DOCUMENT DE RÉFÉRENCE 2005

English version

MAROC TELECOM Moroccan Corporation with share capital of MAD 8,790,953,400 Registred Office: Avenue Annakhil – Hay Riad – – Rabat Registry of Commerce 48947

DOCUMENT DE REFERENCE 2005

This document has been translated from the Document de Référence filed with the French Autorité des marchés financiers (AMF) on April 11, 2006. This English version is for information purposes only. In the event of discrepancies between this version and the original text in French, the original text shall be binding.

Copies of the present document are available on ’s website: www.iam.ma and on AMF website: www.amf-.org TABLE OF CONTENTS

KEY FIGURES 4 3.3 Trading of the company’s shares 29 3.3.1 Places of listing 29 1 PERSONS RESPONSIBLE FOR THE DOCUMENT 3.3.2 Maroc Telecom share price 29 DE REFERENCE AND FOR THE AUDIT OF 3.4 Dividends and dividend policy 31 THE FINANCIAL STATEMENTS 6 3.4.1 Dividends paid during the past five fiscal years 31 3.4.2 Dividend policy 31 1.1 Person responsible for the Document 3.4.3 Tax treatment relating to dividends 32 de Référence 6 3.5 Breakdown of share capital and voting rights 34 1.2 Certification of the Document de Référence 6 3.5.1 Ownership of share capital and voting rights 1.3 Persons responsible for the audit of in the Company 34 the financial statements 7 3.5.2 Authorized share capital 34 1.3.1 Statutory Auditors 7 3.5.3 Changes in the shareholding structure of the 1.4 Information policy 7 Company over last three fiscal years 34 1.4.1 Person responsible for the information 7 3.5.4 Employee stock ownership 35 1.4.2 Financial communication calendar 7 3.5.5 Shareholders’ Agreement 35 1.4.3 Shareholders’ information 7 3.6 Asset pledge 39

2 INFORMATION RELATING TO THE TRANSACTION 8 4 INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES 40 3 GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL 10 4.1 History 40 4.2 General presentation 41 3.1 General information regarding the company 10 4.2.1 Organization 41 3.1.1 Corporate name 10 4.2.2 Description of operations 42 3.1.2 Registered office 10 4.2.3 ISO Certification 44 3.1.3 Legal form 10 4.3 Maroc telecom’s business strategy 45 3.1.4 Legislation 10 4.4 Business activities 47 3.1.5 Commitments of the Company to the market authorities in France 11 4.4.1 Mobile business 47 3.1.6 Registration 12 4.4.2 Fixed-line and Internet segment 57 3.1.7 Term 12 4.4.3 Shareholdings 67 3.1.8 Corporate purpose 12 4.4.4 Distribution 69 3.1.9 Legal documents available for viewing 13 4.4.5 Marketing, Communication and sponsorship 71 3.1.10 Fiscal year 13 4.5 Competition 72 3.1.11 Allocation of profits 13 4.5.1 Mobile 72 3.1.12 General shareholders’ meetings 14 4.5.2 Fixed-line telecommunications 73 3.1.13 Management of the company 16 4.5.3 Data transmission 74 3.1.14 Statutory auditors 20 4.5.4 Internet 74 3.1.15 Trading of shares 21 4.6 Research and development 75 3.1.16 Crossing of thresholds 21 4.7 Seasonality 76 3.1.17 Public bids 22 4.8 Regulatory environment and possible 3.2 General information relating to the company’s dependancies 77 share capital 26 4.8.1 General presentation of the legal environment 3.2.1 Share capital 26 with respect to telecommunications 3.2.2 Form of Shares 26 in Morocco 77 3.2.3 Rights and duties attached to shares 26 4.8.2 The legal environment with respect to 3.2.4 Acquisition by the Company of its own shares 27 telecommunications in Morocco 77 3.2.5 Changes in the Company’s share capital since its 4.8.3 Dispute settlement 84 incorporation 28 4.8.4 Dependencies 84

2 Document de référence 2005 - Maroc Telecom TABLE OF CONTENTS

4.9 Human Resources 85 6 MANAGEMENT 200 4.9.1 Modernization of human resources management 85 4.9.2 Staff 85 6.1 Management and Supervisory Boards 200 4.9.3 Staff turnover 86 6.1.1 Composition and functioning 4.9.4 Changes in the number of employees 86 of the Management Board 200 4.9.5 Staff of the Universal group 86 6.1.2 Composition and roles of the Supervisory Board 202 4.9.6 Training 86 6.2 Corporate governance 206 4.9.7 Evolution of the staff’s compensation 86 6.2.1 Audit Committee 206 4.9.8 Labor relations 87 6.2.2 Code of Ethics 209 4.9.9 Agreements and negotiations 87 4.9.10 Employee benefits 88 6.3 Interests of the corporate executives 210 4.10 Real property 89 6.3.1 Compensation of the Management and 4.11 Intellectual property 90 Supervisory Boards 210 4.12 Insurance 91 6.3.2 Participation of Management structures and 4.13 Legal and arbitration proceedings 92 Supervisory Board in the Company’s 4.14 Risk factors 93 share capital 210 4.14.1 Risks relating to the company’s business 93 6.3.3 Conflict of interests 211 4.14.2 Risks relating to the regulatory environment 95 6.3.4 Interests of corporate executives in significant 4.14.3 Tax risk 97 customers and suppliers of the Company 211 4.14.4 Risks relating to the interests held by major 6.3.5 Service contracts 211 shareholders in Maroc Telecom 97 6.3.6 Stock options 211 4.14.5 Market risks 97 6.3.7 Loans and guarantees granted to corporate executives 211 5 FINANCIAL REPORT 98 6.4 Related party transactions 212 6.4.1 Management Services’ Agreeement 212 5.1 Financial data for years ended December 31, 2004 and 2005 98 6.4.2 Agreement with Al Akhawayn University 212 5.1.1 Financial data in Moroccan dirhams 98 6.4.3 Agreement with the Moroccan government 212 5.1.2 Financial data in euros 99 6.4.4. Management Services Agreement with 213 5.2 General overview 101 6.4.5 Contract with Casanet 213 5.2.1 General presentation 101 6.4.6 Contract with GSM Al-Maghrib (GAM) 213 5.2.2 Market trends and other factors affecting 6.4.7 Early repayment of EDC loans by transfer to earnings 101 the Kingdom of Morocco 213 5.2.3 Scope of consolidation 104 5.2.4 Significant accounting policies and estimates 105 7 RECENT DEVELOPMENTS AND OUTLOOK 214 5.3 Consolidated statement of income 109 5.3.1 Comparison of 2005 with 2004 110 7.1 Recent developments 214 5.3.2 Comparison of 2004 with 2003 114 7.2 Market outlook 215 5.3.3 Comparison of business segment results 114 7.3 Objectives 216 5.3.4 Cash and cash equivalents 117 5.3.5 Contractual obligations and commercial commitments 120 TABLE OF CONCORDANCE 218 5.3.6 Disclosure of qualitative and quantitative information about market risks 120 ANNEXES 220 5.3.7 Transition from individual financial statements to consolidated financial statements 123 Maroc Telecom’s combined ordinary and extraordinary 5.4 Consolidated financial statements 124 general meeting, march 30, 2006 220 5.5 Individual financial statements 168 Glossary 222

Document de référence 2005 - Maroc Telecom 3 KEY FIGURES

2003 2004 2005 Var 2005-2004 Number of employees* 12,170 12,204 11,178 -8.4%

Fixed-line customers* (in thousands) 1,219 1,309 1,341 +2.4%

Mobile customers* (in thousands) 5,214 6,361 8,800 +38.3%

Internet customers* (in thousands) 47 105 252 +140.0%

IFRS

Consolidated revenues (in millions MAD) 17,408 20,542 +18.0%

Consolidated operating income (in millions MAD) 7,597 8,678 +14.2%

Net income (group share) (in millions MAD) 5,171 5,809 +12.3%

Investments (in millions MAD) 2,488 3,210 +29.0%

* Except Mauritel.

Consolidated revenues Important Consolidated data (in millions of Moroccan dirhams) (in millions of Moroccan dirhams)

15,000 22,000 20,542 12,772 20,000 11,949 18,000 17,408 12,000 11,133 16,000 9,684 14,000 9,000 12,000

10,000 8,678 6,000 7,597 8,000 5,809 6,000 5,171 3,000 4,000 2,000 0 0 Revenues Operating Net income Fixed & Internet Mobile income group share

2004 2005 2004 2005

4 Document de référence 2005 - Maroc Telecom KEY FIGURES

Fixed-line customers (thousands) Mobile customers (thousands)

9,000 8,800 1,500

1,308 1,341 8,000 1,219 1,200 7,000 6,361 6,000 900 5,214 5,000

4,000 600 3,000

2,000 300 1,000

0 0

2003 2004 2005 2003 2004 2005

Internet customers (thousands) Number of employees

300 15,000

252 250 12,170 12,204 12,000 11,178

200 9,000

150

105 6,000 100

3,000 50 47

0 0 2003 2004 2005 2003 2004 2005

Document de référence 2005 - Maroc Telecom 5 1 PERSONS RESPONSIBLE FOR THE DOCUMENT DE REFERENCE AND FOR THE AUDIT OF THE FINANCIAL STATEMENTS

In this Document de Référence, "Maroc Telecom" or “the Company” refers to the company Itissalat Al-Maghrib (Maroc Telecom), and “the group” refers to the group constituted by the Company and all direct and indirect subsidiaries, as described in chapter 5.

1.1 PERSON RESPONSIBLE FOR THE DOCUMENT DE REFERENCE

Mr Chairman of the Management Board

1.2 CERTIFICATION OF THE DOCUMENT DE REFERENCE

I attest, after having taken any reasonable measurement for this purpose, that information contained in this Document de Référence are, to my knowledge, in conformity with reality and do not comprise an omission likely to deteriorate its range. I obtained a letter of work- end from statutory auditors, in which they indicate that they have carried out the checking of information relate to the financial standing and the accounts given in this Document de Référence like to the overall reading of the Document de Référence. Historical financial information presented on Document de Référence were the subject of statutory auditors reports, appearing on page 167 and 197 of the foresaid document, on page 157 an 186 of Document de Référence of 2004 filed with the French Autorité des Marchés Financiers (AMF) on April 8, 2005 under the number R 05-038, and on page 292 and 330 of Document de Base filed with French Autorité des Marchés Financiers (AMF) on November 8, 2004 under the number I 04-198, which contain observations.

Rabat, April 7, 2006

Mr Abdeslam Ahizoune Chairman of the Management Board

6 Document de référence 2005 - Maroc Telecom 1.PERSONS RESPONSIBLE FOR THE DOCUMENT DE REFERENCE AND FOR THE AUDIT OF THE FINANCIAL STATEMENTS INFORMATION POLICY

1.3 PERSONS RESPONSIBLE FOR THE AUDIT OF THE FINANCIAL STATEMENTS

1.3.1 Statutory Auditors

Mr Samir Agoumi Mr Abdelaziz Almechatt Correspondent of Salustro Reydel in Morocco Representative of Coopers & Lybrand 100 boulevard Abdelmoumen (PricewaterhouseCoopers) in Morocco 20000 , Morocco 101 boulevard Massira Al Khadra 20100 Casablanca, Morocco First appointed in 2001 for a three fiscal year term by the First appointed in 1998 by statutes, the current mandate, of a general shareholders’ meeting, will expire at the end of the three fiscal year term, was renewed by the general shareholders’ general shareholders’ meeting held to approve the financial meeting held April 8, 2005 and will expire at the end of the statements for the fiscal year ending 31, 2006. general shareholders’ meeting held to approve the financial statements for the fiscal year ended December 31, 2007.

1.4 INFORMATION POLICY

1.4.1 Person responsible for the information Mr Mikael Tiano Managing Director, Administration and Finance Maroc Telecom Avenue Annakhil -Hay Riad Rabat, Morocco Phone : 00 212 37 71 67 67 E-mail : [email protected]

1.4.2 Financial communication calendar All the financial information issued by Maroc Telecom (press releases, presentations, annual reports) is available on its website: www.iam.ma. The following is an indicative calendar of Maroc Telecom’s financial communication for 2006:

January 26, 2006 (before the market) 4th quarter and 2005 revenues February 27, 2006 (before the market) 4th quarter and 2005 results Press conference, analysts conference March 30, 2006 General shareholders’ meeting April 18, 2006 (before the market) First quarter revenues 2006 May 15, 2006 (before the market) First quarter results 2006 July 25, 2006 (before the market) Second quarter revenues 2006 September 5, 2006 (before the market) Second quarter results 2006 Press conference, analysts conference November 3, 2006 (before the market) Third quarter revenues 2006 November 14, 2006 (before the market) Third quarter results 2006

1.4.3 Shareholders’ information

The social, accounting and legal documents, whose Référence filed with the Autorité des marchés financiers communication is ruled by the Moroccan and French laws and (AMF), presentations for investors and financial analysts made the statutes in favour of the shareholders and third parties can by the Company, as well as the various press releases are be consulted (or checked out) at the head office of the available for reading and/or downloading on Maroc Telecom’s Company. website: www.iam.ma. Documents de Référence, updating of Documents de

Document de référence 2005 - Maroc Telecom 7 2 INFORMATION RELATING TO THE TRANSACTION

NOT APPLICABLE

8 Document de référence 2005 - Maroc Telecom Document de référence 2005 - Maroc Telecom 9 3 GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL

The significant information for investors, relating to the subject to the specific provisions of the amended Company and its share capital presented below, are set forth Shareholders’ agreement (See section 3.5.5 "The amended by the bylaws effective on the date of the present document Shareholders’").

3.1 GENERAL INFORMATION REGARDING THE COMPANY

3.1.1 Corporate name

The Company’s corporate name is: “Itissalat Al-Maghrib”. It also operates under the trade names “IAM” and “Maroc Telecom”.

3.1.2 Registered office

The Company’s registered office is located at Avenue Annakhil (Hay Riad), Rabat, Morocco. Phone : +212 37 71 21 21.

3.1.3 Legal form

Maroc Telecom is a Moroccan corporation with a Management Board and Supervisory Board, governed by Chapter II of Act 17- 95 relating to corporations.

3.1.4 Legislation

The Company is governed by Moroccan law, including in Minister of the Economy, Finance, Privatization and Tourism particular Act 17-95 relating to corporations, and by its 1960-01 dated October 30, 2001 and by Order of the bylaws. The French law governing commercial companies is Minister of Finance and Privatization 1994-04 dated not applicable to it. November 22, 2004 ;

As the Company is listed on a regulated market in Morocco, • The statutory Decree 1-93-212, dated September 21, 1993, the provisions of various Moroccan statutes, regulations, relating to the Ethics Council for Securities (CDVM) and the orders, decrees and circulars will be applicable, including in information required of legal entities issuing securities to the particular : public, as amended and extended by Act 23-01 ;

• The statutory Decree 1-93-211, dated September 21, 1993, • The statutory Decree 35-96 relating to the creation of the relating to the Securities Exchange, as amended and central depositary and establishment of a general system of extended by Acts 34-96, 29-00 and 52-01 ; book entry for certain securities as amended and extended by Act 43-02 ; • The General Regulations of the Stock Exchange approved by Order of the Minister of the Economy and Finance 499- • The General Regulations of the central depositary approved 98, dated July 27, 1998, and amended by Order of the by Order of the Minister of the Economy and Finance 932-

10 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

98, dated April 16, 1998, and amended by Order of the • The Circular issued by the Ethics Council for Securities Minister of the Economy, Finance, Privatization and Tourism (CDVM) 01-05, dated March 18, 2005, relating to ethic rules 1961-01, dated October 30, 2001 ; having to frame information within listed companies;

• The statutory Decree 24-96 relating to the Postal Service and • The Circular issued by the Ethics Council for Securities Telecommunications, dated August 7, 1997, as amended by (CDVM) 05-05, dated October 3, 2005, relating to publication Act 79-99, dated June 22, 2001, and by Act 55-01, dated of important information by legal entities issuing securities to November 8, 2004 ; the public; and

• The Decree 1-04-21, dated April 21, 2004, enacting Act 26- • The Circular issued by the Ethics Council for Securities 03 relating to public offers on the Moroccan stock market; (CDVM) 06-05, dated October 13, 2005, relating to publication and diffusion of financial information by legal • The Circular issued by the Ethics Council for Securities entities issuing securities to the public. (CDVM) 01-04, dated June 8, 2004, relating to the thresholds for ownership of shares or voting rights of listed companies;

3.1.5 Commitments of the Company to the market authorities in France

As the Company is also listed on the primary market of • publish, as early as possible, any amendments to the rights Euronext , some provisions of French stock law are attached to the different share categories, applicable to it. Under the current legislation, rules concerning • publish, as early as possible, any information on new facts foreign issuers provided by AMF Regulation are applicable to that may significantly affect the share price and inform the the Company. In addition, organization and functioning rules AMF accordingly, of Euronext Paris are generally applicable to the Company. • notify to the AMF the annual and interim financial statements AMF rules may also apply to public bids for the shares of the of the Company, Company, except dispositions concerning Compulsory acquisition procedures, the obligatory deposit of a public bid • inform the French public about changes in the business of project and an obligatory retreat. the Company or its management,

Other rules of French stock exchange law do not be apply to • make the necessary provisions for allowing the persons who the Company. Is it so concerned by threshold rules. hold their securities through Euroclear France to exercise With regards to French law, a foreign issuer has to take the their rights, particularly by informing them about any annual necessary steps to allow the shareholders to manage their ordinary shareholders’ meeting and by allowing them to investments, and implement their rights. Since Company exercise their voting rights, securities are listed in the primary market of Euronext Paris, • inform the persons who hold their securities through and pursuant to AMF Regulation, the Company is required to : Euroclear France about dividend payment, new shares issue, • inform the AMF of any changes in its share capital and of any allocation, subscription, renunciation and conversion of to the Company, particularly the crossing of thresholds shares, which Maroc Telecom would have received, • update names and details of the person in charge of the • publish in the French financial press information about the information in France, business and the results of the first half of the fiscal year, • provide the AMF with any information it may required in including consolidated revenues and net income, accordance with its mission, laws and regulations applicable consolidated within four months following the end of the first to the Company, half of the fiscal year of the Company, • comply with AMF Regulations relating to information • publish its individual and consolidated annual financial obligation of the public, and statements and annual report, within a six month period as from the end of the fiscal year, • inform the AMF about any draft amendment of its bylaws.

• publish in the French financial press, the consolidated The Company will have to inform the AMF about any general quarter revenues as soon as possible after the end of each shareholders’ meeting resolution authorizing the Company to quarter of the fiscal year, operate in stock exchange on its own shares and to send to the AMF periodic reports of purchases or sales of shares

Document de référence 2005 - Maroc Telecom 11 made by the Company by virtue of the authorization. The Document de Référence will then have to be filed with the AMF and distributed to the public once registered. The Company will have to ensure in France, in a simultaneous way, identical information to the one that it will give abroad, The annual and the interim reports in French will be available particularly in Morocco. for public in France at the office of the financial intermediary in charge of financial service in France (currently: Euro Emetteurs Any publication and information to the public related to in this Finances). chapter will be made by any mean particularly by a notice or press release inserted in a national financial daily newspaper In addition, the Company has the intention to lead an active distributed in France. policy towards all shareholders, including those holding their shares through Euroclear France, doing the best to allow them The information intended for the public in France is written in to participate to any public offer which would, if applicable, be French. made on the international markets. The Company establishes, like French issuers, a Document de However, because of the constraints related to operations on Référence, supplying legal and financial information relating to international markets and in order to be able to benefit from the issuer (shareholding, activities, management, financial the best existing conditions on these markets, in the interest information) without containing however any information of the Company and of all its shareholders, the Company relating to an issue of specific shares. cannot guarantee to the persons holding their shares through In practice, the annual report of the Company can be used as Euroclear France such a participation in all operations which Document de Référence, to the condition that it contains all would, if applicable, be made. the required information.

3.1.6 Registration

The Company was founded in Rabat by a deed dated February 3, 1998. The Company was registered with the Rabat Registry of Commerce on February 10, 1998, under number 48,947.

3.1.7 Term

The term of the Company is 99 years from the date of its registration with the Registry of Commerce, subject to early dissolution or extension as provided for by law or the bylaws.

3.1.8 Corporate purpose

The Company’s corporate purpose, in accordance with its those whose transfer or availability in its favour is provided contract specifications as an operator and pursuant to the for by the applicable law; statutory and regulatory rules in force, is : • market and, on an accessory basis, assemble and • to provide universal service, in the manner provided for manufacture, any telecommunications devices, products under the statutory and regulatory rules in force; and ; and items;

• to establish and/or operate • create, acquire, license and make use of any patents, infrastructure, networks and services of any kind. processes or trade names;

For the purposes of the activities so defined, it may : • take part in any financial syndicate, concern or company, existing or currently being created, having a purpose similar • acquire, own and operate any real or personal property that is necessary or appropriate for its operations, in particularly or related to its own, by any lawful means; and

12 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

• more generally, carry out any transactions of a commercial, Company’s corporate purpose and which could advance its financial or, if necessary, industrial nature relating to real or growth and development. personal property directly related to any part of the

3.1.9 Legal documents available for viewing

The corporate, accounting and legal documents required to be disclosed by law or the bylaws to the shareholders and third parties may be viewed at the Company’s registered office in avenue Annakhil (Hay Riad), Rabat, Morocco.

3.1.10 Fiscal year

The Company’s fiscal year begins on January 1 and ends on December 31.

3.1.11 Allocation of profits

At the close of each fiscal year, the Management Board charged against the optional reserves at its disposal (see draws up a statement of the various corporate assets and also section 3.4 “Dividends and dividend policy”). liabilities as of such date and draws up the annual financial statements and the annual report to be submitted to the Dividend payments shareholders’ meeting, in accordance with applicable law. The net profit generated by the Company, after deduction The ordinary shareholders’ meeting, or absent an of any earlier net losses, shall be subject to a withholding agreement, the Management Board, shall determine the of 5% to fund the statutory reserve; such withholding shall terms of payment of the dividends voted. no longer be required once the amount of the statutory Such payment shall be made within nine months after the reserve exceeds one tenth of the share capital. close of the fiscal year, subject to extension of that period The distributable profit shall consist of the net profit for the by an order of the President of the Court, acting in fiscal year, after funding of the statutory reserve and summary proceedings upon a petition from the Supervisory allocation of earlier net profits or losses carried forward. Board. Against such profit, the shareholders’ meeting may charge If the Company holds shares of its own stock, the related such amounts as it shall see fit in order to fund any dividend entitlement shall be cancelled. optional, ordinary or exceptional reserve funds, or to carry Dividends not collected within five years after the date of forward, to the extent of a maximum aggregate amount of payment thereof shall be forfeited to the Company. half the distributable profit, subject to an exception granted Amounts not collected and not forfeited shall constitute a by a three-fourths’ majority of the members of the claim of the owners against the Company, not bearing Supervisory Board present or represented. interest, unless they are converted into loans on mutually The balance shall be paid out to the shareholders by way of agreed terms. dividend, the aggregate amount of which shall not be less If the shares are subject to a life interest, the dividends than half the distributable profit, subject to an exception shall be payable to the life tenant. The proceeds of the granted by a three-fourths’ majority of the members of the distribution of reserves, other than the carry-forward, shall, Supervisory Board present or represented. however, be allocated to the bare owner. Within the limits set forth by law, the shareholders’ meeting may resolve, on an exceptional basis, to pay out amounts

Document de référence 2005 - Maroc Telecom 13 3.1.12 General shareholders’ meetings

Shareholders’ meetings Agenda The shareholders’ collective resolutions shall be made at The agenda of a shareholders’ meeting shall be determined meetings, which shall be ordinary or extraordinary according by the author of the notice. to the nature of the decisions that they are called upon to One or several shareholders holding at least 2% of the share make. capital may, however, call for one or several draft resolutions A duly convened general meeting shall be deemed to to be entered in the agenda. represent all the shareholders; its decisions shall be binding on all, including those who are absent, not sui juris, Regardless of the number of shares held, any shareholder dissenting or deprived of voting rights. shall be entitled, upon providing evidence of identity, to take part in shareholders’ meetings subject :

• for holders of registered shares, to an entry by name in the Calling of meetings Company’s records;

Meetings shall be called by the Supervisory Board. • for holders of bearer shares, to deposit, at the locations An ordinary shareholders’ meeting may also be called : mentioned in the notice, of the bearer shares or of a certificate of deposit issued by the establishment having • by the statutory auditor or auditors, who may do so only custody of such shares, after requesting the Supervisory Board to call it and the Supervisory Board fails to do so ; • and if applicable, to provide to the Company, in accordance with applicable law, of any evidence allowing • by an agent appointed by a Court order, upon the application of any interested party in an emergency or of his or her identification. one or more shareholders holding at least one tenth of the Such formalities shall be completed no later than five days share capital ; or before the date of the meeting, subject to any shorter period • by the liquidator or liquidators in the event of the provided for in the notice or mandatory statutory rules Company’s dissolution, during the liquidation period. reducing such period. Shareholders’ meetings shall be called and carried out in the manner provided for by law. Participation in meetings The Company shall, at least 30 days before the The shareholders’ meeting shall consist of all shareholders, shareholders’ meeting is convened, publish in a newspaper regardless of the number of shares they hold. chosen among those contained in the list determined by the Minister of Finance and in the Official Bulletin, a notice Corporate shareholders shall be represented by a specially containing the information required by law and the draft appointed agent, who need not personally to be a resolutions to be submitted to the meeting by the shareholder. Management Board. A shareholder may be represented by another shareholder, The Company shall be required to publish, in a newspaper or by his or her guardian, spouse or an ascendant or authorized to carry legal advertisements and in the Official descendant, who need not to be a shareholder in his or her Bulletin, at the same time as the notice of the annual ordinary personal capacities. shareholders’ meeting, the summary financial statements Multiple holders of undivided interests in shares shall be relating to the previous fiscal year, drawn up in accordance represented at shareholders’ meetings by one of them or by with applicable law (which shall include the balance sheet, a single agent. statement of income, statement of cash flows and financing A shareholder having pledged his or her shares shall retain table), and the report from the statutory auditor(s) relating to the right to attend shareholders’ meetingS. such financial statements. Any amendment of such documents shall be published by the Company in a newspaper authorized to carry legal Officers – Attendance sheet advertisements within 20 days after the holding of the annual ordinary shareholders’ meeting. Officers Meetings shall be held at the registered office or at any other The shareholders’ meeting shall be chaired by the Chairman location specified in the notice. of the Supervisory Board or the Vice Chairman of the

14 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

Supervisory Board. Failing this, the meeting shall appoint its An ordinary shareholders’ meeting shall be held each year, own Chairman. within the first six months after the end of the company’s fiscal The Chairman of the meeting shall be assisted by the holders year. of the two largest interests, either personally or as agents, Such meeting shall hear in particular the report from the present and accepting such office, who shall serve as governing body and the report from the statutory auditor or scribes. auditors; it shall consider, amend and approve or refuse the financial statements; and it shall apportion and allocate The officers so appointed shall appoint the Secretary, who profits. need not be a shareholder. It shall appoint members of the Supervisory Board and it shall appoint the statutory auditor(s). Attendance sheet An attendance sheet shall be kept at each meeting, specifying Quorum and majority the names and addresses of the shareholders, and, if The ordinary shareholders’ meeting shall be duly convened applicable, those of their proxies, and the numbers of shares and may validly act only if the shareholders present or and voting rights they hold. represented hold at least one fourth of the voting rights, Such attendance sheet shall be signed by all shareholders exclusive of shares acquired or accepted as security by the present and by the proxies of absent shareholders; it shall Company; if such quorum is not satisfied, a further meeting then be certified by the officers of the meeting. shall be called, for which no quorum shall be required. At an ordinary shareholders’ meeting, resolutions shall be passed by a majority of votes of the shareholders present or Voting rights represented. Each member of the meeting shall have as many voting rights as he or she owns or represents, in particular as a result of Extraordinary shareholders’ meeting voting proxies or other powers of attorney. The voting rights attached to a share shall belong to the life Powers tenant at ordinary shareholders’ meetings and to the bare The extraordinary shareholders’ meeting shall have sole owner at extraordinary shareholders’ meetings. authority to amend any provision of the bylaws. If the shares are pledged, the voting rights shall be exercised It may dismiss the members of the Supervisory Board. by the owner. It may not, however, change the Company’s nationality or The Company may not vote shares that it has acquired or increase the shareholders’ liabilities. accepted as security. It may decide upon the conversion of the Company into a company in any other form, subject to compliance with the applicable statutory rules. Minutes The minutes of meetings shall be entered in a special register Quorum and majority kept at the registered office, the pages of which shall be The extraordinary shareholders’ meeting shall be duly numbered and initialed by the Registrar of the Court at the convened and may act validly only if the shareholders present location of the Company’s registered office. or represented hold at least, upon a first call, half, and upon a Copies of /or extracts from the minutes shall be certified by second call, one fourth, of the voting rights, exclusive of the Chairman of the Supervisory Board alone, or by the Vice shares acquired or accepted as security by the Company. Chairman of the Supervisory Board signing jointly with the If the one-fourth quorum is not satisfied, such second meeting Secretary. may be postponed to a date no later than two months after the date for which it had been called, and may be validly held with Ordinary shareholders’ meetings the presence or representation of shareholders holding at least one fourth of the share capital. Powers At an extraordinary shareholders’ meeting, resolutions shall be The ordinary shareholders’ meeting shall act upon all matters passed by a two-thirds’ majority of votes of the shareholders of an administrative nature exceeding the powers of the present or represented. Supervisory Board and Management Board, and which are not reserved for the extraordinary shareholders’ meeting.

Document de référence 2005 - Maroc Telecom 15 3.1.13 Management of the company

Management Board The members of the Management Board may, subject to the Supervisory Board’s consent, allocate among themselves the Membership tasks of management. Such allocation may in no event, The Management Board shall administer and manage the however, deprive the Management Board of its collegiate Company, under the supervision of a Supervisory Board. The character as the Company’s management body. Management Board shall consist of five members. Meetings of the Management Board may be held outside the The members of the Management Board must be individuals. principal office. All members of the Management Board shall be employees of Resolutions shall be passed by a majority of members present the Company and/or present in Morocco more than 183 days or represented in office, each of whom shall have one vote. per year, subject to exceptions granted by the Supervisory Minutes of resolutions of the Management Board, if any are Board acting by a three fourths majority of the members drawn up, shall be entered in a special register and signed by present or represented. the Chairman of the Management Board and another member. In the event of termination of the office of a member of the Copies of or extracts from such minutes shall be validly Management Board during its term, the Board shall appoint certified by the Chairman of the Management Board or by a his or her substitute in the manner provided for by law and the General Manager. Company’s bylaws.

Powers Appointment and dismissal of members of the Management Board The Management Board shall have full powers to act in all circumstances in the name of the Company, within the The members of the Management Board are currently limitations of the corporate purpose and subject to those appointed by the Supervisory Board, acting by a majority of he powers expressly conferred by law and the Company’s bylaws members present or represented. The Supervisory Board shall on the Supervisory Board under Articles 10.5.3 to 10.5.5 of the appoint one of them to act as Chairman. bylaws. They may be dismissed only by the ordinary meeting of In relation to third parties, the Company shall be bound even shareholders, upon the motion of the Supervisory Board by an action of the Management Board that is not consistent acting by a three-fourths’ majority. If the dismissal is decided with the corporate purpose and bylaws, unless it proves that upon without due cause, it may give rise to liability in the third party was aware that the action exceeded such damages. purpose and/or the bylaws, or could not be unaware thereof in Termination of office on the Management Board shall not the circumstances. entail termination of any contract of employment between the The provisions of the bylaws restricting the Management person concerned and the Company. Board’s powers shall not be binding on third parties. The Chairman of the Management Board shall represent the Term of office Company in its dealings with third parties. The Management Board may, however, confer the same representation power on The members of the Management Board shall be appointed one or more members of the Management Board, who shall for terms of two years, subject to extension. have the title of General Managers. In the event of termination of office of a member of the The provisions of the bylaws restricting the Chairman’s, or, if Management Board during its term, his or her substitute shall applicable, the General Managers’ powers to represent the be appointed for the remaining duration of such term until the Company shall not be binding on third parties. renewal of Management Board. The Chairman of the Management Board and the General All members of the Management Board shall be eligible for Manager or Managers may validly grant powers of attorney to further office. third parties. The powers thereby concerned shall, however, be limited and relate to one or more specific purpose or purposes. Operation In relation to third parties, any action binding the Company shall be validly taken by the Chairman of the Management The Management Board shall manage the Company Board or any other member appointed by the Management collectively. Board as a General Manager.

16 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

Disclosure duties If, on the date of his or her appointment, a member of the Supervisory Board does not hold at least one share of the The Supervisory Board may require the Management Board to Company or, during his or her term of office, ceases to hold at submit a report relating to its management and to current least one share, he or she shall be deemed to have resigned if transactions at any time. Such report may be supplemented, the situation is not fixed within three months. at the Supervisory Board’s request, by a provisional accounting statement for the Company. Such shares shall be assigned in undivided manner to the potential liability of members of the Supervisory Board, To the extent necessary, the Management Board shall forward collectively or individually, in connection with management of to the Supervisory Board a report detailing the application or the Company, or of their personal action. implementation, if applicable, of the points to be adopted by the Supervisory Board in accordance with Articles 10.5.3 to Such qualifying shares must be registered shares; they may 10.5.5 of the bylaws. not be transferred. Such restriction shall be recorded in the Company’s transfer register. At least once a quarter, the Management Board shall submit to the Supervisory Board a report on the Company’s A member of the Supervisory Board who no longer holds operation. office, or his or her heirs or assigns, shall recover unrestricted disposal of the qualifying shares as a result only of approval Within three months after the close of each fiscal year, the by the ordinary shareholders’ meeting of the financial Management Board shall draw up the Company’s annual statements for the last fiscal year relating to his or her office. financial statements (balance sheet, statement of income and notes) and provide them to the Supervisory Board, in order to The statutory auditor(s) shall, under his/their sole enable it to perform its supervisory function. responsibility, secure compliance with the provisions of Article 10.1 of the bylaws, and shall report any breach thereof in their The Management Board shall also provide the Supervisory report to the annual shareholders’ meeting. Board with the report to be submitted to the ordinary meeting of shareholders called to act upon the financial statements for the previous fiscal year. Term of office The members of the Supervisory Board shall be appointed for Compensation a six-year term. The Supervisory Board shall determine, in the appointing The office of a member of the Supervisory Board shall resolution, the manner and amount of compensation paid to terminate upon adjournment of the ordinary shareholders’ each member of the Management Board. meeting that has acted upon the financial statements for the previous fiscal year and was held during the year of expiry of the office of such member. Liability They shall always be eligible for further office. Without prejudice to any specific liability arising out of the They may be dismissed at any time by the extraordinary Company’s receivership or bankruptcy proceedings, the shareholders’ meeting. members of the Management Board shall be liable, personally or jointly as the case may be, to the Company and to third No member of the Supervisory Board may be a member of the parties, for offenses against the statutory or regulatory rules Management Board. If a member of the Supervisory Board is applicable to corporations, for breaches of the bylaws, or for appointed to the Management Board, his or her term of office misconduct in their management. as member of the Supervisory Board shall terminate upon his or her assumption of office. A legal entity may be appointed to the Supervisory Board. At Supervisory Board the time of appointment, it shall be required to appoint a Membership permanent representative who shall be subject to the same conditions and obligations, and shall incur the same civil and The Supervisory Board shall consist of not less than eight and criminal liability, as a member of the Supervisory Board in a not more than 12 members, which may be increased to 15 personal capacity, without prejudice to the joint liability of the members if the Company’s shares are admitted to listing on legal entity that he or she represents. the securities exchange. When the legal entity dismisses its representative, it shall be Each member of the Supervisory Board shall hold at least one required to appoint a substitute concomitantly. It shall share of the Company throughout the term of office. immediately notify its decisions to the Company. It shall act The members of the Supervisory Board shall be appointed by likewise in the event of the permanent representative’s death the ordinary shareholders’ meeting. or resignation.

