement. highly liquid investments with original maturities of between the tax bases of assets and liabilities and payables and Other obligations are measured at three months or less. their carrying amounts in the consolidated financial amortized cost using the effective interest method. Cash flow hedge statements. However, deferred income tax is not When there is a change in cash flows which can be The effective portion of changes in the fair value of 3.3.15 accounted for if it arises from initial recognition of reliably estimated, the value of the financial liability derivatives that are designated and qualify as cash flow goodwill or the initial recognition of an asset or liability is recalculated to reflect such change based on the hedges is recognized in equity in a specific reserve (the Non-current assets and in a transaction Other than a business combination present value of expected cash flows and the originally “cash flow hedge reserve”) . liabilitiesheld for sale that at the time of the transaction affects neither determined internal rate of return. Financial liabilities The gain or loss relating to the ineffective portion is Non-current assets (or disposal groups comprising accounting nor taxable profit or loss. Deferred income are classified as current liabilities except where the recognized immediately in the income statement. assets and liabilities) that is expected to be recovered tax is determined using tax rates (and laws) that have Group has an unconditional right to defer payment until primarily through sale rather than through continuing been enacted or substantially enacted at the balance at least twelve months after the balance sheet date. A hedge is normally considered highly effective if from use is classified as held for sale. Immediately sheet date and are expected to apply when the related the beginning and throughout its life the changes before classification as held for sale, the assets (or deferred income tax asset is realized or the deferred Financial liabilities are derecognized when settled and in the expected cash flows for the hedged item are components of a disposal group) are remeasured in income tax liability is settled. the Group has transferred all the related costs and substantially offset by the changes in the fair value of accordance with the Group’s accounting policies. risks relating to an instrument. the hedging instrument. When the economic effects Deferred income tax assets are recognized only to the deriving from the hedged item are realized, the related Thereafter the assets and liabilities held for sale (or extent that it is probable that future taxable profit will 3.3.12 gains or losses in the reserve are reclassified to the disposal group) are measured at the lower of their be available against which the temporary differences income statement together with the economic effects carrying amount and fair value less cost to sell. Any can be utilized. Deferred income tax is provided on Derivative financial instruments of the hedged item. Whenever the hedge is not highly impairment loss on a disposal group first is allocated temporary differences arising on investments in Derivatives are initially recognized at fair value on effective, the non-effective portion of the change in to goodwill, and then to remaining assets and liabilities subsidiaries, associates and joint ventures, except the date a derivative contract is entered into and fair value of the hedging instrument is immediately on pro rata basis, except that no loss is allocated to where the timing of the reversal of the temporary subsequently remeasured at fair value. The method recognized as part of the net financing cost for the year inventories, financial assets, and deferred tax assets, difference is controlled by the Group and it is probable of recognizing the resulting gain or loss depends on in the income statement. which continue to be measured in accordance with the that the temporary difference will not reverse in the whether the derivative is designated as a hedging Group’s accounting policies. foreseeable future. Additional income taxes that arise instrument, and if so, the nature of the item being When a hedging instrument expires or is sold, or from the distribution of dividends are recognized at the hedged. when a hedge no longer meets the criteria for hedge Impairment losses on initial classification as held for same time that the liability to pay the related dividend accounting, any cumulative gain or loss existing in sale and subsequent losses on remeasurement are is recognized.Deferred tax assets and liabilities are The Group documents at the inception of the equity at that time remains in equity and is recognized recognized in the income statement. Subsequent offset if there is a legally enforceable right to offset transaction the relationship between hedging when the forecast transaction is ultimately recognized increase in fair value less costs to sell may be current tax liabilities and assets, and they relate to instruments and hedged items, as well as its risk in the income statement. When a forecast transaction recognized in the income statement only to the extent income taxes levied by the same tax authority on the management objectives and strategy for undertaking is no longer expected to occur, the cumulative gain of the cumulative impairment loss that has been same taxable entity, or on different tax entities, but various hedging transactions. The Group also or loss that was reported in equity is immediately recognized previously. they intend to settle current tax liabilities and assets documents its assessment, both at hedge inception and transferred to the income statement. on a net basis or their tax assets and liabilities will be on an ongoing basis, of whether the derivatives that 3.3.16 realized simultaneously. are used in hedging transactions are highly effective 3.3.13 Current and deferred income tax in offsetting changes in fair values or cash flows of 3.3.17 hedged items. The full fair value of a hedging derivative Inventories The tax expense for the period comprises current is classified as a current asset or liability when the Inventories are stated at the lower of purchase cost or and deferred tax. Tax is recognized in the income Provisions remaining maturity of the hedged item is less than 12 production cost and net realizable value. Cost is based statement, except to the extent that it relates to Provisions are only recognized when the Group has a items recognized directly in equity. In this case, the present legal or constructive obligation arising from tax is also recognized in equity. The current income past events that will result in a future outflow of

50 Financial Review Annual Report 2012 Financial review

resources, and when it is probable that this outflow consideration received, net of any directly attributable year. The unused portion of traffic at period end is 3.3.26 of resources will be required to settle the obligation. incremental transaction costs and the related income recognized as deferred income in “Other liabilities”; Discontinued operations The amount provided represents the best estimate of tax effects, is included in equity attributable to equity the present value of the outlay required to meet the holders of the Company. • revenue from the sale of mobile phones and fixed- A discontinued operation is a component of the obligation. The interest rate used in determining the line phones and related accessories is recognized at Group’s business that represents a separate major present value of the liability reflects current market 3.3.21 the time of sale; line of business or geographical area of operations rates and takes into account the specific risk of each that has been disposed of or is held for sale, or is a liability. Provisions are not recognized for future Legal reserve • Connection fee recognized on a straight-line basis subsidiary acquired exclusively with a view to resale. operating losses. As per the Company’s statutes, 5% of net profit for over the expected term of the relevant customer Classification as a discontinued operation occurs upon the year is set aside to form a legal reserve, the relationship (either the contract period or estimated disposal or when the operation meets the criteria 3.3.18 transfer to such reserve ceases once it reaches 50% customer life). In the case of promotions with a to be classified as held for sale, if earlier. When an Employee benefits of the Company’s paid in share capital. The reserve cumulative plan still open at the end of the year, the operation is classified as a discontinued operation, the can be utilized for covering losses or for increasing the activation fee is recognized on an accruals basis so comparative income statement is re-presented as if the Short-term benefits Company’s share capital. If the reserve falls below the as to match the revenue with the year in which the operation had been discontinued from the start of the Short-term benefits are recognized in the income said 50%, the Company should resume setting aside service may be used. comparative period. statement in the year when an employee renders 5% of its annual net profit until the reserve reaches service. 50% of the Company’s paid in share capital. Dividend income from investments recorded at fair 3.3.27 value through profit and loss or as available for sale Segment reporting Share-based employee benefits 3.3.22 is recognized when the right to receive payment is The Group recognizes additional benefits to certain established. Operating segments are reported in a manner which managers and Other members of personnel through Dividend distribution is consistent with the internal reporting information share based payment plans. IFRS 2 – “Share-based Dividend distribution to the Company’s shareholders is 3.3.24 provided to the chief operating decision-maker. The Payment” considers these plans to represent a recognized as a liability in the Consolidated Financial chief operating decision-maker, who is responsible for component of employee remuneration. The fair Statements in the period in which the dividends are Interest income allocating resources and assessing performance of the value of the employee services received at the grant approved by the Company’s shareholders. Interest income is recognized on a time-proportion operating segments, has been identified as the board date in exchange for the grant of options or shares basis using the effective interest rate method. of directors. is recognized as an expense with a correspondent 3.3.23 increase in equity. The total amount to be expensed is 3.3.25 3.3.28 determined by reference to the fair value of the options Revenue recognition granted, excluding the impact of any non-market Revenue comprises the fair value of the consideration Earnings per share Recent accounting pronouncements service and performance vesting conditions. The total received or receivable for the sale of goods and Basic The following new standards, amendments to standards amount expensed is recognized over the vesting period, services in the ordinary course of the Group’s activities. Basic earnings per share are calculated by dividing and interpretations have been issued but are not which is the period over which all of the specified Revenue is shown net of value added tax, rebates and the profit for the year attributable to equity holders of effective for the financial year 2012 and have not been vesting conditions are to be satisfied. discounts and after eliminating sales within the Group. the Company, both from continuing and discontinued early adopted: Revenue from the sale of goods is recognized when the operations, by the weighted average number of • IAS 1 (amendment), “Financial statement 3.3.19 Group transfers the risks and rewards of ownership ordinary shares in issue during the year excluding presentation” (effective for annual periods beginning of the goods. Revenue from services is recognized ordinary shares purchased by the Company and held as on or after July 1, 2012). The main change Share capital in the income statement by reference to the stage of treasury shares. resulting from these amendments is a requirement Ordinary shares are classified as equity. Incremental completion and only when the outcome can be reliably for entities to group items presented in ‘Other costs directly attributable to the issue of new shares estimated. Diluted comprehensive income’ (OCI) on the basis of are shown in equity as a deduction, net of tax, from Diluted earnings per share are calculated by dividing whether they are potentially reclassifiable to profit proceeds. More specifically, the criteria followed by the Group in the profit for the year attributable to equity holders of or loss subsequently (reclassification adjustments). recognizing ordinary revenue are as follows: the Company by the weighted average of the number The amendments do not address which items are 3.3.20 • Revenue arising from post-paid traffic, of ordinary shares of the Company outstanding presented in OCI. interconnection and roaming is recognized on the during the year where, compared to basic earnings Treasury shares basis of the actual usage made by each subscriber per share, the weighted average number of shares • IAS 19 (amendment), “Employee benefits” (effective Where any Group company purchases the Company’s and telephone operator. Such revenue includes outstanding is modified to include the conversion of all date January 1, 2013). These amendments eliminate equity share capital (treasury shares), the amounts paid for access to and usage of the Group dilutive potential shares, while the profit for the year the corridor approach and calculate finance costs on consideration paid, including any directly attributable network by customers and Other domestic and is modified to include the effects of such conversion a net funding basis. incremental costs (net of income taxes) is deducted international telephone operators; net of taxation. Diluted earnings per share are not from equity attributable to equity holders of the • Revenue from the sale of prepaid cards and calculated when there are losses as any dilutive effect • IFRS 9, “Financial instruments” (effective date Company until the shares are cancelled or re-issued. recharging is recognized on the basis of the prepaid would improve earnings per share. January 1, 2015). IFRS 9 is the first standard issued Where such shares are subsequently re-issued, any traffic actually used by subscribers during the