Document de référence 2005 - Maroc Telecom 17 Vacancy and appointment to corporations (as amended or extended), by a majority. In the event of vacancy, as a result of death or resignation or In addition to transactions subject by law to the Supervisory any other inability to act, of the holder of one or several seats Board’s consent, the following resolutions shall require prior on the Supervisory Board, the Supervisory Board may, consent from the Supervisory Board acting by a majority of between two shareholders’ meetings, make temporary members present or represented, under Article 10.5.3 of the appointments. bylaws : If the number of members of the Supervisory Board falls • Review, approval and revision of the Business Plan, drawn below eight, the Supervisory Board shall be bound to make up according to the same strategic criteria and requirements temporary appointments to restore its membership within in terms of productivity, profitability and competitiveness as three months of the date of vacancy. the best international operators ; Temporary appointments by the Supervisory Board shall be • Review and approval of the Budget drawn up, according to subject to ratification by the next subsequent ordinary the same criteria and strategic, productivity, profitability and shareholders’ meetings; the member appointed to replace competitive requirements as the best international operators; another shall remain in office only for the remaining duration of • Policy with respect to labour, compensation, training and his or her predecessor’s term. management of human resources and creation of profit Absent ratification of the temporary appointments, the sharing schemes for the Company’s managers or resolutions made and actions taken previously by the employees; Supervisory Board shall nevertheless remain valid. • Appointment of members of the Management Board; and

If the number of members of the Supervisory Board falls • Approval of the draft resolutions to be submitted to the below three, the Management Board shall be required to call, general meeting of the Company’s shareholders with respect within 30 days after the date of the vacancy, an ordinary to the allocation of the earnings of the Company and its shareholders’ meeting to supplement the Supervisory Board’s subsidiaries (pay-out of dividends, reserves, etc.) in the membership. manner provided for under Articles 16 and 10.5.4(x) of the bylaws. Chairmanship and Vice Chairmanship However, by way of exception from the provisions of Article 10.5.3 of the bylaws described below, the following The Supervisory Board shall appoint from among its members resolutions shall be matters for the Supervisory Board and a Chairman and Vice Chairman who shall call meetings of the shall, in accordance with Article 10.5.4 of the bylaws, require Supervisory Board and direct its proceedings, and who shall approval by a majority of at least three fourths of the members hold office during the term of office of the Supervisory Board. of the Supervisory Board present or represented : The Chairman and Vice Chairman must be individuals. • Any significant change in accounting methods; The Supervisory Board may appoint a Secretary for each • Repeal, abandonment, transfer of licenses or concession of meeting, who need not be a shareholder. major operating facilities not provided for under the annual Budget;

Notice of meeting and proceedings • Any decision related to the implementation or initiation of judicial, administrative or arbitral actions or proceedings The Supervisory Board shall meet, upon a notice given by its involving the Company or its subsidiaries, for which the Chairman or Vice Chairman, as frequently as required by the amount of the claim in principle against or at the initiative of Company’s interests, at the registered office or any other the Company or its subsidiaries, whether this concerns an location specified in the notice. Such notice may be given by initial claim or a counter-claim, for each of these actions or electronic message or by fax, in both cases followed by proceedings, amounts to a unitary amount of more than confirmation by ordinary mail, or by registered mail return MAD 100 million or requires judicial enforcement by the receipt requested, or by letter delivered personally against a Company or its subsidiaries, as well as any decisions with receipt, 15 days before the date of the meeting, unless such the aim of obliging the Company and/or its subsidiaries to period is reduced upon the consent of all the members of the reach a settlement for such actions or proceedings involving Supervisory Board. amounts owed or due to the Company for an amount of The Supervisory Board shall act validly only if at least half the more than MAD 25 million ; members of the Supervisory Board are present. • Any decision concerning the conclusion, amendment and/or Subject to the provisions of Articles 10.5.4 to 10.5.5 of the termination of any service provision agreement or any other bylaws described below, resolutions of the Supervisory Board agreement—other than the agreements concerning day-to- shall be passed, in accordance with the Moroccan law relating day transactions entered into under normal conditions—

18 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

between the Company and (i) any shareholder holding more • A motion for amendment of the rights and duties relating to than 30% of the capital and/or voting rights of the Company shares of the Company or its subsidiaries; and/or (ii) the subsidiaries whatsoever of such shareholder, • A motion for amendment of the first or last day of the fiscal for which the management and/or direction are effectively year of the Company or its subsidiaries; directly or indirectly controlled by the latter or by its parent company, whether through a holding in the share capital, • A motion for the choice of the statutory auditors of the through contractual agreements or in concert with a third Company and its subsidiaries; party (hereinafter the “Reference Shareholder”); • A motion for the nomination of one or more members of the • Any decision related to a merger, under any form Supervisory Board; whatsoever, between the business of the Company and any • A motion for dismissal of the members of the Management businesses over which the Reference Shareholder has Board; and control which are in competition with the Company over the sectors of Fixed, Mobile, Internet and Data exchange • A settlement of differences between the Management Board telecommunications (and more generally all businesses and the Supervisory Board. connected to or arising from the Company’s corporate purpose) ; Assignment and powers of the Supervisory Board • Any decision related to the exemption of the obligation for a member of the Management Board to be an employee of the The Supervisory Board shall exercise permanent supervision Company and/or to be present for more than 183 days a year over the Company’s management by the Management Board. in Morocco; At any time, it shall perform such inspections as it shall see fit, and may obtain disclosure of such documents as it • Investments or divestments and borrowings and loans considers being appropriate for the performance of its exceeding more than 30% of the corresponding amounts assignment. The members of the Supervisory Board may shown in the Budget; obtain disclosure of any information or data relating to the • Any creation of a subsidiary with an initial share capital or Company’s operation. shareholders’ equity of more than MAD 100 million, and any The Supervisory Board may, within the limits that it shall takeover(s) or assignment(s) of a holding or interest in any determine and subject to the provisions of Article 10.5 of the group or entity exceeding 20% of the Company’s net assets; bylaws, allow the Management Board to sell real estate • Any resolution relating to a proposed merger, spin-off, assets, sell all or part of investments, create security interests contribution of assets or management lease relating to all or and issue warranties, endorsements or security in the name of part of the business of the Company or one of its the Company. subsidiaries, and any resolution relating to dissolution, liquidation or discontinuation of any substantial operation of It shall submit to the annual shareholders’ meeting its the Company or one of its subsidiaries; observations on the report from the Management Board and on the financial statements for the fiscal year. • Any exceptions from the obligation provided for under Article 16 of the bylaws to pay out dividends of at least half the The Supervisory Board may create from among its members, distributable profit; and and if it so deems necessary, with the assistance of third

• Amendment of the internal regulations of the Company’s parties who need not be shareholders, technical committees audit committee. in charge of reviewing matters that it shall submit to them for an opinion. The activity of such committees and the opinions In addition, in accordance with the provisions of Article 10.5.5 or recommendations issued shall be reported to meetings of of the bylaws described below, the Supervisory Board may the Supervisory Board. not submit the following resolutions to the meeting of shareholders unless they have been made by at least three Such committees shall have advisory powers and act subject fourths of the members of the Supervisory Board present of to the authority of the Supervisory Board, of which they are represented : agencies and to which they shall report.

• A motion for amendment of the Company’s bylaws (including The members of committees shall be appointed by the in particular a reduction or increase in the Company’s share Supervisory Board. Unless otherwise resolved by the capital or changes in the fiscal year); Supervisory Board, the duration of committee members’ terms of office shall be that of their terms as members of the • A motion for issuance of new securities of the Company or Supervisory Board. its subsidiaries; a motion for amendment of the corporate purpose and/or principal business of the Company or its Each committee shall draw up its own internal regulations, subsidiaries; which shall require approval by the Supervisory Board.

Document de référence 2005 - Maroc Telecom 19 Compensation Liability The shareholders’ meeting may allocate to the members Members of the Supervisory Board shall be liable, personally of the Supervisory Board, as compensation for their or jointly as the case may be, to the Company and to third duties, a fixed annual amount in attendance fees. The parties, for offences against the statutory or regulatory rules Supervisory Board may also allocate exceptional relating to corporations, for breaches of the bylaws or for compensation with respect to assignments or duties misconduct in their management. entrusted to its members. If several members of the Supervisory Board have cooperated in the same action, the Court shall apportion liability among them in terms of payment of damages.

3.1.14 Statutory auditors

The Company shall be audited by at least two statutory If it becomes necessary to appoint one or more statutory auditors, who shall be appointed and shall perform their auditors and the meeting of shareholders fails to do so, any duties in accordance with the law. shareholder may apply to the president of the court, acting in summary proceedings, for appointment of a statutory auditor. Appointment, removal from office and incompatibility The statutory auditor(s) appointed by the president of the of offices court shall remain in office until appointment of the new statutory auditor or auditors by the shareholders’ meeting. During the term of the Company, the statutory auditors shall The appointments of statutory auditors shall comply with be appointed for three fiscal years by the ordinary the rules relating to incompatibility of offices laid down by shareholders’ meeting. law. The statutory auditors’ offices shall expire upon adjournment of the ordinary shareholders’ meeting acting Duties of the statutory auditors upon the financial statements for the third fiscal year. The statutory auditors shall be eligible for further office. A statutory auditor appointed by the shareholders’ meeting The statutory auditor(s) shall have a permanent assignment, to replace another shall remain in office only for the exclusive of any interference in the management of the remaining duration of his or her predecessor’s term. Company, of inspecting the Company’s assets, books and If, upon expiry of a statutory auditor’s term of office, a accounting documents, and ascertaining the compliance of motion is submitted to the shareholders’ meeting against its financial statements with applicable rules. They shall also extension of his or her term, the statutory auditor may review the fairness and consistency relative to the summary address the meeting, if he or she so requests. statements of the information provided in the annual report from the Management Board and in the documents sent to One or more shareholders holding at least one tenth of the the shareholders with respect to the Company’s assets and share capital may apply to the president of the court acting liabilities, its financial position and its earnings. in summary proceedings for one or more statutory auditors appointed by the shareholders’ meeting to be barred from The statutory auditor(s) shall ensure that equal treatment office, and apply for appointment of one or more auditors to among the shareholders has been observed. perform their offices in their stead. The statutory auditor(s) shall be invited to attend the Under penalty of inadmissibility, the referral to the president meeting of the Management Board closing the financial of the court shall be entered by a reasoned application statements for the previous fiscal year, and all shareholders’ made within 30 days after the challenged appointment. meetings. If the application is granted, the statutory auditor or auditors At any time of the year, the statutory auditor(s) shall perform appointed by the president of the court shall remain in office such inspections as they shall consider being desirable, and until appointment of the new statutory auditor or auditors by may obtain disclosure on the spot of any document they the meeting of shareholders. consider necessary for the performance of their

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assignment, including without limitation any contracts, statements shall be made available to the statutory records, accounting documents and minute books. auditor(s) at least 60 days before notice of the annual The Management Board’s annual report and summary shareholders’ meeting is given.

3.1.15 Trading of shares

Sales of shares shall be carried out in the manner provided for by law.

3.1.16 Crossing of thresholds

Any individual or legal entity, acting alone or in concert with Any individual or legal entity, acting alone or in concert with others, that becomes the owner, directly or indirectly, of a another, that becomes the owner, directly or indirectly, of a number of shares representing more than one twentieth (5%), number of shares representing more than one tenth (10%) or one tenth (10%), one fifth (20%), one third (33.33%), half (50%) one fifth (20%) of the Company’s share capital or voting rights or two thirds (66.66%) of the Company’s share capital or voting must notify the Company, the CDVM and the Bourse de rights must notify the Company, the CDVM (Moroccan Casablanca, within five working days from the time when any securities regulator) and the Bourse de Casablanca such threshold of is crossed, of his, her or its intended (Casablanca securities exchange), within five working days of objectives within the 12 months after such threshold is crossed, the date it crosses such threshold of the total number of the specifying whether he, she or it is acting alone or in concert with Company’s shares that he, she or it holds, and of the related another, whether he, she or it intends to discontinue or proceed number of voting rights. with acquisition and his, her or its intention to submit the The date of crossing of the threshold shall be the date of appointment of members of the corporate governing bodies execution of the reporting party’s order on the exchange. and to acquire control over the Company or not. In the event of failure to comply with the reporting obligation The date of crossing of the threshold referred to under the above, the shares in excess of the portion that ought to have foregoing paragraph shall be the date of execution of the been reported shall be deprived of voting rights at any meeting reporting party’s order on the exchange. of shareholders until the end of a two-year period following the Without prejudice to and within the limits of mandatory statutory breach. rules, in the event of failure to comply with the reporting In addition to the statutory obligation mentioned above to obligations above, the shares in excess of the portion that ought inform the Company of the crossing of thresholds, any to have been reported shall be deprived of votes at any individual or legal entity, acting alone or in concert with another, shareholders’ meeting held until expiry of two-year period after that becomes the owner directly or indirectly of a number of the date of the breach. shares representing more than 3%, 5%, 8%, 10%, or any Holders of shares may also be subject to the reporting threshold that is a multiple of 5% in excess of 10%, of the share obligations provided for under statutory Decree 1-04-21 capital or voting rights of the Company, must notify the enacting Act 26-03 relating to public bids on the stock market Company, by registered mail with return receipt the total dated April 21, 2004, and Circular 01/04, dated June 8, 2004, number of shares or voting rights that he, she or it holds, within relating to the crossing of thresholds of interest in the share five trading days after the date of acquisition. capital or votes of listed companies. The notice above is also to be given if the interest in the capital Holders of shares or other securities of the Company are falls below the thresholds provided for above. advised to consult their legal counsel in order to ascertain In each aforementioned report, the reporting party shall certify whether the reporting obligations are applicable to them that the report includes all shares or voting rights held or owned. The reporting party shall also specify the date or dates of acquisition or sale of his, her or its shares.

Document de référence 2005 - Maroc Telecom 21 3.1.17 Public bids

Under Moroccan law, public bids are governed by Act 26-03, the main provisions of such proposal. That publication shall dated April 21, 2004, which became effective on May 6, 2004. be the starting point for the bid period. A public bid is defined as the procedure whereby an The CDVM shall forward the main features of the proposed individual or legal entity, acting alone or in concerted fashion public bid to the public authorities, which shall be allowed (the “bidder”), discloses publicly an intention to acquire, two working days from the date of such transmission to rule exchange or sell all or part of the securities entailing access upon admissibility of the proposal having regard to national to the share capital or votes of a listed company. strategic interests. If no decision is taken within two working As in French law, public bids can be volunteers or days, the authorities shall be deemed not to wish to compulsory when certain conditions are gathered. comment. As soon as the proposed public bid has been filed, the Voluntary public bids CDVM shall request the company managing the stock market to suspend the listing of the shares in the company Any individual or legal entity, acting alone or in concerted to which the public bid relates. The suspension notice shall fashion and wishing to report publicly that he, she or it wishes be published. to acquire or sell shares listed on the securities exchange, may file a proposed public bid for acquisition or sale of the The CDVM shall be allowed a period of ten working days from shares. the publication, to review the proposed bid’s admissibility and may require the bidder to provide any evidence or Unlike the French law which provides the intervention of information required for its evaluation. Under the French presenters’ establishments, under Moroccan law, a public bid legislation, it is a period of five trading days following the is to be filed by the bidder with the Moroccan securities publication of the deposit of the bid project. regulator (CDVM), and must include : As in French law, the bidder is required to modify the • the bidder’s objectives and intentions ; proposal in order to comply with the CDVM’s • the number and nature of the company’s securities ; recommendations if the latter considers that the proposal is • the date and terms on which the purchase thereof has been inconsistent with the principles of equal treatment among or may be made ; shareholders, full disclosure, integrity of the market or fairness of transactions and competition. In all cases, the • the price or exchange ratio at which the bidder is offering to CDVM also has authority to require from the bidder any acquire or sell the securities, the information on which these additional warranties and to demand the deposit of security are based and the terms of payment, settlement or in cash or in securities. Grounds shall be stated for any ruling exchange planned ; denying admissibility. • the number of shares to which the proposed public bid relates ; and If a public bid is ruled to be admissible, the CDVM shall notify its ruling to the bidder and publish a notice of admissibility in • if applicable, the percentage of votes below which the a newspaper authorized to carry legal advertisements. bidder reserves the option not to carry out the bid. Concurrently, the CDVM requests the company managing the The proposed public bid must be accompanied by an securities exchange to resume listing. information document. Any proposed public bid shall be accompanied by the The contents and performance of the offers contained in information documents which may be drafted jointly by the the proposed bid shall be warranted by the bidder, and if bidder and the target company if the latter concurs in the applicable, by any person acting as surety. The proposed bidder’s objectives and intentions. If not, the target company public bid filed with the CDVM shall be accompanied by may draft separately and file with the CDVM its own the prior permit or permits from the competent information document within five trading days after approval authorities. Absent such permit, the proposed bid is not of the bidder’s information document. In such case, the admissible. bidder is bound to file a copy of his, her or its information Upon filing of the proposed public bid, the CDVM shall issue document and proposed public bid with the target company a notice of filing of the proposed public bid in a newspaper on the day of filing of his, her or its bid proposal with the authorized to carry legal advertisements, which shall report CDVM.

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The contents of the information document(s) shall be crossed, to file with the CDVM any proposed take-over bid. determined by the CDVM, which shall be allowed a maximum Failing this, such person and those acting in concert shall period of 25 working days to approve the information lose the voting and financial rights attached to their capacity document(s) after the date of filing thereof. as shareholders. Such rights shall be recovered only after a proposed cash take-over bid is filed. Such period may be extended by ten working days, if the CDVM considers that additional evidence or information is The CDVM may grant an exception from the filing of a required. Upon expiry of such period, the CDVM shall grant or compulsory cash take-over bid when : deny approval, and shall provide a justification for any denial. • crossing of the threshold of 40% does not affect control In French law, the AMF has a period of five trading days over the relevant company concerned, in particular as a following the deposit of information notice project to deliver result of a capital reduction or transfer of shares among its visa. During this period, the AMF can ask for any companies affiliated to the same group ; explanations or for justifications necessary for instruction of • the voting rights arise out of a direct transfer, an information notice’s project. The period is then suspended apportionment of assets by a legal entity in proportion of until reception of the required elements. If the information shareholders’ rights as a result of a merger or contribution notice fills the required conditions, the AMF affixes its visa of assets, or a subscription for a capital increase in a that can be matched with a warning. When the information company in financial difficulties. notice is established by the targeted company, the AMF has a delay of three trading days following the deposit to deliver The application for an exception shall be filed with the CDVM its visa. within three working days after the voting rights threshold of 40% is crossed. It shall include covenants by that party to the The bidder and, if applicable, the targeted company, have to CDVM not to initiate any action intended to obtain control each publish, what concerns him, her or it, the information over such company during a specific period, or to implement documents in a newspaper authorized to carry legal a plan for recovery of the company concerned when it is in advertisements within a maximal period of five workdays financial difficulties. after obtaining the visa. Under French law, the information notice must be published in a daily newspaper with a national If the CDVM grants the exception applied for, its ruling shall distribution, notified of charge to the public by the bidder be published in a newspaper authorized to carry legal or the targeted company and published as a summary or a advertisements. press release. This distribution has to occur before the offer’s opening and at latest the second trading day following the Compulsory buy-out bids AMF’s visa. According to the article 20 of Moroccan law 26-03 relating to The managing company shall centralize the acquisition, sale public bids, the filing of a compulsory buy-out bid is or exchange orders and notify the results to the CDVM, which mandatory when one or more individual or corporate shall issue a notice relating to the outcome of the bid in a shareholders of a listed company hold, alone or in concert, a newspaper authorized to carry legal advertisements. specific percentage of voting rights in such company. An Order of the Minister of finance and privatization n°1875- Compulsory public bids 04 dated Ramadan 11, 1425 (October 25, 2004) has fixed at Cash take-over bids 95% the percentage of voting rights imposing on his holder to proceed in a compulsory buy-out bid. Under Article 18 of Moroccan Act 26-03 relating to public The parties entering such bid are required, sua sponte and bids, the filing of a cash take-over bid is compulsory when an within three working days after the percentage of 95% individual or legal entity, acting alone or in concerted fashion, threshold is crossed, to file with the CDVM a proposed holds, directly or indirectly, a fourty percent of votes in a compulsory buy-out bid. Failing this, they shall automatically company listed on the Securities Exchange. forfeit all the voting rights. Such voting rights shall be An order of the Minister of finances and privatization n°1874- recovered only after the filing of a proposed compulsory buy- 04 dated Ramadan 11, 1425 (October 25, 2004) has fixed at out bid. 40% the percentage of voting rights imposing on his holder Filing of a proposed compulsory buy-out bid may also be to proceed in cash take-over bid. required by the CDVM of the individual or individuals, or legal Any individual or legal entity is required, sua sponte and entity or entities, holding, alone or in concert, a majority of the within three working days after the voting rights threshold is share capital listed on the securities exchange, when certain

Document de référence 2005 - Maroc Telecom 23 requirements are met, including the requirement of holding conditions proposed to securities holders. Finally, it can also 66% of the votes concurrently (Order of the Minister of be declared compliant if, without modifying the terms Finance and privatisation n°1873-04 dated Ramadan, 11, stipulated in the previous bid, it withdraw the threshold below 1425). which the initiator would not have followed up with the bid.

Compulsory acquisition procedure Rules relating to target companies and public bidders Under French law, when an individual or legal entity, acting During the term of a public bid, the bidder and the parties alone or in concert, acquires or has agreed to acquire a block with which he, she or it is acting in concert may not, in the conferring on him, her or it, the majority, with regard to the case of a mixed public bid, intervene on the market for titles or voting rights which he, she or it already holds, that securities of the target company or on the market for shares party is required to file an offer for a compulsory buy-out and of the company, the shares of which are tendered in to agree to acquire on the market, during a minimum of ten exchange. trading days, all securities tendered for tendered for sale at In the event of a voluntary take-over bid, the bidder may the price at which the securities have been or is to be sold. withdraw the bid within five trading days after publication of Such a procedure doesn’t exist in Moroccan law. the notice of admissibility of a competing or improved bid. The bidder shall inform the CDVM of the decision to withdraw, which shall be published by the latter in a Competing bids and improved public bids newspaper authorized to carry legal advertisements. This One or more competing public bids, or improved public bids, option is also permitted under French law. may be entered. During the term of the public bid, the target company and A competing public bid is a procedure whereby any individual parties acting in concert with it, if applicable, may not or legal entity, acting alone or in concert, may, from the time intervene directly or indirectly on the shares of the target of initiation of a public bid, and no later than five trading days company. If payment for the public bid is to be made solely before its closing date, file with the CDVM a competing bid in cash, the target company may, however, proceed with relating to shares of the company to which the initial bid performance of a share buy-back program if the resolution of refers. the meeting of shareholders having permitted such program Improved bidding is a procedure whereby the bidder under has expressly so provided. the initial public bid improves the terms of the initial bid, During the term of the public bid, the target company and the either sua sponte or after a competing public bid, by bidder, individuals or legal entities holding directly or modifying the price or the nature or quantity of securities or indirectly at least 5% of the share capital or voting rights of the terms of payment. A bidder wishing to improve the bid is the target company, and any other individuals or legal entities bound to file with the CDVM the changes made to the initial acting in concerted fashion with the foregoing, are required to public bid no later than five trading days before the date of report to the CDVM after each trading day the purchases and close of the initial bid. The CDVM shall determine whether the sales that they have carried out with respect to the shares improved bid is admissible within five trading days after the concerned by the bid, and any transaction resulting in an filing of such proposal. The bidder shall draw up and submit immediate or future transfer of title to the shares or votes of to the CDVM a supplementary information document. the target company. When more than ten weeks have elapsed since the Any delegation of authority to increase the share capital publication of an initiation of a public bid, the CDVM may, in granted by the target company’s extraordinary shareholders’ order to expedite the competition between bids, set a meeting shall be held in abeyance during the term of the cash deadline for the filing of successive improved bids or or stock take-over bid relating to such company’s shares, and competing public bids. the target company may not increase its holdings of its own In the event of a competing bid, the initial or earlier bidder stock. must, within ten days before the close of such bid, inform the During the term of the bid, the appropriate agencies of the CDVM of his, her or its intentions. His bid may be maintained, target company shall give the CDVM prior notice of any withdrawn or modified by an improved bid. proposed resolution within their powers that would prevent Under French law, the price of a competing bid or an performance of the public bid or of a competing bid. improved public bid must be at least 2% above the price Under French law, the initiator of a public bid and parties stipulated in the initial bid. It can also be declared compliant acting in concert with him, her or it, can, subject to if it contains a significant improvement of the terms exceptions, intervene in purchase on the securities market of

24 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION REGARDING THE COMPANY

the target company, according to price’s conditions. Those CDVM’s supervision and penalties rules are also applicable to any agent or advisor acting on its behalf or on behalf of the initiator or of the target company. Public bidders, target companies and parties acting in concert with them are subject to the supervision of the AMF regulations also imposes reporting’s obligations of the purchases and sales with respect to the shares concerned by CDVM, which shall ensure that such bids are carried out in the bid. orderly fashion to the best of investors’ and the market’s interests. The CDVM may impose civil and criminal penalties.

Document de référence 2005 - Maroc Telecom 25 3.2 GENERAL INFORMATION RELATING TO THE COMPANY’S SHARE CAPITAL

3.2.1 Share capital

The share capital of Itissalat Al-Maghrib is MAD the manner provided for by the applicable law. 8,790,953,400, divided into 879,095,340 shares with a par At the Shareholders’ meeting to be held on March 30, 2006 a value of MAD 10 each, in a single class and fully paid in. reduction in capital will be proposed by means of a reduction The shares’ par value may be increased or decreased as in the nominal value of each share from MAD 10 to MAD 6. provided by applicable law. Subject to shareholders’ approval, this reduction, which is not The share capital may be increased, decreased or redeemed prompted by losses, will reduce the share capital to MAD by a resolution of the appropriate assembly of shareholders, in 5,274,572,040.

3.2.2 Form of shares

The shares shall be in registered or bearer form at the Indivisibility of shares shareholders option. Shares shall be indivisible in relation to the Company, which The Company shall keep at the registered office a register shall recognize only one owner for each share. known as the “transfer register” in which are recorded, in chronological order, subscriptions for and transfers of Joint holders of undivided interests shall be bound to appoint registered shares. The pages of such register are to be a joint representative in respect of their relations with the numbered and it shall be initialed by the President of the Company in order to exercise their rights as shareholders; Court. Any holder of a registered share issued by the absent an agreement, the agent shall be appointed by the Company is entitled to obtain a copy thereof certified as true President of the Court, acting in summary proceedings upon by the Chairman of the Management Board. If the register is a petition from any of the holders of undivided interests. lost, copies shall constitute conclusive evidence. The right to obtain disclosure of the documents provided for The Company may decide not to issue shares in physical by law shall nonetheless be held by each of the holders of form. In accordance with the statutory rules elating to the interests in undivided shares, and by each life tenant and bare book entries of securities, the Company’s shares must be owner. evidenced by book entries with the central depositary.

3.2.3 Rights and duties attached to shares

Each share shall carry a right, proportional to the portion of the Company’s bylaws and resolutions of general assemblies and share capital that it represents, in the profits or corporate of the Supervisory Board and Management Board acting upon assets, at the time of distribution thereof during the term of the delegations of authority from the assemblies. Company or upon its liquidation. Heirs, creditors, assigns or other representatives of a shareholder Any shareholder shall be entitled to information relating to the may not, on any grounds whatsoever, call for the affixing of seals Company’s operation and to obtain disclosure of certain on the assets and valuables of the Company, or call for a division corporate documents at the times and in the manner provided or sale by auction thereof, or interfere in any manner whatsoever for by law and the bylaws. in the actions of its administration; for the exercise of their rights, they shall be bound by the statements of corporate assets and Shareholders shall be liable for corporate debts only to the liabilities and resolutions of the shareholders meetings. extent of the par value of the shares that they own; no additional assessment shall be permitted. Whenever it shall be necessary to hold several shares in order to exercise any right, the owners of single shares or shares in The rights and duties attached to a share shall be transferred responsible for combining or acquiring or selling the requisite to any owner thereof. lesser numbers than that required shall be personally number Title to a share shall entail, as of right, acceptance of the of shares or rights.

26 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL GENERAL INFORMATION RELATING TO THE COMPANY’S SHARE CAPITAL

3.2.4 Acquisition by the Company of its own shares

Moroccan legislation French legislation In accordance with Moroccan legislation and its bylaws, the From the listing of its shares on a regulated market in France, Company may acquire those of its own shares which are fully the Company shall be subject to the legislation summarized paid in, up to 10% of the total of its own shares and/or of a below. specific class. Pursuant to AMF Regulation, a company’s acquisition of its Pursuant to the CDVM’s circular 02/03, dated May 23, 2003, own shares shall be contingent, in principle, upon the filing of implementing Decree 2-02-556, dated February 24, 2003, any an information notice subject to approval by the Autorité des corporation (société anonyme), the shares of which are listed marchés financiers. on the Securities Exchange and wishing to acquire its own Pursuant to AMF Regulation and European Commission shares in order to adjust the share price, shall be required to regulation n°2273/2003 of December 22, 2003 a company issue an information notice, which shall require approval from may not carry out transactions relating to its own shares in the CDVM prior to the holding of the assembly of shareholders order to manipulate the market. called to consider the action. After buying back its own shares, a company must publish the The Company’s interventions relating to its own shares in details of its transactions by the end of the seventh trading order to adjust the price shall not interfere with the proper day after their date of execution, and to file with the Autorité operation of the market. des marchés financiers monthly reports containing specific A Company intervening with respect to its own shares shall information relating to the transactions performed. inform the CDVM, no later than the fifth working day after the As of the date of registration of this reference document, close of the relevant month, of the number of shares acquired Maroc Telecom holds none of its own shares and has not been and shares sold, if applicable. authorized by the shareholders’ meeting to initiate a share If the Company does not intervene with respect to its own buy-back program. It reserves the right, however, to shares during a particular month, it shall so inform the CDVM implement such a program in compliance with applicable within the same period. laws. During the buy-back program, any change relating to the number of shares to be acquired, the maximum purchase price and minimum selling price, or the period during which the acquisition is to be performed shall be promptly notified to the public by means of a notice published in one of the newspapers authorized to carry legal advertisements. Such changes shall remain within the bounds of the authorization granted by the shareholders’ meeting.

Document de référence 2005 - Maroc Telecom 27 3.2.5 Changes in the Company’s share capital since its incorporation

The table below sets out the main actions the Company has taken with respect to its share capital since its incorporation in 1998 :

Date Action Amount Premium Number Total Par value Share capital of shares number (in MAD) (in MAD) created of shares

25/02/1998 Incorporation 100,000,000 - 1,000,000 1,000,000 100 100,000,000

25/03/1999 Capital increase 8,765,953,400 - 87,659,534 88,659,534 100 8,865,953,400

4/06/1999 Capital reduction* 75,000,000 - -750,000 87,909,534 100 8,790,953,400

28/10/2004 Change in par value** - - 791,185,806 879,095,340 10 8,790,953,400

* At the time of incorporation, only one quarter of the initial share capital was paid in. As a result of this capital reduction, the share capital was fully paid in. ** By compulsory exchange of 10 new shares’ with a 10 dirhams per value of against one former share with a 100 dirhams per value.

28 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL TRADING OF THE COMPANY’S SHARES

3.3 TRADING OF THE COMPANY’S SHARES

3.3.1 Places of listing

Since December 13, 2004, Maroc Telecom is simultaneously listed on Casablanca Stock Exchange and Enronext.

3.3.2 Maroc Telecom share price

Casablanca Stock Exchange. Main Market, Code 8001.

Moroccan Average Price* High Low n° of shares Trade Value** dirhams (thousands) (MAD million) January 2005 85.92 87.98 84.00 3,385.29 290.85

February 2005 85.65 87.60 83.20 4,503.30 385.72

March 2005 84.50 86.00 80.54 2,999.03 253.43

April 2005 83.46 84.30 82.72 1,744.29 145.58

May 2005 83.14 85.70 80.00 3,179.31 264.31

June 2005 83.07 84.00 81.60 3,780.47 314.03

July 2005 84.55 89.10 82.70 3,059.59 258.69

August 2005 88.75 90.00 86.42 1,681.12 149.20

September 2005 95.84 98.60 89.30 2,937.71 281.54

October 2005 96.29 98.00 95.50 1,828.70 176.09

November 2005 100.01 101.00 96.00 3,507.78 350.81

December 2005 99.04 100.90 96.00 13,497.50 1,339.31

January 2006 111.04 115.45 100.00 6,009.15 667.24

February 2006 128.14 136.00 114.50 8,487.42 1,087.56

* The average price is calculated by dividing trade value by number of shares. ** Not included transactions of « marché de blocs » Source : Casablanca Stock Exhange.

Document de référence 2005 - Maroc Telecom 29 Euronext Paris. Eurolist , Code MA0000011371.

Moroccan Average Price* High Low n° of shares Trade Value** (thousands) (Euro million) January 2005 7.93 8.57 7.54 5,927.35 46.98

February 2005 7.83 8.05 7.67 5,169.93 40.49

March 2005 7.50 8.00 7.14 4,885.22 36.64

April 2005 7.47 7.76 7.15 2,933.87 21.92

May 2005 7.64 7.89 7.30 2,441.60 18.66

June 2005 7.65 7.74 7.50 2,065.03 15.79

July 2005 7.83 8.40 7.36 4,361.84 34.14

August 2005 8.11 8.30 7.92 4,549.63 36.90

September 2005 8.84 9.20 8.15 5,721.16 50.58

October 2005 8.74 8.99 8.48 2,123.46 18.56

November 2005 8.97 9.20 8.61 5,167.68 46.37

December 2005 8.96 9.04 8.70 3,339.36 29.91

January 2006 9.74 10.19 8.98 5,005.20 48.77

February 2006 11.39 12.25 9.99 5,330.33 60.69

* The average price is calculated by dividing trade value by number of shares. ** Not included transactions « hors système ». Source : Euronext Paris.

30 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL DIVIDENDS AND DIVIDEND POLICY

3.4 DIVIDENDS AND DIVIDEND POLICY

3.4.1 Dividends paid during the past five fiscal years

The table below sets out the amount of dividends (in millions of Moroccan dirhams) paid by the Company in respect of fiscal years 2001 to 2005.

Fiscal year Payment year Dividends 2001 2002 730

2002 2003 2,500

2003 2004 2,750

Exceptional dividend 2004 2,374

2004 2005 4,395

2005 2006 6,119*

* Amount proposed at the general shareholders’ meeting of March 30, 2006.

As of December 31, 2005, the Company’s reserves amounted to MAD 4,594 million (except results at the end of December, 2005), out of which MAD 512.9 million are available reserves. Moreover, Maroc Telecom will proceed to an exceptional distribution of MAD 3,516 millions from a share capital reduction by reducing the share nominal value from MAD 10 to MAD 6. In addition, subject to the approval of the shareholders’ meeting to be held on March 30, 2006, Maroc Telecom will propose an extraordinary dividend of MAD 3,516 million by way of a reduction in capital not prompted by losses, by means of a reduction in the nominal share value from MAD 10 to MAD 6.

3.4.2 Dividend policy

Maroc Telecom aims to demonstrate its concern for satisfactory distributable profit, unless exempted by the Supervisory Board compensation to its shareholders while securing the resources by a 3/4 majority. needed for the Company’s development. Accordingly, Maroc In addition, the final provisions of Article 331 of Act 17-95 Telecom intends to establish a policy of regular and significant provide that “a fixed dividend may not be covenanted in favor dividend payment, according to the economic environment and of the shareholders; any clause to the contrary shall be null and the Company’s profits and funding requirements. void, unless the State warrants the shares a minimum The total amount of dividends paid shall be determined taking dividend.” into account the Company’s funding requirements, return on Moroccan company law requires all corporations, including capital and the Company’s current and future profitability. The Maroc Telecom, to fund their statutory reserve with 5% of Company cannot guarantee to shareholders such a payment annual profits until the reserve amounts to 10% of the share level every year. This target is accordingly not a commitment of capital. In 2004, Maroc Telecom had a statutory reserve close to the Company. the maximum, and may accordingly, starting with fiscal year The bylaws (article 16) contain an obligation to distribute 2005, pay out its entire distributable profit, if this is considered annually, in the form of dividend, at least half of the Company’s to be desirable.

Document de référence 2005 - Maroc Telecom 31 3.4.3 Tax treatment relating to dividends

Moroccan tax treatment Investors should be aware that the summary of tax rules Shareholders are allowed a tax credit (which, unlike the avoir applicable in Morocco set out below is for illustrative purposes fiscal eliminated as of January 1, 2005, will continue to apply) only and does not constitute a complete discussion of all chargeable against the amount of French income tax relating potential tax situations applicable to each investor. to such income, in accordance with Article 25-2 of the Accordingly, investors should obtain advice from their usual tax Convention signed on May 29, 1970 between the French advisors as to the tax treatment applicable to their specific Republic and the Kingdom of Morocco (the “Convention”). situation and in particular the consequences of the acquisition, The tax credit amount is set by Article 25-3 of the Convention holding or transfer of ordinary shares. at 25% of the amount dividends paid. According to The tax rules applicable in Morocco with respect to dividend information from the Director of Tax Legislation, the tax credit pay-outs are governed by Act no. 24-86 on corporate income amounted to 33.1/3% of the net amount of dividends tax for companies and Act no. 17-89 on the General Income collected (after deduction of the withholding tax charged in Tax for individuals. Morocco). The proceeds of shares (dividends) collected by individuals or The net dividends collected, plus the attached tax credit, shall companies resident in Morocco or not, are subject to a 10% be taken into account to determine the taxpayer’s overall withholding tax. Companies involved in the payment of such income in the class of proceeds from securities and shall be proceeds shall be responsible for payment of the withholding subject to income tax on a progressive scale, to which are tax to the Treasury. added the dividends collected on or after January 1, 2004. Companies having their registered offices in Morocco are However, dividends paid out by the Company pursuant to a exempt from this withholding tax, provided that they deliver to valid resolution of the Company and collected on or after the paying agent attestations of title to the shares, including January 1, 2005 shall be taken into account for the purposes the reference of the tax applicable in Morocco. of computation of income tax, to the extent of 50% of their It should be noted that dividends paid to residents of countries amount. In addition, they shall be eligible for an annual with which Morocco has entered into tax treaties can benefit allowance of 2,440 for married couples taxed jointly and for from a rate of less than 10% if these treaties provide for such partners taxed jointly starting with the taxation of income for a rate. Further, such persons are usually entitled to credit the the year of the third anniversary of registration of a PACS tax paid in Morocco with the tax authorities in their own agreement defined under Article 515-1 of the French Civil countries according to the procedures eliminating double Code, and of 1,220 for taxpayers who are single, widowed, taxation. divorced or married and taxed separately. The 50% allowance Moroccan exchange control legislation permits foreign shall apply before the allowance of 1,220 or 2,440. shareholders to transfer dividends abroad. In addition, taxpayers resident in France for tax purposes, as defined under Article 4 B of the French Tax Code, may be eligible in respect of such dividends for a tax credit of 50% of French tax treatment the amount of taxable dividends before the allowance. Investors should note that the French tax treatment presented Such credit shall be allowed to the extent of 230 annually below is provided for information only, and does not constitute for married couples taxed jointly and for partners taxed jointly a complete discussion of all the tax situations that may apply starting with the taxation of income for the year of the third to each investor. Accordingly, investors should obtain advice anniversary of registration of a PACS agreement defined under from their usual tax advisers regarding the tax treatment Article 515-1 of the French Civil Code, and of 115 for applicable to their specific situation and in particular to the taxpayers who are single, widowed, divorced or married and acquisition, holding or transfer of shares of the Company. taxed separately. Investors should note that dividends denominated in Individuals holding shares as part of their personal assets Moroccan dirhams shall be converted, for the purposes of and not performing stock exchange transactions on a taxation in France, into euros by applying the exchange rate in regular basis Paris on the date of collection of such dividends. If there is no Dividends paid out by the Company are subject to income tax listing on that day, the average trading price applied at a at progressive rates in France. sufficiently close date is to be used.

32 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL DIVIDENDS AND DIVIDEND POLICY

Companies liable to pay corporate income tax company meeting all such requirements, the rate of corporate income tax is set, to the extent of 38,120 of taxable profit The dividends paid out by the Company shall be subject to per 12-month period, at 15%. Such companies are in addition corporate income tax in France. exempt from the 3.3% welfare contribution mentioned above. In accordance with Article 25-2 of the Convention, the Companies eligible for parent companies exemption regimes. shareholder is granted a tax credit chargeable against French corporate income tax. The tax credit amount is set by Article Companies meeting the requirements of Articles 145 and 216 25-3 of the Convention at 25% of the dividends paid out. of the French Tax Code are, if they chose to, eligible to an According to information from the Director of Tax Legislation, exemption for dividends collected pursuant to the parent the amount of such tax credit equals 33.1/3% of the net company exemption regime. Article 216 I of the French Tax amount of dividends collected (after deduction of the Code, however, provides for the taxation in the taxable income withholding tax charged in Morocco). Such tax credit may not, of the legal entity receiving the dividends, of a portion of costs however, exceed the amount of French corporate income tax and expenses set at a fixed rate of 5% of the amount of relating to such dividends. No surplus tax credit may be used dividends collected, including the traditional tax credit granted against the French taxes payable in respect of other sources under a tax treaty. For each taxable period, however, such of income, or be refunded or carried forward. portion may not exceed the total amount of costs and expenses of all kinds incurred by the company collecting the The dividends collected, plus the related tax credit, shall be dividends during the same period. included in the income subject to corporate income tax at a rate of 33.1/3%. Pursuant to the parent company exemption regime, the traditional tax credit attached to the dividends collected may An additional contribution of 3% of the gross amount of not be used against the amount of corporate income tax. corporate income tax and a welfare contribution of 3.3% of the gross amount of corporate income tax in excess of Investors should note that dividends denominated in 763,000 per 12-month period, shall be added thereto. Moroccan dirhams shall be converted, for the purposes of taxation in France, into euros by applying the exchange rate in However, for companies with revenues of less than Paris on the date of collection of such dividends. If there is no 7,630,000 and the share capital of which, fully paid in, has listing on that day, the average trading price applied at a been held uninterruptedly for the duration of the fiscal year sufficiently close date is to be used. concerned to the extent of 75% at least by individuals or by a

Document de référence 2005 - Maroc Telecom 33 3.5 BREAKDOWN OF SHARE CAPITAL AND VOTING RIGHTS

3.5.1 Ownership of share capital and voting rights in the Company

As of December 31, 2005, the share capital and voting rights of the Company were held as follows :

Shareholders Number of shares % of capital/voting rights Vivendi Universal Group* 448,338,570 51.00%

Kingdom of Morocco 299,771,480 34.10%

Members of Supervisory Board 161,850 0.02%

Employees 2,084,200 0.24%

Public 128,739,240 14.64%

Total 879,095,340 100%

* Thought its 100% Subsidiary (Société de Participation dans les Télécommunication).

3.5.2 Authorized share capital

As of the date of this Document de Référence, the Company to its shareholders for permission to perform such issues or to had not issued any securities other than the ordinary shares set up such programs, in compliance with the applicable rules. carrying direct or indirect rights, at present or in the future, to It will be proposed to the general shareholders meeting of the Company’s share capital. Likewise, no stock option or March 30, 2006 to authorize the Management Board to set up subscription plan has been established in favor of the stock options plans and application of shares. employees. The Company reserves the right, however, to apply

3.5.3 Changes in the shareholding structure of the Company over last three fiscal years

Since December 13, 2004, Maroc Telecom share is listed Universal concluded an agreement regarding the acquisition by simultaneously in Casablanca Stock Exchange and Paris Stock Vivendi Universal of 16% of Maroc Telecom’s share capital. On Exchange after transfer by public bid for sale of 14.9% of Maroc January 4, 2005, this agreement allowed Vivendi Universal to Telecom share capital by Kingdom of Morocco. carry its participation from 35% to 51% by 140,655,260 Maroc On November 18, 2004 the Kingdom of Morocco and Vivendi Telecom shares acquisition.

34 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL BREAKDOWN OF SHARE CAPITAL AND VOTING RIGHTS

The share capital and voting rights of the Company for last 3 years were held as follows :

December 31, 2005 December 31, 2004 December 31, 2003 Sharholders Number % of capital/ Number % of capital/ Number % of capital/ of share voting rights of share voting rights of share voting rights Kingdom of Morocco 299,771,480 34.10% 440,426,710 50.10% 571,411,920 65.00%

Vivendi Universal Group * 448,338,570 51.00% 307,683,330 35.00% 307,683,330 35.00%

Members of Supervisory Board 161,850 0.02% 90 0.00% 90 0.00%

Employees 2,084,200 0.24% 4,250,961 0.48%

Public 128,739,240 14.64% 126,734,249 14.42%

Total 879,095,340 100% 879,095,340 100.00% 879,095,340 100.00%

* Through its 100% subsidiary (Vivendi Telecom International at December 31, 2003 and 2004; Société de Participation dans les Télécommunications at December 31, 2005).

3.5.4 Employee stock ownership

At the Initial Public Offering, Maroc Telecom allowed to its acquired during 3 years, that is to say until December 3, 2007. employees to take part of the capital opening with privileged At December 31, 2005, the share held by employees conditions namely the benefit of a discount of 15% of amounted to 0.24% of the authorized capital and the voting subscription price, provided that they preserve the actions rights.

3.5.5 Shareholders’ Agreement

The amended Shareholders’ Agreement between the the Supervisory Board is contingent upon a change in the Kingdom of Morocco and Vivendi Universal respective beneficial interests of Vivendi Universal and the Government of the Kingdom of Morocco in the Company’s share By an amendment, dated November 18, 2004, Vivendi capital, as follows : Universal and the Government of the Kingdom of Morocco modified the amended shareholders’ agreement. In If the stake of the Government of the Kingdom of Morocco in accordance with this amendment, principal provisions the total voting rights held jointly with Vivendi Universal governing relations between the Kingdom of Morocco and becomes : Vivendi Universal are as follows : • greater than or equal to 50% but less than or equal to 65%, then five members will be appointed by the Organization of the powers within the management Government of the Kingdom of Morocco and three bodies of Maroc Telecom’s members appointed by Vivendi Universal ; Supervisory Board • greater than or equal to 40% but less than 50%, then • The amended Shareholders’ Agreement provides that the three members will be appointed by the Government of Supervisory Board, in theory, is to be composed of eight the Kingdom of Morocco versus five members appointed members, and that a change in the apportionment of seats on by Vivendi Universal ;

Document de référence 2005 - Maroc Telecom 35 • greater than or equal to 30% but less than 40%, then two share capital and voting rights of the Company, one of the members will be appointed by the Government of the members of the Supervisory Board will be appointed by the Kingdom of Morocco versus six members appointed by Government of the Kingdom of Morocco and seven members Vivendi Universal; of the Supervisory Board will be appointed by Vivendi Universal, and the Government of the Kingdom of Morocco shall be • greater than or equal to 20% but less than 30%, then one entitled to appoint one Representative who shall have the right member will be appointed by the Government of the to attend the Supervisory Board without being able to vote. Kingdom of Morocco versus seven members appointed by Vivendi Universal; These rules governing the allocation of the seats on the Supervisory Board shall remain applicable as long as the • greater than or equal to 70% but less than 80%, then Government of the Kingdom of Morocco holds at least 5% of seven members will be appointed by the Government of the share capital and voting rights of the Company. the Kingdom of Morocco versus one member appointed Consequently, since January 4, 2005, three members of the by Vivendi Universal; and Supervisory Board have been appointed by the Government of the Kingdom of Morocco and five members of the • greater than 65% but less than 70%, then six members Supervisory Board by Vivendi Universal. will be appointed by the Government of the Kingdom of • The rules of majority applicable to the Supervisory Board Morocco versus two members appointed by Vivendi previously set out by the Shareholders’ Agreement, the Universal. Protocol of March 4, 2002 and the bylaws adopted on October 28, 2004 were replaced by new rules of majority, set In addition, if the Kingdom of Morocco holds less than 5% of forth in the amended Shareholders’ Agreement and the capital and at least 2 shares of the Company, it will be reproduced identically and in full in the bylaws. The only entitled to appoint 2 representatives of the Government of the decisions subjected to the approval of the Supervisory Kingdom of Morocco who will attend the Supervisory Board Board in the Amendment which are not reproduced in without being able to vote. statutes are related to: (i) the agreement of the parties to require the preliminary approval of the Supervisory Board, • In order to preserve the power to appoint the Chairman of acting by a majority, any exceptions in the commitment of Supervisory Board, the number of seats which the Kingdom Vivendi Universal to propose the appointment to the of Morocco has to have was lowered from three to two seats. Management Board of at least a Moroccan member and (ii) the agreement of the parties to require the preliminary • Pursuant to the Amended Shareholders’ Agreement, the approval of the Supervisory Board, acting by a majority, any following rules will apply to the extent that the application of decision relative to a project recovering from the clause of such rules would result in the Government of the Kingdom of non-competition in the zone MENA provided by the Morocco appointing a number of members of the Amended Shareholders’ Agreement. Supervisory Board greater than the number resulting from the application of the rules described above : Management Board (i) if the shareholding of the Government of the Kingdom of The Amended Shareholders’ Agreement provides that a change Morocco is more than or equal to 22% of the share capital in the apportionment of seats on the Management Board is and voting rights of the Company, three members of the contingent upon a change in the respective beneficial interests Supervisory Board will be appointed by the Government of of Vivendi Universal and the Government of the Kingdom of the Kingdom of Morocco and five members of the Morocco in the Company’s share capital, as described below. Supervisory board will be appointed by Vivendi Universal; If the pro rata share of the Government of the Kingdom of Morocco of the total amount of voting rights held jointly by it (ii) if the shareholding of the Government of the Kingdom of with Vivendi Universal becomes : Morocco is less than 22% and more than or equal to 9% of • greater than or equal to 40% but less than or equal to 65%, the share capital and voting rights of the Company, two then two members will be nominated by the Government of members of the Supervisory Board will be appointed by the the Kingdom of Morocco versus three members nominated Government of the Kingdom of Morocco and six members of by Vivendi Universal ; the Supervisory Board will be appointed by Vivendi • greater than or equal to 20% but less than 40%, then one Universal; and; member will be nominated by the Government of the (iii) if the shareholding of the Government of the Kingdom of Kingdom of Morocco versus four members nominated by Vivendi Universal ; Morocco is less than 9% or more than or equal to 5% of the

36 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL BREAKDOWN OF SHARE CAPITAL AND VOTING RIGHTS

• greater than 70% but less than or equal to 80%, then four demonstrates to the Government of the Kingdom of Morocco, members will be nominated by the Government of the on objective and reasonable ground, a strategic purpose for the Kingdom of Morocco versus one member nominated by Company for such a plan. This right is valid notwithstanding any Vivendi Universal; and discrepancy with the Initial Shareholders’ Agreement. Until the • greater than 65% but less than or equal to 70%, then three earliest of the two following dates: (i) the date on which the members will be nominated by the Government of the Kingdom Government of the Kingdom of Morocco ceases to hold at least of Morocco versus two members by Vivendi Universal. 14% of the share capital and voting rights of the Company or (ii) February 20, 2014. In addition, as long as the Government of the Kingdom of Morocco holds at least 9% of the share capital and voting rights of the Company, one member of the Management Board will be Conditions for transfers of shares and rights of the parties appointed by the Government of the Kingdom of Morocco and • Call option of the Government of the Kingdom of Morocco four members of the Management Board will be nominated by Vivendi Universal would have to transfer to the Government of Vivendi Universal notwithstanding any less favorable stipulation the Kingdom of Morocco its beneficial interest in the of the Amended Shareholders’ Agreement. Company, held directly or through its subsidiaries, in the event These provisions will become automatically null and void in the of a change in the control of Vivendi Universal having such a event that the Government of the Kingdom of Morocco holds impact on competition on the Moroccan market, that it will less than 9% of the share capital and voting rights of the incur an obligation for Vivendi Universal, imposed by the Company. Moroccan competition authorities, to transfer all or a portion The completion on January 4, 2005 of the assignment by the of its beneficial interest in the Company and/or a transfer by Government of the Kingdom of Morocco to Vivendi Universal the Company of one of its business activities representing at of a shareholding representing 16% of the share capital and least 25% of its revenues. voting rights of the Company shall not entail any changes in the This provision will remain in force as long as the Government composition of the Management Board and the allocation of of the Kingdom of Morocco holds at least 20% of the total seats in the Management Board remained the same: two amount of voting rights held jointly with Vivendi Universal. members of the Management Board appointed upon the • “Standstill” obligation of Vivendi Universal motion of the Kingdom of Morocco and three members appointed upon the motion of the Supervisory Board. The amended shareholders’ provided that, so long as at least 30% of the share capital and of the voting rights of the Company is not traded on a stock market, during the period General shareholders’ meetings expiring on February 20, 2006, Vivendi Universal is forbidden from buying shares, directly or through an affiliate or entity Vivendi Universal holds the majority of votes at ordinary acting in concert with Vivendi Universal or with its affiliates, general meetings. unless the beneficial interest of a third party surpasses a threshold of 10%. Audit Committee In application of the amendment, the period during which As long as the Government of the Kingdom of Morocco holds Vivendi Universal is forbidden to transfer Company shares at least 5% of the share capital and voting rights of the without preliminary agreement of Moroccan Minister of Finance Company, at least two members of the Audit Committee of and Privatisation, is extended to February 20, 2008. Maroc Telecom will be appointed by the Government of the • Pro rata tag-along right of the Government of the Kingdom Kingdom of Morocco and this committee’s internal regulations of Morocco shall provide for the possibility for any member of the Audit In the event of a transfer of shares by Vivendi Universal Committee to ask the Audit Committee to carry out an audit of between February 21, 2008 and February 20, 2010 (inclusive) the Company and the obligation for the Audit Committee to that does not trigger a mandatory public tender offer, the rule on any formal request submitted by at least two members Government of the Kingdom of Morocco shall benefit from a of the Audit Committee to carry out such an audit. pro rata tag-along right. However, this tag-along right shall not apply in the event of a transfer between companies within the Specifics rights of the Moroccan government Vivendi Universal group (i.e., between Vivendi Universal and/or any company/companies in which Vivendi Universal The Government of the Kingdom of Morocco also holds a right holds at least two thirds of the share capital and voting rights). to veto a plan of merger, divestment or partial contribution of • Transfer by the Kingdom of Morocco assets that is likely to substantially modify the scope of the Company’s business activities or substantially modify the Without prejudice of restrictions on the ability of the Company’s corporate purpose, unless Vivendi Universal Government of the Kingdom of Morocco to transfer shares in

Document de référence 2005 - Maroc Telecom 37 the Company applicable until February 20, 2006, as described beneficial interest to 51% of the share capital of Mauritel S.A. in the offering memorandum of the Company registered Each of the parties holds a right of pre-emption with respect to November 8, 2004 by AMF under the number I.04-198, the the beneficial interest of the other party. All transfers are subject Kingdom of Morocco has undertaken, for so long as Vivendi to approval by the board of directors of Mauritel S.A. The Universal controls the Company (with the meaning of the agreement also contains a tag along right (droit de suite) allowing provision of Article 144 of Moroccan Law on corporations) not the Government to sell to the acquirer of the beneficial interest in to assign any share of Company either (i) to a Mauritel S.A the same percentage of shares acquired from telecommunications operator or (ii) to a direct competitor of Maroc Telecom. Vivendi Universal as of November 17, 2004, except with the consent, in each case, of Vivendi Universal.

• Right of priority (Droit de préemption) of Vivendi Universal GSM Al Maghrib Shareholders’ agreement In addition, notwithstanding the “stand-still” commitment by On July 8, 2003, Maroc Telecom acquired 35% of the share Vivendi Universal described above, Vivendi Universal shall capital of the distributor GSM Al Maghrib. At the time of this benefit from a right of pre-emption in the event of an acquisition, the Amrouni family (holder of 25%), Air Time (holder assignment by the Government of the Kingdom of Morocco of of 40%), and Maroc Telecom (holder of 35%) entered into a all or part of its shares until February 20, 2010 (inclusive). shareholders’ agreement governing the relationship among the shareholders. The agreement provides for a call option granted by the Amrouni family in favor of Maroc Telecom with respect to Mauritel S.A Shareholders’ agreement 16% of the share capital of GSM Al Maghrib, which would allow On April 12, 2001, Maroc Telecom acquired 54% of the share Maroc Telecom to hold 51% of the share capital. This promise capital of the incumbent Mauritanian operator, Mauritel S.A. At (promesse) is valid until December 31, 2005. The transfer price the time of this acquisition, the Islamic Republic of Mauritania of this 16% will be fixed on the basis of a valuation of the and Maroc Telecom entered into a shareholders’ agreement, business activity established by two independent experts, each under the terms of which Maroc Telecom obtained the right to appointed by one of the parties, and in the case of disagreement appoint members of the Board of Directors of Mauritel S.A. in among the two experts, by the appraisal of one expert appointed proportion to the beneficial interest that it holds (four members by the two independent experts. All transfers of shares to a third out of seven, as long as it holds more than 50% of the share party not a shareholder are forbidden before this date. All capital). Until June 30, 2004, the Mauritanian State benefited transfers among shareholders until this date are subject to a right from a right of veto with respect to significant operations of pre-emption benefiting the other shareholders. The (including, in particular, modification of the legal structure of agreement also governs the management of the company and Mauritel S.A., approval of the budget and business plan, fixing in particular, the appointments of its directors (four appointed by the annual dividend, and the conclusion of any financing. The Maroc Telecom, four appointed by Air Time, and two appointed agreement provides for a payment of dividends at the level of by the Amrouni family). Upon Maroc Telecom’s acquisition of the 30% of the consolidated profits of the Mauritel group, as long as majority of the share capital, the board of directors, composed such a distribution is legally possible and would not compromise of nine directors, will be allocated among five members the fulfillment of objectives set out in the business plan or a proposed by Maroc Telecom and four members proposed by Air healthy financial situation. In addition, Maroc Telecom was not Time. The decisions by the board of directors will be taken by a entitled to transfer shares of Mauritel S.A. before June 30, 2004, two-thirds majority of the members during a period equal to except for a transfer within the group or a transfer of 3% of the twice the term elapsed between the date of the acquisition of share capital to the employees of the Mauritanian operator. 35% of the share capital by Maroc Telecom and the date of the increase to 51% of the share capital of GSM Al Maghrib. On June 6, 2002, Maroc Telecom transferred its beneficial interest of 54% in Mauritel S.A. to the controlling holding In 2005, the company Air Time acquired the participation of company Compagnie Mauritanienne de Communications 25% held by the Amrouni family. With the occasion of this (CMC), and then transferred 20% of the share capital of CMC to transaction, Air Time authorized to Maroc Telecom a sell Mauritanian investors. At the time of this transfer, Maroc Telecom commitment of 16% of GSM Al Maghrib capital, identical to and the Mauritanian investors entered into a shareholders’ that which it enjoyed previously. agreement under which each shareholder holds management In addition, Maroc Telecom exerted on December 29, 2005 the rights with respect to CMC in proportion to the levels of its sell commitment of 16% of this company capital in order to beneficial interest. In reference to this transfer, CMC was carry the rate of its participation to 51%. In parallel, Maroc substituted to Maroc Telecom in the shareholders’ agreement. Telecom is discussing with the other shareholder of GSM Al Finally, under the terms of the shareholders’ agreement, CMC Maghrib for a possible transfer of participation. transferred 3% of the share capital of Mauritel S.A. to the employees of the Mauritanian operator, thus bringing its

38 Document de référence 2005 - Maroc Telecom 3. GENERAL INFORMATION REGARDING THE COMPANY AND ITS SHARE CAPITAL ASSET PLEDGE

3.6 ASSET PLEDGE

No pledge on assets of the Company has been granted. Also, the shares in Maroc Telecom’s subsidiaries are not pledged for the benefit of third parties.

Document de référence 2005 - Maroc Telecom 39 4 INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES

4.1 HISTORY

Maroc Telecom was created on February 25, 1998 as a result Morocco. The Company has extended the range of fixed-line of a split of the Office National des Postes et telecommunications services it provides with the launch of Télécommunications pursuant to the enactment of Act 24-96 narrowband Internet in 1995 and broadband ADSL in 2003, and the implementing decrees relating to telecommunications. together with dedicated data transmission services for Maroc Telecom, the incumbent telecommunications operator business users using state-of-the-art technology. in the Kingdom of Morocco, is organized around two business On February 20, 2001, Vivendi Universal acquired a 35% segments: the Mobile segment and the Fixed-line and Internet interest in the Company pursuant to an invitation to tender segment. organized by the Government of the Kingdom of Morocco for A mobile telephone service was introduced in Morocco in the selection of a strategic partner. Vivendi Universal was 1987, using analog technology. As soon as the GSM digital granted certain rights relating to the Company’s management standard was adopted, Maroc Telecom, as the incumbent and operations (see section 3.5.4 “Shareholders’ Agreement). operator, expanded its mobile telephone services and was the Maroc Telecom, along with the SFR-Cegetel group, is now first operator in and the second in the MENA (Middle affiliated with the Telecommunications Division of the Vivendi East North Africa) region to operate a GSM network (since Universal group. April 1, 1994). Maroc Telecom soon extended coverage to the Pursuant to an agreement dated November 18, 2004 between country’s main economic and political centers. In January the Government of the Kingdom of Morocco and Vivendi 1995, Maroc Telecom signed its first international roaming Universal, the Kingdom of Morocco transferred ordinary agreement. In order to prepare for the arrival of a new shares representing 16% of Maroc Telecom’s share capital. competitor on the market and to increase market penetration, Since the actual acquisition date of that stake on January 4, Maroc Telecom introduced prepaid schemes and GSM 2005, the breakdown of Maroc Telecom’s capital has been as packages in 1999, and launched rate plans in 2000. There are follows : now two mobile operators in Morocco, including Maroc Telecom (see section 4.5 “—Competition”). Vivendi Universal Group 51.0% There has been a fixed-line telephone service in Morocco Kingdom of Morocco 34.1% since the first half of the twentieth century and Maroc Telecom is at this date, and even if two license were attributed the only Public 14.9% operator with a fixed-line telecommunications license in

40 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES GENERAL PRESENTATION

4.2 GENERAL PRESENTATION

4.2.1 Organization

The group’s simplified legal structure as of December 31, 2004 was as follows :

Vivendi Universal Kingdom of Morocco Market

51.0 %* 34.1 %* 14.9 %*

Consolidation Scope Maroc Telecom

80 %* 35 %*

CMC GSM AL MAGHRIB Others

51 %*

MAURITEL SA 100 %*

Mauritel Mobile

* the percentages of detention correspond to the percentages of voting rights.

Since 2001, Maroc Telecom has been part of the Vivendi SFR owns a 28% stake in Neuf Cegetel, France’s leading Universal group, a leading player in media and alternative fixed-line telecommunications operator. telecommunications, with activities in music, interactive games, NBC Universal is a major global player in media and television and cinema and fixed-line and mobile communications with activities encompassing the production telecommunications. Other than Maroc Telecom, Vivendi Universal holds leading positions in each of its businesses : of films and television shows, the broadcasting of TV networks and the operation of theme parks. • Universal Music Group, a wholly-owned subsidiary of Vivendi Universal, is the world leader in recorded music with Mauritel S.A., acquired on April 12, 2001 by Maroc Telecom, is one out of every four CDs sold worldwide. the incumbent telecommunications operator in Mauritania.

• Vivendi Universal Games, a wholly-owned subsidiary of GSM Al Maghrib is a distributor of Maroc Telecom’s mobile, Vivendi Universal, is a global developer, publisher and fixed-line and Internet products and services. distributor of multi-platform interactive games. Organized into General, Central and Regional Divisions based • Canal+ Group, a wholly-owned subsidiary of Vivendi on its businesses and services, Maroc Telecom combines Universal, is the French leader in pay-TV (Canal+) and digital Mobile, Fixed-line and Internet operations with Support, TV (CanalSat) and has the world’s third largest film library Networks & Services and Administrative & Finance functions. (StudioCanal). This structure is supplemented by two Central Divisions, in • SFR, in which Vivendi Universal owns a 56% stake, is charge of Compliance and Communication, and Human France’s number two mobile telecommunications operator. Resources, respectively.

Document de référence 2005 - Maroc Telecom 41 On December 31, 2005, the functional organization chart of the Group is:

President

Office Management & Safety of information

Regulation and Communication Legal & Corporate matters Central Division

Organisation & Quality Human Resources Division Central Division General Control Division

Fixed-line and Network and Mobile Administration Internet General Services General Division and Finance Division General Division General Division

8 Regional Divisions

Maroc Telecom is decentralized with eight Regional Divisions organisational adjustments to adapt its business structure to arranging each of the operational structures and the the new environment. These adjustments mainly included appropriate functions supports allowing them to be reactive pooling some businesses, merging reporting levels, and more autonomous on the field. strengthening regional sales forces and creating a new In July 2005, just before the full liberalisation of the regional unit (in Tangiers). telecommunications market, Maroc Telecom initiated

4.2.2 Description of operations

Maroc Telecom is organized around two business segments : segment had 1.34 million customers as of December 31, 2005. As of the same date, its network, entirely digitized for • The Mobile segment provides mobile-telecommunications switching, consisted of over 6,825 kilometers of intercity fiber services. It had 8.8 million customers as of December 31, 2005. optic cable and over 3,700 kilometers of urban fiber optic It operates a GSM network covering almost the entire cable. population through more than 4,180 base stations; Maroc Telecom’s products and services are marketed through a • The Fixed-line and Internet segment provides fixed-line distribution network consisting of owned branches covering the telephone services including public , Internet services entire territory of Morocco and through independent distribution and data transmission services. The Fixed-line and Internet channels (see section 4.4.4 “Distribution”).

42 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES GENERAL PRESENTATION

The table below describes the development of Maroc Telecom’s customer base(1) over the past four fiscal years :

As of December 31, (thousands) 2003 2004 2005

Mobile customers* 5,214 6,361 8,800

Fixed-lined customers 1,219 1,309 1,341

Internet customers** 47 105 252

* Mobile customer figures include prepaid phone card users and postpaid subscribers. ** Internet customers concerns IP accounts opened with Maroc Telecom (subscribers and pay-as-you-go customers).

The telecommunications sector accounted for 5.3% of rapidly, from MAD 8.5 billion in 1999 to MAD 24.6 billion in Morocco’s GDP as of December 31, 2005. This sector grew 2005 :

As of December 31, (In millions) 1999 2000 2001 2002 2003 2004 2005

Value of telecoms market 8.5 12.4 15.2 17.0 18.9 21.4 24.6*

Source: ANRT * Maroc Telecom estimation.

The table below describes the breakdown of revenues for the fiscal years ended December 31, 2004 and 2005 :

Published Change 2004/2005 In millions of MAD En norme IFRS 31/12/2004* 31/12/2005 Published Proforma**

Gross revenues Mobile 9,684 12,772 +31.9% +29.2%

Gross revenues Fixed-line and Internet 11,133 11,949 +7.3% +5.9%

Intersegment transactions -3,409 -4,179 +22.6% +20.8%

Total consolidated net revenue 17,408 20,542 +18.0% +16.0%

* CMC-Mauritel group is consolidated by global integration since July 1st, 2004. ** The comparable basis shows the impact of the full consolidation of CMC-Mauritel as if it had actually occurred at the beginning of 2004 and of a constant MAD/ Mauritanian Ouguiya exchange rate.

Gross revenue includes flows of business between the Mobile • lines leased by the Fixed-line and Internet segment to the segment and the Fixed-line and Internet segment. Intersegment Mobile segment. transactions relate mainly to the following services : These flows are eliminated in the “consolidated revenues” line • interconnection services relating to the flows of traffic item. between Maroc Telecom’s fixed-line and mobile networks, and, (1) Excluding Mauritel.

Document de référence 2005 - Maroc Telecom 43 4.2.3 ISO Certification

Within the framework of its global policy of quality activities, development of the offers, the marketing, the Maroc Telecom obtained in 2003 the ISO 9001 version 2000 installation/deinstallation, the activation/deactivation, the certification for certain activities, such as the invoicing of the invoicing and covering, the after-sales service, information Mobile and the Mobile call centers and the fixed-line, the and assistance for the following products and services : invoicing and collection of the fixed-line revenues. • Business products including specific offers; In December, 2004, Maroc Telecom was rewarded for the • Fixed-line products as well as the phone information quality of its products and services by obtaining the ISO 9001 business; version 2000 certification for all of its activities within the framework of a total quality method. • Internet products; This certification deals with the conception and the • Mobile products.

44 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES MAROC TELECOM’S BUSINESS STRATEGY

4.3 MAROC TELECOM’S BUSINESS STRATEGY

Against the background of a growing telecommunications • a segmented and competitive offer, tailored to consumers’ market, supported by demand boosted by favorable economic expectations ; and demographic conditions, Maroc Telecom’s goal is to retain • an extensive distribution network, the densest in the country, leadership in all its market segments (mobile, fixed-line and with almost 40,000 direct and indirect retail outlets licensed Internet), and to maintain its position as the preferred by Maroc Telecom ; telecommunications services provider in Morocco, and • a modern network infrastructure, offering the country’s best profitability levels. mobile coverage ; and Despite the sector’s opening to competition, Maroc Telecom • strong brands enjoying high customer recognition. has succeeded in maintaining its leadership in each segment of Maroc Telecom’s strategy is accordingly organized along the the market, relying in particular on : following main lines:

Stimulating growth in the mobile market by increasing market penetration and usage of mobile telecommunications services and introducing new services

In order to maintain its leading position, Maroc Telecom maintained its leadership position by anticipating the changes intends to continue its efforts to increase penetration of in its environment. Maroc Telecom is considered as a mobile services in Morocco, to broaden its customer base and forerunner in developing new technologies, and is due to increase customer loyalty. launch the new 3G services in 2007. In addition, Maroc Telecom is seeking to stimulate prepaid The expansion of the customer base remains the priority, but customer usage, with promotional offers on voice services with a firm grip on customer acquisition and customer loyalty (promotional offers on rechargeable cards) and on data costs. The penetration rate increased from 31.23% at the end services (SMS and MMS promotional offers). of 2004 to 41.34% at December 31, 2005 (Source: ANRT), which confirms the Moroccan market’s strong growth Maroc Telecom has introduced new value-added services potential. In the medium term, the penetration rate is likely to based on SMS, MMS and GPRS, primarily to enhance its reach more than 60% (Maroc Telecom estimates). range and to increase ARPU. Maroc Telecom has always

Reinforcing its competitiveness in fixed-line to deal with liberalization in this segment

The fixed-line telecommunications market has now been (Blahssab range) which give better value to residential and completely liberalized since two new licenses were granted to business customers since they allow an unlimited number of Meditel and Morocco Connect in 2005. These new entrants calls and unlimited call time to all fixed-lines. will launch their first Fixed-line and Internet offers in 2006. • Improve the quality of pre- and after-sales service, which has For several years now, Maroc Telecom has been preparing been rewarded by the quality certification obtained at the itself actively for the arrival of competition with the ambition of end of 2004. consistently offering its clients the best value throughout the country and of satisfying market needs. • Increase the frequency of sales contacts with corporate and business clients. Hence, Maroc Telecom’s strategy has three main aims; (i) to consistently improve the competitiveness of its offering, with • Launch a points-based customer loyalty program along the particular attention paid to service quality, (ii) to build a lines of air miles programs, allowing customers to earn gifts. customer loyalty program and (iii) to launch new innovative • Develop a determined strategy to achieve a rapid increase in services. ADSL penetration, which at the end of 2005 had reached This strategy essentially aims to : 21% of fixed lines (excluding public telephony). • Continue long-standing efforts to adjust prices so that Maroc • Launch new services in 2006, namely double- and triple-play Telecom’s fixed-line customers benefit from the best call packages, including internet access, TV over ADSL, and charges available on the market. voice over IP (VoIP), which are now possible due to improved • Increase penetration of unlimited fixed-to-fixed rate plans IP and super-fast broadband technologies.