52 Financial Review Annual Report 2012 Financial review

as part of a wider project to replace IAS 39. IFRS extend the use of fair value accounting but provide 4.2 9 retains but simplifies the mixed measurement guidance on how it should be applied where its use Impairment of non-current assets model and establishes two primary measurement is already required or permitted by Other standards 4. categories for financial assets: amortized cost and within IFRSs or US GAAP. Non-current assets are reviewed to determine whether fair value. The basis of classification depends on the Use of Estimates there are any indications that the net carrying amount entity’s business model and the contractual cash flow • IAS 28, “Associates and joint ventures” (revised). of these assets may not be recoverable and that they characteristics of the financial asset. The guidance in This revised standard includes the requirements for The preparation of these Consolidated Financial have suffered an impairment loss that needs to be IAS 39 on impairment of financial assets and hedge joint ventures, as well as associates, to be equity Statements required management to apply accounting recognized. In order to determine whether any such accounting continues to apply. accounted following the issue of IFRS 11. policies and methodologies that are based on complex, elements exist it is necessary to make subjective subjective judgments, estimates based on past measurements, based on information obtained • IFRS 10, “Consolidated financial statements” • IFRS 7, “Financial instruments: Disclosures” experience and assumptions determined from time within the Group and in the market and also on past (effective date January 1, 2013). The objective of (amended) (effective date January 1, 2013). This to time to be reasonable and realistic based on the experience. IFRS 10 is to establish principles for the presentation amendment includes new disclosures intended to related circumstances. The use of these estimates and preparation of consolidated financial statements facilitate comparison between those entities that and assumptions affects the amounts reported in the When a potential impairment loss emerges it is when an entity controls one or more Other entity (an prepare IFRS financial statements and those that balance sheet, the income statement and the cash flow estimated by the Group using appropriate valuation entity that controls one or more Other entities) to prepare US GAAP financial statements. statement as well as the notes. techniques. The identification of the elements that present consolidated financial statements. Defines • IAS 32, “Financial instruments: Presentation” may determine a potential impairment loss and the the principle of control, and establishes controls as (amended) (effective date January 1, 2014).Updates The final amounts for items for which estimates and estimates used to measure such loss depend on factors the basis for consolidation. Set out how to apply the the application guidance contained within IAS 32 assumptions were made in the Consolidated Financial which may vary over time, thereby affecting the principle of control to identify whether an investor to clarify some of the requirements for offsetting Statements may differ from those reported in these estimates and measurements. controls an investee and therefore must consolidate financial assets and liabilities on the balance sheet. statements due to the uncertainties that characterize the investee. Sets out the accounting requirements the assumptions and conditions on which the estimates for the preparation of consolidated financial • IAS 16, “Property, plant and equipment” (amended) are based. 4.3 statements. (effective date January 1, 2013).The amendment clarifies that spare parts and servicing equipment The accounting principles requiring a higher degree of Depreciation of non-current assets • IFRS 11, “Joint arrangements” (effective date are classified as property, plant and equipment subjective judgment in making estimates and for which The cost of property and equipment is depreciated on January 1, 2013). IFRS 11 is a more realistic rather than inventory when they meet the definition changes in the underlying conditions could significantly a straight-line basis over the useful lives of the assets. reflection of joint arrangements by focusing on the of property, plant and equipment affect the Consolidated Financial Statements are briefly The useful life of property and equipment is determined rights and obligations of the arrangement rather described below. when the assets are purchased and is based on the than its legal form. Proportional consolidation of joint • IAS 32, “Financial instruments: Presentation” past experience of similar assets, market conditions ventures is no longer allowed. (amended) (effective date January 1, 2013). The and forecasts concerning future events which may amendment clarifies the disclosure requirements 4.1 affect them, amongst which are changes in technology. • IFRS 12, “Disclosures of interests in Other entities” for segment assets and liabilities in interim financial (effective date January 1, 2013). IFRS 12 includes statements. Goodwill The actual useful lives may therefore differ from the the disclosure requirements for all forms of interests Goodwill is tested for impairment on an annual basis to estimates of these lives. The Group regularly reviews in Other entities, including joint arrangements, The Group is currently assessing the impact of these determine whether any impairment losses have arisen technological and business sector changes, dismantling associates, special purpose vehicles and Other off new standards and amendments. that should be recognized in the income statement. costs and recoverable amounts in order to update balance sheet vehicles. More specifically, the test is performed by allocating residual useful lives. Such regular updating may entail • Amendments to IFRS 10, “Consolidated financial the goodwill to a cash generating unit and subsequently a change of the depreciation period and consequently a statements”, IFRS 11, “Joint arrangements” and estimating the unit’s fair value. Should the fair value change in the depreciation charged in future years. IFRS 12, “Disclosures of interests in Other entities” of the net capital employed be lower than the carrying (effective date January 1, 2013). These amendments amount of the CGU an impairment loss is recognized provide additional transition relief in IFRSs 10,11 for the allocated goodwill. 4.4 and 12, limiting the requirement to provide adjusted comparative information to only the preceding The allocation of goodwill to cash generating units and Deferred tax assets comparative period. the determination of the fair value of a CGU requires The recognition of deferred tax assets is based on estimates to be made that are based on factors that forecasts of future taxable profit. The measurement of • IFRS 13, “Fair value measurement” (effective may vary over time and that could as a result have an future taxable profit for the purposes of determining date January 1, 2013). IFRS 13 aims to improve impact on the measurements made by management whether or not to recognize deferred tax assets consistency and reduce complexity by providing a which might be significant. depends on factors which may vary over time precise definition of fair value and a single source of and which may lead to significant effects on the fair value measurement and disclosure requirements measurement of this item. for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not

54 Financial Review Annual Report 2012 Financial review

4.5 236 million) and Euro borrowings amounting to Euro 18 rate borrowings based on the Group’s perception of Income tax 5. million (equivalent to US$ 24 million). future interest rate movements. In particular, the risk monitored relates to the impact of movements in The companies of the Group are subject to different inancial Risk In certain instances the Group has entered into floating rate indices on the Group’s finance costs. tax legislation. A significant amount of estimates are economic hedging agreements to manage the risk of necessary in order to account for the total tax effects Management fluctuations relating to these financing operations. As of December 31, 2012, 20.5% of the Group’s on the financial statements. The Group has a number In particular, Pakistan Mobile Communication financial liabilities were floating rate liabilities, of operations for which the relevant taxes are difficult Limited (“PMCL”) had borrowings hedged by hedging mainly relating to borrowings of PMCL. Prior to the to estimate and thus has to accrue some tax liabilities 5.1 agreement for US$ 129 million and Euro 18 million Refinancing Plan the Group used certain interest rate based on estimates. Whenever the actual tax expense Financial Risk Factors (equivalent to US$ 24 million) as of December 31, derivatives to hedge movements in interest rates. is different from the estimated, the difference is 2012. Such borrowings were fully hedged by PMCL Subsequent to the Refinancing Plan, the majority of the recorded in the income statement. The Group’s activities expose it to a variety of financial using cross currency swaps pursuant to which interest Group’s long term borrowings are fixed rate. Therefore risks: market risk (including currency risk, fair value payments and principal payments are paid in Pakistani the Group does not use interest rate derivatives. The interest risk and cash flow interest risk), credit risk and Rupee. The Group subsidiaries generally execute Group considers the sensitivity of its finance costs to 4.6 liquidity risk. In particular the Group is exposed to risks their operating activities in their respective functional movements in interest rates. In particular an increase / from movements in exchange rates, interest rates and currencies. Some Group subsidiaries are, however, decrease of 1.0% in interest rates as of December 31, Fair value of derivatives and Other market prices. The Group’s overall risk management exposed to foreign currency risks in connection with 2012, would have resulted in an increase / decrease in financial instruments program focuses on the unpredictability of financial scheduled payments in currencies that are not their finance costs of US$ 11 million. The fair value of financial instruments is determined markets and seeks to minimize potential adverse functional currencies. In general this relates to based on quoted market prices, where available, or effects on the Group’s performance through ongoing foreign currency denominated supplier payables and 5.2.3 on estimates using present values or Other valuation operational and finance activities. Depending on the receivables. The Group monitors the exposure to techniques. Those techniques are significantly affected risk assessment, the Group uses selected derivative foreign currency risk arising from operating activities Price risk by the assumptions used, including discount rates hedging instruments. The management has overall and, where relevant, enters into hedging transactions The Group has limited exposure to equity securities and estimates of future cash flows. Where market responsibility for the establishment and oversight of the in order to manage the exposure. price risk on investments held by the Group. prices are not readily available, fair value is based on group’s risk management framework. either estimates obtained from independent experts or As described further in “Credit Risk”, the Group 5.2.4 quoted market prices of comparable instruments. has provided loan facilities to Globalive Wireless Credit Risk 5.2 Management Corp which are denominated in CAD. Market Risk The Group considers that it is not exposed to major 4.7 As of December 31, 2012, if the functional currencies concentrations of credit risk in relation to trade had weakened / strengthened by 10% against the receivables. However, credit risk can arise in the Provisions and contingencies 5.2.1 US$, the Euro and CAD, with all Other variables event of non-performance of counterparty, particularly In recognizing provisions the Group analyses the extent Foreign exchange risk held constant, the translation of foreign currency in relation to credit exposures for trade and Other to which it is probable that a liability will arise from receivables and payables would have resulted in a receivables, financial instruments and cash and disputes with employees, suppliers and third parties The Group operates internationally and is exposed decrease/ increase in profit for the year (after tax) of cash equivalents. The Group considers that the and in general the losses it will be required to incur to foreign exchange risk arising when its business US$ 156 million, mainly relating to US$ denominated concentration of credit risk with respect to trade as a result of past obligations. The definition of such transactions are in currencies Other than its functional borrowings. Additionally, the Group has investments receivables is limited given that the Group’s customer provisions entails making estimates based on currently currency. The main currencies to which the Group is in foreign operations, whose net assets are exposed to base is largely pre-paid subscribers. Post paid known factors which may vary over time and which exposed are the US Dollar, the Canadian Dollar and the foreign currency translation risk. Currency exposure to subscribers generally represent a small portion of the could actually turn out to be significantly different from Euro. such risk is not hedged. subscriber base and therefore the credit exposure is those referred to in preparing the financial statements. limited. In addition, the Group tries to mitigate credit In general the Group’s subsidiaries are encouraged to 5.2.2 risk by adopting specific control procedures, including obtain financing in their functional currency in order assessing the credit worthiness of the counterparty and to have a natural hedge of the exchange rate of such Cash flow and fair value limiting the exposure to any one counterparty. financing. As some transactions are executed in interest rate risk foreign currencies, and in particular in US$, CAD and Credit risk relating to cash and cash equivalents, Euro, the Group may be subject to the risk of exchange The Group is exposed to market risks as a result of derivative financial instruments and financial deposits rate fluctuations. changes in interest rates particularly in relation to arises from the risk that the counterparty becomes borrowings. Borrowings issued at floating rates expose insolvent and accordingly is unable to return the As of December 31, 2012 the Group’s borrowings the Group to cash flow interest rate risk. Borrowings deposited funds or execute the obligations under the included US$ borrowings amounting to US$ 4,075 issued at fixed rates expose the Group to fair value derivative transactions as a result of the insolvency. million, PKR borrowings amounting to PKR 35,922 interest rate risk. The basic strategy of interest rate To mitigate this risk, wherever possible the Group million (equivalent to US$ 370 million), BDT borrowings risk management is to balance the debt structure conducts transactions and deposits funds with financial amounting to BDT 18,797 million (equivalent to US$ with an appropriate mix of fixed and floating interest institutions with a minimum of investment grade rating.

56 Financial Review Annual Report 2012 Financial review

The Group is exposed to credit risk relating to financial After considering such losses and the previously December 31, 2011 carrying ExpecteD less than 1 between 1 More than 5 receivables as follows: explained impairment, an amount of US$ 756 million Liabilities amount cash flows year and 5 years years is recorded in financial receivables. (see Note 22 (*) • During 2008 the Company entered into two loan “Other financial assets” for further details). Liabilities due to banks 828 906 529 376 1 agreements to provide a total amount of CAD 508 Bonds 238 294 55 239 - million to Globalive Wireless Management Corp In general the remaining Other receivables and Shareholders loans 2,912 3,618 - 3,618 - (“GWMC”), a subsidiary of the associate Globalive financial receivables included in financial assets relate Other borrowings 58 59 24 32 3 Investment Holdings Corp (“Globalive”). During to a variety of smaller amounts due from a wide range Telecommunication license 2009, 2010, 2011 and 2012 further loans were of counterparties, therefore, the Group does not payable 190 242 97 101 44 provided and as of December 31, 2012 the amount consider that it has a significant concentration of credit Trade payables 738 738 738 - - outstanding under such loan agreements, including risk except for the ones mentioned above. accrued interest, was CAD 1,790 million (equivalent 4,964 5,857 1,443 4.366 48 to US$ 1,804 million). 5.3 * Expected cash flows are the gross contractual undiscounted cash flows including interest, charges and Other fees. The loans were primarily provided to GWMC to fund Liquidity Risk the acquisition of spectrum licenses in Canada. The The table below analyses the group’s derivative financial instruments into relevant maturity groupings based on the licenses were awarded to GWMC during March 2009 remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are by Industry Canada and GWMC launched operations The Group monitors and mitigates liquidity risk arising the contractual undiscounted cash flows. in December 2009. During the start-up phase of from the uncertainty of cash inflows and outflows by operations Globalive has incurred losses and as maintaining sufficient liquidity of cash balances as well CARRYING EXPECTED CASH LESS THAN 1 BETWEEN 1 AND a result the Group’s share of losses exceeds the as undrawn credit lines and by diversifying its sources December 31, 2012 AMOUNT FLOWS (*) YEAR 5 YEARS carrying value of the investment. of finance. In general, liquidity risk is monitored at entity level whereby each subsidiary is responsible for Cash outflow / (cash inflow) The Group’s share of the excess losses of Globalive managing and monitoring its cash flows and rolling Foreign exchange derivatives (58) (59) (56) (3) compared to the carrying value of the investment liquidity reserve forecast in order to ensure that it Total (58) (59) (56) (3) have been disclosed together with the long term has sufficient committed facilities to meet its liquidity receivable. During the year, the Group performed needs. a reorganization of the GWMC holding. As part of the reorganization, an independent appraisal was The table below analyses the group’s financial As of December 31, CARRYING EXPECTED CASH LESS THAN 1 BETWEEN 1 AND performed, as a result of which the receivable was liabilities into relevant maturity groupings based on 2011 AMOUNT FLOWS (*) YEAR 5 YEARS impaired by USD$ 344 million, accordingly the the remaining period at the balance sheet to the Cash outflow / (cash inflow) amount of the accumulated loss and impairment contractual maturity date. The amounts disclosed in Foreign exchange derivatives (61) (78) (5) (73) recorded as of December 31, 2012 was CAD 1,040 the table are the contractual undiscounted cash flows. million (equivalent to US $ 1,048 million). Total (61) (78) (5) (73)

* Derivative cash flows for interest rate derivatives and foreign exchange derivatives represent the net cash flow from the relevant swap transaction as such deriva- tives are net settled. Cash inflow and cash outflow for Other derivative instruments are shown separately as such derivatives are gross settled.

ExpecteD December 31, 2012 carrying cash flows less than 1 between 1 More than 5 Liabilities amount (*) year and 5 years years Liabilities due to banks 672 738 470 268 - Bonds 256 289 188 101 - Shareholders loans 3,765 4,496 - 4,496 - Other borrowings 65 90 24 66 - Telecommunication license payable 145 174 85 60 29 Trade payables 710 710 710 - - 5,613 6,497 1,477 4,991 29

58 Financial Review Annual Report 2012 Financial review

5.4 an unfavorable effect on the financial activities of the • Segment capital expenditure is the total cost Capital risk management Group and on the ability to receive funds from the incurred during the period to acquire property, plant subsidiaries. 6. and equipment, and intangible assets Other than The Group’s objectives when managing capital are to Revenue generated by the majority of the Group goodwill. safeguard the Group’s ability to continue as a going subsidiaries is expressed in local currency. The Group Segment reporting concern in order to provide returns to shareholders expects to receive most of this revenue from its • The Mobile Telecommunication business in Egypt and to maintain an optimal capital structure to reduce subsidiaries and therefore it relies on their ability to be The chief operating decision-maker has been identified and Tunisia, relate to the operations of ECMS and the cost of capital. In order to maintain or adjust the able to transfer funds. as the board of directors of the Group. The board Orascom Telecom Tunisia S.A. respectively, which capital structure, the Group may, among Other things, of directors reviews the Group’s internal reporting were both disposed of in 2011, Accordingly these adjust the amount of dividends paid to shareholders, The regulations in the various countries where the in order to assess its performance and allocate have no income statement or asset disclosures for return capital to shareholders through share buyback subsidiaries operate could reduce the ability to pay resources, mainly from a geographical perspective, of the year ended December 31, 2012. transactions, issue new shares or sell assets to interest and dividends and to repay loans, credit the mobile telecommunication business. Management reduce debt. instruments and securities expressed in foreign has determined the reportable operating segments currency through the transfer of currency. In addition, according to the information analyzed periodically by in some countries it could be difficult to convert large the board of directors as follows: 5.5 amounts of foreign currency due to central bank regulations. The central banks may amend regulations • Mobile telecommunication business in Algeria; Other risks in the future and therefore the ability of the Company to receive funds from its subsidiaries may be restricted. • Mobile telecommunication business in Pakistan; 5.5.1 Political and economic risk • Mobile telecommunication business in Bangladesh; in emerging countries • Other GSM which comprises the mobile A significant amount of the Group’s operations are telecommunication businesses in Central and South conducted in Algeria and Pakistan. The operations Africa; and of the Group depend on the market economies of the countries in which the subsidiaries operate. In • Other Telecom service (Non GSM Service) which particular, these markets are characterized by includes Other territories in which the Group economies that are in various stages of development or operates as a mobile telecommunication operator are undergoing restructuring. Therefore the operating and Other services. results of the Group are affected by the current and future economic and political developments in these For the years ended December 31, 2011, management countries. also considered the Mobile telecommunication businesses in Egypt and Tunisia as separate reportable In particular, the results of operations could be operating segments. As these businesses were unfavorably affected by changes in the political or disposed of in 2011, they are no longer included within governmental structures or weaknesses in the local the disclosures. The Group reports on operating economies in the countries where it operates. These segments which are independently managed. The changes could also have an unfavorable impact board of directors assesses the performance of such on financial condition, performance and business operating segments based on: prospects. • Total revenues

5.5.2 • EBITDA, defined as profit for the period before income tax expense (or if applicable profit from Regulatory risk in emerging countries continuing operations for the period before Due to the nature of the legal and tax jurisdictions in income tax expense), gains (losses) on disposal the emerging countries where the Group operates, it is of associates, share of profit (loss) of associates, possible that laws and regulations could be amended. foreign exchange gains (losses), financial expense, This could include factors such as the current tendency financial income, disposal of non-current assets, to withhold tax on the dividends of these subsidiaries, impairment charges, depreciation and amortization receiving excessive tax assessments, granting of and net unusual capital loss. relief to certain operations and practices relating to foreign currency exchange. These factors could have

60 Financial Review Annual Report 2012 Financial review

The information provided to the board of directors is measured consistently with that of the financial statements.

Financial expense - previous (2) (95) - - (51) (8) (2) (381) 3 (536)

period g n thers n ui n GSM) Net Foreign exchange gain / (loss) (1) (22) - - 7 (3) 2 (57) - (74) t

n - current period elecom No isia & O ti n As of December 31, 2012 T g yp gladesh gs u eratio n

solidated Net Foreign exchange gain / (loss) E n n

ther GSM (7) (28) - - (55) (7) 2 (55) - (150) A lgeria T n

a - previous period Pakista ices ( Op o O ther v B C D isco n O Share of profit (losses) of Associ- ser H oldi ates - current period ------(103) - (103)

Total segment Share of profit (losses) of Associ------(135) - (135) revenue - current period 1,841 1,133 - - 554 91 8 - - 3,627 ates - previous period

Total segment revenue - previous Impairment of financial assets ------(344) - (344) period 1,860 1,134 - - 511 233 189 - (291) 3,636 current period

Impairment of financial assets - EBITDA - current period 1,094 489 - - 192 33 (6) (47) - 1,755 prior period ------(22) - (22)

Other non-operating costs - current EBITDA - previous period 1,051 402 - - 170 109 21 17 (123) 1,647 period - - - - - (3) - (74) - (77)

Depreciation and amortization - Other non-operating costs - prior ------current period (243) (265) - - (174) (16) (1) (6) - (705) period

Depreciation and amortization - Profit (Loss) Before Income Tax - 852 128 - - (39) 5 (8) (890) - 48 previous period (314) (284) - - (151) (31) (9) (7) 23 (773) current period

Impairment charges - current Profit (Loss) Before Income Tax - 728 7 (42) 935 (95) 123 - (511) (986) 159 period - - - - (12) - - - - (12) previous period

Impairment charges - prior period - - - - (10) - - - - (10) Total assets - current period 3,736 1,602 - - 1,181 213 42 1,350 - 8,124

Gains (losses) on disposal of non- Total assets - previous period 2,378 1,341 - - 490 174 46 3,526 - 7,955 current assets - current period - (6) - - (6) - (3) - - (15)

Gains (losses) on disposal of non- Capital expenditure - current 55 176 - - 119 18 - 19 - 387 current assets - previous period (3) 2 (42) 935 - 57 2 - (893) 58 period

Capital expenditure - previous Financial income - current period 3 5 - - 2 (1) - 68 - 77 period 40 261 - - 409 26 78 2 - 816

Financial income - previous period 2 10 - - 2 3 5 62 (4) 80 • Holding and Other mainly represent income and expense relating to activities provided from the holding and Other companies. These represent mainly management fees and revenue as a result of supporting activities pro- vided by Orascom Telecom Holding. Financial expense - current period (1) (73) - - (48) (5) - (327) - (454)

There were no intersegment revenues recorded in 2012 or 2011. The following table provides a breakdown of revenue and Other income by product and service:

Product and services 2012 2011

Mobile 3,619 3,599 Fixed - line and Internet 8 37 Other income 40 30 Total revenue and Other income 3,667 3,666

62 Financial Review Annual Report 2012 Financial review

7. 9. Assets and liabilities Purchases and services classified as held for sale and discontinued IN MILLION OF US$ 2012 2011 operations Interconnection traffic 318 336 2012 result of the Demerger. The results of operations Telephony cost 301 269 In 2012 there are no assets and liabilities classified as relating to the Spin-Off Assets have been classified as Customer acquisition costs 202 203 held for sale or discontinued operations. discontinued operations in 2011. Maintenance costs 154 161 2011 Discontinued Operations Orascom Telecom Tunisia S.A. Utilities 137 137 Discontinued operations in 2011 relate to the Spin-Off In November 2010, the Company announced that it had Mobile Finish Good Purchases 62 101 Assets and Orascom Telecom Tunisia S.A. (“OTT”). entered into a share purchase agreement with Qatar Advertising and promotional services 94 93 Telecom Q.S.C., pursuant to which the Company sold Rental of civil and technical sites 76 74 Spin Off Assets its entire 50% shareholding of OTT for a total cash Other leases and rentals 31 37 As described in Note 2, during November and consideration of US$ 1.2 billion. The transaction was Rental of local network 32 36 December 2011 the Company transferred its completed on January 2, 2011. shareholdings in the Spin-Off Assets to OTMT as a Consulting and professional services 26 31 Raw, ancillary and consumable materials and goods 11 12 The following provides a breakdown of discontinued operations for the years indicated: National and international roaming 9 9 Other service expenses 83 101 For the year ended December 31, Carrying Expected cash Less than 1 (In millions of US$) amount flows (*) year Total 1,536 1,600

Revenues 291 - 291 Expenses (193) - (193) Share of profit/(loss) from associates (42) - (42) Profit before tax from discontinued operations 56 - 56 10. Income tax (4) - (4) Profit after tax from discontinued operations 52 - 52 Other expenses Gain from disposal of OTT - 930 930 (In millions of US$) 2012 2011 Income tax on gains - (237) (237) Profit from discontinued operations 52 693 745 Promotion and gifts 62 81 Annual contributions for licenses 31 31 Provisions for risks and charges 6 17 Write down of current receivables and liquid assets 21 17 8. Other operating expenses 17 29 Revenues Total 137 175

(In millions of US$) 2012 2011

Revenues from services Telephony services 3,179 3,158 Interconnection traffic 390 387 International and national roaming 17 18 Other services 25 29 Total revenues from services 3,611 3,592 Total revenues from sale of goods 16 44 Total 3,627 3,636

64 Financial Review Annual Report 2012 Financial review

11. 12. Personnel costs Depreciation and amortization

(In millions of US$) 2012 2011 (In millions of US$) 2012 2011

Wages and salaries 146 160 Depreciation of property and equipment: Social security 12 8 Plant and machinery 562 616 Pension costs 31 18 Commercial and Other tangible assets 34 33 Other personnel costs 50 58 Buildings 9 13 Total 239 244

Amortization of intangible assets Licenses 100 107 Personnel costs include Board of Directors remuneration of US$ 2 million in 2012 and US $ 3 in 2011. Other intangible assets - 4

Personnel cost includes share based compensation costs of US$ 4 million in 2012 and US$ 3 million in 2011. Total 705 773 Other personnel costs include US$ 15 million in termination benefits as a result of corporate re-structuring at OTH.

The table below provides a breakdown of the number of employees as of December 31:

Impairment charges amounting to US$ 12 million (in number of employees) 2012 2011 13. in 2012, (2011 US$ 10 million) mainly relate to the Senior management 175 156 impairment of property and equipment (plant and machinery) in Bangladesh. Middle management 897 1,012 Impairment charges Staff 10,747 10,781 Total 11,819 11,949

The table below provides a breakdown of the average number of employees for the years ended December 31, 2012 and 2011:

(in number of employees) 2012 2011

Senior management 166 189 Middle management 955 957 Staff 10,764 11,268 Total 11,885 12,414

66 Financial Review Annual Report 2012 Financial review

15.1 15.3 14. Financial income Interest on shareholders loan Disposal of non current assets Interest income decreased in 2012 compared to 2011 a In 2011, VimpelCom provided two shareholders loans result of a decrease in interest income on deposits, due to the Group to refinance certain financial liabilities. During the year ended 2012, OTH disposed of non- The Company has disposed during the second quarter to the decrease in the deposits balance during the year These shareholders loans are repayable in 2014 and current assets generating losses of US$ 15 million, of 2011 Powercom against the debt related to it, (See Note 22). bear fixed rates of interest of 9.50% which is payable mainly relating to disposals of property and equipment generating a net gain amounting to US$ 58 million. in kind prior to maturity. During the year ended in Pakistan and Bangladesh amounted to US$ 13 million These losses were not classified as losses from December 31, 2012, a further facility of US$ 2,500 and losses from disposals of Ring Tunisia companies discontinued operation as they are not representing a 15.2 million was provided by VimpelCom which bears amounted to US $ 2 million. separate major line of business or geographic area of interest at 12.50%. For the year ended December 31, operation. Financial expense 2012, interest accrued on such loans amounted to US$ 322 million. Refinancing Plan