Document de référence 2005 - Maroc Telecom 45 Remaining the principal engine of Internet development in Morocco

Maroc Telecom has chosen a determined strategy of rapidly commercial policy organized around gradual price cuts and developing the Internet market in Morocco. The great high speed internet access. Maroc Telecom also intends to success of the new unlimited ADSL Internet access services, develop the number of initiatives designed to increase the launched in early 2004, along with the reduction in rates in penetration of Internet, in particular in schools, to develop March 2005 and promotional offers launched throughout the specific plans for business users, and to assist in the year, is a sign of the market’s growth potential. Maroc development of content and use of the Internet. Telecom intends to focus its efforts on broadband, with a

Capitalizing on its brands and making Maroc Telecom a reference in terms of customer service in Morocco

Maroc Telecom enjoys strong public recognition and an to make Maroc Telecom the reference in customer service in excellent image with its product brands, such as Jawal Morocco by continuing to improve presentation, signage (prepaid mobile telephony), El Manzil (fixed-line telephony and customer interface at the point of sale, and continuing for residential and business users) and Menara (Internet to improve customer services (technical start-up, after-sales access). The Company’s goal is to further extend the service, commercial administration, call centers) which have recognition of the Maroc Telecom brands by continuing to already enabled it to face the competition successfully, in market its name and brands. The Company also proposes particular in the areas of mobile telephony and the Internet.

Relying on network infrastructure complying with the most recent technological standards

Maroc Telecom has the most extensive and technologically services to its customers, Maroc Telecom intends to proceed advanced network infrastructure in Morocco. With its modern with its policy of investment in its network, prioritizing the high-performance network, based on a fully meshed and development of capacity and coverage, the introduction of new secured fiber optic backbone, Maroc Telecom offers a wide mobile and fixed-line technologies, the optimization and range of high-quality telecommunications services (fixed line, restructuring of the networks (consolidation of switching mobile, data and broadband Internet). In order to maintain a centers, centralized monitoring) and reinforcement of the reliable leading-edge network, providing innovative new domestic and international interconnection networks.

Maintaining rigorous financial management and a sound financial structure

Maroc Telecom will seek to maintain its level of profitability by paying out dividends to its shareholders. In addition, Maroc proceeding with a policy of regular and dynamic commercial Telecom may seize acquisition opportunities that would innovations, while continuing to conduct a policy of controlled enable it to create shareholder value, while observing strict costs and investments. Its large cash-flow generating ability and selective investment criteria. should enable it to maintain a sound financial structure while

46 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

4.4 BUSINESS ACTIVITIES

4.4.1 Mobile business

The information provided in this paragraph, except the at the end of 2005. On the postpaid segment, the total number revenues, only concerns the Mobile business in Morocco. of customers increased 25.5% between the end of 2004 and 2005, to 576,000 customers. Maroc Telecom offers prepaid services (the Jawal card) and a General presentation range of postpaid offers. Maroc Telecom is the leader in the Moroccan market for mobile Maroc Telecom provides extensive coverage both in terms of communications. The Company’s market share reached infrastructure and commercial presence. Its network covers 66.65% as of December 31, 2005 (Source: ANRT). This market almost the entire population of Morocco (Maroc Telecom has expanded considerably since 2000, with the number of estimate). Internationally, with over 399 roaming agreements, mobile customers (all operators) rising from 2.851 million in Maroc Telecom’s customers have access to services in over 2000 to 12.358 million as of December 31, 2005 (Source: 207 countries. This extensive commercial presence has been ANRT). Over the same period, the market penetration rate rose achieved through a direct and indirect distribution network of from 1.3% to almost 41.34% (Source: ANRT). approximately 40,000 retail outlets licensed by Maroc Telecom The mobile market (all operators) is mainly a prepaid market. In (see section 4.4.4 “—Distribution”). 2005, the prepaid customer base in Morocco increased 32.7% The following table breaks down Maroc Telecom’s mobile rising from 8.878 million customers to 11.781 million customers revenues for the past two years:

In millions of Moroccan dirhams - IFRS Published 2004* 2005

Gross Mobile Revenues 9,684 12,772

• Maroc Telecom 9,444 12,198

Revenues for Mobile communication services ** 8,882 11,284

Terminal equipment revenues 562 914

• Mauritel 239 573

• Intersegment transactions *** -2,287 - 2,938

* Excluding CMC-Mauritel group for the first six mouths of the year ** including Management Services Agreement with Mauritel revenues of MAD 6 million. *** including MAD 21 million from Mauritel Mobiles.

Change in customer base The Moroccan market for mobile communications expanded Maroc Telecom defines the period of validity of a prepaid card rapidly with the introduction of prepaid plans in 1999. This pre- as an initial six-month period corresponding to the duration of payment system meets customers’ need to manage call costs the card’s credit, followed by a second six-month period and to avoid exceeding rate plan limits. This formula is particularly during which the customer, while having the option of well-tailored to the Moroccan market, owing in particular to the recharging the phone card, continues to receive calls. youth of the population, with half of it aged under 25. The Moroccan telecommunications regulator, the Autorité The following table sets out the main data relating to prepaid nationale de réglementation des télécommunications (ANRT) and postpaid services offered for the past three years. Maroc defines a mobile subscriber a person with a postpaid mobile Telecom defines the churn rate as the ratio of cards subscription that is still activated, or a person with a prepaid disconnected or contracts terminated to the average card who has made or received at least one call (charged or customer base during a given period. For prepaid customers, free) within the past three month.

Document de référence 2005 - Maroc Telecom 47 2003 2004 2005 Number of mobile customers * (thousands) 5,214 6,361 8,800

• Prepaid 5,005 6,105 8,472

• Postpaid *** 209 256 329

Churn rate (%)**

• Prepaid 12.0% 11.4% 12.1%

• Postpaid *** 20.0% 15.6% 15.1%

Average churn rate (%) 12.0% 11.6% 12.2%

ARPU (MAD/subscriber/month)

• Prepaid 93 95 94

• Postpaid *** 824 790 710

ARPU 122 123 119

* Postpaid subscriptions and prepaid cards. ** See glossary ***Including “Forfaits sans angagement” in 2005.

Prepaid services have seen sustained growth since their Pricing launch, in particular through subsidized packages including a GSM hand set at fairly low prices, and Maroc Telecom’s In April 2002, the pricing of Maroc Telecom’s mobile many promotions for rechargeable phone cards, which telecommunications services changed to time-based charges stimulated growth and developed the loyalty of the from unit charges (this computation system was based on a rate expanded customer base. of 24 to 48 seconds according to destination and times). This change improved the customers’ perception of the pricing Post-payment covers mainly a high-consumption customer system. Calls are charged by the second after the indivisible first base generating substantially higher ARPU than prepaid minute for traditional subscribers and by 20-second increments customers. for postpaid rate plans and prepaid calls. For the last three fiscal years, and despite the intense This pricing overhaul was accompanied by price cuts in order: competition in the market, Maroc Telecom has succeeded • to encourage the use of rate plans for postpaid subscribers, in stabilizing its churn rate in 2005 at 12% owing to its by offering them a wider range of rate plans and prices that efforts to build customer loyalty while maintaining an are reduced along with the rate plan’s duration; acquisition policy in order to extend its base (see “Offers”). Accordingly, the loyalty program offered to prepaid • to provide prepaid customers with substantial cuts customers since mid-2002 has been improved through the according to the amount of rechargeable phone cards launch of a point-based Fidelio loyalty scheme. The bought ; and customer has the choice of his fidelity bonus: additional • to develop usage by changing over to an indivisible minute. time, SMS, or GSM terminal. The table below sets out the change in average charges per minute, prepaid and postpaid, in Moroccan dirhams (excluding tax) as of December 31 of each year concerned.

48 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

In Moroccan dirhams 2003 2004 2005 Access costs 167/208 333/208 • Prepaid* 208 42/83 **** 125/83 17/42 ****

• Postpaid 100 100 100

Subscription

• Postpaid*** 125 125 125

Mobile Price per minute (excluding tax) **

To Maroc Telecom Mobile • Prepaid 3.00 3.00 3.00 • Postpaid*** 1.50 1.50 1.50

To Maroc Telecom Fixed-line • Prepaid 3.00 3.00 3.00 • Postpaid*** 1.50 1.50 1.50

To other mobiles • Prepaid 4.00 4.00 4.00 • Postpaid*** 2.00 2.00 2.00

* Including initial call credit. ** Indivisible first minute; increments of one second for postpaid and 20 seconds for prepaid. *** Traditional subscription formula; peak times. **** Different costs according to credit including all taxes corresponding: in 2005, respectively MAD 400/250, 150/100 and 20/50; in 2004, respectively MAD 100/250, 50/100.

Since November 1, 2003, Maroc Telecom has provided its charges. The new international pricing policy is in line with the customers with a further cut in the price of mobile calls abroad. general trend of new offers, in which the “price” variable is This price cut was also accompanied by a harmonization of reflected in attractive and competitive charge scales.

Mobile communication services Maroc Telecom offers prepaid and postpaid services for different terms for making calls outside the contract rate plan. consumer and business customers. These services comprise a The table below shows the range of Maroc Telecom’s Mobile wide range of offers with different levels of user commitment and offers.

Service Customers Commitment Calls outside rate plan Product

Prepaid Consumer No No Jawal Classique Jawal Jeunes Postpaid Consumer No No Liberte rate plan SMS/MMS rate plan Yes No Controlled rate plans Yes Yes Standard subscription Individual rate plans Business Business Class plans Intenso/Extenso/Extenso+

Document de référence 2005 - Maroc Telecom 49 Prepaid Pricing plans relating to prepaid services As of December 31, 2005, the prepaid customer base Maroc Telecom applies a differentiated pricing plan for consisted of 8.472 million customers, or almost 96% of the prepaid customers according to the type of card Jawal mobile customer base. (Classique or Jeune), the call destination, as well as according Maroc Telecom aims to maintain ARPU by stimulating to schedules for the Jawal Jeune card. So : consumption (selling a wide range of top-ups), by developing • For a customer of Jawal Classique, prices are MAD 3 per the use of value added data services (SMS and MMS) and by minute excluding tax (Tax of 20% non included), at each applying the increase in the termination charge on international time, for calls towards a fixed or mobile number Maroc calls as of January 1, 2005. In addition, the group has launched Telecom, and of MAD 4 towards another Moroccan mobile several promotional offers on top-ups to increase customer network. loyalty and to stimulate usage. • For a customer of Jawal Jeune, the price at peak time (Monday to Friday, from 8 am to 8 pm) to Maroc Telecom Offers numbers is MAD 6.45 excluding tax and MAD 7 excluding Maroc Telecom provides prepaid services under the “Jawal” tax to another network. In off-peak periods, an brand. The prepaid services are aimed primarily at residential undifferentiated rate of MAD 1.45 excluding tax is applied to users, who demand a broad range of access and pricing offers. calls to Maroc Telecom numbers and MAD 2 (excluding tax) to any other network. Maroc Telecom’s prepaid plans are marketed as packages (handset and a SIM card) and wrappers (including a SIM card SMS and MMS are charged MAD 0.80 per message excluding only), according to the following formulas : tax. The SMS price range is between MAD 3 and MAD 5 • Jawal Classique, which offers an undifferentiated day/night excluding tax for sending to foreign countries. tariff ; Pricing of international calls varies according to the country of • the Jawal Jeunes formula, with special rates in the call destination, and is the same for both formulae. The evenings, on weekends and on public holidays. countries of destination are classified in fourteen areas and their rates vary from MAD 9.60 to MAD 24 excluding tax per These two formulas are valid initially for six-months, minute. corresponding to the duration of the card’s credit, and then a further six-month period during which the customer may In 2005, to boost consumption, Maroc Telecom launched recharge the phone card and receive calls. limited-edition promotional offers for prepaid clients, giving In 2005, Maroc Telecom introduced a new access fee of unlimited calls at a special price. MAD 50 (including tax) and propose two access charges of In addition, prepaid clients are compensated for incoming MAD 100 and 250, (including the activation charge and the calls, by means of a call credit which is available on their next initial credit). A selection of packs is also marketed with MAD top-up. 0 against payment of an amount of MAD 1,200 including tax which will be versed on the customer Jawal account at a rate of MAD 100 including tax per month. Finally, Maroc Telecom Migration of prepaid customers to postpaid propose promotion on wrappers doubling the initial credit. In order to build its customer loyalty and to raise ARPU, Maroc In order to develop the use of prepaid services, Maroc Telecom is implementing a strategy intended to migrate high- Telecom markets a range of rechargeable phone cards from user prepaid customers to postpaid offers, a two parts MAD 10 to MAD 1,200, with automatic bonuses linked the strategy. First, the Jawal services include an option for purchase of a MAD 50 or more rechargeable phone card. customers to migrate their prepaid accounts free of charge to Promotions are implemented for the whole range of a postpaid rate plan or subscription while retaining their call rechargeable phone card rates and are part of a policy of numbers. Second, Maroc Telecom offers capped postpaid building customer loyalty, increasing usage and developing rate plans, which are a basic product attractive to prepaid the customer base. customers wishing to migrate to postpaid while retaining The available recharging resources are also diversified, with a control over their communication costs. This strategy, which dual goal of reducing distribution costs and facilitating relies on frequent promotional campaigns to boost migration, recharging for the customer. Thus, in addition to PVC scratch aims at raising blended ARPU. card recharging, Maroc Telecom offers electronic recharging In 2005, continuing this strategy, Maroc Telecom launched and recharging through bank cash dispensers. two new products: the Liberté and Liberté SMS/MMS rate Lastly, Maroc Telecom is considering new ways of topping up plans. call time in order to eliminate card manufacturing and logistics costs.

50 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

Postpaid • Liberté rate plan : Maroc Telecom has developed a range of 3 controlled rate plans with no commitment for 45 minutes, As of December 31, 2005, the postpaid customer base 90 minutes and 150 minutes for a monthly subscription of amounts to 328,808 subscribers. The postpaid customers are MAD 99, MAD 169 and MAD 229 (excluding tax) respectively. mainly heavy users. The customer gets a main rate plan, free off-peak calls for The slight fall in postpaid ARPU is due to an overall trend of the same amount of time and a rechargeable account. new customers’ consumption, a phenomenon common to • SMS/MMS Liberté rate plan: aimed at young people, Maroc most operators and to the introduction of new rate plans. Telecom offers a range of two data rate plans with 100 and Maroc Telecom is seeking to increase ARPU by stimulating 300 SMS/MMS, a voice bonus and a rechargeable account subscribers’ usage of its services and usage of new and with no commitment for MAD 74 and MAD 166/month existing voice and data services (SMS, MMS and GPRS). (excluding tax) respectively. Postpaid is marketed mainly through the branches of Maroc Furthermore, to satisfy business needs, in 2005 Maroc Telecom’s distribution network, 25 of which are dedicated to Telecom launched a new range of rate plans grouped together mobile services. In addition, 17 branches are especially in the “Business Class” offer. This offer comprises six types of dedicated to businesses and major accounts. Postpaid is also all-inclusive rate plans for domestic calls (inclusive minutes distributed through the GSM Al Maghrib network (see “section ranging from 5h to 30h in 5h steps), certain international calls 4.4.4 Distribution”). and free SMS, MMS and GPRS. The postpaid offers are addressed at the entire consumer and Lastly, since the end of 2004, Maroc Telecom has marketed business market. The business market comprises small and two special products: an SMS rate plan for the speech and medium-sized enterprises and industries, local government hearing impaired and a pack including special software for the and major public and private accounts. visually impaired.

Subcribers plans Business users Maroc Telecom offers three plans to consumers : Given the potential and strategic importance of business customers, Maroc Telecom has established a specific policy • the traditional subscription, a monthly subscription offering for this segment, organized around a dedicated range of offers invoicing for consumption varying according to peak and off- and services and a dedicated distribution network. In addition, peak times (see paragraph “Pricing plans relating to postpaid for major accounts, Maroc Telecom is implementing services”) ; customized service solutions meeting its customers’ specific • rate plans, which offer ten formulas based on communication requirements, in particular in terms of control over their staff time and a single count for calls regardless of destination and calls and management of their costs. times. They allow a development of usage by encouraging In addition to the consumer rate plans detailed above, also greater consumption (see paragraph “Pricing plans relating to open to businesses, Maroc Telecom launched the following postpaid services”); and “Mobile Solutions for Business” in 2002 : • controlled rate plans, which allow control of communication • Intenso : a suitable formula when GSM calls are made mainly expenses by blocking outgoing calls when the rate plan has internally, Intenso offers ten hours of calls free per month and been exhausted. In order to make additional calls, the customer per line for all communications within the business, may recharge the account with Jawal rechargeable phone cards. This rate plan has been introduced in order to build customer • Extenso : a suitable formula when GSM calls are made loyalty and to encourage migration towards postpaid plans. mainly to outside contacts, Extenso offers competitively priced subscription and outside call charges; and The rate plan offers, with ten formulas ranging from 1 to 15 hours, provide a charging of calls by 20-second increments • Extenso + : launched in May 2004, it combines the two after the first minute, and a single rate for any domestic call. foregoing offers and as such demonstrates the flexibility These offers include a doubling of the call time for calls to offered by Maroc Telecom to its business customers. Maroc Telecom numbers, automatic carry-over of unused time Lastly, to allow companies to control the calls their employees and free SMS, MMS and GPRS service. make, Maroc Telecom offers the Mouzdaouij service (with the In 2005, to boost recruitment of new postpaid subscribers and possibility of having two numbers on the same SIM card to to encourage prepaid clients to migrate to postpaid, Maroc differentiate between personal and professional calls), capped Telecom launched “no commitment” offers which allow invoices, reduced call charges based on volumes, exemption customers to return to their initial offer free of charge. There from subscription fees subject to certain conditions, were two types of these offers : reductions for certain international calls and the favorite numbers offer. Other extras available for companies to

Document de référence 2005 - Maroc Telecom 51 manage their mobile fleet include “EasyFact” CD-based MAD 74 to MAD 166 (excluding tax) for the Liberté SMS/MMS invoicing service and e-management. rate plans. Loyalty building-policy For business customers, Business Class rate plans range from MAD 435 (excluding tax) for a 5h rate plan to MAD Building loyalty among customers has been a key strategy for 1,320 (excluding tax) for 30h. Maroc Telecom since 2000 and has prepared Maroc Telecom for the arrival of competition. The loyalty offers set up as early For the visually impaired, a handset and special software as January 2000 consist of offering handsets at preferential are offered at a competitive price, while an SMS rate plan prices. for MAD 125/month (excluding tax) is available for the speech- and hearing-impaired. The Gold project for high-volume users was launched in 2001. These customers are provided free of charge with a loyalty For Businesses, pricing of subscription and card, a top-of-the-range , a dedicated call enter communications varies according to the number of lines (a toll-free number 999) and a privileged welcome at and as they choose Intenso or Extenso formula. In 2005, commercial agencies. Since July, 2003, the Gold club was Maroc Telecom overhauled its business tariffs. integrated into the program Fidelio and the selection is made The SMS and MMS are charged MAD 0.80 per message according to points. New advantages are granted to excluding taxes and their price ranges between MAD 3 and customers: a VIP treatment after-sales service and bonus MAD 5 excluding tax for SMS to foreign countries. The points. GPRS is charged between MAD 40 and MAD 530 per month Fidelio is the first point-based loyalty scheme introduced in excluding tax depending on the chosen volume of data. Morocco. It is reserved for postpaid customers and was The pricing of international calls varies according to the launched on June 1, 2002. This scheme allows points to be country of call destination, whatever the formula of aggregated on the basis of invoicing, and provides advantages subscription. The countries of destination are classified in in the form of free or cut-price handsets, and free calls and four areas and their rates vary from MAD 5.55 to MAD 21 SMS messages. Since April 2003, Maroc Telecom has set up per minute excluding tax. the Fidelio 24-month offer. In 2004, 66,000 customers signed up again for 12 or 24 months through the Fidelio scheme. In 2005, Maroc Telecom introduced bonuses on incoming Supplementary services provided with prepaid and calls, granting customers points for the calls that they receive. postpaid offers At the end of December, 83,612 customers had signed up for Prepaid supplementary services these bonuses. Many supplementary services are included in the Jawal plan, including ID, call waiting, dual call service and the Pricing plan relating to postpaid services “Family & Friends” service, all free of charge. Voicemail and all SMS and MMS the services related are also included in Activation expenses for a SIM card are identical whatever the any plan. type of subscription and established at MAD 100 excluding tax. Besides, since 2003, via the introduction of the Camel The pricing for the postpaid services differs when it concerns technology (see glossary), prepaid customers may use classic subscription, fixed price (package) or specific formula international roaming for their voice services. to Businesses. There are also supplementary services at an additional cost, For a classic subscription, the royalty is MAD 125 excluding such as the favorite number offer launched in 2005, which gives tax and the airtime price is MAD 1 per minute in off-peak time the client a reduction for calls made to a particular number. whatever the destination and of MAD 1.50 for calls towards Maroc Telecom numbers, or MAD 2 (excluding international calls) to other numbers at peak time. Postpaid supplementary services There were new price cuts in 2005 for the 10 individual or The postpaid offer includes the prepaid supplementary controlled rate plans. Tariffs now vary from MAD 150 to MAD services mentioned above. It also includes detailed invoicing, 725 (excluding tax) for individual rate plans and from MAD 169 conference calls, CLIR and call transfer, all of them offered to MAD 785 for controlled rate plans. These rate plans include free of charge. a predefined airtime of between 1h and 15h, free off-peak calls for the same amount of time, and free SMS, MMS and GPRS. Postpaid clients can get reductions through the Family & Friends service and a reduction in call charges based on For no commitment rate plans, charges range from MAD 99 to volume. In addition the Mouzdaouij service allows users to MAD 229 (excluding tax) for the Liberté rate plans, and from have two numbers on the same SIM card.

52 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

Services available at an additional cost are also marketed to • GPRS satisfy the needs of customers who make calls outside their The General Packet Service (GPRS) was launched in rate plan like "Heure Complice" which gives an extra hour of October 2002 for business customers, and was extended to all calls to two or three numbers, and the SMS/MMS rate plans. postpaid customers starting on March 1, 2003. The GPRS is Maroc Telecom has also introduced unlimited calls by offered in the form of four rate plans (from 1 to 60 MB) and offering optional extras for individual rate plans, which are charged by volume (the user pays only for the quantity of data charged at an additional cost. actually exchanged, and not the duration of consultation). Moreover, Maroc Telecom’s postpaid subscribers are GPRS facilitates the use of data for those who are traveling, provided with international roaming for voice and SMS such as optimised Internet/intranet connections, sending and services, as well as for data services (MMS and GPRS). reception of e-mail, WAP-mode browsing and file transfer. In 2005, Maroc Telecom’s GPRS offer was enhanced by a “GPRS Free Access” formula which grants access to all GPRS Value added services services, without a subscription or any commitment. As of December 31, 2005, value-added services contributed At December 31, 2005, more than 1.5% of postpaid customers, 4.7% (excluding VMS) to total revenue. The contribution of or a total of over 5,046 customers, used this service. VMS to total revenue, as of the same date, was 3%. Maroc Telecom takes special care to develop value-added services, • MMS in particular with the introduction of the latest technological The Multimedia Messaging System (MMS) was launched in innovations to the Moroccan market on an exclusive basis June 2003 for postpaid customers and extended to prepaid (WAP as early as 2000, GPRS in 2002, and MMS in 2003). customers in July 2004. It allows the exchange of text, These services are in addition offered to roamers. images and sound. • VMS At December 31, 2005, number of MMS subscribers rose to The Voice Mail System (VMS) was introduced in 1998 for more than 1 million. They exchanged over 22.1 millions MMS postpaid customers and extended to the prepaid customer messages. base in 2003. It is included in all prepaid and postpaid The MMS was enriched at the end of 2004 with the launch of plans. As of December 31, 2005, there were 7.584 million the Picture postcard by MMS. This novelty, exclusivity of voicemail boxes in operation, representing 86% of the total Maroc Telecom, allows to send a text and a photography mobile customer base. from a MMS mobile. The addressee receives the message in This service was extended in 2005 with the introduction of the form of a real Picture postcard brought by the Post office. two new functions : • Contents services • Automatic call-back allows postpaid clients to call back Since May 2005, Maroc Telecom has offered a service for the person who has left a message on their voicemail downloading content under its own “Mobile Zone” brand. simply by pressing a key. This service is offered at the This service enables subscribers to download ringtones, standard cost of a call from a Maroc Telecom mobile. screen savers and videos onto compatible handsets. • Straight to voicemail enables all Maroc Telecom Mobile Customers are provided with local, regional and international customers leave to a message on the other person's value-added content. Exclusive content is available through voicemail without making the telephone ring. This service partnerships with internationally renowned brands (Star Wars cuts down the intrusive nature of calls. for cinema, the Spanish La Liga for football) and exclusive • SMS agreements with other suppliers of international content. SMS (Short Message Service) has been offered since April 2000. The service has been regularly enhanced with the launch Sale of handsets of SMS Info in 2001 (SMS messages containing information of local interest such as TV programs, pharmacies on duty, train Prepaid schedules, etc.) and SMS Chat in 2002 (a community service The range of Jawal prepaid packages is also diversified in aimed mainly at young customers), and the first pilots of kiosk- terms of models and prices. In this respect, Maroc Telecom type services in 2003 (SMS messages offering content or places particular emphasis on the renewal of handsets and remote voting services suited to radio or TV programs). the latest associated functionalities. In 2005, almost 854 million SMS messages were billed, 77% In 2005, Maroc Telecom reduced its prices further and prices growth compared to 2004. The total number of outgoing SMS now start at MAD 290 including tax (with a MAD 20 credit). amounted to 1,154 millions, 76% growth compared to 2004.

Document de référence 2005 - Maroc Telecom 53 Postpaid to information on prepaid products and services. The actions taken to develop postpaid services focus on In addition, Maroc Telecom conducts customer satisfaction customer acquisition, loyalty and development of the surveys monthly in order to measure the quality of the service offered. service provided by the commercial branches. The policy of acquisition of postpaid customers is Maroc Telecom monitors the quality of service offered organized around the attractiveness of the offer, the through statistical indicators. In 2005, the average richness of the associated products and services, and the response time after the greeting message was 23 seconds, range of handsets offered. Offers of cobranding attract down from 27 compared to 2004, owing to efforts made to customers and ensure the successful launch and renewal improve response time. of the handsets range, often launched at the same time as Maroc Telecom makes the public aware of new offers at the international level, and offering to the local through a special number that present and potential customers state-of-the-art design and technology. Maroc customers may call for information on such offers. Telecom offers a wide range of packages with minimum commitment duration (12 or 24 months). Business call centers Since 2003, Maroc Telecom has also focused on loyalty building, as described above. Maroc Telecom makes available directly to its business customers dedicated services through its ww.mobileiam.ma portal, which displays, several on-line services along with Customer services descriptions of the offers. In order to accompany the deployment of these offers, Business customers can accordingly handle their fleets Maroc Telecom has set up a customer relations policy, with remotely through the Self Care service, by changing offers an approach built along several lines: information, or activating supplementary services. recruitment and reminders (with a goal of customer In addition, business customers may easily monitor their retention). This customer service policy also responds to mobile telecommunications budgets through the EasyFact the needs of both consumers and businesses. service. This allows the receipt of invoices connected with Pursuant to its overall quality policy for its operations, the GSM subscriptions on CD-ROM for more detailed and Maroc Telecom was awarded ISO 9001 version 2000 easy access. certification in 2003 for the invoicing of mobile customers and its mobile call center. After sales service The width of its handsets range has led Maroc Telecom to Mobile call centers set up an after-sales service provided by its direct In order to develop customer relationships and improve distribution network. This service is offered free of charge satisfaction rates, Maroc Telecom’s call center is organized during the warranty period. In addition, the Gold after-sales to respond, through six customer service numbers, to the service provides its dedicated customers with immediate various segments of the customer base: prepaid, postpaid, replacement of a handset, by home delivery. Gold customers, roamers, prospective customers and Fidelio members. In 2005, over 6.5 million calls were handled by this center, which has a staff of more than 286. Portals Since March 2000, the call center has provided customers Maroc Telecom has set up three portals : with information regarding Maroc Telecom products and • www.mobileiam.ma describes the services and services, requests for activation and parameterization of a commercial deals offered and enables businesses to service, information regarding offer and pricing plan access the Self Care service; changes, a service for checking remaining balances and Fidelio program benefits, and a complaints service. • the WAP Maroc Telecom portal, in addition to theme- Information of local interest in several languages (Arabic, based information, offers access to the yellow pages; French, English) is also offered to roamers. and The Interactive Voice Service (IVS) set up in January 2005 • the Mobile Zone portal, which allows customers to handled more than 12 million calls for prepaid clients, download content. offering them access, 24 hours a day and 7 days a week,

54 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

International roaming • IN platforms Roaming is a service offered by telecommunications Maroc Telecom has developed an Intelligent Network (IN) operators enabling mobile telephone users to call and be for Jawal prepaid customers. The IN platforms are used called in a foreign country. For this purpose, the operators mainly for real-time management of the prepaid customers’ credits and also manage the implementation of value- in various countries enter into roaming agreements, added services such as invoices or capped-rate plans. allowing their customers’ telephones to be easily connectable to a foreign network if necessary. • SMS platforms Maroc Telecom entered into its first roaming agreement The mobile network includes four SMSC servers, which with SFR in January 1995. This roaming arrangement is store and deliver short messages (SMS). carried out in the ordinary course of business. As of • VMS platforms December 31, 2005, Maroc Telecom had entered into 399 The VMS service supplements the basic call service. It roaming agreements with associated operators in 207 allows the recording of voice messages in the event that countries, including in 7 countries through agreements with the correspondent is busy or cannot be reached. operators of the GMPCS systems (Thuraya and Maroc Telecom currently has two VMS platforms (based in Globalstar). Rabat and Casablanca). Morocco’s tourism industry generates a large in flow of • MMS platforms visitors, providing large potential for roaming revenues. In order to catch most of this traffic, Maroc Telecom has Maroc Telecom has one MMS-C platform. This platform, developed a customer acquisition policy through connected with the SMS center, the WAP Gateway associations with foreign operators, and has entered into platform and the GPRS network, allows the offer of preferential agreements with the largest among them. advanced multimedia services such as the sending of photographs, image transfer, consultation of an image GPRS and MMS services have been offered on a roaming bank and transfer of multimedia messages (text, audio and basis since the end of 2003. At December 31, 2005, Maroc photo). Telecom had signed agreements with 80 operators in 54 • GPRS platforms countries for GPRS/MMS roaming for postpaid customers (50 of which are for roaming out) and with 68 operators in Maroc Telecom has developed the use of packet-switched 41 countries for prepaid customers (32 of which are for networks and, in particular, the Internet. The GPRS service roaming out). is a packet-switched network architecture with roaming management and radio access. Maroc Telecom currently has two GPRS platforms. Infrastructure Maroc Telecom’s mobile network is based on the GSM BSS network technology, deployed throughout almost the entire territory The network allows almost the entire population to be of Morocco. It is characterized by a well-developed covered through over 4,180 radio base stations located infrastructure, high international connectivity and a quality throughout the Moroccan territory. of service similar to that of international operators. The deployment plan for fiscal year 2005 provides for the This network is made of two parts, the NSS network and establishment of 430 GSM sites. A plan for the service platforms, and the BSS network. redeployment and extension of TRXs (radio cells), initiated in 2002 and continued in 2003, 2004 and 2005, has allowed optimized use of the radio access equipment NSS network and service platforms (TRX). The NSS network combines the switching equipment and service platforms. The switching network, consisting of 27 Quality and capacity MSC centers, is built around six TMSC transit centers. In In order to allow an extension of capacity without adding order to secure the sharing and support of traffic, all MSCs further centers, and in order to add new services (MMS, are connected to at least two TMSCs. GPRS, roaming, prepaid, rechargeable phone cards Signal traffic is separated from voice traffic through the use prepaid by SMS or at the bank cash dispenser), the of an SS7 network with four STP systems. infrastructures of the mobile services’ networks and

Document de référence 2005 - Maroc Telecom 55 platforms have been upgraded using recent software achieved through a major program of radio optimization releases for the latest generation equipment (SSNC and and preventive maintenance. Power CP). With a concern for the health of the population, Maroc The improvement in quality of service indicators for the Telecom launched a survey to measure the density of mobile network is a priority for Maroc Telecom. electro-magnetic fields in the vicinity of GSM sites. The Accordingly, the rate of successful dial-up in 2005 findings from that survey, conducted by Bureau Veritas, exceeded 98%, the cut-off rate remained below 1.1% and confirmed the Maroc Telecom GSM sites’ compliance with the rate of successful SMS delivery amounted to 97% European standards. (excluding promotions free SMS). This improvement was

56 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

4.4.2 Fixed-line and Internet segment

Information described in this paragraph is limited to the Fixed- The main fixed-line telecommunications services provided by line and internet activities in Morocco. Maroc Telecom are :

• telecommunications services ; General presentation • interconnection services with domestic and international operators; Maroc Telecom is the leading provider of fixed-line telephony, • data transmission services for business users, Internet internet and data transmission services in Morocco. These service providers, and other telecoms operators; and markets were all fully liberalized in 2005, with the granting of • Internet services, which include Internet service provision fixed-line telecommunications licenses to two new operators. and Internet-related services, such as hosting. At December 31, 2005, these licenses had still not been used (See section 4.8 “Regulatory environment and possible The table below shows the breakdown of revenues from dependencies”). Fixed-line and Internet services for the fiscal years ended December 31, 2004 and 2005.

In millions of MAD – IFRS standards Published Year ended December 31, 2004* 2005 Fixed-line and Internet Gross revenue 11,133 11,949

• Maroc Telecom 10,944 11,617 Voice 6,597 6,583 Interconnection** 2,760 3,145 Data 1,241 1,374 Internet 346 515

• Mauritel 189 332

• Intersegment transactions *** -1,122 -1,241

* Excluding Mauritel for first six months ** Interconnection revenues are mainly revenues from international interconnection, regardless of destination (fixed-line or mobile), plus domestic interconnection revenues. *** Including MAD 12 million for Mauritel S.A. in 2004.