As a result of the Refinancing Plan in 2011, (see also Note 2 for further details): 15. • the unamortized portion of the arrangement fees (US$ 74 million) relating to the Senior Facility, the Net financing costs Equity Linked Notes and the OTH High Yield Notes has been recognized in the income statement (in million of US$) 2012 2011 upon the extinguishment of the relevant financial instruments; Interest income – deposits 9 15 Other interest income 68 65 • the Group incurred early repayments fees for US$ 30 million in relation to the equity linked notes due 2013 Financial income 77 80 issued by Orascom Telecom Oscar S.A.; Interest on bonds (29) (76) Interest on bank borrowings (81) (79) • interest rate derivatives were entirely extinguished Interest on shareholders loans (323) (146) and the cumulative gains and losses which had been Refinancing Plan - (150) recognized in cash flow hedge reserves, amounting Fair value losses on derivatives - (65) to US$ 46 million, were reclassified from equity to the income statement. Other financial expenses (21) (20) Financial expense (454) (536) Foreign exchange losses, net (79) (142) Fair value gains/(losses) on foreign exchange derivatives 5 (8) Net foreign exchange losses (74) (150) Net financing costs (451) (606)

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16. 18. Share of profit and loss Other non-operating of associates costs

Share of loss of associates in 2012 and 2011 includes and indirect interests, the Group holds 65.4% of the Other non-operating costs mainly relate to a dispute license fees to foreign governments on which a 32% the investment in Globalive Canada Investment outstanding shares and holds 33.2% of the voting between OTH and the Egyptian tax authorities involving Egyptian withholding tax was due. The total estimated Holdings Corp. and Globalive Canada Holdings Corp. rights. The Group has significant influence over this liabilities for withholding taxes on certain investments liability, including penalties is US$ 77 million, of which (collectively “Globalive”). The Group holds a 65.4% investment but does not have control over the financial made by OTH during the tax years of 2000 to 2004. US$ 31 has already been paid. investment in Globalive which comprises a combination and operating policies of Globalive. Therefore the The tax authority alleges that certain investments of voting and non-voting rights. Considering direct investment is equity accounted. made by OTH in its subsidiaries were payments of

The following table provides selected financial information of the Group’s associates as of December 31, 2012 and 2011 and for each of the years then ended. 19.

(In millions of US$) 2012 2011 Income tax expense

Current asset 110 91 (IN MILLIONS OF US$) 2012 2011 Non-current assets 964 883 Current liabilities 119 209 Current income tax expense 285 369 Non-current liabilities 1,624 1,467 Deferred taxes (32) (126) Revenue 305 206 Income tax expense 253 243 Net loss (354) (372) % shareholding 65.4% 65.4% Current income tax receivables and liabilities in the consolidated balance sheet are as follows: Proportional share of net loss (231) (243) (IN MILLIONS OF US$) 2012 2011 Elimination of intercompany transactions 132 112 Current income tax receivable 64 99 Equity accounting and Other adjustments (4) (4) Current and non current income tax liabilities (105) (337) Share of loss in associate (103) (135)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

17. (IN MILLIONS OF US$) 2012 2011 Impairment of financial Profit/(loss) before income tax 48 159 assets Tax calculated at Company's income tax rate 12 40 Different income tax rates in subsidiaries (2) (120) Impairment of financial assets in 2012 amounting to particular, pursuant to the separation agreement, Theoretical income tax for the year 10 (80) US$ 344 million relates to impairment of the financial an amount of US$ 72 million was recognized as the Permanent differences 168 200 receivable from GWMC, following an independent receivable due from OTMT. The receivable balance was Unrecognized deferred tax for tax losses 59 81 appraisal of the value of such asset, see Note 22. adjusted pursuant to a memorandum of understanding Reversal of unused deferred tax assets 10 23 Impairment of financial assets in 2011 relates to a among the various parties and as a result a settlement settlement loss on the receivable from OTMT. In loss of US$ 22 million was recorded. Minimum tax expense 6 14 Adjustments in respect of prior years - 4 Other differences - 1

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20. Property and equipment

Commercial and Additions to property and equipment in 2012 mainly Land and Plant and Assets Under relate to assets under construction and commercial (In millions of US$) Buildings machinery Other tangible Construction Total assets and Other tangible asset investments relating to new base stations in Pakistan (Pakistan Mobile Cost Telecommunications Limited), Bangladesh (Orascom As of January 1, 2012 123 5,389 240 451 6,203 Telecom Bangladesh Limited), Algeria (Orascom Additions 9 23 46 292 370 Telecom Algeria) and Burundi (U-Com Burundi S.A.). Disposals (5) (76) (5) (1) (87) These investments are mainly driven by the expansion Exchange differences (8) (231) (12) (40) (291) of the business, increased capacity and the change in GSM technology. Reclassifications - 347 1 (365) (17)

As of December 31, 2012 119 5,452 270 337 6,178 Disposals of property and equipment in 2012 includes Depreciation and impairment losses the sale of the entire 26th floor – located at 2005A As of January 1, 2012 70 3,030 178 23 3,301 – Nile City Towers - Corniche El Nil, Ramlet Beaulac Depreciation for the year 9 562 34 - 605 - 11221 Cairo to OTMT, pursuant to the settlement agreement. Disposals (3) (47) (5) - (55) Impairment losses - 10 - 2 12 Change in scope of consolidation in 2011 relates to Exchange differences (5) (144) (11) (19) (179) the property and equipment of the Spin-Off Assets and As of Dec. 31, 2012 71 3,411 196 6 3,684 Powercom. See Note 7 for further details.

Net book value as of Dec. 31, 2011 53 2,359 62 428 2,902 Impairment losses in 2012 of US$ 12 million and 2011 of US$ 10 million relate the impairment of plant and Net book value as of Dec. 31, 2012 48 2,041 74 331 2,494 equipment in Bangladesh. Property and equipment pledged as security for bank borrowings amount to US$ Commercial and 1.0 billion as of December 31, 2012 (US$ 1.1 billion as Land and Plant and Assets Under of December 31, 2011) and primarily relate to securities (In millions of US$) Buildings machinery Other tangible Construction Total assets for borrowings of PMCL.

Cost In the year ended December 31, 2012 the Group did As of January 1, 2011 135 5,507 242 807 6,691 not capitalize any borrowing costs (in 2011 the Group Additions 6 73 27 488 594 capitalized borrowing costs of US$ 200 thousand, Change in the scope of consolidation (8) (221) (17) (388) (634) relating to the acquisition of property and equipment). Disposals (6) (17) (7) (35) (65) The Group leases various assets under non-cancelable Exchange differences (5) (326) (12) (40) (383) finance lease agreements. As of December 31, 2012 Reclassifications 1 373 7 (381) - the Group had assets under finance lease with net book As of Dec. 31, 2011 123 5,389 240 451 6,203 value of US$ 26 million (US$ 24 million as of December 31, 2011) mainly relating to a sale and lease back of Depreciation and impairment losses the premises at Nile City Towers (headquarter offices in As of January 1, 2011 69 2,663 168 28 2,928 Cairo), as well as minor finance leases for vehicles and equipment. Depreciation for the year 13 631 35 - 679 Change in the scope of consolidation (3) (111) (12) (4) (130) Disposals (5) (5) (4) - (14) Impairment losses - 9 - 1 10 Exchange differences (4) (157) (9) (2) (172) As of December 31, 2011 70 3,030 178 23 3,301

Net book value as of Dec. 31, 2010 66 2,844 74 779 3,763 Net book value as of Dec. 31, 2011 53 2,359 62 428 2,902

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Additions to intangible assets in 2012 mainly relate the expected cash flows, resulting from business plans 21. to the acquisition of software licenses in Algeria and approved by the respective Board of Directors, using Intangible assets Pakistan. Additions to Others relates to intangible the post-tax weighted average cost of capital (WACC) assets in progress in Bangladesh. as the discount rate. More specifically, the value in use was calculated on the basis of the discounted cash The Goodwill generated by the change in the scope of flows resulting from the five year business plan, using (In millions of US$) Licenses Goodwill Others Total consolidation relates to the acquisition of MedCable in a growth rate of 1% and a discount rate equal to the 2012. weighted average cost of capital, calculated using the Cost capital asset pricing model. As of January 1, 2012 1,517 945 35 2,497 Intangible assets pledged as security for bank Additions 13 - 4 17 borrowings amount to US$ 1.0 billion as of December Fair value less costs to sell (“FVLCTS”) was calculated Change in scope of consolidation - 17 - 17 31, 2012 (US$ 1.1 billion as of December 31, 2011) and to assess the recoverability of the Algeria business, Disposals (1) - - (1) primarily relate to securities for borrowings of PMCL. since, as more fully discussed in Note 27, the Company is engaged in without prejudice settlement Reclassifications 4 - (5) (1) discussions with the Algerian Government, including Currency translation differences (51) (31) - (82) 21.1 the exploration of a possible sale of an interest in As of December 31, 2012 1,482 931 34 2,447 OTA to an Algerian state entity. Costs to sell are Impairment tests for goodwill immaterial in the context of this valuation. Although Amortization and impairment losses Goodwill is allocated to the individual CGU which the settlement discussions are ongoing and the As of January 1, 2012 817 105 17 939 reflects the minimum level at which the units are terms of any settlement are uncertain, the Company monitored for management control purposes. determined that the valuation placed on the business Amortization for the year 100 - - 100 by the Company and the Algerian government, Disposals (1) - - (1) The carrying amount as of December 31, 2012 and pursuant to the settlement discussions, was the best Currency translation differences (34) (5) (1) (40) 2011 was subject to an impairment test to compare the available evidence of FVLCS. This valuation exceeded As of December 31, 2012 882 100 16 998 carrying amount with value in use and the recoverable the Algeria segments book value. amount. During 2012 and 2011 no impairments were identified. Value in use is determined by discounting Net book value as of December 31, 2011 700 840 18 1,558 Net book value as of December 31, 2012 600 831 18 1,449

The following table provides an analysis of goodwill by segment: (In millions of US$) Licenses Goodwill Others Total

Cost AS OF DECEMBER 31, 2012 CENTRAL AND SOUTH (IN MILLIONS OF US$) ALGERIA PAKISTAN BANGLADESH AFRICA AND Other TOTAL As of January 1, 2011 1,358 1,014 51 2,423 Additions 287 - 5 292 GSM 477 275 16 62 830 Change in the scope of consolidation (101) (50) (9) (160) Telecom Services - - - 1 1 Reclassifications 7 - (7) - 477 275 16 63 831 Currency translation differences (34) (19) (5) (58) As of December 31, 2011 1,517 945 35 2,497

Amortization and impairment losses AS OF DECEMBER 31, 2011 ALGERIA PAKISTAN BANGLADESH CENTRAL AND SOUTH TOTAL As of January 1, 2011 760 151 25 936 (IN MILLIONS OF US$) AFRICA AND Other Amortization for the year 111 - 4 115 GSM 485 273 17 64 839 Change in the scope of consolidation (28) (44) (9) (81) Telecom Services - - - 1 1 Currency translation differences (26) (2) (3) (31) 485 273 17 65 840 As of December 31, 2011 817 105 17 939

Net book value as of December 31, 2010 598 863 26 1,487 The movement in goodwill in 2012 includes US$ 26 million from foreign Net book value as of December 31, 2011 700 840 18 1,558 currency translation movements.

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Derivative financial instrument 22. 2012 2011 Other financial assets (IN MILLIONS OF US$) ASSETS LIABILITIES ASSETS LIABILITIES

Foreign exchange derivatives 58 - 61 - 2012 2011 Total 58 - 61 - Non- Non- Less non-current portion (In millions of US$) current Current Total current Current Total Foreign exchange derivatives 2 - 57 - Financial receivables 777 2 779 964 52 1,016 Current portion 56 - 4 - Derivative financial instruments 2 56 58 57 4 61 Deposits 1 32 33 1 160 161 Financial assets held for trading - - - - 4 4 22.2 Financial assets held to maturity - 4 4 - - - Foreign exchange derivatives Financial assets available for sale 1 51 52 2 10 12 Foreign exchange derivatives primarily relate to the economic hedge of PMCL. The cross currency swap relates to certain 781 145 926 1,024 230 1,254 borrowings of PMCL, which are swapped from US$ to PKR and from Euro to PKR, whilst the associated interest is swapped from LIBOR to KIBOR and from Euribor to KIBOR. The changes in the fair value of the derivative are recognized in foreign exchange loss / gain in the income statement. As of December 31, 2012 the fair value of this derivative asset was US$ 58 million (US$ 61 as there is a constructive obligation on the group to 22.1 million as of December 31, 2011). cover the associates’ obligation. These losses were Financial Receivables deducted from the long term receivable. As of December 31, 2012 and 2011 financial During the year ended December 31, 2012 the receivables mainly relate to loans provided to Globalive accumulated losses of associates deducted from long 22.3 Management Corp (“GWMC”), a subsidiary of Globalive term receivables amounted to US$ 720 million (CAD Deposits (see Note 16 “Share of loss of associates”). 715 million). Deposits primarily relate to letters of guarantee and Other restricted cash held as security for the performance of Group obligations. During 2008 the Company entered into two loan Pursuant to its annual business plan cycle, in the agreements with Globalive Management Corp fourth quarter, management reassessed the long term Deposits with amounts of US$ 33 million as of December 31, 2012 (US$ 161 million December 31, 2011) are (“GWMC”, a subsidiary of Globalive) to borrow an business plan of GWMC. Subsequently, an impairment pledged or blocked as security against related bank borrowings or Others commitments. amount of up to CAD 508 million. Both loans are test was deemed necessary, given the change in non-revolving term loans bearing interest of Libor plus GWMCs business plan resulting from the reassessment. 18%. In 2009 the loan agreements were amended The following table shows the ageing analysis of financial receivables and deposits as of December to increase the facility to CAD 608 million and were The recoverable amount for GWMC was determined 31, 2012 and 2011: further amended during 2010 to increase the facility based on a value in use calculation using cash flow to CAD 970 million. As of January 1, 2011 the interest projections covering 10 years. A 10 year period was rate was reduced to Libor plus 10.8%, and the total deemed appropriate since the business will be in a 2012 2011 principal amount (not including accrued interest) start-up phase for several years, while it purchases FINANCIAL FINANCIAL outstanding under this facility amounted to US$ 1,037 and implements the additional spectrum necessary to (IN MILLIONS OF US$) DEPOSITS RECEIVABLES DEPOSITS RECEIVABLES million (CAD 1,059 million). accommodate current and future handset technologies. Based on the impairment test, the recoverable amount Not past due 33 779 161 1,016 During 2012, a further US$ 161 million (equivalent was lower than the book value of the investment in Past due 0-30 days - - - - to CAD 161 million) was advanced to GWMC, after GWMC .The resulting impairment charge amounted Past due 31-120 days - - - - considering foreign exchange differences of US$ 20 to US$ 344 million (CAD 344 million). In determining Past due more than 150 days - - - - million, (negative CAD 12 million) the total principal the recoverable amount for the investment in GWMC, 33 779 161 1.016 amount outstanding at December 31, 2012 amounted a discount rate of 11.4% was used, which was to US$ 1,218 million (CAD 1,208 million). determined using the methodology described under “ As of December 31, 2012 the amount outstanding Use of Estimates”. under such loan agreements, including accrued After considering the share of the accumulated losses DECEMBER 31, DECEMBER 31, interest, amounted to US$ 1,804 million (CAD 1,790 and the previously explained impairment, the amount COMPANY NAME % OWNERSHIP 2012 2011 million). Given that the Group’s share of losses is in recorded in financial receivables resulting from the Lingo Media Corporation 23% 1 1 excess of the carrying value of the investment, given facility is US$ 756 million, (CAD 750 million). that the net book value of the investment has been Other investments - 51 11 written down, the group continue recording the losses 52 12

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The movement of deferred tax assets and liabilities during the year, without taking into consideration any offsetting is provided 5 million. Based on an assessment of the contractual 22.4 in the tables below: rights, management does not consider that it has Lingo Media Corporation significant influence over the company. Therefore, In August 2008, the Company entered into a the investment has been recorded as a financial asset Deferred tax liabilities Depreciation and Unremitted Fair Other Total subscription agreement to acquire 2,857,143 common available for sale and measured at fair value. As (In millions of US$) amortization earnings value shares of Lingo Media Corporation, a media entity of December 31, 2012, 2011, the fair value of the As of December 31, 2011 204 - 18 4 226 focusing on online advertising. The investment investment was US$ 1 million. represents approximately 23% of the total share Charged / (credited) to the income statement (8) - (18) 1 (25) capital and existing voting rights. The Company also Currency translation differences (6) - - - (6) purchased share warrants to acquire up to 2,142,857 22.5 As of December 31, 2012 190 - - 5 195 shares of this entity. The warrants can be exercised from the date of the agreement for a period of two Other investments years, at an increasing price from US$4 up to US$8; Other investments mainly relate to government the warrants were expired without exercise. The total treasury bills and investment bonds purchased by

n t purchase price of the shares and warrants was US$ PMCL in Pakistan. n

d n se

Deferred tax assets n p e losses otal a F air assets T

(In millions of US$) ccrued v alue OTHER reciatio p airme ex A ax p of m T e I D amortizatio n

As of December 31, 2011 149 51 5 5 10 - 220 23. Charged / (credited) to the income statement (7) 13 (3) (1) 3 2 7 Deferred taxes Exchange differences (3) (3) - - - - (6) As of December 31, 2012 139 61 2 4 13 2 221 Deferred income tax assets and liabilities are offset due to the same tax authority. The following table when there is a legally enforceable right to offset provides a reconciliation of deferred tax assets and current tax assets and liabilities and when the deferred liabilities of the Group to the amounts included in the Deferred tax assets on tax losses carry forwards the tax treatment of such expenses, as they might be income tax assets and liabilities relate to income taxes face of the balance sheet. mainly refer to income tax loss carry forwards of the challenged by local tax authorities. Group’s subsidiaries in Pakistan with no expiry date. No liability has been recognized in respect of (In millions of US$) 2012 2011 No deferred tax assets were recognized on income unremitted earnings associated with investments in Deferred tax liabilities, gross 195 226 tax loss carry forwards for some foreign subsidiaries, subsidiaries, branches and associates and interests Deferred tax assets offset (145) (155) mainly Orascom Telecom Bangladesh Limited in joint ventures, where the Group is in a position to (“Banglalink”) and CAT, as it is currently not probable control the timing of the reversal of the temporary Deferred tax liabilities 50 71 that taxable profit will be available in the near future differences and it is probable that such differences will Deferred tax assets, gross 221 220 against which such tax loss carry forwards might be not reverse in the foreseeable future. Deferred tax liabilities offset (145) (155) utilized. Deferred tax assets 76 65 The following table provides a breakdown by estimated Generally the Group does not recognize deferred tax recoverability of recognized deferred tax assets and assets for temporary differences related to accruals liabilities: The movement in the deferred income tax account is as follows: for provisions, due to uncertainties in connection with

(In millions of US$) 2012 2011 As of January 1, 6 170 Deferred tax liabilities Deferred tax assets Charged / (credited) to the income statement (32) (126) (In millions of US$) 2012 2011 2012 2011 Charged directly to equity - 16 within 1 year - 1 8 8 Change in the scope of consolidation - (50) within 1 - 5 years 156 180 186 181 Assets held for sale - - after 5 years 39 45 27 31 Currency translation differences - (4) 195 226 221 220 As of December 31, (26) 6

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24. 25. Trade receivables Other current assets

(In millions of US$) 2012 2011 (In millions of US$) 2012 2011

Receivables due from customers 147 217 Receivables due from tax authority 725 719 Receivables due from telephone operators 107 87 Prepaid expenses 70 67 Receivables due from authorized dealers 7 5 Advances to suppliers 7 7 Other trade receivables 102 11 Other receivables 63 66 Allowance for doubtful receivables (130) (115) Allowance for doubtful current assets (38) (34) Total 233 205 Total 827 825

The following table shows the movement in the allowance for Other current assets:

The following table shows the movement in the allowance for doubtful receivables: (In millions of US$) 2012 2011

(In millions of US$) 2012 2011 At January 1 34 33 Currency translation differences - - At January 1 115 108 Additions (allowances recognized as an expense) - 4 Currency translation differences (5) (4) Reclassifications 4 (3) Additions (allowances recognized as an expense) - 14 At December 31, 38 34 Change in the scope of consolidation 6 (1) Use (3) (3) Reversal - - Reclassifications 3 1 At December 31, 130 115 26. Cash and cash equivalents

The following table shows the ageing analysis of trade receivables as of December 31, 2012 and 2011, net of the (In millions of US$) 2012 2011 relevant provision for doubtful receivables: Bank accounts and deposits 2,025 1,013 Cash on hand 1 1 (In millions of US$) 2012 2011 Total 2,026 1,014

Not past due 92 43 Past due 0-30 days 53 88 Cash and cash equivalents at December 31, 2012 includes US$ 1,844 million (US$ 896 million as of Past due 31-120 days 34 14 December 31, 2011) held in subsidiaries which have regulatory restrictions, contractual restrictions or operate in countries where exchange controls and Other legal restrictions apply and are therefore not Past due 121 - 150 days 4 30 available for general use by the Company. Past due more than 150 days 50 30 Trade receivables 233 205

The maximum exposure to credit risk at the reporting date is the carrying value of the receivable. The Group does not hold any collateral as security.

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28.3 2.5 billion. The credit facility is primarily to finance 3,043 million (L.E. 3,043 million as of December 31, Shareholder loan working capital and investment requirements and each 27. 2011) divided into 5,245,690,620 shares each having a drawdown must be approved by the lender. The loan, par value of L.E. 0.58. As described in Note 2, certain of the Company’s which is repayable in a single payment on maturity Share Capital financial liabilities included mandatory repayment in May 2017, bears fixed rate interest of 12.50% per The shareholders voted an increase in OTH’s authorized clauses in the event of a change of control, which was annum, payable in kind prior to maturity by automatic Authorized and issued share capital and share capital from L.E. 7.5 billion to L.E. 14.0 billion triggered as part of the VimpelCom Transaction. In addition to the principal balance. As of December 31, legal reserves during the April 14, 2011 general meeting, with the May 2011, VimpelCom provided two shareholder loans 2012, the amount outstanding under such facility was issued and paid-in capital remaining unchanged. to the Group to refinance such financial liabilities. The US$ 612 million. As disclosed in note 2, the Demerger was implemented Any future issuances relating to the portion of the shareholder loans are repayable in May 2014 and bear by effectively partitioning the Company into two Company’s authorized share capital being increased a fixed interest rate of 9.5% which is payable in kind separate companies, OTH and OTMT, in accordance pursuant to this resolution will only be undertaken in on maturity. As of December 31, 2012 the amount 28.4 with the demerger guidelines of the Egyptian Financial order to repay debt, will offer customary preemptive outstanding under such loans was US$ 3,153 million Supervisory Authority as per decree no. 124 of the rights to all shareholders, and will be issued at fair (US$ 2,912 million as of December 31, 2011). Other Borrowings year 2010 and the related tax laws. The Demerger market value rather than par value. Other borrowings mainly relates to finance leases and resulted in the reduction of the issued capital of the During 2012 the Company entered into a new five year loans from suppliers. Company via a decrease in the nominal value per Dividends credit facility with VimpelCom for an amount of US$ share. As a result, the aggregate nominal value of shares issued by OTH as of December 31, 2012 is L.E. No dividends were distributed during 2011 or 2012.

28.5 28. Currency Information of Borrowings - n n Borrowings n d aka ee n ar tia T gla p n uro n otal WITHIN US$ yp thers E T a D i R u

(IN MILLIONS OF US$) 1-2 2-3 3-4 4-5 AFTER Pou lgeria g O

ONE TOTAL B Pakista E DECEMBER 31, 2012 YEARS YEARS YEARS YEARS 5 YEARS A YEAR deshi Total borrowings by currency of issue 4,075 24 41 370 236 2 10 4,758 Liabilities to banks 470 94 47 46 10 5 672 Notional amount of currency derivatives (129) (24) - 153 - - - - 496 198 78 30 26 - 828 Borrowings after derivative effect 3,946 - 41 523 236 2 10 4,758 Bonds 188 45 13 10 - 256 of which (after derivative effect): 30 173 35 - - - 238 floating rate borrowings 310 - - 523 236 2 10 1,081 Shareholder loan - 3,153 - - 612 - 3,765 fixed rate borrowings 3,636 - 41 - - - - 3,677 - - 2,912 - - - 2,912 As of December 31, 2011 Other borrowings 25 24 8 3 2 3 65 Total borrowings by currency of issue 3,293 65 44 399 222 2 11 4,036 18 24 6 2 3 5 58 Notional amount of currency derivatives (144) (65) - 209 - - - - Total as of December 31, 2012 683 3,316 68 59 624 8 4,758 Borrowings after derivative effect 3,149 - 44 608 222 2 11 4,036 Total as of December 31, 2011 544 395 3,031 32 29 5 4,036 of which (after derivative effect): floating rate borrowings 237 - - 608 222 2 - 1,069 fixed rate borrowings 2,912 - 44 - - - 11 2,967 28.1 28.2 Liabilities due to Banks Bonds Financial liabilities include secured liabilities of US$ 530 million as of December 31, 2012 and US$ 740 million as of December 31, 2011. In general, the financial liabilities are secured on property and equipment of the relevant The decrease in Liabilities to Banks relates to the The increase in bonds relates to notes issued by PMCL subsidiary, pledged shares and receivables. normal scheduled repayments of borrowing facilities in in Pakistan.Appendix B includes a detailed analysis of accordance with the relevant agreements. Appendix A Bonds as of December 31, 2012. includes a detailed analysis of liabilities due to banks as of December 31, 2012.