Telecommunication services Plan). So, the number of lines (except Business users and Companies’ lines) divided by homes gives a rate of 15.7 % The table below sets out the evolution of the penetration penetration of the residential homes. Besides, some 164,000 rate of fixed-line telecommunications in Morocco as of lines of public telephony do not report the real number of December 31. users of Maroc Telecom public call boxes and Telestores (See 2000 2001 2002 2003 2004 2005 paragraph "public Telephony "). 5.1% 3.9% 3.9% 4.1% 4.4% 4.5% The fixed-line penetration rate fall between 1999 and 2002 Source : ANRT, Maroc Telecom (loss of approximately 330,000 customers) is due mainly to the migration of existing customers from fixed-line to mobile, The penetration of fixed-line telephony in Morocco is defined as a result of competition from prepaid mobile offers for the as the ratio of the number of lines (including public telephony) residential segment. to the total Moroccan population, which amounted to approximately 30 million as of December 31, 2005 (Source: The Company has implemented since 2002 a policy designed Recensement 2004 – Haut Commissariat au Plan). to boost its operations in the area of fixed-line telecommunications by : This relatively weak penetration rate must be considered at the light of the high number of persons by home which is 5.3 • developing an active marketing and commercial policy on average (Source: Inventory 2004 -Haut Commissariat au tailored to the customers’ expectations and requirements,

Document de référence 2005 - Maroc Telecom 57 in particular with creation of the “El Manzil” brand for fixed- Telecom has accordingly launched specific offers and line offers for the residential segment, prices targeting that customer base; and • offering new services. Maroc Telecom has accordingly set • deploying substantial efforts to provide the Moroccan up a consistent range of offers and in particular launched a population with access to the internet. The price cut carried capped offer enabling households to control their out in March 2005, together with regular promotional offers, consumption. This policy has mitigated the substitution of has enabled a much broader proportion of the population to fixed-line by mobile and boosted the growth in fixed lines. access the internet. Its emphasis has been on residential subscribers, The fixed-line customer base has grown at a rate of 2.49% during 2005, raising the overall base to 1.341 million lines • proceeding with the development of its fleet of public call (exclusive of Maroc Telecom’s in-house base). boxes, initiated in 2001, and continuing its investments in this area, The table below describes the development of the fleet of telephone lines by segment • paying particular attention to the business market; Maroc

Number of lines as of December 31 2002 2003 2004 2005 Residential 800,890 871,366 889,623 884,546

Public telephony* 77,813 91,514 135,760 164,091

Corporate 248,744 256,333 283,186 292,519

Customer base** 1,127,447 1,219,213 1,308,569 1,341,156

* Combines the lines of Maroc Telecom telestores and public booths. ** The customer base includes all subscriptions for a fixed-line telephone regardless of technology used (STN or ISDN). It does not include Maroc Telecom’s in-house base.

The consumer market client can also make unlimited calls in off-peak or peak The consumer market includes residential subscribers, periods, can have a capped call credit to call other numbers small businesses consisting of craftsmen, tradesmen and (which can be topped up), or have a call credit for calls to the professions, and public telephony. mobile numbers. Maroc Telecom also offers “El Manzil” packages combining a fixed-line telecommunications service or subscription with the Consumer offers supply of a partially subsidized handset and activation of the Maroc Telecom’s consumer offers of fixed-line line. Maroc Telecom, with 36 different models of handsets and telecommunications have been marketed, since March 2002, fax machines, has considerably extended its range of under the brand “El Manzil”. With the “El Manzil” range of products over the past three years. In order to stimulate products and services, the Company provides capped and demand, Maroc Telecom also regularly organizes promotional unlimited access offers. campaigns, in particular through the “0 dirham package”, which cancels the access charges and handesets cost on The capped rate plan offers combine calls and subscriptions subscribers. with various pricing formulas and meet customers’ demand by enabling them to control their consumption. These bulk The range of “El Manzil” offers is also regularly enhanced with packages have boosted fixed-line telecommunications on the new offers, such as the “Master Package”, which includes a residential market. year’s subscription payable in advance. Unlimited offers are based on Maroc Telecom’s traditional subscription, enhanced with various options such as the Consumer value-added services “Blahssab” offer. Maroc Telecom offers valued-added services to consumers Launched in April 2005, the “Blahssab” range of rate plans, such as voice mail, detailed invoices in Arabic or in French, available in three formats, enables subscribers to make an caller ID display, call-waiting notification and line transfer. unlimited number of calls for an unlimited amount of time to all fixed lines in Morocco. Depending on the format chosen, the These services also include an option for subscribers using

58 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

capped rate plans to recharge their accounts remotely, by Prepaid phone cards simply placing a telephone call. Maroc Telecom has a prepaid offer called Kalimat, a telephone card usable from any private fixed-line terminal or public call box. These cards are marketed without subscription or Loyalty-building programs commitment. A “Kalimat International” formula, specially Maroc Telecom has developed targeted loyalty-building dedicated to international calls, is also offered. programs, which have led the operator to set up loyalty clubs In order to facilitate the use of prepaid phone cards, in 2005 (“El Manzil” Classic, Silver and Platinum clubs, offering price Maroc Telecom decided to group several cards together into a cuts on packages, free months of subscription and cut-price single card. This new card was due out at the beginning of 2006. offers with “El Manzil” partners), the circulation of a magazine (Génération “El Manzil”) to members, and distribution free of charge of a monthly newsletter enclosed with the invoice to Business market all customers. This market, which covers SMEs, SMIs, local government and public and private major accounts, is a key segment for Maroc Public telephony Telecom, as it includes high-volume telecommunications Maroc Telecom also provides a public telephony service with users. Maroc Telecom is seeking to develop this segment and has adopted a dedicated organization and strategy (see “— its own booths and the call boxes operated by third parties, or Customer services—Relations with Businesses”). “telestores”. As in other countries at a similar stage of development, public telephony remains the preferred means of communication for the lower incomepart of the population. Offers to the business market The public telephone lines managed by Maroc Telecom, In addition to the basic offer, Maroc Telecom offers businesses directly or by telestore operators with whom the Company has all the functionalities of digital telecommunications through the entered into operation agreements, amounted to over ISDN offer marketed under the Marnis brand. This solution 164,091 lines as of December 31, 2005 growing by 21% with enables businesses to use an end-to-end digital network regards to 2004. carrying the data flow for multimedia applications (voice, data Public Booths. Maroc Telecom emphasizes the development and images) by means of either a basic access, with two of its public call boxes, and for this purpose, has entirely communication channels, or a primary access with 30 renewed and extended its fleet in recent years in order to communication channels. have secure boxes operated with smart cards. These call Maroc Telecom has set up, since October 2002, a range of boxes are remotely monitored by a nationwide supervision pricing options for businesses that it markets under the name system. of “Tarifs Préférence Entreprises” (see “—Pricing”). Telestores. During the past five years, the network of Since October 2003, Maroc Telecom has offered a “Wellcom telestores has seen substantial growth. As of December 31, Pack PABX”, a turnkey offer of a switchboard including 2005, it included over 43,000 telestores throughout the installation, hardware maintenance and upgrading of the country. switchboard according to the customer’s requirements. Almost all telestore operators are bound to Maroc Telecom During 2005, Maroc Telecom launched its new “Multi-lines by exclusive agreements. They make a profit based on the rate plan” for businesses and major accounts. These rate difference between the retail price and the preferential price plans, which include call time of 15h to 600h, cover calls to charged by Maroc Telecom. In October 2004, against a local and domestic fixed-line numbers with a single price per background of heightened competition (see section 4.5.2“— minute within the rate plan ranging from MAD 0.30 to MAD Competition— Fixed-line telecommunications—Market for 0.38 (excluding tax). Calls made outside the rate plan are public telephony”), the regulation setting the minimum charged extra at standard rates. Subscribers are granted the distance between two telestores at 200 meters was repealed option of grouping several dial-up or ISDN lines together in in order to allow a denser network of telestores. The repeal of the same rate plan. that rule ( disputed by certain existing telestore operators and certain associations representing them) entailed a significant Business added-value services increase of new telestores’ openings during the last quarter 2004 and the first quarter of 2005. In addition, on November With a view to cost management, Maroc Telecom offers 1, 2005, Maroc Telecom made significant changes to its price businesses an electronic invoicing system called Smart Fact. list, in particular reducing the minimum call charge to MAD 1 Maroc Telecom provides on a monthly basis a CD-ROM with for consumers. details of the calls and an analysis of consumption by product.

Document de référence 2005 - Maroc Telecom 59 Maroc Telecom has set up a range of “welcome numbers”, interconnection prices. toll-free number (0800xxxxx), Eco numbers (0810xxxxx) and Following the ANRT decision to reduce fixed-to-mobile Direct numbers (0820xxxxx), accessible throughout Morocco interconnection charges by 7% as of September 1, 2005, at a single rate, facilitating customers’ access to their Maroc Telecom has reduced its fixed-to-mobile rates by 5%. business and allowing a suitable response. The table below sets out the evolution of the average price Maroc Telecom also offers high-charge numbers such as in Moroccan dirhams (excluding tax) per minute of a three “audiotext” with charge back to the service provider. minute domestic call at peak times from a fixed-line For Moroccan call centers, Maroc Telecom has offered since terminal : 2003 a virtual call center solution, CAIR (Centre d’Appel Intelligent Réseau or network smart call center), consisting of 2005 the creation within Maroc Telecom’s network of the functionalities of call centers, such as voice servers, and the Fixed-line Local 0.46 routing of calls according to the availability of call center Fixed-line Domestic 1.00 operators. This solution enables businesses to set up customer-response solutions with minimum cost. Fixed-line to Mobile 1.90

Calls from telestores and Maroc Telecom public call Pricing boxes are still priced by charging units. The retail prices For several years, the ONPT, and later Maroc Telecom, for public telephones are substantially higher than those implemented a price rebalancing policy characterized by cuts from a private terminal. in call rates and gradual increases in subscription charges. As of November 1, 2005, Maroc Telecom reviewed its phone The resulting pricing changes have been designed to grow the shop rates. It reduced the minimum call charge to MAD 1 market while complying with regulatory requirements and including tax and reduced the tariff unit for all destinations in preparing for the arrival of competition. stages from MAD 1.50 to MAD 1 including tax. In addition, since the second half of 2002, invoicing terms have been changed from a confusing unit-based billing to • International calls time-based billing, with the introduction of an indivisible first The international price scale was simplified in June 2004 minute, and the price scale has been simplified with four and is now divided into eight geographical areas. The charge levels: local, domestic, mobile and international. implementation of the new price scale was accompanied by a significant decline in call prices, in line with reductions implemented in previous years. Access charges Prices by zone in Moroccan dirhams To fixed- To According to the price rebalancing policy launched in 1994, Excluding taxes/ minute full hours line mobile on September 1, 2005, Maroc Telecom increased its standard as of December 31, 2005 subscription charges from MAD 80 to MAD 90 (excluding tax) for residential customers and from MAD 110 to MAD 120 Zone 1 : North West Europe 4.00 5.42 (excluding tax) for businesses. Service activation charges Zone 2 : South West Europe 2.75 4.50 remained unchanged in 2005. They are respectively MAD 500 and MAD 1,000 excluding tax for the Residential and business Zone 3 : North Africa 3.50 3.50 customers. However, to boost the growth of the customer Zone 4 : Canada & USA 4.17 4.17 base, Maroc Telecom launched from time to time since May, Zone 5 : 6.00 6.00 2002 the promotions on the access including the exemption from payement of initial expenses: several promotions of this Zone 6 : Eastern Europe 7.00 7.00 type were proposed in 2005, both to the Residential and Zone 7 : Rest of America, Africa, business users. Asia and Pacific 13.33 13.33 Zone 8 : Rest of the World 16.67 16.67 Call prices

• Domestic calls. In December 2005, to support the development of call The orientation of prices towards the cost of calls has centers in Morocco, Maroc Telecom launched a new offer reduced prices for domestic calls and, correspondingly, with a single rate of MAD 0.50/minute for calls to France, increased prices for local calls. The prices for fixed-line to Belgium, Spain and Italy, on condition that volumes exceed mobile calls are closely related to the changes in 200,000 minutes per quarter.

60 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

• Rate plans and other pricing options Calls to Local Single Double Maroc Telecom has also implemented a targeted pricing fixed Line (CAA) Transit Transit policy involving specific rate plans or price options. Full price 0.13 0.3804 0.5513 Maroc Telecom offers a range of “Business Preferential Reduced price 0.0651 0.1902 0.2756 Tariffs”, which allow its business clients to benefit from lower rates on domestic calls based on three price options: Following the ANRT decision, termination charges to mobiles “Group Preferential Tariff”, “Volume Preferential Tariff” and were reduced by 7% as of September 1, 2005. At December “Mobile Preferential Tariff”. The range of services also 31, 2005, they were as follows : includes an “International Preferential Tariff” which includes lower rates on international calls. Calls to Mobile Mobile Termination There are also targeted price offers for consumer clients. The “El Manzil” capped rate plan was introduced in Full price 1.3309 response to strong demand from consumers wanting to Reduced price 0.6655 control spending and has driven renewed growth in the customer base. Maroc Telecom regularly launches promotional offers on El Manzil top-up cards to stimulate International interconnection use by capped rate plan clients. Maroc Telecom has very strong international connectivity, with “Blahssab” offers (unlimited rate plans) allow the customer 230 foreign destinations. to make unlimited calls to local and national fixed-line numbers, subject to a rate plan fee ranging from MAD 199 to MAD 729 including tax. Rates for other destinations are • Evolution of the market those of either standard rate plans or capped rate plans, Incoming international traffic terminating in Morocco, whether depend on the format chosen. on fixed-line or mobile networks, accounts for a volume in The fixed-line price list is available on the “Grille tarifaire” excess of a billion minutes per year, and is growing regularly. section of the www.elmanzil.ma website. In 2005, the volume of incoming international traffic to Morocco was approximately 5 times larger than the volume of traffic leaving Morocco (Maroc Telecom estimate). Interconnection service The strong presence of the Moroccan community abroad, Interconnection services include interconnection with together with the growth in fixed-line and mobile customer domestic and international operators. bases, price cuts and the imbalance of purchasing power between Morocco and the main “caller” countries (mainly Domestic interconnection Western Europe) are the main structural features of the Moroccan market, explaining the size of the incoming Domestic interconnection is regulated by the Moroccan international traffic and the imbalance between the volume of telecommunications regulator. In this respect, Maroc Telecom incoming traffic and outgoing traffic. The liberalization of is bound to comply with interconnection requests, taking European markets has also favored the development of the account of the reasonable requirements and capacities of volume of this traffic. other operators. In order to adapt itself to international market conditions, The interconnection charge serves as compensation for the Maroc Telecom leads, for several years, a price decline policy actual use of the network and the related costs (see section for incoming international traffic. The Company also 4.8 “Regulatory environment & possible dependancies”). proceeded to a differentiation of the prices according to the Interconnection with domestic mobile operators is a major ending, fixed or mobile, so as to adapt rates to the costs. The cost item for fixed-line telecommunications, as the costs of volumes’ progress and a contained prices decline allowed a traffic termination on mobile networks are far higher than the progress of 15 % of the Fiscal Year 2005 revenue. interconnection income generated by traffic entering the It is to note that, during the Fiscal Year 2004, Maroc Telecom did fixed-line network. not forward incoming international traffic to Méditel after the ANRT decision dated December 27, 2004. However, Maroc Telecom considered that Meditel had only partially reinstated the • Domestic interconnection pricing interconnection, and applied to the ANRT for full reinstatement The table below sets out domestic interconnection pricing to by Meditel of the entire interconnection capacity. Through a fixed-line and mobile, in Moroccan dirhams (excluding tax) per decision dated November 9, 2005, the ANRT decided in favor of minute as of December 31, 2005 : Maroc Telecom (see section 4.8.3 “Settlement of disputes”).

Document de référence 2005 - Maroc Telecom 61 The operators not having succeeded in finding a price Number of lines 2003 2004 2005 agreement, the Management committee of the Moroccan telecommunications regulator ordered the immediate restoring Domestic leased lines* 6,292 6,169 5,980 of the interconnection and decided to raise the average price International leased lines* 148 166 209 of ending of the incoming international traffic to Médi Telecom Maghripac 1,537 1,504 1,470 via IAM network to 1.6289 DH/HT/mn. Frame Relay 859 1,226 1,401 VPN IP 0 80 1,214 • Fighting fraud * Customer leased lines, except lines to customer operators. The international traffic carried by Maroc Telecom has seen slower growth than expected in recent years, due to the diversion of traffic by fraudulent means. A specific action plan The range of products and services dedicated to Maroc to fight fraud on incoming international traffic was set up in Telecom’s network solutions consists of the following offers : liaison with the Moroccan telecommunications regulator. It • Leased lines: Maroc Telecom offers domestic and included the creation of a dedicated department, provided international leased-line services, including the physical with detection equipment, and awareness building among the chain, modems and monitoring of the leased lines. In order technical and commercial teams. Since 2004, 36 cases have to meet the demand for the establishment of call centers in been referred to the Moroccan telecommunications regulator Morocco, Maroc Telecom offers special prices for call and 9 judgments were acted by the Moroccan Courts in centers together with one-stop shopping for end-to-end Maroc Telecom’s favour The Company believes that fraud on leased lines with France, which simplifies operational incoming international traffic is now under control. management ; Maroc Telecom constantly reinforces and modifies its anti- • Maghripac : the Maghripac network is a solution based on fraud measures and considers that fraud concerning the X25 packet data transmission technology, specially international incoming calls is currently under control. suited to interactive computer applications. Maroc Telecom offers two kinds of access to the Maghripac network: direct access through leased lines and indirect access through the • Outgoing international STN,

For outgoing traffic, Maroc Telecom negotiates with most • Frame Relay : this service allows businesses to carry foreign operators in order to terminate its traffic abroad at the multimedia flows (voice, data and image) within their lowest possible cost and to offer the most attractive price to networks at flow rates up to 34 Mbps. The Frame Relay offer the end consumer. provides a high level of performance with a warranted minimum flow rate associated with each permanent virtual This policy enables Maroc Telecom to make regular cuts in circuit defined between the call’s endpoints; and retail prices in order to stimulate the market (see “Telecommunication services—Pricing”). • VPN IP MPLS : Maroc Telecom offers a virtual private network solution (interconnection of sites using a common infrastructure), developed on the IP/MPLS protocols and Data services marketed as the “IP Connexion” range. This service is accessible through the leased lines, Marnis and ADSL. Data services for Corporate Maroc Telecom also offers secure roaming Internet access. Maroc Telecom offers its customers (mainly business In 2005, the range was rounded out with IP VPN ADSL customers) a complete range of data transmission services access with guaranteed bandwidth. meeting the most recent technological standards. Historically, Maroc Telecom has adapted its ranges of products and the first data services launched on the market were leased services to the business market in particular in terms of a analog lines, then digital lines, then packet technology (X25 guaranteed quality of service. At present, Maroc Telecom network in 1991), and, recently, Frame Relay (in 2001) and agrees by contract with its customers to maintain a high level VPN IP solutions (launched at the end of 2003). of quality of service. In particular, Maroc Telecom measures The table below sets out the evolution of the breakdown of the the rate of availability for the network and complies with data transmission base (exclusive of Maroc Telecom’s in- international standards as regards that availability (see also house base) over the periods concerned (Source : Maroc “Infrastructure”). Telecom).

62 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

Data transmission services to Internet providers Data pricing Data transmission services are regulated by the Moroccan Maroc Telecom has regularly cut its prices for leased lines and telecommunications regulator in order to guarantee fair for other related data services. These cuts reflect competition. In this respect, Maroc Telecom, as the incumbent technological changes and the related reductions in costs. operator, is bound to provide interested Internet service The current prices are in line with the prices applied by providers (ISPs) with non-discriminatory technical and pricing international operators. solutions enabling the ISPs to make competitive offers to their The table below sets out, as an illustration, the cuts in the customers and allowing fair competition in relation to the price of a domestic 2 Mbps leased digital line for the periods same Internet services that Maroc Telecom provides to its concerned : own end customers under the “Menara” brand (see “— Internet”). Monthly subscription As from Accordingly, the following offers, the contents and prices of (MAD excluding tax) Apr 01 Feb 02 Nov 03 Apr 04 which are approved by the Moroccan telecommunications regulator, allow ISPs to market Internet access offers through Local 2 Mbps 33,348 25,000 17,500 9,000 various forms of access :

• Transit IP offer, for Maroc Telecom international Internet bandwidth; In 2004, Maroc Telecom proceeded to a revision of its Operators leased lines offer, reserved for the Developers of • offer of free PSTN collection for the caller, allowing ISPs to Public Networks of Communication ( DPNC) : the pricing is offer rate plans; made by class of distance, for the outputs until 155Mb/s. • offer of PSTN collection with repayment to ISPs, charged to Finally, the following table shows the decrease in the tariff of the caller, enabling the ISPs to market Internet access offers international half-circuit leased lines to France (applicable rate without subscriptions; for Call centers). Maroc Telecom is attentive to remain establishment of a delocalised call center. It decreased tariffs • bulk ADSL offers allowing ISPs to market packaged ADSL competitive in this area, as the price of international twice in offers, including the access and Internet components; and 2004 and once in 2005 : • “ISP special” offer for the provision of Internet service over leased lines.

Monthly subscription Before As from As from As from As from As from ( In MAD excluding tax ) Nov 00 Nov 00 Sep 03 Apr 04 May 04 June 05

64 Kbps 20,250 14,700 14,700 10,500 7,088 6,143

2 Mbps 405,000 147,015 110,261 110,261 99,235 86,004

Document de référence 2005 - Maroc Telecom 63 Internet The table below sets out the number of Menara Internet customers (the Menara customer base represents customers of The first Internet connection was established in Morocco by the Internet access plans marketed by Maroc Telecom, exclusive Maroc Telecom in 1995. Between 1997 and 2000, Morocco has of access for Maroc Telecom’s in-house use). seen the creation of many ISPs which have subsequently consolidated around two major players (Maroc Telecom and Fiscal years ended December 31, Maroc Connect). The Internet market nevertheless grew slowly 2003 2004 2005 until the end of 2003. The pace of development of that market has increased significantly since the first half of 2004. Narrowband * Number of active customers 42,509 43,459 9,436 The slow development of the Internet market before 2004 was due to the combination of three factors: the low rate of computer • Libr@cces** ownership, which to date includes only 11% of urban households Number of active customers 0 11,909 1,622 (Source: ANRT, 2005), the relatively high cost of the Internet for users (access and call costs), and fairly limited local content. • Subscription 42,509 31,550 7,814

The estimated number of internet users is currently 3.8 million, Broadband *** with a growing proportion of users (88.4%) connecting to the Number of active customers 4,649 61,330 242,977 internet in public places (source: ANRT, 2005). • ADSL 2,572 60,064 242,129 Maroc Telecom has a determined policy to increase internet access in Morocco and provides solutions both for access and • Leased lines 2,077 1,266 848 use. A clear example of this is the price cut carried out in March * The narrowband line includes the Menara Classic, Menara Toucompri and 2005 and a series of promotional offers (free modem, 50% Menara Libre Accès (pay-asyou-go) Internet service offers. reduction for the first three months, etc.). ** The Libr@cces (pay-per-use) customer base only includes accounts having accessed the internet at least once over the past three months. The ANRT gave At December 31, 2005, Maroc Telecom had 252,413 internet a new definition (Decision ANRT/DG/N01/05 dated March 9, 2005) of the terms 'internet users' and ‘internet subscribers'. This decision had an impact on the access contracts, which represents 21.4% of fixed lines pay-per-use customer base and on Maroc Telecom’s total customer base, since (excluding public telephony). As of December 31, 2005 ADSL only those clients having accessed the internet at least once over the past three lines accounted for 20.6% of the total number of fixed lines months can be counted, whilst Maroc Telecom previously used a six-month (excluding public telephony). period to calculate its number of internet users. On this basis, Maroc Telecom’s pay-per-use customer base as of December 31, 2004 was 7,426 instead of 11,909 reported. The customer base growth is mainly due to ADSL, launched in *** The broadband line includes Menara Internet consultations through leased 2003 and commercialized in an ‘unlimited’ formula since March lines, Menara ADSL Internet consultations starting in 2003. 2004.

The Internet offers Maroc Telecom’s Internet access offers are marketed under For broadband, Maroc Telecom offers ADSL contracts with the Menara brand. bandwidth ranging from 128 Kbps to 4 Mbps (January 2006), enabling users to use their fixed-line phone at the same time. The consumer market These contracts have met with a great success since the launch of Unlimited ADSL in March 2004, and particularly For narrowband, Maroc Telecom markets : since prices were cut as of March 1, 2005. This resulted in an • Menara libr@cces : dial-up offers without subscription with increase in the customer base of more than 182,000 in 2005. time-based charging included in the telephone invoice for There were several promotional offers in 2005, which the line used; and stimulated the market. In addition, as of November 2005, the • Menara Toucompri Internet rate plan : comprehensive offers modem is now free for all 24-month contracts (for a 12-month contract the modem costs MAD 180 including tax instead of including a subscription and a connection time based on MAD 500 including tax).To answer the increasing customers the volume of use. requirements in terms of security and content control, Maroc These offers include services for the hosting of personal Telecom launched in December, 2004 the “Pack Menara webpages, e-mail services and options such as time carry- Sécurité” which offers protection solutions against viruses or over, an evening and weekends package, or usage limits. not sought E-mail (spam) as well as tools of parental control.

64 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

The Business market • a telephone enquiries service (call number 160), provided For businesses, broadband is provided via ADSL or via through dedicated information centers; leased internet lines (with bandwidth up to 34 Mbps). At • the routing of calls to emergency numbers; and present, the business customer base mainly uses ADSL. • an Arabic-language telephone directory. Maroc Telecom The success of ADSL is not only due to the fact that it is also publishes a professional “yellow pages” directory. affordable but also because it meets a number of needs that This business is not significant in terms of revenues. were already satisfied by leased internet lines (speed, unlimited and constant access). The ADSL Pro offer provides bandwidth ranging from 128Kbps to 4Mbps and Customer services includes a wide range of services, in particular secure e- mails, a domain name, a web page for contacts and so The customer relationship is at the core of Maroc Telecom’s forth. business. Accordingly, and to meet its customers’ expectations and requirements, Maroc Telecom has Maroc Telecom also hosts businesses’ web sites, with two developed an active customer relations management policy. kinds of solutions: mutualized hosting (on a Maroc Telecom platform) or dedicated hosting (joint leasing of a server), Invoicing and collection providing businesses with visibility on the Internet while minimizing the cost. Since 2002, Maroc Telecom has upgraded its invoicing tools As well as internet access and web hosting services for and processes for both fixed-line and the Internet, in businesses, Maroc Telecom also offers a complete range of particular through the : optional extras, including an IP address, domestic and • establishment of a system of automated collection of international domain name and e-mail addresses. charging data; • changeover from per-unit to per-minute billing (except for Internet pricing public telephony, which remains charged per unit); Over the past two years, Maroc Telecom has cut prices of • detailed invoicing; all its ranges of products. • clearer presentation of the Fixed-line and Internet invoices in order to improve their legibility; The table below presents the main Internet prices in force in Moroccan dirhams (including VAT). • establishment of an interactive voice system enabling fixed-line subscribers to be informed of the current bill in (In MAD, including VAT) December 31, 2005 real time; and • establishment of a dedicated invoicing system for all the Unlimited ADSL at 128 kbps 199 per month Internet offers. Toucompri rate plan* 79 per month In 2005, this review continued with :

Libre Accès (pay as you go) 0,20 per minute • The implementation of a new sales information system “WIAM” which improves the billing process, * Evenings and weekends, ten hours’ connection. • A bimonthly invoice for clients with low invoices, enabling them to pay their invoices every two months. Other products and services As for collection procedures, Maroc Telecom set up in early 2003 a dedicated organization made of 27 collection In accordance with its contract specifications, Maroc departments and seven customer management Telecom is bound to provide the following services (without departments. limitation): Through these actions, Maroc Telecom expects to obtain • a free maritime radio-communication service to broadcast ISO 9001 version 2000 certification in 2004 for all its fixed- maritime safety notices; line invoicing and collection services. • a two-way telecommunications service for the exchange of messages between ships at sea and any termination Call centers point of the public networks; Maroc Telecom’s Fixed-line and Internet segment currently • a telegraph and service (Maroc Telecom has applied has the following Call Centers: to the Moroccan telecommunications regulator for • The Fixed-line Call Center deals with general enquiries, permission to discontinue the telex service since the assistance with Maroc Telecom products, orders, the sale terminal equipment is no longer being manufactured); and activation of services as well as electronic top-ups for

Document de référence 2005 - Maroc Telecom 65 capped rate plan accounts. Customer service advisors optic systems using the SDH technology with multiple flow are also trained to carry out outgoing call campaigns in rates of 2.5 and 10 Gbps. the areas of debt collection, telesales and telemarketing. With almost 10,660 kilometers of fiber optic cable, Maroc • The Domestic Claims Center (Fixed-line) centralizes Telecom’s transmission backbone is able to handle any kind billing disputes concerning residential and professional of fixed-line, data and mobile traffic. It made of : customers, phone shops and companies. • 6,888 kilometers of intercity fiber optic cable; • The Internet Call Center is available for Menara • 3,766 kilometers of urban fiber optic cable; and customers. It provides information and technical assistance to clients. Customer service advisors are also • the related SDH n x 2.5 and 10 Gbps equipment. trained to carry out outgoing call campaigns (prospecting for clients, telemarketing etc.). Switching and service platforms • Fault-reporting Centers (Fixed-line) receive calls reporting The switching exchanges have a capacity of approximately faults on fixed phone lines and passes on information to 1,910,000 subscriber lines. The network made of 14 transit teams in charge of resolving them. centers with capacity of 9,122 PCM, 74 CAA and 416 URAD. Services offered by the various call centers are monitored A smart network platform for value-added services allows by quality control indicators. Maroc Telecom to offer various services, such as prepaid cards, prepaid lines, toll-free numbers and kiosk service. Relations with Businesses Over the past two years, Maroc Telecom has emphasized Access network the reinforcement of its relationship with businesses. This is With almost 8.6 million kilometers of copper wire, Maroc evidenced by the creation at the end of 2001 of a Business Telecom’s access networks cover almost the entire territory Directorate, and, within the Business Directorate, of a Major of Morocco. The ADSL network established in 2003 allows Accounts Directorate. The latter acts as a one-stop shop for broadband Internet access with flow rates up to 2 Mbps for the largest public or private customers: the major accounts most Moroccan towns. sales engineers handle the entire commercial relationship with their customers for all of Maroc Telecom’s products In addition, the quality of service was a substantialy and services on a nationwide basis. Business branches improved. Accordingly, the rate of reported malfunctions at within each regional directorate also act as relays for the the end of December 2005 was 8.07%, and over 99% of Business Directorate as regards SME-SMI customers (see malfunctions noted were fixed within less than 24 hours. section 4.4.4“—Distribution”). International network Subscribers portals With nearly 230 relationships with foreign operators, Maroc Maroc Telecom has developed direct relationships with its Telecom secures Morocco’s connectivity to all countries fixed-line and Internet customers through its various portals worldwide through two international transit centers (www.elmanzil.ma for consumer Fixed-line and Internet (Casablanca and Rabat) and three fiber optic submarine subscribers, www.iamentreprises.ma for businesses and cables (SMW3, Tétouan-Estepona and Eurafrica), in www.menara.ma for Internet subscribers). In addition to addition to satellite connections via Intelsat, Arabsat and important information relating to the products and services Eutelsat. marketed, functionalities such as on-line subscription for services (Self Care) or the consultation of bills are also accessible by this means. Data networks Maroc Telecom offers a wide range of data transmission Infrastructure services through its Maghripac network, a Frame Relay network, an ATM routing network, a VPN IP network and Maroc Telecom has developed a fully digitized, modern network, at the leading edge of available technology, 11 optical local loops for the connection of multiservice allowing a wide range of services to be offered. This business customers. network made of a transmission backbone, switching At the end of 2005, the monthly malfunction reporting rate centers, service platforms and an access network. (all data products aggregated) is 2.29% (2.6% in 2004 and Nationwide transmission backbone 4,4% in 2003) and the repair rate for malfunctions (all data products aggregated) is 85% in less than four hours and Maroc Telecom’s transmission network made mainly of fiber 97% in less than 24 hours.

66 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

The Internet reliability assessment, enhancement and optimization have been carried out throughout the access chain, providing an Maroc Telecom also has a domestic Internet network and a improvement in the malfunction reporting rate reaching 13% redundant international bandwidth which increased from 1.4 at the end of December 2005. Gbps as of December 31, 2004 to 7.1 Gbps as of December 31, 2005. A large-scale program has been initiated to improve the performance of the Internet infrastructure and to improve the quality of service, as regards both installation with the customer and after-sales service. Auditing,

4.4.3 Shareholdings

Mauritel Mauritel group includes Mauritel SA and Mauritel Mobiles. 2004, the Mauritanian Regulatory Authority (‘ARE’) launched a Mauritel SA is the incumbent Mauritanian operator and was call for expression of interest to select consultants to assist it created in 1999, following its spin-off from the Office National in granting licenses. This procedure could, at a stage yet to be des Postes et Telecommunications, the Mauritanian National determined, lead to the granting of international carrier Postal and Telecommunications Office. licenses, local loop radio licenses and VSAT licenses enabling internet and voice over IP services. In 2000, Mauritel SA created Mauritel Mobiles, a wholly- owned subsidiary, which obtained a license to operate a GSM As at December 31, 2005, Mauritel’s total number of fixed-lines Mobile telecommunications network. was 39,920, representing a 1.5% penetration rate and covering the main Mauritanian towns. Other than residential On April 12, 2001, in response to an international invitation to clients and companies, almost 12% of the customer base tender launched by the Mauritanian government, Maroc comprises phone shop lines, enabling a greater proportion of Telecom acquired a 54% stake in Mauritel SA. the population to have access to telephone services. In January 2002, Maroc Telecom created the Compagnie Mauritel also offers internet access via the standard dial-up Mauritanienne de Communication (hereinafter CMC), a telephone network, ISDN lines and leased lines. These company incorporated under Mauritanian law with an initial services were extended at the beginning of 2006, with the share capital of MAD 0.2 million to which it transferred the launch of ADSL offers. The internet customer base reached shares it held in Mauritel SA. After this increase in capital by 2,343 accesses as of December 31, 2005. way of contribution in kind, Maroc Telecom sold a 20% stake in CMC to a group of Mauritanian investors on June 6, 2002. During 2003, CMC assigned 3% of the shares in Mauritel SA Mobile telecommunications to the latter’s employees for MAD 17 million in compliance Mauritel Mobiles, a wholly owned subsidiary of Mauritel, is with the commitments undertaken at the time of the focused on mobile telecommunications. It provides prepaid privatisation in 2001. As of July 1, 2004, the Mauritanian and postpaid services and offers roaming and SMS for all its government’s veto rights expired, giving Maroc Telecom clients and specially adapted services for businesses, such as exclusive control of this subsidiary which is fully consolidated closed user-groups. To boost consumption, Mauritel Mobiles in Maroc Telecom’s financial statements. offers volume reductions on call charges and special offers on top-ups. Fixed-line telecommunications, Data and Internet It operates in a liberalized market alongside the Compagnie Mauritel provides both fixed-line telecommunications (voice Mauritano-Tunisienne de Telecommunications (Mattel). During and data) and internet access services. 2005, the ARE initiated a procedure to grant a third mobile license. At present, the schedule of this procedure is still not Although Mauritel has no longer had the monopoly of basic available. services (domestic fixed-line telecommunications, telex and telegraph) since June 2004, it remains the only fixed-line With a customer base of more than 465,183, virtually all of telecommunications operator in Mauritania. In November which is prepaid, Mauritel Mobiles has an estimated market

Document de référence 2005 - Maroc Telecom 67 share of 70% (Source Mauritel). The mobile penetration rate in The following table summarizes Mauritel Group’s main Mauritania is in the region of 23% (Maroc Telecom estimates). operating and financial data :

As of December 31 2003 2004 2005 % Change 2005/2004

Mobile customer base 252,449 330,564 465,183 +40.7%

Number of fixed-lines 38,334 38,903 39,920 +2.6%

Internet customer base 1,582 1,600 2,343 +46.4%

Contribution to Maroc Telecom’s consolidated data % change on in million of Moroccan dirhams – IFRS 2004* 2005 a comparable basis

Consolidated revenues 719 826 +19.7%

• Fixed-line (gross) 354 332 -2.2%

• Mobile (gross) 462 573 +29.3%

Earnings from operations 222 267 +23.1%

• Fixed-line 43 18 -55.9%

• Mobile 179 248 +44.8%

* Pro forma data include data for the 1st half of 2004.