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shares purchased by the Company and held as 29. 32. treasury shares or for the purposes of the share based compensation. Diluted earnings per share is calculated Other liabilities Earnings per share by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive Basic and diluted potential ordinary shares. During the period covered 2012 2011 Basic earnings per share is calculated by dividing the by the report, the Company did not have any dilutive Non- Non- profit attributable to equity holders of the Company potential ordinary shares and as such diluted and (In millions of US$) Current current Total Current current Total by the weighted average number of ordinary shares basic earnings per share are equal. outstanding during the year, excluding ordinary Telecommunication license payable 85 60 145 82 108 190 Prepaid traffic and deferred income 135 - 135 139 - 139 Due to local authorities 150 - 150 174 - 174 Profit /(loss) attributable to equity holders of the Company (in million of US$): 2012 2011 Personnel payables 58 27 85 67 19 86 Other 146 23 169 130 40 170 - from continuing operations (205) (84) Total 574 110 684 592 167 759 - from discontinued operations - 745 Weighted average number of shares (in millions of shares) 5,246 5,231 Earnings per share – basic and diluted (in US$) (0.04) 0.13 Telecommunication license payable is mainly related to the Orascom Telecom Bangladesh license, which was renewed in September 2011 for a further 15 years. In accordance with the agreement the fee of BDT 19.8 billion is payable over three years. 33. The commitments as of December 31, 2012 and 2011 are provided in the table below: 30. Commitments Trade payables (In millions of US$) As of December 31, 2012 As of December 31, 2011 Property and equipment 52 90 Total 52 90 (In millions of US$) 2012 2011 Commitments for purchase of property and equipment mainly relate to the Capital expenditure payables 389 396 purchase of tools related to PMCL and Bangladesh. Trade payables due to suppliers 104 141 The following table provides the future aggregate minimum lease payments under Trade payables to telephone operators 82 75 non-cancellable operating leases: Other trade payables 135 126 Total 710 738 (In millions of US$) 2012 2011

Trade payables are all due within one year. Within one year 7 6 Between 1-5 years 2 - 9 6

31. Bangladesh to face value added expected tax claim 34. 30 days of the calendar year. The incentive payable to and US$ 6 million in Ring Group to face expected eligible employees is based on their specific category. Provisions claims and termination benefits for some employees. Share based The average GDR price in the last 30 days of 2012 was US$ 3.04 (US$ 2.75 in 2011). The total expense Current provisions as of 31 December 2012 include Long term provisions relate primarily to provisions compensation recognized in the income statement, within personnel provisions recognized by OTH for expected tax claims for asset retirement obligations in Bangladesh and In September 2011, the remuneration Committee costs was US$ 4 million in 2012 (US$ 3 million in amounting to US$ 63million, US$ 47 million in Pakistan. granted an incentive to eligible employees payable in 2011). The 2012 incentive was paid in January 2013 cash based on the average GDR price during the last whilst the 2011 incentive was paid in January 2012.

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35.1 35.2 35. Transactions with VimpelCom and Transactions with Associates Related party transactions Wind Telecom Group of the Group Transactions with the VimpelCom Group relate to The Group has provided financing to GWMC, an Transactions with subsidiaries, associates, with the Parent Company and its subsidiaries and Other related parties the shareholder loans provided by VimpelCom, as associate of the Group, in connection with the funding are not considered atypical or unusual, as they fall within the Group’s normal course of business and are conducted described in note 28 above. of the acquisition of the spectrum licenses. For further under market conditions that would be performed by independent third parties. details see Note 22 “Other financial assets”. Transactions with Wind Telecom and its subsidiaries The main related party transactions are summarized as follows: mainly relate to management fees charged by the Company and interconnection traffic between the Group and the subsidiaries of Wind Telecom, and particularly Wind Telecomunicazioni SpA. Sale of services Purchase of Interest income/ and goods services and goods (expenses)

(In millions of US$) 2012 2011 2012 2011 2012 2011 35.3 VimpelCom Group Key management compensation VimpelCom Amsterdam Finance B.V. - - - (323) (146) Key management includes executive and non executive directors of the Board of Directors of the VimpelCom Garmeenphone 10 - 28 - - - Company, the Company’s chief financial officer, Other managing directors considered key personnel and the chief executive officers of significant subsidiaries. VimpelCom 46 - 40 - - -

Wind Telecom Group The compensation paid or payable to key management for employee services is shown below: Wind Telecom SpA 10 10 - - - - Wind Telecomunicazioni SpA - 3 - - - - WIS sarl - 12 - 11 - As of December As of December (In millions of US$) 31, 2012 31, 2011 OTSE - - - 3 - - Salaries and Other short-term employee benefits 11 Associates Share based payments 4 3 GWMC 4 2 - - 67 57 ECMS - 8 - - - - Summit technology - - - 6 - - Total 70 35 68 20 (256) (89)

36. against the financial receivable with OTMT. As a result of the acquisition, the group expects to Receivables Borrowings Payables Business combinations reduce costs through synergies between MedCable and the Group’s operations in Algeria. The provisional (In millions of US$) 2012 2011 2012 2011 2012 2011 On November 15, 2012 OTH entered into a sale and goodwill arising from the acquisition amounts to US$ 17 VimpelCom Group purchase agreement with OTMT relating to million. VimpelCom Amsterdam Finance B.V. - - (3,765) (2,912) - - (i) OTH’s purchase from OTMT of 555,000 shares in VimpelCom Garmeenphone 3 - - - 9 - Medcable Ltd (“MedCable”) for a total price of Euro The fair values of the assets acquired, liabilities VimpelCom Telenor 2 - - - - - 100, (ii) the purchase of amounts owed by MedCable assumed and goodwill recognized on the acquisition are to OTMT equal to Euro 12,293,710 (the “MedCable provisional given that the purchase price allocation as Wind Telecom Group Loans”), and, (iii) the transfer of the promissory part of the application of the acquisition method had Wind Telecom SpA 26 16 - - - - notes issued by PMCL to OTV for a total amount of not yet been completed as of the date of these financial Associates Euro 7,706,190 (the “PMCL Promissory Notes”). The statements. Management expects to have the purchase GWMC 16 7 756 953 - - consideration relating to the MedCable price allocation completed within 12 months from the Total 47 23 (3,009) (1,959) 9 - Loans and the PMCL Promissory Notes was offset acquisition date.

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whereby certain expenses have been disallowed. The heads aggregating Rs. 3,254 million (equivalent to US$ 37.4 37. Company has filed appeal before CIR (A) against the 33 M) for the year 2008. The Company has filed the Egyptian tax dispute in relation to order. Appeals up to and including Tax Year 2005 have appeal against the order before CIR (A). The Company license payments during the period Contingent assets and been decided up to the level of the ATIR, whereby, the has also filed Writ petition before High Court and stay assessments were set aside for fresh consideration. Re- against the recovery proceedings has been obtained till 2000-2004 liabilities assessment orders for up to Tax Year 2005 have also the filing of appeal before ATIR. Sales tax authorities The Egyptian tax authorities have conducted a been issued. Against appeals filed by the Company on issued show cause amounting to Rs 389 Million review and assessed taxes of approximately L.E. 2.4 The Group is subject to various legal proceedings and re-assessment orders: (equivalent to US$ 4M) in respect of apportionment of Billion(equivalent to US$ 375 million). relating to alleged claims which arise in the ordinary course of business Input tax. The tax authorities issued order by alleging liabilities for withholding taxes on certain investments due to the nature of the operations of the Group and • For assessment year 1995-1996 to 1999-2000, non-payment of FED amounting to Rs 266 million made by OTH during the tax years of 2000 to 2004. the nature of the markets where the Group operates. substantial relief has been allowed by the ATIR. (equivalent to US$ 3 M) on Connection Charges & The tax authority alleges that certain investments However, appeal effect orders are awaited from tax Equipment Revenue for the years 2002 and 2003. The made by OTH in its subsidiaries were payments of The Group recognizes a provision for losses and authorities. Company has filed the appeal against the order before license fees to foreign governments on which a 32% liabilities when the existence is certain or probable. CIR (A). A writ petition has also been filed before the Egyptian withholding tax was due. As of December 31, 2012 the Company is a party in a • For assessment year 2000-2001 to 2002-2003, the High Court and stay against recovery of tax demand number of legal disputes which resulted from carrying Company and Department have filed the appeal has been granted in this respect. OTH challenged these assessments at the internal out its activities. Based on the legal advice obtained, before ATIR against the decision of CIR (A). tax committee which rejected OTH’s challenge. OTH the Company’s management considers based on The tax authorities issued orders for the years appealed the case to the high appeal committee of the the information available to them at the date hereof • For tax year 2003, department appeal is pending 2007 to 2009 creating aggregate demand of Rs 838 tax authority. that the outcome of these disputes, individually or before ATIR on the issue of taxation of income from million (equivalent to US$ 8.6M on account of FED by in aggregate, should not be material to the Group’s sale of imported equipment and accessories. Further, contending that the company was franchisee of IWCPL. The high appeal committee of the tax authority results (except as Otherwise disclosed). PMCL appeal is pending before CIR (A) on the issue of The Company is in process of filing appeal with (ATIR) rendered its ruling dated May 15, 2012 and the decision brought forward losses. against CIR (A) order. The Company has also filed was notified to OTH on May 23, 2012. Writ petition before High Court and stay against the 37.1 • For tax year 2004, department appeal is pending recovery proceedings has been obtained till the filing The high appeal committee of the tax authority reduced before ATIR on the issue of Salary Commission. of appeal before ATIR.Management of the Company the tax assessment from approximately 2.4 Billion to PMCL tax claims Further, PMCL appeal is pending before CIR (A) on believes that all the above cases will be decided in an amount of approximately L.E. 397 M (equivalent to Up to Tax year 2011, the ACIR has levied tax amounting the issue of brought forward losses. the Company’s favor in the appellate forums as the US$ 62 million).. Rs. 32,568 million (equivalent to US$ 336 million for demands raised against the Company are illegal and The high appeal committee rejected the argument of alleged short payment of tax under section 162/205 For assessment year 1997-1998 and 1998-1999, without lawful authority. the tax authority that investments in existing mobile of the Ordinance. The commissioner Inland Revenue tax authorities levied taxes by alleging that the operators could be treated as license fee payments (Appeals [CIR (A)] has decided the matter against the company had not made tax deductions required while but upheld the assessment of the tax authority where parent Company. The parent Company has filed an making certain payments. Against appeal filed by tax 37.3 it related to OTH first “greenfield” operations in which appeal with appellant tribunal Inland Revenue (ATIR) authorities the issue has been decided against the a new license was granted by a foreign government company by the High Court. Company is contesting the Income tax contingency of LDI (in particular, in relation to OTH’s investment in its DCIR has ordered PMCL to pay Federal Excise Duty issue in the Supreme Court. The Company is contesting income tax deducted subsidiary in Algeria and its former subsidiary in Syria). (FED) on technical services fees accrued in respect of on payments made to foreign inter-connect Tax Year 2010 in an amount of approximately Rs. 574 telecommunication service Operators, with the income OTH has appealed the decision of the high appeal million (equivalent to US$ 6 million). 37.2 tax authorities. The Company believes that the matter committee of the tax authority to the court of first will be decided in its favor. However, in the interest of instance. For the tax year 2009, tax authorities have curtailed Sales tax contingency prudence, it has made a provision of Rs. 2,029 million expenditure claimed by the Company, and raised a Sales Tax Authorities of Azad Jammu & Kashmir (equivalent to US$ 21 million), which is included under The Company has made an advance payment to the demand amounting to Rs. 3,631 million (equivalent Territory (AJK) have levied Federal Excise Duty (FED) accrued liabilities. tax authority of L.E. 199 million (equivalent to US$ 31 to US$ 37 million). The Company has filed the appeal and penalties in an amount of approximately Rs. million), and a full provision has been made for the before CIR (A) against the order. Further, stay order 86.5 million ( equivalent to US$ 892 K ) based on an For tax year 2008 and 2009 tax authorities have remaining amount. has been obtained from High Court till the decision of allegation that PMCL has sold connections in AJK that framed assessment by curtailing expenditure claimed CIR (A). are liable to FED. by the company, thereby creating a disputed amount of Rs. 177M (equivalent to US$ 1.8M) and Rs. 217M Appeals filed by the Company, for Tax Years 2006 The appeal is pending before Appellate Tribunal (equivalent to US$ 2.2M) respectively. The Company and 2007 have been decided in favor of the Company (Custom, Excise and Sales Tax) for AJK. A writ petition has filed the appeal with Appellate Tribunal Inland by Commissioner Inland Revenue [CIR (A)]. The tax has been filed with the High Court and a stay against Revenue (ATIR) against the decision of Commissioner authorities had contested the decision of CIR (A) the recovery of this amount has been granted by the Inland Revenue [CIR (A)]. Management of the company before Appellate Tribunal Inland Revenue (ATIR). In High Court. believes that the case will be decided in the company’s this respect an appeal effect order has been issued, The tax authorities levied Sales tax/FED under various favor in the appellate forums.