Other than the Mauritel sub-group, Maroc Telecom owns no Casanet other strategic assets. A wholly owned subsidiary of Maroc Telecom, Casanet is one Maroc Telecom’s representatives have seats on the Boards of of the leading internet service providers in Morocco. It is CMC, Mauritel SA and Mauritel Mobiles and none of Maroc focused on offers to business clients and the management of Telecom’s directors have any operational functions in any of portals, including the Menara portal. these companies. In 2005, provisional revenues for Casanet amounted to MAD The consolidation method of the Mauritel sub-group, and its 28.8 million whilst provisional earnings reached almost MAD 4 contribution to Maroc Telecom’s results are resumed in Notes million. 1, 2, 23 and 28 of the Consolidated Financial Statements. In addition, chapter “6.4 Related Parties Transactions” gives details of the financial flows and the nature of such flows Médi 1 Sat between Maroc Telecom and the Mauritel sub-group. In addition, in 2005, Maroc Telecom acquired a 25% stake in Medi 1 Sat which is preparing a in Tangier GSM Al- Maghrib offering continuous news in Arabic and in French. This project is financed by Moroccan and French investors. In GSM Al-Maghrib is a distributor of Maroc Telecom’s mobile, the long term Maroc Telecom will own 28% of this project with fixed-line and internet products and services. The acquisition an investment of MAD 4.2 million, alongside the other by Maroc Telecom of a 35% stake in GSM Al-Maghrib in July investors Caisse de Depôt et de Gestion (28%), Radio 2003 enabled Maroc Telecom to obtain an independent local Mediterranee Internationale (14%) and Compagnie distribution network. Internationale de Radio Television (30%). In participating in In 2005, GSM Al-Maghrib’s revenues amounted to MAD 1,373 this project, Maroc Telecom intends to establish closer links million, and earnings reached MAD 28 million. with the media industry, and namely to accompany the development of the content of its ADSL “triple play” offer.

68 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

4.4.4 Distribution

General organization and strategy of Maroc Telecom’s distribution network

Organization Direct distribution network Maroc Telecom has an extensive direct and indirect Maroc Telecom’s direct commercial network counts 277 distribution network, made of almost 40,000 retail outlets branches organized and structured to meet the local needs of licensed by Maroc Telecom subject to distribution agreements the various customer segments. with local retailers or nationwide distributors. In 2005, the various distribution channels were as follows : Consistent coverage With knowledge of regional and local specific features, Maroc • a direct network comprising 277 branches; Telecom’s own commercial network provides coverage suited • the local indirect network, made up of small independent to the entire domestic territory. In addition, almost all the tradesmen bound by exclusive agreements and each branches market the entire range of products and services managed by the closest Maroc Telecom commercial (Fixed-line, Mobile and Internet). branch. A large proportion of these retailers also manage telestore business approved by Maroc Telecom; Suitability to the needs of the various types of customers • an independent shop network dedicated mainly to Mobile, The branches are divided into four classes according to the managed by the company GSM Al Maghrib in which Maroc type of customers. The network has four major accounts Telecom has held a 35% participating interest since July branches (with nationwide coverage); 13 business branches; 2003; and 28 retailer branches and 231 consumer branches (located in • distributors structured on a nationwide basis, and for which most urban areas in order to provide optimal convenience for telecommunications are not the major business, such as customers). Among the consumer branches are 25 branches large-scale retailers (), press distributors (Sapress), dedicated to mobile, located mainly in shopping malls and the Régie des Tabacs (the tobacconist agency) or the post high-potential areas. offices of Barid Al Maghrib. Indirect distribution network Distribution Strategy Regional indirect network The extent and organization of Maroc Telecom’s distribution The network of telestores, the main business of which is the network are major strategic strengths for the Company. The operation of a public telephony service approved by Maroc Company’s distribution strategy is organized mainly along the Telecom, also distributes prepaid fixed-line and mobile cards, following lines : and subscriptions for fixedline telecommunications. • maintaining the central role of the direct network, in The network of retailers consists mainly of tobacconists, particular for high-value-added services; convenience stores, bookstores and other promoters of telecom and electronic products that have entered into • developing the indirect networks’ local reach in order to agreements for the marketing of MarocTelecom products and increase proximity to customers; services. • strengthening the role of telestores in the distribution of The indirect network reached more than 18,000 retail outlets prepaid products and the marketing of fixed lines; and licensed by Maroc Telecom in 2005. Agreements are made • taking advantage of synergies between the direct and with each telestore which permits a wide-reaching distribution indirect distribution channels. network and allows distribution on a local level. Compensation to telestore owners consists of commissions on the products and services sold.

Document de référence 2005 - Maroc Telecom 69 Nationwide indirect network Independent network The diversification of distribution channels has been The acquisition in July 2003 of an interest in the distributor completed by association agreements on a nationwide basis GSM Al Maghrib enabled Maroc Telecom to obtain an with channels such as Sapress (the nationwide leader in the independent local network. GSM Al Maghrib is the single distribution of press and books), Barid Al Maghrib (Morocco’s entity authorized to distribute Maroc Telecom mobile postpaid post office, which provides subscription, sale and invoice products in Morocco. collection services), the Régie des Tabacs and the “Marjane” and “Aswak Assalam”, both large-scale retailers. Maroc Telecom accordingly has a licensed nationwide indirect distribution network accounting for almost 20,000 additional retail outlets.

Distribution agreements As of December 31, 2005, Maroc Telecom had in place distribution agreements with the following companies :

Company Nature of the business Date of the association Maroc Telecom products distributed agreement GSM Al Maghrib Distribution of telecom products 11/2003 Prepaid mobile and fixed-line cards Mobile, fixed-line and internet subscriptions Electronic phone card recharging

Barid Al Maghrib Morocco’s post office 06/2003 Prepaid mobile and fixedline cards Fixed-line subscription

Cofarma Marjane hypermarkets 10/2002 Prepaid mobile and fixedline cards and supermarkets Fixed-line subscription

Mahatta Gas stations 07/2002 Prepaid fixed-line and mobile cards (groupe Total Maroc)

Régie des Tabacs Manufacturer and distributor 11/2003 Prepaid fixed-line and mobile phone cards of tobacco products in Morocco

Promo Presse Press distributor 03/2003 Prepaid fixed-line and mobile cards (groupe Sapress)

ICA Data Systems Distributor of computer 11/2002 Fixed-line and mobile electronic recharging and telecoms products

Canal Market Monetics; distributor of 11/2002 Fixed-line and mobile electronic recharging electronic recharging

Aswak Assalam Supermarkets 05/2003 Mobile packages, wrappers and prepaid rechargeable phone cards

70 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES BUSINESS ACTIVITIES

4.4.5 Marketing, Communication and sponsorship

Maroc Telecom is the largest advertiser in Morocco. The Maroc Telecom created a series of internal communication company assigns a significant communication and marketing tools for the benefit of employees to ensure a constant budget covering its mobile, fixed-line, business and internet information flow (internal newspaper, hot news, intranet, services, and both internal and corporate communication. management convention, charter of corporate values etc.). Maroc Telecom’s Compliance and Communication Division is responsible for internal and corporate communication, Sponsorship including brand image and group logo, ensuring the consistency of the communication strategies for all of Maroc Maroc Telecom is particularly active in sports sponsorship, Telecom’s businesses, as well as managing sponsorship. helping to detect new talent both at the national and local level. In football, it supports the Fédération Royale Marocaine de Football and the Groupement National de Football, in Product communication athletics the Fédération Royale Marocaine d’Athlétisme, as Product communication involves launching offers by means well as golf and horse riding organizations. In each of these of above- and below-the-line media advertising campaigns on sports, the aim is to help discover and train young Moroccan television, radio, press, billboards and so forth. talent and to prepare them for the various national, continental and international competitions. Maroc Telecom uses “co-branding” operations which involve communicating jointly with handset suppliers promoting both Aware of the important role of art and culture in everyday life, the latter's brands and the Maroc Telecom brand. Maroc Telecom participates in several projects, including sponsoring festivals (the Casablanca Festival, Rabat Festival, In 2005, in addition to promotional campaigns, Maroc Ahidous Festival, Al Hait Festival, Marrakech International Telecom also launched a group of campaigns to promote Film Festival etc.) supporting the Mohamed V theatre and public awareness and encourage internet use, explaining for purchases paintings. example the appeal of the internet and promoting its use at home. Slogans included “Toujours pas connecté à Internet Maroc Telecom is also involved in protecting the environment chez vous ?” (”Still not connected to the internet at home?”) with projects like “Clean Beaches” or the rehabilitation of the and “Et vous, c’est pour quand l’ADSL à la maison ?” (“And Arsat Moulay Abdeslam park in Marrakech carried out under when will you have ADSL at home?”). These campaigns aim the auspices of the Mohamed V Foundation for Environmental to increase internet use and to boost the penetration of ADSL Protection. at home, underlining the idea of “internet for all”.Maroc The group is also active in community action, with Telecom also uses direct marketing campaigns with its clients partnerships with the Mohammed V Foundation for Solidarity, via clubs (the “El Manzil” club), newsletters and magazines the National Institute for the Rights of the Child, the Moroccan (Generation El Manzil and Mobimag) and internet portals AIDS Association, the Cancer Research Association and other (www.iam.ma, www.elmanzil.ma, www.iamentreprises.ma, charities. www.mobileiam.ma and www.menara.ma). Maroc Telecom has also undertaken a number of initiatives within the framework of the National Initiative for Human Internal and corporate communication Development (INDH), mainly by creating a fund for starting up businesses and promoting employment. Maroc Telecom benefits from excellent spontaneous brand awareness among the public. Positioning the Group’s product brands with respect to the “Maroc Telecom” parent brand was amongst the major tasks for 2005 in order to develop a coherent brand structure with a real unity between the parent brand and the product brands.

Document de référence 2005 - Maroc Telecom 71 4.5 COMPETITION

As of December 31, 2005, 15 licenses for telecommunications • A fixed-line license including local loop (without restricted operators had been awarded in Morocco: three licenses for the mobility) and national and international transmission was operator of a public fixed-line telecommunications network awarded to Meditel in July 2005. (Maroc Telecom, Méditel and Maroc Connect), two GSM • A fixed-line license including local loop (with restricted licenses (Maroc Telecom and Méditel), five licenses for mobility) and national and international transmission was operators of GMPCS-type satellite telecommunications awarded to Maroc Connect in September 2005. networks, three licenses for operators of VSAT-type satellite telecommunications networks, and two licenses for operators In the mobile business, an invitation to tender is due to be of shared radio-electronic networks (3RP). launched on May 2, 2006 to grant third generation (UMTS) In 2005, the liberalization process for the fixed-line market licenses, and a third GSM mobile license could possibly be continued and two fixed-line telecommunications licenses were granted in 2007. awarded :

4.5.1 Mobile telecommunications

In the mobile sector, Maroc Telecom has a direct competitor in In the prepaid services market, mobile operators organize Médi Télécom (“Méditel”), the holder of a mobile license since frequent promotions, which has led to a fall in the prices. In August 1999. The majority of Méditel’s stock is held by the parallel, they have granted a high level of subsidies for Telefonica and Portugal Telecom groups (32.18% each). The handsets, contributing to sustained growth of the market. minority interests are held by the BMCE Bank group and the In postpaid services market, the operators distinguish Holdco group (which is more than 75%-owned by the Caisse themselves on prices and the specific features of their des Dépôts et de Gestion), with interests of 18.06% and offers. Maroc Telecom has a broad range of rate plans 17.59% of the stock, respectively (Source: Médi Telecom and tailored to the customer’s needs, whether individual or CDG). business customers. The Moroccan market for mobile telecommunications had 12.358 million GSM customers as of December 31, 2005. This Maroc Telecom’s brand enjoys a very high recognition, for market is mainly prepaid, with more than 95.33% prepaid postpaid as well as for prepaid services (Jawal). Maroc Telecom customers. In terms of market share, Maroc Telecom had at is also known for its expertise thanks to the performance and that date 66.65% of the overall market as compared to quality of its network (Source: survey conducted by Sofres). 33.35% for Méditel (or 4.1 million customers) (Source: ANRT). Maroc Telecom has the following competitive strengths:

• Maroc Telecom covers almost the entire Moroccan As of December, 31 Status Market Share population (Maroc Telecom estimate); 2005 (as % of number of customers) • Maroc Telecom relies on a dense and localized distribution network of almost 40,000 licensed retail outlets; Mobile prepaid Open competition Maroc Telecom : 67.1% Méditel : 32.9% • As early as January 2000, Maroc Telecom launched loyalty- building offers. Starting in April 2002, Maroc Telecom Mobile postpaid Open competition Maroc Telecom : 57.1% innovated on the market with a points-based loyalty Méditel : 42.9% system, “Fidelio”; Total Mobile Maroc Telecom : 66.65% • The two operators are distinguished by their methods of Méditel : 33.35% compensating resellers: Maroc Telecom compensates (Source : ANRT) resellers for sales, Méditel also compensates for calls (air time). This market is characterized by very strong seasonality during Accordingly, in order to enable its customers to enjoy the the summer period, which sees a significant increase in most recent innovations, Maroc Telecom acts as a pioneer by operation, due mainly to the arrival for vacations of large regularly introducing the latest technologies, such as WAP in numbers of Moroccans living abroad. 2000 or GPRS in 2002.

72 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES COMPETITION

The table below lists the years of launch of mobile Méditel is developing a competitive policy on the business technologies on the market by the two operators : market through an offer of GSM gateways known as “Lo- Box”. That offer indirectly creates competition for Maroc Maroc Telecom Méditel Telecom’s customers not only for mobiles but also for fixed- line services. The Moroccan telecommunications regulator WAP 2000 2004 has permitted marketing of the Lo-Boxes while nonetheless SMS Info 2001 2003 prohibiting operators from subsidizing them or from establishing specific offers connected with their use (ruling GPRS 2002 2004 ANRT/DG/N.01/04 dated January 22, 2004 relating to the use MMS 2003 2004 of GSM gateways). Maroc Telecom believes that this phenomenon affects 10% of the fixed-line-to-mobile traffic of MMS and GPRS roaming 2004 - its business customer base. Méditel is acting aggressively with respect to subsidies for new customers and spends heavily on marketing and communication.

4.5.2 Fixed-line telecommunications

Two new fixed-line telecommunications licenses were Interconnection of incoming international traffic awarded in July and September 2005. As of December 31, 2005, the recipients of these licenses had still not started The market for the interconnection of incoming international operating. Operations are likely to start in 2006. traffic is made up of two segments : Maroc Telecom currently faces competition in the public • interconnection of incoming international traffic bound to telephony and business segments of the fixed-line Maroc Telecom’s network (fixed-line or mobile), and telecommunications market. • interconnection of incoming international traffic bound to other operators networks. Public telephone market Maroc Telecom, pursuant to its license, is entitled to offer The public telephone market is estimated by Maroc Telecom at international operators termination of their traffic to Morocco, over MAD 3.9 billion annually (base 2004). Until 2003, Maroc regardless of the end destination of the calls (Maroc Telecom Telecom had a monopoly. Competition started in 2004 with two fixed-line, Maroc Telecom mobile or Méditel mobile). This right new entrants: Méditel, which, since spring of 2004, has deployed is exclusive as regards to traffic to its own subscribers. As of telestores using a GSM technology, and Globalstar, deploying December 31, 2005, Maroc Telecom accordingly maintained a telestores using a satellite technology. monopoly on the markets for interconnection of incoming The Thuraya satellite operator also announced in September 2004 international traffic bound to Maroc Telecom’s Fixed-line and its forthcoming entry at market pursuant to the execution of an Mobile networks. association agreement with the Moroccan company Quickphone. Thuraya will, like Globalstar, offer public telephony based on Méditel, pursuant to its license, has a non-exclusive right to satellite technology. carry incoming international traffic to its own subscribers. However, between August 1, 2003 and January 2005, Méditel In December 2005, Maroc Telecom’s share of the public telephony has technically prevented Maroc Telecom from routing market was estimated at 96% as a percentage of the number of lines. incoming international traffic to Méditel’s customers. Maroc Telecom has challenged this action before the Moroccan telecommunications regulator and Moroccan Business fixed-line telephone market telecommunications regulator concluded to the immediate Méditel, by installing “Lo-Box” GSM gateways, has entered establishment of the interconnection of incoming international the market for Business fixed-line telecommunications. traffic bound to Méditel (see 4.13 “Extraordinary events and Installation of this hardware at the PABX outlet allows litigation”). conversion of the fixed-line-to-mobile traffic into mobile-to- mobile traffic without going through Maroc Telecom’s fixed-line network (also see the discussion of the ruling ANRT/DG/N.01/04 above).

Document de référence 2005 - Maroc Telecom 73 4.5.3 Data transmission

As of December 31, 2005, competition for data transmission • the independent networks deployed by certain major services was fairly limited. It consisted of the following four account customers, which have opted to build their own forms : data networks and use radio solutions in particular. This competition is not significant. • competition from ISPs with VPN IP services, such as those offered by Maroc Connect. The service offered is VPN IP- The table below summarizes the market situation as of based on the ISP IP network for interconnection of sites on December 31, 2005 : a domestic and international basis;

• operators of VSAT satellite telecommunications networks, Market status Parts de marché such as Space Com S.A., Gulfsat Maghreb and Cimecom de Maroc Telecom S.A. On the domestic market, the service is suited to remote Domestic data Competition from : locations where Maroc Telecom is not present. Maroc transmission services - Maroc Connect, with ser Telecom may, however, meet its customers’ requirements vices based on VPN IP Not available by means of customized offers such as wireless service. - VSAT operators for connection The VSAT operators provide the call centers with of remote locationss international leased lines.; - Private networks (radio solutions))

• the international operator Equant, which provides International data Competition from : > 90% international connectivity services to a few major account transmission services - Equant (en valeur*) customers. Maroc Telecom considers that Equant offers - VSAT operators services to approximately 20 airlines formerly customers of the SITA network, and to approximately 25 businesses. This * in terms of revenues as of December 31, 2005. competition remains highly limited since the entire traffic of Equant’s customers is carried through a leased line with a total capacity of 2 Mbps; and

4.5.4 Internet

The main competitor on the market for internet access December 31, 2005 according to the Moroccan services is Maroc Connect, present on the consumer and telecommunications regulator : business markets, with an overall market share of less than Status of the market Market Share 5% as of December 31, 2005 (Source: ANRT). (% of number Maroc Telecom has a very strong position on the ADSL of consultations) market, a market segment which is growing rapidly, with a Narrowband access Open competition Maroc Telecom : 72% market share of more than 97% (Source: ANRT). (excluding “Accès libre”) Other ISP : 28% The following table sets out the market situation as of Broadband access Open competition Maroc Telecom : 98% (ADSL and leased lines) Other ISP : 2%

74 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES RESEARCH AND DEVELOPMENT

4.6 RESEARCH AND DEVELOPMENT

Maroc Telecom has a research and development department even though such work may not be considered as patentable which works on the Company’s products. This research usually inventions or processes. leads to the launch of new products and/or services or Maroc Telecom research and development costs are not transformations and/or improvements of existing products, significant.

Document de référence 2005 - Maroc Telecom 75 4.7 SEASONALITY

The summer months, with the return of Moroccans living month of Ramadan (from October 5 to November 3 in 2005) is abroad, and the fortnight preceding the ‘Id al-Adha holiday a low point of consumption for both the fixed-line and mobile (January 21 in 2005) traditionally see sustained business businesses. (primarily mobile and fixed-line public telephony), while the

76 Document de référence 2005 - Maroc Telecom 4. INFORMATION CONCERNING COMPANY BUSINESS ACTIVITIES REGULATORY ENVIRONMENT AND POSSIBLE DEPENDANCIES

4.8 REGULATORY ENVIRONMENT AND POSSIBLE DEPENDANCIES

4.8.1 General presentation of the legal environment with respect to telecommunications in Morocco

This chapter summarizes the legal environment with respect to upon Maroc Telecom. It is also impossible to determine with the telecommunications business in Morocco and does not certainty whether domestic or international regulatory describe it in a comprehensive manner. It cannot be agencies or third parties will challenge Maroc Telecom’s determined with certainty whether recent and future changes compliance with the statutes and regulations in force. in statutes and regulations will have material adverse effects

4.8.2 The legal environment with respect to telecommunications in Morocco

General presentation The Moroccan telecommunications statute stresses the interconnection, and the general terms of operation of the strategic nature, in both economic and social terms, of this public telephony networks. sector. The objectives of this statute are to favor the In 2001, Decree 1-01-123 determined the conditions of the development of telecommunications infrastructure in order to State’s supervision of the Moroccan telecommunications secure a high-quality service for the entire population throughout the country, and to favor the development of new regulator’s accounts and created a panel of expert advisers for information technology. For the , the such purpose. objective is to offer businesses telecommunications services In 2004, Act 24-96 amended and supplemented by Act 55-01 which will allow them to increase their competitiveness and will completed the liberalization process initiated in 1997, in strengthen the role of Morocco as a regional platform in the particular through clarification of the existing statutory rules. area of telecommunications. The operators’ contribution to universal service and to local The reform of the Moroccan telecommunications sector was development was reduced from 6% to 2% of revenues, initiated by Act 24-96, dated August 7, 1997 (Act 24-96), which excluding tax and net of interconnection costs. Act 55-01 also dissolved the Office National des Postes et allowed for access to alternative infrastructure (motorways, Télécommunications (ONPT) and laid down the conditions for railroads, etc.) and permitted sharing of existing liberalization of the telecommunications sector. telecommunications infrastructure (see “Universal Service” and “Rights of way”). Finally, the ANRT’s powers were Prior to Act 24-96, the Government of the Kingdom of Morocco reinforced (see “Mission of Moroccan telecommunications had already liberalized the market for internet access, allowing regulator”). the development of ISPs. The dissolution of the ONPT led to the creation of three In 2004, the ANRT published a note setting out general guidelines separate legal entities: Itissalat Al-Maghrib (Maroc Telecom), a for the liberalization of the telecommunications sector over the corporation organized under private law (société anonyme); period 2004-2008. Barid Al Maghrib (the post office, or BAM), a public agency This note is intended to specify the conditions under which organized as a financially independent legal entity; and the liberalization will occur over the coming years and, in particular Moroccan telecommunications regulator (“ANRT”), the principal (i) the specific actions which will have to be undertaken in mission of which is regulation of the telecommunications sector. matters of regulation and (ii) the liberalization strategy which, in Most of the powers previously reserved for the minister in the long term, aims to establish competition between three charge of telecommunications were accordingly transferred to operators (including those operators already in place) in all the Moroccan telecommunications regulator. segments of the fixed-line and mobile markets. The liberalization process continued with the adoption of a In 2005, the decrees concerning interconnection and the series of implementing decrees concerning mainly the general terms of operation of the public telephony networks operation of the Moroccan telecommunications regulator, the were amended and supplemented, respectively, by decree no. terms applicable to an open telecommunications network, the 2-05-770 and decree no. 2-05-771 dated July 13, 2005. A new list of value-added services which operators may provide decree no. 2-05-772 dated July 13, 2005, relating to ANRT’s

Document de référence 2005 - Maroc Telecom 77 new powers of monitoring compliance with the law on the documents accompanying the invitation to tender. The freedom of pricing and competition, was adopted. These three applicant whose bid is deemed to be the most favorable, as decrees were published in the Official Moroccan Gazette indicated by an opinion issued by the Moroccan (Bulletin Officiel) no.5336 dated July 21, 2005. telecommunications regulator, is awarded the contract. The On December 23, 2005 the ANRT’s Board of Directors made award is entered in a public report. Notice of the issuance of the following decisions : a license is by decree of the Prime Minister provided within no more than two months, and grounds are to be stated for any • to launch an invitation to tender to grant 3G mobile licenses refusal of a license. Licenses awarded are personal and may on May 2, 2006 be assigned to a third party only pursuant to a decree. • to implement regulatory controls according to the following In addition to complying with the contract specifications, the timetable : holder of the license is also required to comply with all • Carrier pre-selection on July 8, 2006 applicable statutory and regulatory rules in force, including in particular: (i) the general conditions of operation, (ii) the • Partial local loop unbundling on January 8, 2007 conditions of provision of an open telecommunications network • Full local loop unbundling: July 8, 2008. and (iii) the conditions of interconnection among networks. Lastly, the legal framework has also been supplemented by a The general conditions of operation of public telephony number of decisions made by ANRT, on both a general and an networks are defined by Decree 2-97-1026, as amended and individual basis, made both for the purposes of regulating the supplemented by decree no. 2-05-771 dated July 13, 2005. sector and for settling disputes between operators. That decree establishes certain obligations, relating in particular to competition (the principle of fair competition), pricing (the principle of equal treatment among users, non- Rules applicable to the establishment and operation of discrimination, compliance with maximum charges and the telecommunications networks and services in Morocco method of invoicing), cost accounting, confidentiality and Act 24-96, as supplemented by Act 55-01, implements neutrality of service. different rules according to the nature of the In addition, the operators are bound to contribute to certain telecommunications networks and services provided. general needs of the State. In particular, they are bound to contribute to local development, environmental protection, research and training in the area of telecommunications and Networks and services subject to a license the requirements and burdens of universal service (see “— General description Universal service”). The establishment and operation of any public telephony The conditions of interconnection and the supply of leased networks using the public domain or using the spectrum of lines are defined by Decrees 2-97-1025 as amended and radioelectric frequencies requires a license. supplemented by decree no. 2-05-770 dated July 13, 2005 and 2-97-1027, dated February 25, 1998 (see “— A license may be issued only in response to an invitation to Interconnection—General background”). tender. Invitations to tender are issued by the Moroccan telecommunications regulator. Contract specifications define, As regards radioelectric frequencies, Decree 2-98-157, dated among other items : February 25, 1998, delegating authority with respect to the determination of fees for the allocation of radioelectric • the conditions for the establishment of the network; frequencies, provides that the fees are to be set by an order of • the conditions for the provision of the service; the minister in charge of telecommunications after obtaining • the area of coverage of that service and the schedule for an opinion from the minister of finance. Order 310-98, dated completion; February 25, 1998, as amended by Order 606-03, dated February 4, 2004, provides that three fees are payable: the • the radioelectric frequencies and the numbering blocks charge for monitoring radio-communication stations, the fee allocated; for the allocation of radioelectric frequencies and the duty for • the terms of payment of the license fee; the inspection of operators of radio-communication stations. • the duration of the license’s validity and the conditions of its Decree no. 2-05-772 dated July 13, 2005 sets out the ANRT’s renewal; and monitoring procedure regarding disputes, anti-competitive • the terms of payment of the consideration. practices and economic concentration, taking into account in The conditions for access and interconnection with public particular ANRT’s new powers of monitoring compliance with telephony networks and, if applicable, the conditions for the law on the freedom of pricing and competition. leasing of the elements of that network, are specified in the

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Legal status of Maroc Telecom universal service costs (for the fixed-line business), thus Pursuant to Act 24-96, the telecommunications networks and generalizing the “pay or play” principle (see 4.14 Risk factors). services previously operated by the ONPT, namely fixed-line It should be noted that Maroc Telecom provides telephone telecommunications network and services, mobile services throughout the entire territory of Morocco, including in telecommunications network and services and the right to use unprofitable areas and to unprofitable customers. the radioelectric frequencies allocated or assigned to the ONPT, A special fund was created by the 2005 budget into which the were transferred to Maroc Telecom. universal service contributions are to be paid (see section 5.2.4 Because of its position as the incumbent operator, Maroc Significant accounting policies and estimates — Contribution to Telecom is subject to specific contract specifications approved universal service). by Decree 2-00-1333, dated October 9, 2000, which define the By the terms of Act 55-01, the parameters of the universal conditions for the operation of all the networks and services service requirement will encompass the local development initially operated by the ONPT. obligations and the amount of the overall contribution is set at These contract specifications specify the conditions in a maximum of 2% of pre-tax revenues, and net of accordance with which Maroc Telecom is to establish and interconnection costs. Maroc Telecom’s contract specifications operate, for an unlimited duration : are therefore expected to be revised accordingly (see “— a) fixed telecommunications services (including data Universal service”). transmission services, leased lines and the integrated Maroc Telecom pays a fee to the Moroccan telecommunications services digital network), on a local and nationwide basis; regulator for use of the spectrum of radioelectric frequencies, in b) telegraph services; an amount set by regulation. c) telex services; d) maritime radiocommunications services; Other licenses awarded e) mobile telecommunications services using the GSM standard; Maroc Telecom’s contract specifications provided for a period of exclusivity until December 31, 2002 for the exploitation of a f) mobile telecommunications services using the NMT fixed-line network and a public network of international standard; telecommunications. Likewise, they provided that no license g) radio paging services; and for operation of the land-based cell telecommunications h) international telecommunications services. network using the GSM network could be awarded before As Act 55-01 has been enacted, the Moroccan August 5, 2003 (other than the license already granted to telecommunications regulator will now adapt the contract Méditel). specifications accordingly. Thus, for instance, the provisions As regards mobile telecommunications, pursuant to an invitation relating to periods of exclusivity are expected to be removed, to tender issued by the Moroccan telecommunications regulator, while those relating to universal service and local development a GSM-type license was awarded on August 2, 1999 to Méditel are expected to be modified. for a term of 15 years, subject to extension. Early 2005, the term It should be noted that mobile telecommunications services of this licence has been extended to 25 years. using the NMT standard were discontinued after the grant of In 1999 and late 2002, ten licenses for the establishment and permission by the Moroccan telecommunications regulator, and operation of telecommunications networks were awarded in that Maroc Telecom has applied to the latter for permission to Morocco. Apart from the license awarded to Méditel, five discontinue the provision of telex services, for which handsets licenses were issued to operators to operate GMPCS satellite are no longer manufactured. telecommunications networks, three licenses were issued to Maroc Telecom’s services are to be provided on a permanent and operators to operate VSAT satellite telecommunications continuous basis, in an objective, transparent and non- networks, and two licenses were issued to operators to discriminatory manner. The Company is accordingly required to operate trunked radioelectric networks (3RP) in Morocco. avoid any price discrimination based on geographical location. In 2005, two fixed-line telecommunications licenses were Maroc Telecom agrees to use its best efforts to achieve levels of awarded : quality of service in line with international standards. In this respect, • A fixed-line license including local loop (without restricted the Moroccan telecommunications regulator may perform mobility) and national and international transmission was inspections of Maroc Telecom, and the Company is required to granted, to Meditel in July 2005. provide an annual report relating to the quality of its services. • A fixed-line license including local loop (with restricted Since the promulgation of Act no. 55-01, the contribution to the mobility) and national and international transmission was universal service represents 2% of total revenues, and Maroc granted to Maroc Connect (ISP) in September 2005. Telecom is allowed to offset these amounts with its own

Document de référence 2005 - Maroc Telecom 79 As Meditel and Morocco Connect had not started to operate Unrestricted networks and facilities their fixed-line service in 2005, Maroc Telecom was the only The Moroccan telecommunications regulator permits the fixed-line operator in 2005. establishment of internal networks and radioelectric facilities consisting solely of low-powered and short-range devices without Networks and services requiring licenses restriction. However, such networks and radioelectric facilities are subject to the same requirements applicable to the approval The establishment and operation of any independent network, of devices (regarding the protection of the safety of users and other than an internal network, requires a license. Independent operating staff, compatibility, etc.). The Moroccan networks are telecommunications networks without commercial telecommunications regulator also determines the technical purposes, reserved solely for private use (i.e., where use is conditions of use of such networks and facilities. The reserved for the party establishing it) or shared use (i.e., where establishment of a telecommunications network by a commercial use is reserved for the exchange of internal communications concern consisting of several legal entities is also unrestricted, among a single group of companies). The license is issued by provided that all such entities are located within the territory of the Moroccan telecommunications regulator and is subject to Morocco. If not, the permit procedure needs to be observed. The the payment of fees. Notice of the allocation of a license is use of the network is to be reserved for the concern’s own provided within no more than two months, and grounds are to purposes, and the network’s infrastructure must be entirely leased be stated for any denial of a license. One of the requirements for from one or more licensed operators of a public telephony network. issuance of the license is that the network does not interfere with the operation of existing networks. In addition, the Moroccan telecommunications regulator sets the terms on which Legislation with respect to pricing independent networks may be connected to a public telephone network, without in any event allowing the exchange of Theoretically, telecom operators are free to set their own rates, communications among parties other than those for whom use with the exception of interconnection charges and leased line of the network is reserved. tariffs which are controlled by ANRT. Maroc Telecom offers interconnection and leased lines and as such its rates for these activities are controlled by the ANRT. Services subject to reporting The provision of value-added services is unrestricted, subject to the provision of prior notice to the Moroccan Interconnection telecommunications regulator. The list of value-added services is determined by regulations adopted by the Moroccan General background telecommunications regulator. Decree 2-97-1024, dated Interconnection is governed by the telecommunications statute February 25, 1998, defines the following as value-added and more specifically by Decree 2-97-1025, as amended and services: electronic messaging, voice mail, audiotext, supplemented by decree no. 2-05-770 dated July 13, 2005, electronic data interchange, enhanced fax, on-line information, which defines the technical and pricing conditions that access to data (including data processing and searches), file operators of public telephony networks are required to offer for transfer, conversion of protocols and coding and the provision interconnection to their own networks. of internet service. This list may be amended or supplemented by an order of the minister in charge of telecommunications at Any operator of a public telephony network is required to grant the Moroccan telecommunications regulator’s discretion. requests for interconnection made by a holder of a license to operate a public telephony network with reasonable regard to The Moroccan telecommunications regulator acknowledges the requirements of the applicant and the operator’s capacities. receipt of the notice if the proposed services comply with the The interconnection is to be subject to a contract between the legislation in force. If, pursuant to provision of the service, it operators, intended to determine the technical, administrative appears that the latter has a material adverse effect on public and financial terms of the interconnection, in compliance with security or order, or is in breach of public morality, the the principles of objectivity, full disclosure and non- competent authorities may cancel their permission immediately. discrimination. If a disagreement occurs between the parties at Providers of value-added services are required to obtain a the time of negotiation of the agreement, either party may refer license to use the connection capacities of one or more public the matter to the Moroccan telecommunications regulator. telephony networks, unless the value-added service provider is itself the holder of a license. Act 55-01 provides that such capacity is to be used solely to link customers to a point of Dominant operators presence and between the point of presence and the network of the public telephony network operator, subject the Moroccan Specific interconnection obligations are imposed upon telecommunications regulator’s grant of special permission to a operators designated by ANRT as exercising a significant value-added service provider to use any other technical means. influence on a given market. An operator is considered to

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exercise a significant influence, if, either individually or in provision of leased lines as well as quality (i.e., the time for conjunction with another, it enjoys a dominant position enabling provision of service and time for repair after a failure has been it to behave independently with respect to its competitors, reported). The Moroccan telecommunications regulator regulates clients and consumers. leased lines, which operators of public telecommunications Under Decree 2-97-1025, as amended and supplemented by networks are required to provide. This list may be supplemented, decree no. 2-05-770 dated July 13, 2005, operators exercising after consultation with the operator concerned, by a mandate a significant influence on a given market are required to publish that further services be provided. Each operator offering leased technical and pricing terms for interconnection, once they have lines is required to publish the technical terms of provision in its been approved by the Moroccan telecommunications regulator. price catalog, including in particular the “principles and terms of The pricing terms must cover only the actual costs of use of the indemnification.” The price catalog is to be determined on the network and related costs. basis of an operator’s costs. The determination of relevant costs is carried out by the operator and monitored by the Moroccan For such purpose, the presentation of pricing terms must be telecommunications regulator. Maroc Telecom is under an sufficiently detailed to allow a precise determination of the obligation to comply with requests for leased lines and is bound relevant costs, and the Moroccan telecommunications regulator to offer an equivalent alternative solution if it is unable to comply is in charge of determining the appropriate accounting with the request. Maroc Telecom has a right to lease transmission methods. capacity of its fixed-line network to other operators offering Maroc Telecom is accordingly required to offer pricing terms capacity-leasing services. that comply with the principles of objectivity, full disclosure and non-discrimination, and which approximate its costs. As of 2006, interconnection charges are to be calculated using the Pricing Long Run Average Incremental Costs method. An ANRT Decree 2-97-1026, as amended and supplemented by decree decision dated September 1, 2005 defined the rules for no. 2-05-771 dated July 13, 2005, provides that the prices for adopting the Long Run Average Incremental Costs method to connection, subscription and calls comply with the principle of set interconnection charges for 2006. In addition, Ruling 06/04, dated May 24, 2004, specified the procedure for approval of the equal treatment among users and be determined so as to avoid technical and pricing terms for interconnection. The operator is discrimination based on geographic location. In the latter required to forward to the Moroccan telecommunications respect, it is only in the event of exceptional difficulty in regulator, on or before October 1 of each year, a schedule of installing a line that operators are permitted to provide special interconnection pricing terms valid from January 1 to December prices and terms for lines in their catalogs. As regards pricing, 31 of the following year. After a consultation procedure, the the decree provides only that the services are to be provided Moroccan telecommunications regulator may request that the “on the best economic terms”. operator revise its pricing terms to satisfy the principles of Maroc Telecom’s contract specifications confirm that it objectivity, full disclosure, non-discrimination and cost-based maintains this pricing discretion for all the services offered to its pricing. The operator is bound to comply with the Moroccan subscribers. Maroc Telecom may grant cuts according to telecommunications regulator’s request. In the event of volume and establish its own marketing policy. Maroc Telecom disagreement, the Moroccan telecommunications regulator’s is bound to publish its prices and the general terms of its offers director settles the matter, provided that in all cases, the terms for each service. Any price change is to be notified to the are to be approved by the Moroccan telecommunications Moroccan telecommunications regulator, which may object if regulator on or before December 20 of each year. the change does not comply with the rules of fair competition or On January 13, 2006, the Moroccan telecommunications the principles of uniform domestic pricing. Finally, users’ regulator approved Maroc Telecom’s technical and pricing invoices must provide them with full disclosure. terms for 2006. One exception from the principle of freedom of pricing is that The project of modifications in Ruling n°2-97-1025 related to the prices applicable to services included in the operator’s interconnection, replaces the threshold of 20% market share by provision of universal service may not become effective without the notion of dominant operator in a specific market. Changes the Moroccan telecommunications regulator’s consent. In related to the obligations of those dominant operators have not addition, Maroc Telecom’s prices for maritime radio- been established yet. communication services are to be cost-based (and free for safety messages, such as distress and emergency calls).