88 Financial Review Annual Report 2012 Financial review

37.6 under the Agreement on the Promotion and Reciprocal 37.5 Claims for 2008 and 2009 Tax Years Other Algerian claims Protection of Investments between Egypt and Algeria OTA tax claims have been violated by actions taken by the Algerian In September 2010 OTA received a preliminary tax government against OTA, including the Algerian Court OTA is subject to tax claims by the Algerian tax notification from the DGE in respect of the years 2008 Bank of Algeria Claim of First Instance’s 28 March 2012 judgment against authority with respect to payment of taxes during its and 2009, in which the DGE re-assessed taxes alleged On 15 April 2010, an injunction by the Bank of Algeria OTA and a member of its senior executive team and the taxation period between 2002 and 2009. to be owed by OTA in the amount of approximately came into effect that restricts all Algerian banks from Tax Reassessments. DZD 17.1 billion (equal to approximately US$ 217 at the engaging in foreign banking transactions on behalf Claims for July 2004 to exchange rate as of 31 December 2012), despite the of OTA. OTA has challenged this injunction in the Sim-card Users August 2007 Period fact that OTA has already paid the taxes due for these Algerian courts but the case is still pending. As a result years. of the injunction OTA is prevented from importing In 2010, the Algerian government issued a new finance In 2001, when OTA signed its investment agreement equipment from foreign suppliers and is prevented law, where in case of failure to identify the SIM card with the Algerian Investment Promotion Organization The tax audit for these years was initiated in early 2010 from transferring funds outside of Algeria. The Algerian user, a penalty amounting to DZD 100,000 (equivalent in connection with its GSM license, OTA was granted following the tax filing for 2009. authorities alleged breaches of foreign exchange to US$ 0.0013) for each unidentified SIM is paid for favorable tax treatment for a period of five years This reassessment was based primarily on the regulations by OTA and a member of its senior the first year and increase to DZD 150,000 (equivalent starting in July 2002 and ending in August 2007. allegation that OTA did not keep proper accounts for management, as described below. to US$ 0.0019) for the second year. Although the OTA has been charged by the Algerian Directions the years 2008 and 2009 notwithstanding that OTA’s exposure cannot currently be estimated, it is not des Grandes Entreprises (DGE) with a final tax accounts were fully audited and approved by both OTA’s On 28 March 2012, the Algerian Court of First Instance expected to have a material impact on the financial reassessment for 2004 and has been ordered to pay international auditors, and its local statutory auditors. handed down a judgment against OTA and a member of statements. approximately DZD 4.532 billion, including penalties, OTA received a final tax notification from the DGE in OTA’s senior executive team. The judgment consists of (equal to approximately US$ 57 at the exchange rate as respect of the years 2008 and 2009 in December 2010. fines of DZD 99 billion (approximately US$ 1,300 at the Algerian business of 31 December 2012). OTA’s administrative appeal against this notification exchange rate as of 28 March 2012) including a criminal was rejected in March 2012 (of which OTA was formally sentence against a member of OTA’s senior executive The Algerian government has announced its intention In November 2009, OTA received a further final tax notified in June 2012). OTA appealed this rejection team. to unilaterally purchase OTA, alleging that it has the reassessment for the years 2005 through 2007 from before the Algiers Administrative Tribunal in October right to do so under the pre-emption right contained the DGE ordering it to pay approximately DZD 43.9 2012; these proceedings remain pending. On 5 April 2012, OTA and its senior executive appealed in the 2009 Finance Act and the 2010 Supplemental billion, including penalties (equal to approximately US$ the Criminal Court’s judgment and on 27 May 2012, Finance Act. Pursuant to this announcement, the value 637 at the exchange rate as of 31 December 2012). Furthermore in 2011 OTA received an additional tax the Algerian Criminal Court of Appeal handed down of OTA was to be determined by a valuation advisor The DGE has alleged that (i) OTA did not keep proper notification from the DGE in respect of the penalties judgment on the day of the hearing, confirming retained by the Algerian Government. The unilateral manual accounts during these years notwithstanding for claims for July 2002 to August 2007 period, in the the judgment against OTA, suspending the criminal purchase of OTA by the Algerian Government could that OTA’s accounts were fully audited and approved by amount of approximately DZD 6.56 billion (equal to custodial sentence previously ordered against OTA’s have a materially adverse effect on the financial both OTA’s international auditors and its local statutory approximately US$ 81 at the exchange rate as of 31 senior executive and transferring the burden of position and results of operations of the Company. auditors, and (ii) OTA deducted certain expenses such December 2012). payment of the US$ 80.5 fine ordered against the as management and bad debt expenses and therefore senior executive to OTA. On 31 May 2012, OTA lodged a OTA remains a strategically important asset for the understated the taxable income. In Algeria the tax OTA continues to appeal all of the tax claims and final appeal against the 27 May 2012 judgment before Company and, therefore, VimpelCom is interested in authorities are able to raise additional tax assessments continues to believe that the assessments are the Algerian Supreme Court, which is still pending. exploring with the Algerian government, a resolution for four years after the end of the relevant tax period. unjustfied. Without prejudice to its rights and the rights Should OTA lose its final appeal, it will be required to which would allow the Company to retain an interest OTA has received the final tax assessment for the of its shareholders under its investment agreement pay the fine assessed by the Bank of Algeria. in OTA. VimpelCom is engaged in without prejudice years 2004, 2005, 2006 and 2007. OTA filed a tax claim with the Algerian Investment Promotion Organization, settlement discussions with the government, including objection (tax appeal) on the 2004, 2005, 2006 and applicable bilateral investment treaty and applicable OTA maintains that OTA and its senior executive have the exploration of a possible sale to the Algerian 2007 final tax assessments. laws, OTA was required to prepay claimed amounts acted in compliance with the law, and accordingly, no government by OTH of an interest in OTA, including, and penalties totaling approximately DZD 71.9 billion provision has been made for the Bank of Algeria claims subject to certain conditions, a majority stake in OTA. On 7 March 2010 OTA received a rejection on (equal to approximately US$ 955 using the average in the financial statements. Any transaction will be subject to corporate approvals its submitted administrative appeal filed on 27 annual exchange rates according to the years in by OTH and VimpelCom. Such settlement discussion December 2009 against the notice of reassessment which amounts were prepaid). Management views the Arbitration following Tax Reassessments and Bank may address the resolution of the tax and Other dated 16 November 2009 received from the DGE in amounts paid to the DGE as uncertain tax positions and of Algeria litigation Algerian claims described above, which may be part of respect of the tax years 2005, 2006 and 2007. OTA’s have accounted for them using a two step approach in any settlement agreement. Depending on the terms administrative appeal in relation to the 2004 tax accordance with IAS 12. In so doing, the Company has On 12 April 2012, OTH submitted a formal Notice of of any such settlement agreement, the accounting for reassessment has also been rejected. OTA appealed considered the technical merits of the assessments, Arbitration against the Algeria government in respect the tax and Other Algerian claims may be materially these rejections before the Algiers Administrative including input in the form of a technical report from of actions taken by the Algerian government against different to that currently refflected in the financial Tribunal. Its claims were rejected in April 2012. an independent external expert. There are significant OTA. The claim in the Notice of Arbitration is being statements. OTA appealed the decision of the Administrative risks involved in this case and as a result, the prepaid made under the arbitration rules of the United Nations Tribunal before the State Council in July 2012; these claimed amounts may not be fully recovered and for Commission on International Trade Law. In its Notice It is contemplated that, pursuant to any sale to proceedings remain pending. this appropriate provision has been recorded. of Arbitration, OTH asserts that since 2008 its rights the Algerian government, that the governance and

90 Financial Review Annual Report 2012 Financial review

management control of OTA would be such that from 2005 to 2008. No further appeals were made and Group will own an indirect 99.3% interest in Globalive Vimpelcom would continue to consolidate OTA. the amount became payable. No further payments Wireless Management Corp., and will therefore gain The Company continues to be open to finding an have been made and management has not made any control and fully consolidate the investment. amicable resolution with the Algerian government that provision as the parent company of Ring Algeria, Ring is mutually beneficial to both parties. Distribution SAE (and ultimately the entire Ring group) Under the terms of the signed agreement, upon is under liquidation. obtaining certain necessary regulatory approvals, OTH will indirectly acquire all of AAL Corp.’s interest in 37.6 Globalive Wireless Management Corp., which operates 37.9 under the WIND Mobile brand in Canada. AAL Corp. is Pioneer Investment Ltd a holding company that is majority-owned by Anthony The Jordanian Tax Authority has claimed JD 59.7 Telecel Globe Group Telecel CAR Lacavera. As part of the consideration to be paid to million (equivalent to US$ 84 million) income taxes In August 2009, Telecel CAR received from the Post and AAL Corp. (which includes cash consideration and a against Pioneer Investment Ltd in connection with Telecommunication Ministry a license revaluation document continuing economic participation in WIND Mobile for the sale of Fastlink (Jordan Mobile Telecommunication requesting payment of an amount of 577 M XAF (equivalent AAL Corp.), the Globalive group’s fixed-line assets Services) to MTC in 2002. The court issued a final to US$ 1.2 million). Telecel did not pay this amount and no (including the Globalive name and trademark) will be judgment against Pioneer Investment Ltd on May 19, provision has been booked. transferred to AAL Corp. 2011 confirming the assessment by the Jordanian Tax Authority. No further appeals are available to Pioneer U-Com Completion of the transactions is subject to satisfaction Investment Ltd. Pioneer Investment Ltd has no In January 2010, UCOM received a preliminary of certain conditions, including Canadian regulatory business operations or assets in Jordan and is a limited assessment from the tax administration amounting to approval of the conversion of OTH’s non-voting shares liability company with shareholders liability limited to US$ 11 million. U-Com disputed this assessment and into voting shares, which would result in OTH holding the capital of the company. booked a total provision with an amount US$ 7 million an indirect 65.1% voting and economic interest in in this respect. On August 2010, a settlement was Globalive Wireless Management Corp. immediately signed between U-COM and the local tax authority, in before completion of the transactions with AAL Corp. 37.7 which U –Com agreed to pay US$ 3.1 million of which OTH currently holds an indirect 32% voting interest and US$ 1.9 million were paid on 30 September 2010 in 65.1% economic interest in Wind Mobile Canada. AAL Orascom Telecom Iraq Corp Limited order to resolve all pending issues relating to the tax Corp. currently holds an indirect 66.7% voting interest Upon the disposal of its investment in Iraqna for Mobile due relating to financial years 2008 and 2009. and 34.3% economic interest. Services, Orascom Telecom Iraq Corp Limited provided a warranty to the purchaser. Liability under this warranty in respect of tax covenant claims is limited to US$ 60 million. 38. In December 2011 and March 2012, Iraqna received a Subsequent events tax claims for an amount of approximately 219 billion Iraqi Dinars that is allegedly imposed on OTH as a guarantor and in May 2012, Iraqna received Another 38.1 tax claim for an amount of approximately 96 billion Iraqi Dinars. OTH’s position in respect of those tax WIND Mobile Canada claims is that OTH is not liable for any such amount. On January 18, 2013, OTH and WIND Mobile’s founder, Chairman and Chief Executive Officer Anthony Lacavera, jointly announced that they had entered 37.8 into an agreement to transfer Mr. Lacavera’s shares of WIND Mobile Canada to the Group. Mr. Lacavera, will Ring Algeria remain WIND Mobile’s Chairman and CEO until closing, During 2009 Ring Algeria received tax claims and will continue in a non-operational capacity as WIND amounting to US$ 46 million relating to the tax periods Mobile Canada’s Honorary Chair. Upon closing, the

92 Financial Review Annual Report 2012 Financial review

Liabilities to banks Current Non-current Total Currency Nominal Line of credit Maturity Securities

Millions of US$ Millions of contract currency

Orascom Telecom Holding S.A.E. NSGB Car Loan 1 - 1 L.E. 15 15 28/02/2013 Unsecured NSGB Car Loan Ext2 - 1 1 L.E. 9 9 31/07/2015 Unsecured Credit Agricole 13 - 13 US$ or Equivalent in L.E. 22 22 30/04/2013 Unsecured HSBC 11 - 11 US$ or Equivalent in L.E. 15 15 31/05/2012 Unsecured 25 1 26 Pakistan Mobile Communications Limited Faysal Bank Limited 2 28 30 PKR 2,600 2,600 29/7/2016 Secured Habib Bank Limited - Islamabad - Pakistan (2007) 10 - 10 PKR 1,000 3,000 18/12/2013 Secured

Royal Bank of Scotland, London; Citibank International plc; Sumitomo Mitsui Banking Corporation Europe Limited 11 5 16 US$ 17 70 28/02/2014 Secured - ECGD - ECA Round II

Royal Bank of Scotland London; Citibank International plc; Sumitomo Mitsui Banking Corporation Europe Limited - 10 - 10 EUR 7 85 31/12/2013 Secured Coface - ECA Round II

DEG – Germany 7 - 7 EUR 5 20 15/08/2013 Secured FMO – 7 - 7 EUR 5 20 15/08/2013 Secured MCB Bank Limited (PKR 22.060 Billion) - Islamabad - Pakistan 83 38 121 PKR 11,030 22,060 01/04/2014 Secured

SCB Bank Limited STFA (PKR 5.1 Billion) - Islamabad Pakistan 9 - 9 PKR 850 5,100 05/09/2013 Secured

Dubai Islamic Bank (Pakistan) Ltd Ijara Facility PKR 1 Billion - 10 10 PKR 1,000 1,000 15/06/2019 Secured Silkbank Limited PKR 400 Million 1 4 5 PKR 380 400 30/07/2015 Secured MCB Syndication PKR 7.08 Billion Facility 12 33 45 PKR 4,377 4,651 13/10/2016 Secured MCB PKR 900 Million 1 8 9 PKR 900 900 12/06/2016 Secured Citibank N.A OPIC 2 19 21 PKR 2,000 3,251 15/06/2019 Secured Burj Bank Ltd.-Ijarah Facility for PKR 1 Billion - 10 10 PKR 1,000 1,000 31/12/2017 Secured MCB Bank Ltd PKR 6.00 Billion-Syndication - 5 5 PKR 500 6,000 29/11/2017 Secured Meezan Short Term 5 - 5 PKR - 500 After 3 Months Secured 160 160 320

94 Financial Review Annual Report 2012 Financial review

Liabilities to banks Current Non-current Total Currency Nominal Line of credit Maturity Securities

Millions of US$ Millions of contract currency

Orascom Telecom Bangladesh Limited Hermes Facility 16 12 28 US$ 29 120 01/07/2014 Secured DFI Facility 7 4 11 US$ 11 30 15/06/2014 Secured USD Commercial Facility 25 - 25 US$ 24 130 08/01/2013 Secured Standard Chartered Bank, London 6 20 26 US$ 29 50 30/09/2016 Secured BDT B Facility 3 1 4 BDT 306 1,030 30/06/2014 Secured Brac Bank Limited 11 - 11 BDT 840 863 29/10/2013 Unsecured Commercial Bank of Ceylon 1 - 1 BDT 100 100 31/05/2013 Unsecured The City Bank Limited 11 - 11 BDT 850 1,034 14/08/2013 Unsecured Citibank NA 15 - 15 BDT 1,150 1,195 24/04/2013 Unsecured Dutch Bangla Bank Limited 9 - 9 BDT 700 1,000 31/10/2013 Unsecured Dhaka Bank Limited 3 - 3 BDT 250 250 28/02/2013 Unsecured Eastern Bank Limited 14 - 14 BDT 1,150 1,350 31/05/2013 Unsecured Mutual Trust Bank Limited 10 - 10 BDT 796 850 30/11/2013 Unsecured One Bank Limited 4 - 4 BDT 350 350 30/04/2013 Unsecured Premier Bank Limited 6 - 6 BDT 500 500 30/10/2013 Unsecured Pubali Bank Limited 13 - 13 BDT 1,000 1,000 31/01/2013 Unsecured The Trust Bank Limited 5 - 5 BDT 400 400 31/05/2013 Unsecured Standard Chartered Bank 19 - 19 BDT 1,500 1,600 10/12/2013 Unsecured WCS - 1st Trn 33 - 33 BDT - 2,650 2-Nov-13 Unsecured WCS - 2nd Trn 22 - 22 BDT - 2,495 13/12/2013 Unsecured 233 37 270 PKR Orascom Telecom Algeria S.P.A. Hermes loan 2006 'Secured by pledge over OTA's business undertaking; pledge over OTA' s bank account 46 - 46 US$ 47 86 15/11/2012 Secured 46 - 46 Telecel Globe Limited - Banque de development des etats de l'afrique Central March 2007 1 1 2 XAF 1,398 2,464 30/06/2015 Secured Ecobank CentrAfrique S.A 1 1 2 XAF 1,342 3,000 08/10/2014 Secured Commercial Bank Centrafriqu - - - XAF - - 31/07/2012 Unsecured Banque Sahélo Sahalienne pour le Commerce et l'Investissement 1 2 3 XAF 1,255 1,500 31/01/2016 Secured Ecobank CentrAfrique S.A 1 - 1 XAF 278 - Secured Banque Populaire Maroco Centrafricaine 1 - 1 XAF 394 - Secured Commercial Bank Centrafrique 1 - 1 XAF 460 - Secured 6 4 10 Total - liabilities to banks 470 202 672

96 Financial Review Annual Report 2012 Financial review

Bonds Current Non-current Total Currency Nominal Maturity Securities

Millions of US$ Millions of contract currency

Pakistan Mobile Communications Limited

Royal Bank of Scotland and Deutsche Bank Securities Inc. (Euro Bond) 113 - 113 US$ 250 13/11/2013 Unsecured Pak Oman Investment Company Limited - Karachi - Pakistan (Trustee - Public Listed TFC) 6 - 6 PKR 3,262 31/05/2013 Secured Allied Bank Limited - Karachi - Pakistan (2007) 38 - 38 PKR 4,257 28/10/2013 Unsecured MCB PPTFC Facility of PKR 2.4 7 18 25 PKR 2,430 13/10/2016 Unsecured JS Bank - TFC (Listed)-Karachi-Pakistan 4 16 20 PKR 2,000 18/04/2016 Secured

Orascom Telecom Bangladesh Limited Senior Secured Bonds Due 2014 20 34 54 BDT 7,070 30/06/2014 Secured

Total - bonds 188 68 256

98 Financial Review Annual Report 2012 Financial review

Subsidiaries, joint ventures and associates

Country of do- Shareholding (directly/indirectly) held by Orascom Country of do- Shareholding (directly/indirectly) held by Orascom miciliation Telecom Holding miciliation Telecom Holding

North Africa Algeria Orascom Telecom Algeria S.P.A. 96.81% Europe France Orascom Telecom Wireless Europe 100.00% Algeria Data Base Management services Algeria 100.00% Luxembourg Orascom Luxembourg Sarl 100.00% Algeria Ring Algeria LLC 98.01% Luxembourg Orascom Luxembourg Finance SCA 100.00% Algeria Consortium Algerian Telecommunication S.P.A. 50.00% Luxembourg Orascom Telecom Sarl 100.00% Algeria Ring Algeria Services 97.02% Luxembourg Orascom Telecom Finance SCA 100.00% Luxembourg Orascom Telecom Acquisition 100.00% Asia Bangladesh Orascom Telecom Bangladesh Limited 100.00% Luxembourg Orascom Telecom One Sarl 100.00% Bangladesh Ring Bangladesh 98.98% Luxembourg Orascom Telecom Oscar 100.00% Pakistan Pakistan Mobile Communications Limited 100.00% Malta Sawyer Limited 100.00% Pakistan Business & Communications 100.00% Malta Orascom Telecom Eurasia Limited 100.00% Pakistan Link Direct International Limited 100.00% Malta Oratel International Inc plc 100.00% Pakistan Ring Pakistan 94.59% Malta Moga Holding Limited 100.00% Pakistan Ring Pakistan Service 94.59% Malta International Wireless Communications Pakistan Limited 100.00% Pakistan Link Pakistan Ltd. 99.99% Malta TMGL 100.00% Pakistan LinkdotNet Pakistan 100.00% Malta Telecel International Limited 100.00% Pakistan Waseela Bank 100.00% Malta Orascom Iraq Holding 100.00% Malta Orascom Telecom Iraq Corporation 100.00% Middle East Dubai Ring Dubai 96.53% Malta Orascom Telecom Ventures Limited 100.00% Egypt Cortex Egypt 94.00% Malta Telecel Globe Limited 100.00% Egypt Ring for Distributions 99.00% Malta Orascom Telecom Holding (Malta) Canada Limited 100.00% Egypt Advanced Electronic Industries 96.52% Malta Minimax Ventures 100.00% Egypt MMMS 98.80% Malta Financial Powers Plan Limited 100.00% Egypt OTH for mobile phone investments 100.00% Malta Orascom Telecom ESOP Limited 100.00% Iraq Ring Iraq 96.53% Europe Malta Orascom for International Investment Holding 100.00% Central Africa Burundi U-Com Burundi S.A. 100.00% Malta Data Base Management services Limited 100.00% Central Africa Telecel Centrafrique S.A. 100.00% Malta Orascom Telecom CS 100.00% Malta Orascom Telecom Finance 100.00% North America Canada Globalive Investment Holdings 47.60% Netherland Orascom Telecom Netherland 100.00% Canada Globalive Canada Holdings 65.40% Netherland Orascom telecom Holding Canada BV 100.00% Canada Globalive Wireless Management 65.40% Switzerland Telecel International S.A. Switzerland 100.00% Canada Gloablive Wireless LP (GELP) 65.40% United Kingdom International Telecommunication Consortium Limited 50.00% Canada Globalive Telecom Holdings 65.40% United Kingdom Medcable 100.00% Canada Orascom Telecom Holding (Canada) Limited 100.00%

100 Financial Review Annual Report 2012 Glossary of terms Glossary of terms

Average Revenue per User (“ARPU”): Friends and Family (“FnF”): Average monthly recurrent revenue per The friends and family feature allows users to customer (excluding visitors roaming revenue stay in touch with friends and family at lower and connection fee). This includes airtime tariffs. revenue (national and international), as well as, Interconnection Exchange (“ICX”): monthly subscription fee, SMS, GPRS and data This is an Interconnection Exchange company in revenue. Quarterly ARPU is calculated as an Bangladesh. It receives all calls made from average of the last three months. mobile and fixed operators and passes local calls to the destination network whereas international Bangladesh Telecommunication Regulatory calls will be passed to the IGW. Commission (“BTRC”): The regulatory authority for the telecom sector Minutes of Usage (“MOU”): in Bangladesh, overseeing licensing, policies, etc. Average airtime minutes per customer per month. This includes billable national and international outgoing traffic originated by Capital Expenditure (“Capex”): subscribers (on-net, to land line and to Other Tangible & Intangible fixed assets additions operators). Also, this includes incoming traffic to during the reporting period, includes work in subscribers from land line or Other operators. progress, network, IT, and Other tangible and intangible fixed assets additions, but excludes license fees. GTH’s Market Share Calculation Method: The market share is calculated through the data Churn: warehouse of GTH’s subsidiaries. The number of Disconnection rate. This is calculated as the SIM cards of competitors that appeared in the number of disconnections during a month divided call detail record of each of GTH’s subsidiaries is by the average customer base for that month. collected. This reflects the number of subscribers of the competition. However, GTH deducts the number of SIM cards that did not appear in the Churn Rule: call detail records for the last 90 days to account A subscriber is considered churned (removed for churn. from the subscriber base) if he exceeds the 90 days from the end of the validity period without The same is applied to GTH subsidiaries. This recharging. It is worth noting that the validity method is used to calculate the market shares period is a function of the scratch denomination. of Djezzy. In Pakistan and Bangladesh, market In cases where scratch cards have open validity, share as announced by the regulators is based on the subscriber is considered churned in case he disclosed information by the Other operators which has not made a single billable event in the last 90 may use different subscriber recognition policy. days (i.e. outgoing or incoming call or SMS, WAP session). Open cards validity is applied for OTA, Mobilink and Banglalink so far. Organic Growth for Revenue and EBITDA: Non-IFRS financial measures that reflect changes Canadian Radio-television and in Revenue and EBITDA excluding foreign Telecommunications Commission (“CRTC”): currency movements and Other factors, such as business under liquidation, disposals, mergers A public organisation in Canada with mandate and acquisitions. We believe readers of this as a regulatory agency for broadcasting and earnings release should consider these measures telecommunications. Its main responsibility is as it is more indicative of the Group’s on-going regulating telecommunication carriers. performance. Management uses these measures to evaluate the Group’s operational results and trends.

102 Glossary of Terms