Leased lines Universal Service Decree 2-97-1027, dated February 25, 1998, relating to the conditions for the provision of an open telecommunications Universal service obligations cover telecommunications network sets the pricing and technical conditions for the services including: a telephone service of a specified quality at

Document de référence 2005 - Maroc Telecom 81 an affordable price; value-added services, the contents and interconnection, of the telecommunications activities covered by performance standards of which are set in the contract their licenses. This amount is paid to the Moroccan specifications of operators of public telephony networks telecommunications regulator. The contribution in respect of (including services allowing access to the internet); the routing research is set at 0.25% of the same revenues. This amount is to of emergency calls, and the provision of an enquiries service be paid into a special fund allocated to research. Operators and a telephone directory, in printed or electronic form. carrying out research programs pursuant to agreements made with Act no. 55-01 instituted the “pay or play” principle and set the research agencies listed by the regulation in an equivalent amount contribution required of public telephony network operators are exempt from the payment requirement. with respect to their universal service obligations at 2% of pre- tax revenues and net of interconnection charges, handset sales Rights of way and income from value added services. The operators may accordingly either perform the universal service duties Act 55-01 introduces a provision whereby legal entities organized themselves, or pay a contribution into a special allocation fund. under public law, public contractors and the other operators of Only the routing of emergency calls and the provision of an public telephony networks must make their property (e.g., enquiries service and a telephone directory, in printed or easements, major roads, conduits, high points, etc.) available to electronic form, are services to be performed by the operators operators so requesting for the purpose of the installation and on a mandatory basis. The terms of performance of the operation of transmission equipment. Compliance is mandatory universal service duties are set, for each operator, in special only if the installation does not interfere with the existing public specifications approved by decree. use. It is to be provided on acceptable, objective and non- discriminatory regulatory, technical and financial terms, securing Particular licenses may be issued, after invitations to tender, for an environment of fair competition. The purpose of this provision the performance of universal service duties. Special contract is to allow operators to make use of the infrastructure currently at specifications will be approved by decree and will set the terms the disposal of entities such as the Office National de l’Electricité, of implementation of the universal service function and of the Office National des Chemins de Fer (railroads), Autoroutes du certain value-added services. If an invitation to tender for the Maroc (highways) or other operators of public infrastructure award of such a license is unsuccessful, the State will appoint networks. The contracts must be forwarded to the Moroccan an operator of a public telephony network, holding a market telecommunications regulator for its information and the latter share of 20% or more of a particular telecommunications may resolve any related disputes. service, to perform the universal service function concerned. In addition, the operators of alternative infrastructure networks According to its current contract specifications, Maroc Telecom (public or private entities) may lease or assign to an operator is required to provide a service of emergency calls allowing the excess capacity at their disposal and/or rights of way over transmission of a telephone call to a public emergency service the public domain. The leasing agreement must be forwarded agency free of charge. It must also provide a telephone to the Moroccan telecommunications regulator for its directory of its subscribers to each of them, free of charge. information, and may not interfere with the rights of way that Installation, operation and maintenance of call boxes on the public other operators are entitled to obtain. highway must also be provided. Any removal of a call box requires consent from the Moroccan telecommunications regulator. A free service of maritime radio-communications must be Numbering and portability of numbers offered to carry safety messages at sea. A two-way service of The Moroccan telecommunications regulator allocates numbers, telecommunications for messages between ships at sea and blocks of numbers and prefixes to the operators of public any termination point of the public networks is also to be telephone networks on terms which must be objective, provided. These services are to be charged at the lowest transparent and non-discriminatory. These numbers, blocks of possible cost and subject to a specified quality standard. Maroc numbers and prefixes may not be transferred without express Telecom may discontinue the operation of that service on more prior consent from the Moroccan telecommunications regulator. flexible terms than for the call box service. A telegraph and telex Act 55-01 provides that the conditions for portability of numbers service is also to be provided. are to be set by the Moroccan telecommunications regulator.

Contribution to research, training and standardization Pre-selection in telecommunications Pre-selection of the carrier (i.e., of the operator carrying the call Act 55-01 sets the required contribution from operators of public on the domestic and international network, as opposed to the telephony networks in respect of training and standardization at local loop network), is scheduled to be in operation 12 months 0.75% of revenues excluding tax, net of the costs of after the award of licenses, according to the Moroccan

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telecommunications regulator (see note setting out general Governors, and is in charge in particular of resolving disputes guidelines for the liberalization of the telecommunications relating to interconnection. The Director of the Moroccan sector over the period 2004-2008). telecommunications regulator is its executive agency. Challenges on the basis of misuse of powers against the Moroccan telecommunications regulator’s rulings are referred to Unbundling of the local loop the Rabat Administrative Court. Act 55-01 does not specify the terms for unbundling of the local loop. Under the current schedule, partial unbundling is Mission of the Moroccan telecommunications regulator expected to be implemented in 18 months, followed by The mission of the Moroccan telecommunications regulatory complete unbundling three years after the award of licenses, authority is to develop the legal environment for the according to the Moroccan telecommunications regulator. telecommunications sector, to monitor and secure compliance with the legislation relating to fair competition among the Accounting separation operators, and to resolve certain disputes. The Moroccan telecommunications regulator drafts proposals for In accordance with decree no.2-97-1026 as amended and the development of legal, economic and safety rules relating to supplemented by decree no. 2-05-771 dated July 13, 2005, and telecommunications activities. Towards this end, it prepares with decree no.2-97-1025 as amended and supplemented by legislative bills, draft decrees and draft ministerial orders. decree no. 2-05-770 dated July 13, 2005, operators are required to keep cost accounts allowing a determination of their costs, The Moroccan telecommunications regulator prepares and proceeds and earnings connected with each network they updates the contract specifications for operators of public operate or service they offer. telephony networks. Maroc Telecom’s contract specifications require that it distinguish The Moroccan telecommunications regulator processes in separate sets of accounts for the following activities: applications for licenses and establishes maximum charges for interconnection, fixed-line telecommunications, telegraph, telex, services relating to universal service needs. maritime radio-communications, internet access, GSM, NMT, The Moroccan telecommunications regulator sets the technical RM, and international telecommunications. The annual financial and administrative specifications for the approval of terminal statements are to be submitted for auditing to an entity equipment and radioelectric facilities, and the technical rules designated by the Moroccan telecommunications regulator. applicable to telecommunications networks and services generally. The Moroccan telecommunications regulator manages and The Moroccan Telecommunications Regulatory monitors the spectrum of radioelectric frequencies, and allocates Authority « Autorité Nationale de Réglementation des these frequencies. Télécommunciations » (ANRT) Pursuant to its responsibility to monitor compliance with relevant Act 24-96 created the Moroccan telecommunications legislation, the Moroccan telecommunications regulator has regulator as a public agency subject to the authority of the expansive rights to obtain information, as well as disciplinary Prime Minister. It is a separate legal entity that is financially powers. The Moroccan telecommunications regulator may independent and subject to the State’s financial supervision conduct enquiries relating to telecommunications operators in and direction. order to ascertain whether they comply with their obligations. The information in the Moroccan telecommunications regulator’s Agencies of the Moroccan telecommunications possession is forwarded to the appropriate government authority regulator and may be publicly disclosed, unless it is considered to be confidential or commercially sensitive. If such information is not Decrees 2-97-813 and 2-98-158, dated February 25, 1998, provided or is provided late, Act 55-01 enables the Moroccan specified the membership of the Moroccan telecommunications telecommunications regulator’s Director to impose fines (the scale regulator’s Board of Governors and its powers. The governing of penalties ranges from MAD 20,000 to MAD 100,000, according bodies of the Moroccan telecommunications regulator are the to the information withheld). Board of Governors, the Executive Committee and the Director. Any operator failing to comply with the requirements laid down by The Board of Governors consists, in addition to its Chairman, of statute, regulation or contract specifications incurs certain seven representatives of the State having ministerial rank and penalties. First, the Moroccan telecommunications regulator’s five individuals appointed by decree for terms of five years. It is Director issues a warning. Second, the operator incurs a fine not chaired by the Prime Minister and sets the Moroccan telecommunications regulator’s general policies and its annual exceeding 1% of its revenue, excluding tax and net of agenda. An Executive Committee assists the Board of interconnection costs, as reported the previous year. In such cases, the Moroccan telecommunications regulator’s Director

Document de référence 2005 - Maroc Telecom 83 refers the matter to the King’s Prosecutor at the Rabat Court of penalties of imprisonment and fines. Such criminal penalties, First Instance in order to initiate criminal proceedings, and may however, are outside the scope of the Moroccan bring a related civil action. Such fine is doubled if the operator is a telecommunications regulator’s powers. repeat offender (i.e., it has been convicted within the previous five The Moroccan telecommunications regulator’s remit includes the years by an irrevocable decision for the same offense). Third, the resolution of disputes occurring among operators, or between an Moroccan telecommunications regulator may suspend all or part operator and a user, as well as the resolutions of problems of the operator’s license for a term not exceeding 30 days, connected with the general operating conditions of a license. The temporarily suspend the license or reduce its duration by up to executive committee has authority to resolve disputes with respect one year, or revoke the license. Suspension of the license is to interconnection and other matters for which it has received a ordered by the appropriate governmental agency upon a proposal delegation of authority from the Board of Governors. It should be from the Moroccan telecommunications regulator’s Director, and noted that Act 55-01 has extended the scope of the Moroccan revocation is ordered by decree upon a proposal from the telecommunications regulator’s powers with respect to litigation to Moroccan telecommunications regulator’s Director. Finally, in the cover compliance with the provisions relating to competition event of offenses against national defense or public safety, the contained in Act 6-99 regarding freedom of pricing and competition. Moroccan telecommunications regulator’s Director may, by a The Moroccan telecommunications regulator prepares the reasoned ruling and after informing the appropriate governmental procedures for the award of licenses by invitation to tender, agency, promptly suspend the license, permit or operation of processes license applications and receives prior notifications for value-added services. In addition, the equipment covered by the activities subject to the reporting system. It issues permits and license, permit or operation may be impounded immediately. prepares the related licenses and contract specifications. It also Furthermore, parties who, among other offenses, establish or monitors the operators’ compliance with the terms of their licenses. provide a telecommunications service without a license or in breach of a suspension or revocation may be punished by

4.8.3 Dispute settlement

In 2005, ANRT ruled on a number of disputes between Maroc Maghrib (IAM) and Medi Telecom concerning the mobile Telecom and other operators. These decisions are termination charge. summarized as follows : • Decision no. 07/05 of the ANRT’s Management Board • Decision no. 03/05 of the ANRT’s Management Board (20/07/2005) relating to the dispute between Medi Telecom (01/06/2005) relating to the dispute between Medi Telecom and Itissalat Al Maghrib (IAM) concerning the means of and Itissalat Al Maghrib (IAM) concerning the colocation on invoicing interconnection traffic. IAM sites. • Decision no.11/05 of the ANRT’s Management Board • Decision no. 04/05 of the ANRT’s Management Board (09/11/2005) relating to the dispute between Medi Telecom (20/07/2005) relating to the dispute between Medi Telecom and Itissalat Al Maghrib (IAM) concerning access to the and Itissalat Al Maghrib (IAM) concerning the renegotiation submarine cable SEA-ME-WE 3. of the interconnection contract. • Decision no. 12/05 of the ANRT’s Management Board • Decision no. 05/05 of the ANRT’s Management Board (09/11/2005) relating to the dispute between Itissalat Al (20/07/2005) relating to the dispute between Medi Telecom Maghrib (IAM) and Medi Telecom concerning the full and Itissalat Al Maghrib (IAM) concerning direct reinstatement of the interconnection link to allow the IAM interconnection between Medi Telecom’s and IAM’s mobile network to route incoming international traffic to Medi switching systems. Telecom.

• Decision no. 06/05 of the ANRT’s Management Board These decisions are available on the ANRT website (20/07/2005) relating to the dispute between Itissalat Al (www.anrt.net.ma).

4.8.4 Dependencies

As a service provider, Maroc Telecom is not directly involved its clients, are purchased from different suppliers so as not to in any industrial process. The elements of the its network create any form of dependency. infrastructure, and the handsets and SIM cards that it sells to

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4.9 HUMAN RESOURCES

4.9.1 Modernization of human resources management

Considering that the richness of its staff’s talents will enable it • A certification of the HR management process, which to sustain the pace of its growth, Maroc Telecom initiated in confirms the implementation of programs and processes 2001 a plan for the modernization of its human resources. aimed at constantly improving the quality of the company’s services, in particular by using human resources to the best In order to pursue its development and to mobilize its human advantage of Maroc Telecom’s strategy. resources, Maroc Telecom has decided to promote a human resources policy based on performance recognition and the • A new mobility policy to promote career advancement, improvement of skills. The HR department has created which takes into account both the employees’ desires and innovative tools and programs enabling Maroc Telecom to skills and the Company’s requirements. At present, all meet its challenges. employees are informed of job vacancies within the Group and can apply for these jobs. A support program has been The main modernization initiatives have been as follows : set up to encourage mobility and to help employees settle • A collective labor agreement, signed by Maroc Telecom and into their new job. its labor unions on November 16, 2004. It sets out the • A training policy tailored to the Company’s strategic needs, guidelines of an HR policy suited to the Company’s strategy focused on developing employee skills. In 2005, our training and provides a single management framework for all of the sessions were systematically appraised and new learning Company’s employees. methods were used to improve their efficiency. • A job classification system, which lists all the occupations Other projects : within Maroc Telecom, and gives a description of each • Compensation policy. The Group has switched from a employee’s tasks and responsibilities. structured pay scale to a new system of individual • A new appraisal system, based on an annual interview. compensation which aims to compensate employees for Since 2003, each employee has an interview with his/her their contribution to the Company’s success. manager to assess the employee’s performance over the • Retraining of management and sales staff assigned to sales past year and to determine the objectives for the coming agencies. An individual evaluation of the professional and year, which the employee commits to. behavioral skills of agency managers and their employees • An efficient HR information system, which has made the was initiated in 2005. The outcome will determine the human resources management much more flexible, redeployment of staff and the implementation of training provided a reliable information base and helped in defining programs in order to meet Maroc Telecom’s commercial and implementing HR development programs. requirements.

• A skills management tool that provides Maroc Telecom with • Management of key executives and high-potential a standard with which to appraise each employee’s skills individuals. Once again, this relies on assessing resources, and to set up personal development plans suited to the defining personal development programs and determining Company’s strategy. succession plans.

4.9.2 Staff

47% of Maroc Telecom’s staff is under the age of 40, which staff, marketing staff, financiers, etc.), is one of the companies contributes to the Company’s internal vitality. Maroc Telecom, hiring the largest number of new graduates in Morocco. which calls upon varied skills at a high level (engineers, sales

Document de référence 2005 - Maroc Telecom 85 4.9.3 Staff turnover

The rate of staff turnover (i.e., the ratio of staff having left 1.40% in 2003. at year-end to the staff at the beginning of the fiscal year) * The increase in staff turnover was due to the implementation of a new was 8.4%* in 2005 as compared to 0.75% in 2004 and voluntary redundancy plan in 2005

4.9.4 Changes in the number of employees

The table below shows the changes in the number of launched in 2005 a third incentive-based voluntary departure employees at Maroc Telecom for the past three fiscal years plans. In total, 912 people left the company and were granted ended December 31, 2003, 2004 and 2005 : a leave package, set at two months’ salary per year of service and capped at 48 months. That action’s impact was in the order of MAD 473 million, MAD 313 million of which related to 2003 2004 2005 2005. 87.2% of the departures involved technical and Number of employees administrative staff with an average length of service of 26 at the end of the period 12,170 12,204* 11,178 years with the Company and an average age of 50. Those employees who left pursuant to this voluntary departure plan

* see Note 19 of consolidated financial statements. on the basis of incentives for resignation also retained the benefit of early retirement and healthcare coverage (subject to In order to improve its operational efficiency and face the contributions), in accordance with the relevant legislation in competitive environment in which it operates, Maroc Telecom force.

4.9.5 Staff of the Vivendi Universal group

The staff numbers mentioned in the table above also include The service contract enables the Vivendi Universal group to the expatriate staff of the Vivendi Universal group operating provide the Company with technical assistance services (see with Maroc Telecom pursuant to a service contract and on 6.4 “Related-party transactions”). fixed-term contracts. The number of expatriate staff was 32 in 2003, 27 in 2004 and 26 in 2005.

4.9.6 Training

Training is considered as an essential investment in Maroc This is reflected in 44,469 days of training provided to 16,959 Telecom’s future. It is part of an overall effort to develop and participants, representing an average of nearly 4 days per adapt the Company’s human resources to its requirements. employee.

4.9.7 Evolution of the staff’s compensation

The gross compensation granted to Maroc Telecom’s staff in millions of Moroccan dirhams 2003 2004 2005 consists of both a fixed and a variable component. The amount of the variable component (performance bonus) is set Payroll costs individually according to each employee’s achievement of Maroc Telecom 1,550 1,604 1,946 targets. Consolidated payroll costs The evolution of payroll costs over the past three fiscal years Maroc Telecom Group 1,688 2,056 is as follows :

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4.9.8 Labor relations

Employer-staff communication Union representativeness The telecommunications sector has been characterized by The latest elections, organized in September 2003, in continuous communication between employers and labor accordance with the labor legislation in force, allowed the unions. This dialogue has been enhanced by the presence of election of employees’ representatives. The elected well-structured and representative labor unions. candidates were divided as follows :

In order to comply with the new provisions of the Labor Code, • SNPT (CDT) : 48.8% Maroc Telecom will set up other bodies to represent the staff • UST (UMT) : 38.1% (such as works council, a health and safety committee and a • Indépendants : 7.1% social welfare committee) in the near future. • FNPT (UMT) : 4.8% • SAT : 1.2% Labor unions • SNPT (FDT) : 0% (did not take part in the election of There are six labor unions within Maroc Telecom : employees’ representatives)

• Syndicat National des Postes et Télécommunications (SNPT), • FMPT : 0% (did not exist at the time of the affiliated with the Confédération Démocratique de Travail elections). (CDT) ; In accordance with the provisions of the Labor Code, the • Union Syndicale des Telecom (UST), affiliated to the leading two labor unions are the most representative unions UnionMarocainedeTravail(UMT); within the Company. • Syndicat Autonome des Telecom (SAT); The labor unions will be required promptly to appoint their • Syndicat National des Postes et Télécommunications (SNPT), union representatives in the various representative affiliated with the Fédération Démocratique de Travail (FDT); establishments (the labor constituencies within Maroc Telecom, after consultation of the unions, consist of eight • Fédération Nationale des Postes et Télécommunications, representative establishments and three bodies of affiliated with the Union Marocaine de Travail (UMT); and employees). • Fédération Marocaine des Postes et Télécommunications, Professional elections have been held through two separate affiliated with the Union Nationale de Travail au Maroc electoral processes and have resulted in the appointment, on (UNTM). the one hand, of staff appointees on the joint administrative It should be noted that the UST, SAT and FMPT were commissions, and on the other hand, of staff representatives. established after the creation of Maroc Telecom. Forty-seven percent of eligible voters took part in the election of staff appointees and 75% in the election of staff representatives. The results achieved show the dominance of the SNPT (affiliated to the CDT), followed by the UST (affiliated to the UMT) in the two aforementioned electoral processes.

4.9.9 Agreements and negotiations

Six company agreements have been signed with the unions representative unions signing the collective labor agreement, (in October 1999, March 2001, December 2002, January which is the first collective labor agreement in the telecoms 2004, November 2004 and December 2005). sector in Morocco. This agreement also covered an increase in salary involving several aspects of remuneration. The The agreement signed in January 2004 with the labor unions agreement signed in December 2005 involved in particular an included plans for a shift from internal regulations to a increase in certain travel allowances, reduced interest rates collective labor agreement. The agreement signed in for housing loans and the implementation of a support system November 2004 resulted in Maroc Telecom and the most to help employees acquire means of transport.

Document de référence 2005 - Maroc Telecom 87 4.9.10 Employee benefits

In addition to statutory welfare benefits (including in particular • Summer vacation centers. For their leisure, employees are pension, mutual insurance, coverage for occupational hazards eligible, at prices negotiated and subsidized by Maroc and occupational diseases), Maroc Telecom’s staff enjoys a Telecom, to use the firm’s residential vacation centers. In number of welfare benefits, including in particular the benefits order to strengthen the existing scheme and to expand the listed below : programs it can offer its employees while securing attractive value for money, Maroc Telecom enters into agreements with • Supplementary pension. In addition to the basic scheme tourism promoters every year. provided by the various agencies (CMR, RCAR and CNSS), the employees may join a supplementary pension scheme, • Medical and community activities. Employees and their taken out with the Caisse Interprofessionnelle Marocaine de families may obtain health care from a network of medical Retraite (CIMR). The contributions amount to 7.50% of the and community centers staffed by 19 contracted salaries of those participating. Maroc Telecom contributes physicians, including three specialists. In 2005, 2,504 50% of these payments. 6,722 employees have taken people benefited from the medical services provided by advantage of these supplementary pension benefits as of these centers. December 31, 2005. • Occupational health. In addition to medical treatment, • Supplementary healthcare insurance. Employees may take Maroc Telecom has also set up preventative health out supplementary healthcare insurance providing 100% measures which aim to prevent any deterioration in its reimbursement of the medical expenses incurred for employees’ health due to their work. These measures themselves and their dependents. The costs of membership include : of the supplementary healthcare insurance are assumed • ensuring general hygiene in the workplace, jointly by Maroc Telecom and the insured party, in equal shares. The premium rate amounts to 1.2%, excluding tax • protecting employees from the risk of occupational of the gross salary. 8,452 employees have applied for the hazards, supplementary insurance as of December 31, 2005. • improving working conditions (ergonomic work techniques, the elimination of hazardous products and • Life insurance. Active employees and pensioners up to the age of 70 are provided with life insurance in an amount of MAD the risk of contagion). 100,000. An optional additional bracket potentially up to MAD • Pensions. The pensions of the Company’s employees are 900,000 is open to those employees wishing to subscribe. The maintained by three external pension funds, according to cost of that bracket is assumed by the employee entirely, and the origin of the employees: CMR for the staff from the the amount of the contribution is computed in the basis of a Ministry of PTT, RCAR for the staff from the ONPT, and levy of 0.35% of the insured capital. CNSS for the staff hired by Maroc Telecom. These pension funds provide payment of the employees’ pensions, in • Property loans. An employee in a permanent position is consideration of the contributions withheld (employer and eligible for loans for the acquisition or construction of employee’s share) and paid monthly by Maroc Telecom. housing from banks that have entered into agreements with Maroc Telecom. The amount of the loan is set according to the employee’s ability to repay, provided that the loan period may not exceed 18 years.

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4.10 REAL PROPERTY

For the purposes of development of its networks and for its • 27% of sites are in the process of being formally registered, commercial, support and administrative functions, Maroc around 80 of which are subject to legal disputes. These Telecom makes use of almost 4,500 sites (buildings, land, sites include buildings that belong to several presumed etc.), spread out over the entire territory of Morocco, including owners and where ownership is contentious, certain pieces 3,350 leased locations and 1,150 owned for accounting of land for which there is lack of evidence of ownership, purposes by Maroc Telecom. land owned by local authorities and subject to several The 1,150 sites include those that were historically owned by oppositions, and land subject to compulsory purchase by the Kingdom of Morocco and which were legally transferred to Maroc Telecom. Maroc Telecom at the time of its incorporation in 1998, in The estimated costs linked to these procedures (payment of compliance with Act no. 24-96 via a contribution in kind. land registration fees) and / or the potential financial risks Maroc Telecom is currently in the process of obtaining formal likely to arise from any contentious issue over the legal title of legal title to these sites. Administrative proceedings are ownership are deemed to be not significant. expected to be completed at the end of the second half of The Company’s auditors have noted this matter in their 2006. This timetable is given as an indication, since the length unqualified audit reports on the consolidated financial of administrative procedures may vary. statements and in the notes thereto (see note 4 to the As of December 31, 2005, the 1,150 sites broke down as consolidated financial statements). follows : In connection with any transfer of ownership of real or • 37% of the sites are legally owned by Maroc Telecom, personal property allocated to charitable works falling within which has legal title to them. the private domain of the State to the Company which should • 36% of sites are under requisition. Requisition is a claim to be made in the form of a remunerated contribution through an a property right. It is delivered by the land registrar once the increase in the share capital in favor of the Government of the application for land registration has been made. It becomes Kingdom of Morocco , the latter has undertaken to reconvey a title deed once regulatory administrative formalities have to Vivendi Universal, simultaneously with the increase in been completed, i.e. publication of application for land capital and at no cost, a percentage of the shares issued at registration, boundary marking, notification of requisition the time of this increase in capital equal to the percentage of and finally registration. This procedure is subject to the capital of the Company held by Vivendi Universal prior to regulatory time limits. the realization of these assets.

Document de référence 2005 - Maroc Telecom 89 4.11 INTELLECTUAL PROPERTY

As of December 31, 2005, Maroc Telecom owned some 525 December 17, 2004, concerning the protection of industrial trademarks and trade names (registered trademarks), two and intellectual property rights. patents and one design model. Maroc Telecom is careful to take any action either necessary “Itissalat Al-Maghrib”, “Maroc Telecom”, “Jawal”, “El Manzil”, or desirable in order to protect the trademarks, the patents “Kalimat”, “Menara”, “Fidelio”, “Les pages jaunes de Maroc and the design model that it has developed. Telecom”, “Maghribcom” and “Mouzdaouij” are among the Maroc Telecom has a research and development department main trademarks and trade names owned by the group in which works on the Company’s products. This research Morocco. usually leads to the launch of new products and/or services or The first patent, registered in 1997, is related to the complete transformations or improvements of existing products, even execution, with a prototype, of an NDT (Digital Transmission though such work may not be considered as patentable Terminal device). This device is used to connect customers to inventions or processes. These improvements made to Maroc Telecom’s Marnis integrated service digital network, protected inventions may be registered for protection by and was the method used to carry a digital connection to means of an instrument known as an additional patent, the each customer. formalities for the registration of which are identical with those The second patent, registered in 1999, regards complete for the principal patent. execution, with a prototype, of a remote display device Maroc Telecom has launched among its employees an through a radio paging network named RAKKAS. This innovation contest intended to reward the best ideas or wireless device allows the display of banking, stock exchange projects, with possible benefits for the Company in terms of or other information at any location covered by the RAKKAS the registration of patents, trademarks or design models. radio messaging network. The rights to use the trademarks and trade names granted to The design model registered in 2002 mentions the Maroc Telecom are described in the service agreements made implementation of a new design for the shelters of call boxes with its contractors. Some contracts for the sale of services or to be installed in public locations. This design model was products from Maroc Telecom’s Mobile segment and Fixed- developed for the Moroccan market and takes account of, line and Internet segment confer on retailers a right to exploit among other factors, mechanical, electrical, electromagnetic Maroc Telecom’s trademarks during the term of performance (electric sparking, radiation, storms) and sound constraints in of the agreement, in accordance with the procedure agreed order to provide the user with comfortable and entirely safe between the parties. use of the public call box. This shelter has now been On November 25, 2004, Maroc Telecom purchased the extensively deployed by Maroc Telecom. “Maroc Telecom” trademark and domain names which had The brands and trade names currently owned by Maroc been filed in France by this third party. Telecom, of which there are 525, are protected over the entire national territory. For the 284 trade names registered before January 5, 2005, the protection period is 20 years (renewable indefinitely) from the date of their registration. For the 241 registered subsequently, the protection period is 10 years in accordance with Act no.17-97 which came into force on

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4.12 INSURANCE

Over the past three years, Maroc Telecom has instituted a Maroc Telecom’s insurance costs amounted to MAD 31.5 program to improve its risk management, including the million in 2005, MAD 13.9 million in 2004, and MAD 17.2 following measures : million in 2003. As of Decemebr 31, 2005, the main insurance policies to date are the following : • estimating and assessing potential risks, • Property damage and operating losses: the coverage • identifying those risks likely to affect the Company’s employees, property or its performance, afforded to the company is capped at MAD 200 million per casualty, whether relating to damage or to operating losses. • determining a more suitable property risk coverage plan, • Third-party liability (operation and after delivery): the which has been assessed and updated by insurance coverage cap ranges from MAD 5 million to MAD 7 million, experts, according to the nature of the casualty. • optimizing the cost of cover for such risks, In 2005, to improve risk coverage, an invitation to tender was • covering the remaining risks through insurance policies, launched, which resulted in Maroc Telecom taking out a new • setting up claims notification and claims management “Material damage and business interruption” insurance policy. procedures, (as well as prevention and protection measures The new policy, which is valid as of January 1, 2006, has against risks of fire and explosion) in order to ensure optimal significantly increased the level of cover, and yet the premium compensation at fair value of the damaged property. paid has been reduced. Maroc Telecom accordingly took out, in May 2003, an Maroc Telecom now has a total cumulative contractual loss insurance policy for its third-party and professional liability, as limit of MAD 850 million instead of MAD 400 million fixed by a result of personal injury, property damage and intangible the previous policy, which was not cumulative. damage caused to third parties in the course of its operation. In addition to this insurance policy, in 2005 Maroc Telecom In June 2003, it also took out an insurance policy securing the has also initiated a program to improve protection against fire indemnification relating to compensation for occupational and explosion risks at the sites most at risk. accidents and diseases. In the same time, Maroc Telecom has reinforced the system Maroc Telecom has supplemented and reinforced this system protect its assets against the risks of fire and explosion. by taking out an insurance policy for “property damage and As regards the security of data and uninterrupted data operating losses” commencing on July 1, 2004. In addition to processing operations, Maroc Telecom currently does not extending the limits of coverage to risks of operating losses have a back-up computer center. However, a plan for a back- and the value of the property secured, the policy has also up system will be finalized for the most critical items in the raised the contractual indemnification limits in order to secure beginning of 2006. continued operation and to avoid any material loss.

Document de référence 2005 - Maroc Telecom 91 4.13 LEGAL AND ARBITRATION PROCEEDINGS

To the Company’s knowledge, there are no pending or potential • In November 2004, the National Federation of Phone Shop government, legal or arbitration proceedings, including Associations applied to the Commercial Court of Rabat for proceedings of which the Company has knowledge, that may an injunction to order Maroc Telecom to suspend the have or have had in the past 12 months, a significant effect on granting of authorizations to operate phone shops which the Company and on the group’s financial position, profits, did not meet the “chaining” requirement, imposing a business and property, with the exception of the following minimum distance of 200 meters between each phone litigation : shop. This application to the court only concerned the • Between August 1, 2003 and January 2005, Méditel has suspension of the granting of the aforementioned discontinued the interconnection required to terminate authorizations. The Federation’s application was dismissed. incoming international calls to its customers, thereby In a ruling dated December 28, 2004, the Commercial Court compelling foreign operators sending such traffic to go declared that this application was not within its jurisdiction. through Méditel’s commercial partners. Maroc Telecom is The same Federation brought a writ before Commercial thereby being prevented from routing a substantial portion Court of Rabat, demanding the withdrawal of all of incoming international traffic. A case has been brought authorizations delivered by Maroc Telecom to new phone before the ANRT on this matter. This claim led to a decision shop operators that do not respect the chaining rule. The by the ANRT dated December 27, 2004 ordering the Court of First Instance, in a ruling dated April 6, 2005, (non- immediate reinstatement of interconnection and setting a enforceable) ordered Maroc Telecom to reverse its decision new price for incoming international traffic for Medi to abandon the 200 meter chaining principle and to Telecom’s subscribers. In 2005, Maroc Telecom brought the withdraw the authorizations that had been granted that did case before the ANRT again due to the partial reinstatement not respect the chaining rule. This judgment is of interconnection by Meditel. Another decision by the accompanied by a penalty of MAD 500 /day for non- ANRT dated November 29, 2005, ordered that Meditel execution. On June 27, 2005, Maroc Telecom appealed reinstate the interconnection capacity to the same level that against this judgment before the Commercial Court of was available before the interconnection was interrupted in Appeal of Casablanca. The hearing was due on March 28, August 2003 (see section 4.5 “Competition”). 2006. • In 2004 Maroc Telecom brought a claim before the ANRT to The Company does not intend to revoke its decision to put obtain a decrease in the termination charge of the two an end to chaining, as it considers that the claims made by mobile operators present on the market. This resulted in an ANRT decision in July 2005, in which the ANRT ordered a the Federation are not legally founded. 7% reduction in the termination charge of the two mobile operators as of September 1, 2005.

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4.14 RISK FACTORS

In addition to the other information contained in this Company’s shares. If one or more of such risks were to occur, Document de Référence, investors should carefully consider the activities, financial position, earnings and development of the risks described below before deciding to invest in the the Company could be affected.

4.14.1 Risks relating to the company’s business

Maroc Telecom’s revenues and earnings are share diminished to approximately 66.7% as of December 31, dependent to a significant extent on the Moroccan 2005 (Source: ANRT). Over the same period, the Company cut economy. its prices and set up promotional offers (including customer subsidies) to anticipate and respond to the competition. Maroc Maroc Telecom’s core business is the provision of Telecom may be required to implement further price cuts and telecommunications services in Morocco, the provision of international telecommunications services to and from promotions to maintain its position on the market. In addition, Morocco. Accordingly, Maroc Telecom’s revenues and The granting of two new licenses on the fixed-line profitability depend to a significant extent on telecommunications market in 2005 could further increase telecommunications spending by Moroccan customers and competition on the market (see “Risks relating to the regulatory international telephone traffic to and from Morocco. The environment” below). The intensification of competition among evolution of usage of telecommunications services in the existing operators or with new entrants could result in a Morocco reflects, in part, the evolution of the country’s continued reduction in Maroc Telecom’s market share, and in economic position, and more specifically, the population’s increased costs for customer acquisition and retention, which disposable income and its businesses’ economic activity. A could lead to a reduction in Maroc Telecom’s revenues and contraction or slower-than-expected growth of the earnings (see 5.2.2 “Market trends and other factors affecting Moroccan economy could have a negative impact on the earnings”). development of the customer base and the usage rate of fixed-line and mobile telecommunications services in Morocco, which could have a material effect on the growth Maroc Telecom is dependent on the reliability of its and profitability of Maroc Telecom’s activities, and possibly information systems; damage to or loss of all or part of entail a decline in its revenues and earnings. its systems could result in a loss of customers and a In this context, the perception of possible acts of terrorism, fall in revenues. whether committed in Morocco or abroad, could significantly Maroc Telecom can be paid for its services only insofar as it affect the Moroccan economy in general (in particular through a decrease in tourism business). As regards this risk, uses reliable information systems (including collection and which is not specific to Morocco, Maroc Telecom cannot invoicing systems), and succeeds in protecting and securing forecast the consequences of the perception, informed or the continuity of such systems’operation. Maroc Telecom has otherwise, of such possible acts of terrorism. established a security policy for its information systems allowing it to deal with ordinary disturbances in computer operations (unauthorized access, power cuts, theft, hardware Maroc Telecom faces an intensification of crash, etc.) and to secure uninterrupted service. Nevertheless, competition on the Moroccan market for Maroc Telecom does not currently have a back-up center for telecommunications, which could lead to a loss of its information systems. An event entailing a destruction of all market share and a reduction in Maroc Telecom’s or part of its systems (such as an act of God, a fire or an act revenues. of vandalism) would have a material effect on the Company’s ability to invoice and collect from its customers and therefore Two licensed operators are currently present on the Moroccan on its revenues and operating income. Such a situation would market for mobile telecommunications: Maroc Telecom and also have a material effect in terms of image and reputation for Méditel. Over the past three years, Maroc Telecom’s market the Company, which could lead to a loss of customers.

Document de référence 2005 - Maroc Telecom 93 Maroc Telecom is dependent on the reliability of its customers, fail to succeed in attracting new customers, or be telecommunications networks. A disturbance to such required to bear significant costs in order to maintain its networks could result in a loss of customers and a fall customer base, which would have a negative effect on its in revenues. business, revenue and earnings. Maroc Telecom is able to provide services only insofar as it is able to protect its telecommunications networks from damage Alternative means of communication could result in a caused by disturbances, power cuts, computer viruses, acts reduction of the usefulness or even in the of God and unauthorized access. Any disturbance to the obsolescence of the fixed-line network, which could system, accident or breach of security measures causing lead to the loss of a competitive advantage and reduce interruption in the Company’s operations could affect its the Company’s revenues significantly. ability to provide services to its customers and have a material effect on its revenues and operating income. Such The Company has already had to deal with the substitution disturbances would also have a material effect in terms of of fixed-line customers by mobile customers, which has image and reputation for the Company, which could lead to a been heightened by the use of alternative technologies. As loss of customers. In addition, the Company could be required an illustration, GSM gateway services are beginning to to bear additional costs in order to repair the damage caused compete with Maroc Telecom’s fixed-line voice services (see by such disturbances. 4.5 “Competition”). The Company’s fixed-line telecommunications activities could be affected by the development of such gateways or other Maroc Telecom’s indirect distribution network could be alternative means of communication. Such alternative weakened if Maroc Telecom does not succeed in technologies could jeopardize the usefulness of Maroc maintaining it. Telecom’s infrastructure and fixed-line network, by enabling Maroc Telecom has an extensive distribution network, with a competitors to use mobile telecommunications services to direct network of branches, an indirect network consisting of compete with Maroc Telecom without having a fixed-line telestores, retailers and partners, and an independent network network. Maroc Telecom’s infrastructure and extensive network (see 4.4.4 “Business—Distribution”). would then become less useful or even obsolete, which would lead to the loss of a competitive advantage and could affect If Maroc Telecom were unable to maintain close relations or to significantly the Company’s revenues and earnings. renew its distribution agreements with the components of its indirect network, if its indirect distribution network were to be jeopardized for other reasons, in particular the actions of Health risks, whether real or perceived, or other competitors, or if the managers of telestores failed to comply problems connected with mobile devices or their base with the exclusive agreements made with Maroc Telecom by stations, could result in less intensive use of mobile distributing products competing with those of Maroc Telecom, communications. the distribution network could be weakened and the Company’s business and earnings could be affected Certain studies of mobile technology claim that the significantly. electromagnetic signals emitted by mobile devices and base stations involve health risks. Such risks, whether real or perceived, and the publicity they receive, together with any resulting Continued and rapid changes in technology could legislation or litigation, could reduce the Company’s base of intensify competition or require Maroc Telecom to mobile customers, make the establishment of new base stations make significant additional investments. and the maintenance of existing base stations more difficult, or incite customers to reduce their use of mobile telephones. Many services offered by Maroc Telecom involve intensive use of technology. The development of new technologies could cause some services of the Company to cease to be Fraudulent diversion of traffic could limit the competitive. Maroc Telecom could fail to identify new Company’s revenues and affect its earnings. opportunities in due time, and be required to make significant additional investments, in particular for the development of new The Company first experienced a fraudulent diversion of its products and services, or to obtain a new license (for instance traffic in 2001. In response, Maroc Telecom has established a for UMTS), or for the installation of infrastructure required to plan to combat that fraud. Maroc Telecom cannot forecast, enable it to remain competitive. The new technologies in which however, whether new means of fraud will develop, the the Company may choose to invest may affect its ability to sectors that potential offenders will attack, nor the effects that achieve its strategic targets. Maroc Telecom could then lose any such fraud could have. If Maroc Telecom fails to prevent

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these fraudulent activities, it could see a reduction in its traffic public authorities, relating to the management of the in the sector affected by the fraud, and its revenues and companies acquired; or earnings could thereby be affected. • fail to adapt to the specific features of the countries in which any such companies would be acquired. Maroc Telecom may carry out acquisitions of telecommunications companies or licenses. Maroc Telecom could fail to retain its key employees or In order to extend its geographical presence, Maroc Telecom to hire highly skilled personnel, which could affect could acquire telecommunications companies or licenses in significantly the Company’s activities and its ability to other countries. Such transactions necessarily involve risks. If adapt to its environment. Maroc Telecom does not achieve the results expected from Maroc Telecom’s performance is dependent to a significant such transactions, its business and earnings could be extent on the abilities and services provided by its management affected. In particular, Maroc Telecom could : team. The management team has significant experience and • carry out acquisitions on financial or commercial terms that knowledge of the telecommunications industry. The loss of key were subsequently found to be unfavorable; members of management could have a significant adverse impact on Maroc Telecom’s ability to implement its strategy. • incur difficulties in integrating the companies acquired, or their networks, products or services; Maroc Telecom and its performance are also dependent on skilled personnel having the experience and technical or • fail to retain the key employees of the companies acquired commercial abilities required for the development of its or to recruit skilled personnel as may be required; business. Maroc Telecom’s ability to adapt its services, • fail to achieve the expected synergies or economies of products and commercial offers, whether in the area of fixed- scale; line or mobile telecommunications, is highly dependent on the presence of competent and skilled teams in its various markets. • make investments in countries where the political, economic or legal situation involves particular risks, such as Failure by Maroc Telecom to retain its key personnel, whether its civil or military unrest, the absence of effective or management team or its commercial and technical executives, comprehensive protection of shareholders’ rights, or could affect the Company’s business and its operating income disagreements with other major shareholders, including could diminish substantially.

4.14.2 Risks relating to the regulatory environment

The interpretation of existing legislation and the have a material impact on the Company’s earnings (see 4.8 adoption of new statutory rules could affect Maroc “Management’s discussion and analysis of financial condition Telecom’s activities significantly. and results of operations”—5.2.4 “Significant accounting policies and estimates—Contribution to universal service”). Legislation relating to the telecommunications industry in Morocco is currently evolving. Act 55-01, dated November 2004, could be interpreted in a manner that could affect Maroc The award of a third mobile license could weaken Telecom’s business significantly, and result in a reduction in its Maroc Telecom’s position on the market for mobile revenue and earnings. In addition, the introduction of (i) carrier telecommunications services. pre-selection, (ii) unbundling, and (iii) the portability of numbers will necessarily favor the competition to Maroc The Moroccan telecommunications regulator has stated that a Telecom’s detriment. third GSM license could be awarded in the near future. It is As regards the universal service obligations imposed on possible, however, that the regulator’s stance will change. The Maroc Telecom, an unfavorable interpretation of the nature of Company cannot forecast whether this process of such obligations by the supervisory authorities, affecting liberalization of the mobile sector will evolve in a favorable either the calculation of the provisions established by Maroc manner. If such liberalization were to entail heightened Telecom prior to the adoption of Act 55-01 or the Company’s competition on the market for mobile telecommunications in evaluation of its investment expenses that may be offset with Morocco, Maroc Telecom could see its market share diminish the universal service obligations under the new statute, could and its customer acquisition and retention costs increase, which could result in a reduction in its revenues and earnings.

Document de référence 2005 - Maroc Telecom 95 Liberalization of the fixed-line market could restrict market, the urban areas or the international market, which Maroc Telecom’s market share and affect its could restrict the opportunities for Maroc Telecom to extend profitability. the number of its large-use customers, or divert its existing customers in such markets. Maroc Telecom operates in a fixed-line telecommunication market that has just been liberalized. Two new fixed-line licenses were awarded in 2005 for national, international and Maroc Telecom could be affected by the Moroccan local loop services. telecommunications regulator’s application of the Liberalization of the fixed-line market could reduce the base of legislation relating to competition. existing or potential customers for Maroc Telecom, who may Under Act 55-01, the Moroccan telecommunications be attracted by the competition. In addition, the entry of new regulator’s duties will henceforth also include monitoring and operators through the award of international licenses will ensuring the observance of fair competition among operators entail heightened competition, which could result in a with regard to Act 6-99 relating to freedom of pricing and decrease in international rates. Accordingly, the liberalization competition. The Moroccan telecommunications regulator of these markets may affect Maroc Telecom’s revenue and could accordingly rule on matters relating to the competitive earnings. environment of the telecommunications market. Maroc Maroc Telecom could be affected by regulatory decisions Telecom cannot forecast to what extent the Moroccan enabling other operators to enter the telecommunications telecommunications regulator’s rulings in this area might affect market on terms less onerous than those imposed on Maroc its operations. Telecom, and to have access to Maroc Telecom’s network on favorable terms. An operator could provide telecommunications services without having to bear the same Favorable interconnection costs for other operators obligations as Maroc Telecom, while enjoying the benefit of could significantly affect the Company’s future the latter’s infrastructure, thereby enabling it to target highly earnings. profitable markets, to the detriment of Maroc Telecom. In order to provide services to its customers, Maroc Telecom As a dominant operator on the fixed-line, voice and data is required to connect its network to that of any other operator networks, the Company is bound under Act 55-01 to permit holding a domestic license, and vice versa. The access to its network, which will enable competitors to interconnection charges are approved by the Moroccan provide their own services through the use of Maroc Telecom’s telecommunications regulator. The Company cannot forecast network. whether the Moroccan telecommunications regulator’s policy Such operators may thereby target markets with with respect to the fixed-line and mobile interconnection comparatively high profitabilities, such as the businesses charges will be favorable to it.

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4.14.3 Tax risk

Maroc Telecom could be unable to deduct certain allowances for doubtful accounts. The amount of bad debt for which Maroc Telecom has made against all the debtors for whom it has made a provision. If the a provision is deductible from its taxable base, subject to the deductibility of such provisions for doubtful receivables in an presentation of evidence of legal action taken against the amount below a certain threshold were to be challenged, the debtors. Maroc Telecom has not initiated such legal action Company’s earnings and profit could be adversely affected.

4.14.4 Risks relating to the interests held by major shareholders in Maroc Telecom

The Company could be influenced by Vivendi Universal, whose interests may not always be consistent with those of the Company’s other shareholders. Vivendi Universal hold a majority of the stock and voting rights The interests of Vivendi Universal with respect to such matters in the Company. Accordingly, Vivendi Universal will retain and the factors that it will take into account when exercising control over the decisions requiring adoption by the its voting rights may not be consistent with those of the shareholders acting by a simple majority of votes. Company’s other shareholders.

4.14.5 Market risks

In accordance with its cash management policy, Maroc For market risks (foreign exchange risks, interest rate risks, Telecom does not invest in equities, in equity mutual funds or stock valuation risks and liquidity risks), see 5.3.6 in derivatives. Maroc Telecom invests its cash with financial “Disclosure of qualitative and quantitative information institutions either in sight deposits or term deposits. The about market risks”. counterparty exposure limits for each financial institution are approved by the Management Board.

Document de référence 2005 - Maroc Telecom 97 5 FINANCIAL REPORT

5.1 FINANCIAL DATA FOR YEARS ENDED DECEMBER 31, 2004 AND 2005

Maroc Telecom’s consolidated financial data is summarized in financial statements at December 31, 2004. Impacts included the table below. The financial data for the years ended the following : December 31, 2004 and 2005 has been taken from the • MAD -514 million on revenues, mainly relating to the Group’s consolidated financial statements, which were elimination of handset subsidies from revenues, with no prepared in accordance with International Financial Reporting impact on earnings from operations Standards (IFRS), audited by the statutory auditor Abdelaziz • MAD -71 million on earnings from operations mainly due to Almechatt, representative of Coopers and Lybrand Morocco the application of IAS16 relating to property, plant and (PricewaterhouseCoopers in Morocco), and by Samir Agoumi, equipment correspondent of Salustro Reydel in Morocco. • MAD +72 million on shareholders’ equity mainly linked to a IFRS-compliant 2004 financial statements and the transition restatement of customer loyalty bonuses. document were published by Maroc Telecom when it reported Most of the financial tables present pro forma financial data. its consolidated financial statements for the six months ended Pro forma data assume that Mauritel was fully consolidated June 30, 2005. for 12 months in 2004 (versus 6 months in the consolidated The transition to IFRS had a limited impact on the group’s financial statements).

5.1.1 Financial data in Moroccan dirhams

Statement of earnings data

(in millions of Moroccan dirhams) Reported Pro forma December 31 2005 2004 2005 2004 Revenues 20,542 17,408 20,542 17,739 Operating expenses 11,864 9,811 Earnings from operations 8,678 7,597 8,678 7,692 Earnings before interest and other financial charges and income and income taxes 8,695 7,627 8,695 7,722 Earnings 5,921 5,228 5,921 5,228 Attributable to the equity holders of the parent 5,809 5,171 5,809 5,171 Basic earnings per share (in Moroccan dirhams) 6.6 5.9 6.6 5.9 Diluted earnings per share (in Moroccan dirhams) 6.6 5.9 6.6 5.9

Statement of financial position data

(in millions of Moroccan dirhams) 31/12/2005 31/12/2004 01/01/2004 ASSETS Non-current assets 14,788 14,021 13,761 Current assets 15,090 13,663 13,099 Total assets 29,878 27,684 26,860 LIABILITIES Share capital 8,791 8,791 8,791 Equity attributable to equity holders of the parent 19,195 17,773 17,756 Minority interests 529 428 67 Total equity 19,724 18,201 17,823 Non-current liabilities 264 881 1,498 Current liabilities 9,890 8,602 7,539 Total liabilities and equity 29,878 27,684 26,860

98 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT FINANCIAL DATA FOR YEARS ENDED DECEMBER 31, 2004 AND 2005

5.1.2 Financial data in euros

The company maintains its accounting records and prepares for Maroc Telecom in euros, translated at the exchange rates its financial statements in Moroccan dirhams. The aim of this used for Vivendi Universal’s consolidated financial position section is to help investors make comparisons in euros. and earnings for the years ended December 31, 2004 and The table below sets out selected consolidated financial data 2005.

Statement of earnings data

(in millions of euros) Reported Pro forma December 31 2005 2004 2005 2004 Revenues 1,860 1,581 1,860 1,611 Operating expenses 1,074 891 Earnings from operations 786 690 786 698 Earnings before interest, other financial charges and income and income taxes 787 693 787 701 Earnings 536 475 536 475 Attributable to the equity holders of the parent 526 470 526 470 Basic earnings per share (in euros) 0.6 0.5 0.6 0.5 Diluted earnings per share (in euros) 0.6 0.5 0.6 0.5

Statement of financial position data

(in millions of euros) 31/12/2005 31/12/2004 01/01/2004 ASSETS Non-current assets 1,358 1,251 1,247 Current assets 1,385 1,219 1,187 Total assets 2,743 2,470 2,434 LIABILITIES Share capital 807 784 796 Equity attributable to equity holders of the parent 1,762 1,586 1,609 Minority interests 49 38 6 Total equity 1,811 1,624 1,615 Non-current liabilities 24 78 136 Current liabilities 908 768 683 Total liabilities 2,743 2,470 2,434

Document de référence 2005 - Maroc Telecom 99 The table below sets out the MAD/EUR exchange rates used for Vivendi Universal’s consolidated financial statements for the years ended December 31, 2004 and 2005.

Dirhams per euro Jan 2004 Dec 2004 Dec 2005

Period-end rate used for statement of financial position data 11.03721 11.20733 10.89167

Average rate used for statement of earnings data 10.80293 11.01360 11.04579

(Source : Vivendi Universal)

The exchange rates above are provided for convenience only. For information relating to the impact of foreign exchange The group does not claim that the amounts denominated in variations on the group’s earnings, see section 5.3.6 Moroccan dirhams were, could have been or could be “Disclosure of qualitative and quantitative information about converted into euros at such exchange rates or any other rate. market risks”.

100 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT GENERAL OVERVIEW

5.2 GENERAL OVERVIEW

The discussion and analysis below are to be read together with this The operational data included in Chapter 5.2 refer only to business Annual Report as a whole including, in particular, the audited activities in Morocco and do not take into account data reflecting consolidated financial statements of Maroc Telecom for the years Mauritel business (for further information about Mauritel, see 4.4.3 ended December 31, 2004 and 2005. “Description of Operations – Mauritel”).

5.2.1 General presentation

Maroc Telecom is the incumbent telecommunications operator in telecommunications services, internet services and data the Kingdom of Morocco. The Company owns and operates transmission services for residential and business customers in fixed-line and mobile telecommunications networks. Maroc Morocco. It also offers public telephone services through its Telecom is organized into two business segments : own network of public payphones, and through an independent network of phone shops. Its services also include • The Mobile business provides mobile telecommunication services (subscriptions, rate plans, prepaid phone cards and interconnections with other domestic and international handsets) for individuals and businesses in Morocco (see 4.4.1 telecommunication operators (see 4.4.2 “Description of “Description of Operations –Mobile segment”). Mobile Operations – Fixed-line and Internet segment”). business has expanded rapidly and represents a growing share In addition, through its investment in the incumbent of Maroc Telecom’s revenue, rising from almost 47% in 2004 telecommunications operator in Mauritania, Mauritel S.A., (pro forma) to more than 52% in 2005. Maroc Telecom provides telecommunications services in Mauritania. • The Fixed-line and Internet business provides fixed-line

5.2.2 Market trends and other factors affecting earnings

As Maroc Telecom provides telecommunications services in mainly of handsets used by customers and subscribers (mobile Morocco, including international telecommunications services and fixed telephones and multimedia devices). to and from Morocco, the revenues and earnings of Maroc Telecom are dependent to a significant extent on Moroccan consumers’ average telecommunications spending and, to a Mobile segment lesser extent, on the volume of international telephone traffic to The Mobile segment combines mobile telecommunications Morocco. Trends in the consumption of telecommunications services (voice, data and roaming) and sales of mobile services in Morocco need to be considered against a backdrop handsets. of changes in the country’s economy and, more specifically, in the Moroccan population’s disposable income. From this point The revenues generated by the mobile telecommunications of view, the firm growth in Morocco’s gross domestic product sector vary according to changes in the number of customers should be noted, i.e. 5.2% in 2003, 4.2% in 2004 and an and Average Revenue per User (ARPU). Those two factors estimated 1.8% in 2005 (Source: Morocco’s Treasury and were affected to a significant extent by the introduction of External Finances Department). prepaid plans in 1999 and the liberalization of the market in 2000, with the award of a second license in August 1999 (see 4.8 “Regulatory environment”). Main factors determining revenues In terms of Mobile segment customers, Maroc Telecom has Maroc Telecom generates revenue primarily from sales of benefited from the expansion of the market, as shown by a telecommunications services by the Mobile segment and by the significant increase in the penetration rate. The penetration Fixed-line and Internet segment and, to a lesser extent, from rate measures the ratio of users of mobile telecommunications sales of products associated with those services, consisting services to Morocco’s total population. It grew rapidly over the

Document de référence 2005 - Maroc Telecom 101 past five years, from 1.3% at December 31, 1999 to 24.9% at including the price and volume of mobile telecommunications December 31, 2003 and to 41.3% at December 31, 2005 related traffic (incoming calls, outgoing calls and value-added (Source: ANRT). The number of mobile users increased from services). 364,000 at the end of 1999 to almost 12.358 million at the end ARPU fell from MAD 123 in 2004 to MAD 119 in 2005. This of December 2005 (Source: ANRT). The growth in the decrease was mainly due to the decline in postpaid ARPU. penetration rate was boosted by the launch of prepaid plans in 1999, allowing users to control their spending. Prepaid ARPU decreased slightly, from MAD 95 in 2004 to MAD 94 in 2005, despite strong growth in the prepaid mobile At December 31, 2005, Maroc Telecom had a 66.7% share of customer base (+38.8% clients compared to 2004). the Moroccan mobile market (Source: ANRT), with prepaid customers accounting for 96.3% of Maroc Telecom’s mobile Postpaid ARPU fell between 2004 and 2005, from MAD 790 to customers (Source: Maroc Telecom). MAD 710 as a result of the acquisition of lower-use subscribers and the introduction of new rate plans and in particular the capped plan. Postpaid customers remain Tariffs predominantly higher-use customers. As a result, Maroc Telecom is implementing a strategy to encourage its high-use Tariffs include access charges (subscription, prepaid phone prepaid customers to migrate to postpaid offers in order to cards, installation charges and the price of handsets) and increase revenues and build loyalty. usage charges. The entry of a second mobile operator into the Moroccan mobile telecommunications market has put downward Fixed-line and Internet segment pressure on prices, and prompted operators to adapt their The Fixed-line and Internet segment combines fixed-line product range. They initiate frequent promotional offers on telecommunications services and internet services (for both handset subsidies and usage charges. Maroc Telecom residential and business customers), data transmission has tried to offset the negative impact of these price cuts on services (mainly for businesses) and interconnection services ARPU by expanding its customer base and boosting usage. (for domestic and international operators). As in the Mobile segment, revenues in the fixed-line business Traffic vary according to the subscriber base, the pricing policy and Incoming and outgoing mobile traffic grew rapidly, due to the usage level of each of the services. Revenues generated increases in the number of prepaid and postpaid customers. by international interconnection services are determined by Average usage by postpaid subscribers (outgoing traffic) grew the volumes of incoming traffic on the fixed-line network and to 358 minutes per subscriber per month in 2005, while usage by changes in interconnection charges, which are subject to by prepaid customers was stable at 19 minutes per user per renegotiation from time to time. Revenues generated by month for the same period. domestic interconnection services are determined by the requirement that Maroc Telecom offer interconnection Morocco’s tourism industry also plays a part in this services at prices compensating the actual cost of the use of development, generating a large flow of visitors (including the network and related costs. Moroccans resident abroad), and providing a strong potential revenue stream from roaming services. In 2005 and 2004, After a slight decline in 2004, consolidated revenues roaming accounted for more than 4.74% of mobile revenues. progressed by 7% in 2005, driven by the enlarged customer In order to capture most of this traffic, Maroc Telecom has base (up 2.4%), strong growth in the ADSL business and a entered into alliances with most foreign operators, and has further increase in incoming international traffic (up 19% signed preferential agreements with the largest among them. compared to 2004). At December 31, 2005, Maroc Telecom had 399 roaming In 2005, voice services accounted for more than 55% of agreements with 80 associated operators in 54 countries. Fixed-line and Internet consolidated revenues whilst internet services, although growing strongly, still accounted for only 4% of revenues. ARPU

Mobile ARPU corresponds to the revenue generated by Fixed-line telecommunications services incoming and outgoing calls and value-added services over a particular period (excluding roaming revenue), divided by the Historically, the penetration rate of fixed-line average number of customers over the same period and by telecommunications services, which include public telephone the number of months in the period. The monthly average lines, has been fairly low, owing in particular to the large number customer base is the average number of customers per month of people per household and the high usage rate of public during the period. ARPU is influenced by several factors, telephones, which has hindered the development of residential

102 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT GENERAL OVERVIEW

fixed-line telecommunications. The fall in the penetration rate Interconnection revenues generated by incoming until 2002 was primarily due to fixed-line customers switching to international calls depend on call volume and the allocation mobile services. Through a policy of developing new products of charges negotiated with international operators. Growth in and services, such as package deals and capped plans (El traffic was affected by the increase in fraudulent diversion of Manzil), prepaid cards, unlimited offers launched in September traffic until 2003. Nonetheless, revenues were up 15% in the 2005 (Blahssab el Manzil) and the extension of public telephone year ended December 31, 2005, due to a cut in tariffs caused coverage, Maroc Telecom has seen penetration recover since by international market conditions, leading to higher 2003, to 4.5% of total population at December 31, 2005 (source: volumes. In addition, as a result of the ANRT decision dated Maroc Telecom). December 27, 2004, Maroc Telecom was to able to resume Maroc Telecom is continuing to rebalance its prices, a process carriage of Meditel’s incoming international traffic during the initiated by the ONPT, by cutting call prices and gradually year ended December 31, 2005, which had been suspended increasing subscription charges. These price changes are in 2003. intended to develop the market, in compliance with legal The positive impact of increased traffic on international requirements and in preparation for the arrival of competition in interconnection services revenues was limited by the 2005, with fixed line telecommunications licenses having been reduction in termination rates over the same period as a result granted to two new operators (see 4.4.2 “Description of of pressure from foreign operators to cut these prices, and Operations — Fixed-line and Internet segment). Maroc Telecom’s efforts to stimulate outgoing international traffic by reducing the imbalance between the prices for incoming and outgoing traffic. Data transmission services Maroc Telecom also provides data transmission services to Seasonality businesses through a wide range of products and services (ISDN, X25, leased lines, VPN IP), and a reliable and high- The summer months, with the return of Moroccans living quality network. This business is dependent on the abroad, and the two weeks preceding the Eid al-Adha holiday development of the Moroccan economy. Liberalization of the (January 21 in 2005) traditionally bring strong business levels data transmission market, initiated with the award of VSAT (primarily mobile and fixed-line public telephony), while the satellite telecommunications licenses in 2001, has not yet had month of Ramadan (from October 5 to November 3 in 2005) a significant impact on Maroc Telecom revenues. represents a low point for both fixed-line and mobile business. Internet services Maroc Telecom markets internet services under its “Menara” Operating expenses brand. With the development of new offers (subscription-free Operating expenses include : dial-up, plans featuring inclusive hours, ADSL) and price cuts, the market has seen rapid growth since the beginning of 2004. • purchases, mainly including the cost of handsets and The number of customers accessing the internet through Maroc interconnection costs, Telecom increased by 141% between the end of 2004 and the • payroll and payroll-related costs, end of 2005. The growth in 2005 was boosted by the leading • taxes and duties, position the Company has developed, along with promotional offers in the ADSL market, which accounted for 96% of the total • other operating expenses, such as fees and network internet customer base at December 31, 2005. maintenance costs, The main competitor on the internet services sector is Maroc • depreciation, impairment and provisions. Connect, which operates in the consumer and business Operating expenses rose in 2005 due to an increase in segments. communication costs resulting from more intense advertising campaigns for the mobile business and greater corporate communication, an increase in payroll costs, a rise Interconnection services in international bandwidth costs linked to internet traffic, Interconnection revenues arise mainly from incoming higher ANRT fees due to revenue growth and a universal international traffic, in particular interconnection with service charge of MAD 137 million relating to 2005, and international operators (excluding revenues generated by increased costs caused by the extension of the network in outgoing calls, which are included in fixed-line revenues), and regions. interconnection with Meditel.

Document de référence 2005 - Maroc Telecom 103 5.2.3 Scope of consolidation

Mauritel Maroc Telecom holds 51% of the voting rights of Mauritel figures. Between 2003 and June 30, 2004, Maroc Telecom S.A., the incumbent operator in Mauritania and operator of a accounted for its interest in Mauritel under the equity method fixed-line telecommunications network. Mauritel S.A. itself on the basis of its 40.8% stake (see notes to the consolidated holds 100% of Mauritel Mobiles, which holds a mobile financial statements). telecommunications license. Mauritel S.A. is owned by the holding company Compagnie Mauritanienne de Communications (CMC), in which Maroc Telecom holds 80%, GSM Al Maghrib so that Maroc Telecom holds a 40.8% interest in the On July 8, 2003, Maroc Telecom acquired 35% of the share Mauritanian incumbent operator. Through CMC, the Mauritel capital of GSM Al Maghrib, an exclusive distributor of Maroc group has been fully consolidated by Maroc Telecom since Telecom products and services with approximately 280 retail July 1, 2004 (see the notes to the consolidated financial outlets. GSM Al Maghrib has been accounted for by the equity statements). Mauritel’s contribution to the consolidated method since July 1, 2003. GSM Al Maghrib’s contribution to earnings of the Maroc Telecom group amounted to MAD 59 Maroc Telecom’s consolidated earnings was MAD 14 million in million in 2004 and MAD 73 million in 2005. 2005 compared to MAD –3 million in 2004. Mauritel’s consolidated revenues totaled MAD 906 million in 2005 (3.7% of Maroc Telecom’s consolidated pro forma revenues) with earnings from operations of MAD 267 million Other non consolidated investments (3.0% of Maroc Telecom’s consolidated pro forma earnings from operations). Its non-current assets amounted to MAD Maroc Telecom’s other non-consolidated investments include 924 million (6.8% of Maroc Telecom’s consolidated assets). Casanet (in charge of maintaining Maroc Telecom’s “Menara” Long-term debt amounted to MAD 108 million (91% of Maroc internet portal), an investment in Matelca (currently in liquidation), Telecom’s consolidated long-term debt) and cash and cash and other minority stakes. equivalents MAD 311 million. The above data are 100%

104 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT GENERAL OVERVIEW

5.2.4 Significant accounting policies and estimates

Context of the preparation of 2005 consolidated Use of estimates financial statements and 2004 financial statements In connection with the preparation of its financial statements, In application of the European regulation 1606/2002 dated Maroc Telecom must make estimates and use certain July 19, 2002 concerning the adoption of international assumptions. Maroc Telecom’s management bases its accounting standards, the consolidated financial statements estimates on past experience and on various other of Maroc Telecom for the year ended December 31, 2005, assumptions that it deems reasonable under the were prepared in accordance with International Financial circumstances. These estimates permit an evaluation of the Reporting Standards (IFRS) as determined by the International appropriateness of book value. The figures derived from such Accounting Standards Board (IASB) and adopted by the estimates and assumptions could differ if other estimates or European Union at December 31, 2005. The 2005 financial assumptions had been used. The main items calculated on the statements include an opening statement of financial position basis of estimates are provisions for litigation, provisions for at January 1, 2004, in accordance with IFRS 1 “First time restructuring, impairment of trade receivables and inventories, adoption of International Financial Reporting Standards” and and deferred income. the 2004 financial statements were prepared using the same Management reviews its estimates and evaluations regularly basis of accounting. based on past experience and various other assumptions that The impact of the transition to IFRS and the final reconciliation it deems reasonable, which constitute the basis of its between the financial statements prepared under French evaluations of the book value of its assets and liabilities. GAAP and the comparative 2004 IFRS financial statements are presented in Note 33. Contribution to universal service Until December 31, 2002, Maroc Telecom was required to set Statement of compliance aside 4% of its annual Mobile segment revenues, excluding Maroc Telecom’s consolidated financial statements have been revenues from sales of handsets, interconnection and value- prepared in accordance with International Financial Reporting added services, for its universal service obligation. Act 55-01, Standards (IFRS). promulgated in 2004, reduces the rate of the universal service contribution to 2% of Maroc Telecom’s revenues net of Maroc Telecom prepared its 2005 consolidated financial interconnection costs, and allows Maroc Telecom to offset this statements and its 2004 comparative financial statements in contribution with its own costs of implementing the universal accordance with: service, thereby establishing the principle of “pay or play”. • All mandatory IFRS and IFRIC (International Financial Maroc Telecom was exonerated from these contributions in Reporting Interpretations Committee) standards and 2004. interpretations at December 31, 2005. All these standards In January 2006, the executive committee in charge of and interpretations have been adopted by the EU. approving the universal service programs proposed by the • From January 1, 2004 : operators granted Maroc Telecom a subsidy of MAD 202 million to implement the universal service program it had • IAS 32 and IAS 39 on financial instruments. Maroc proposed for 2005. Given this amount, Maroc Telecom will be Telecom is not concerned by any sections of IAS 39 not bound to pay MAD 137 million to the universal service fund for adopted by the EU. Maroc Telecom has consequently its contribution for 2005. This amount was provisioned in the applied IAS 39 (see note 15) in full to its 2004 financial accounts at December 31, 2005. statements and its 2005 consolidated financial statements. The following option, pending publication of an IASB or IFRIC Deferred income text on the matter: Deferred income mainly corresponds to prepaid Pending an IASB or IFRIC interpretation, Maroc Telecom does subscriptions, unused prepaid minutes sold and to provisions not accrue loyalty bonuses granted to customers for the related to customer loyalty programs. replacement of their mobile phone that do not result in an additional cost relative to the benefit granted to new customers at the inception date of a contract. Loyalty Provisions bonuses convertible into free services are accrued. Provisions are recorded when, at the end of the period, the Group has a legal, regulatory or contractual commitment to a

Document de référence 2005 - Maroc Telecom 105 third party resulting from past events, and it is probable that financial commitments and contingent obligations, for which there will be an outflow of resources to the third party, without they have liability. These detailed records are updated on a any consideration expected from the latter, and that the regular basis by the departments concerned and reviewed with amount can be evaluated accurately. If the time value effect is senior management. significant, provisions are determined by discounting Commitments arising from fixed asset contracts are based expected future cash flows at a pre-tax discount rate which solely on the contracts included in the reporting system. In reflects the market’s current evaluation of the time value of addition, commitments arising from real estate rental contracts money. If no reliable estimate can be made of the amount of are estimated on the basis of one month’s expense given that the obligation, no provision is recorded and a disclosure is virtually all termination clauses require one month’s notice. made in the notes to the consolidated financial statements. Restructuring provisions are recorded when the Group has Segment data approved a formal and detailed restructuring program and has either started to implement the program or has published the A segment is a distinguishable component of the group that is program publicly. Future operating expenses are not provisioned. engaged in providing a product or service, or a group of No provision for pensions and post-retirement benefits related products or services (business segment), or in relating to the Group’s Moroccan companies has been providing a product or service in a specific economic recorded in the consolidated financial statements as pension environment (geographic segment), that generates significant expenses are covered by statutory pension plans set up for revenue from external customers, and that is subject to risks employees in Morocco. and rewards that are different from those of other business segments.

Inventories • Business segment data Inventories comprise : Revenues from each business segment include revenues from • Goods held for sale to customers upon line activation, the provision of telephone services to customers and which comprise fixed and mobile telephones and subscribers as well as inter-segment transactions. Inter- accessories. Inventories are accounted for using the first-in, segment transactions are conducted at market price. first-out method ; Earnings from operations reflect the difference between • Equipment and supplies unrelated to the telecoms network. operating income and expenses. Costs are allocated directly These inventories are measured at their average acquisition to the relevant segments or alternatively by using cost cost. allocation ratios based on economic criteria. Capital expenditure is directly allocated to the relevant Trade accounts receivable and other segments. Fixed assets used by several segments are allocated in proportion to dedicated assets. The main items These comprise trade and other receivables and are initially not divided between the segments are tax, cash, financial recognized at their fair value, and then at amortized cost less assets, borrowings and shareholders’ equity. impairment. The classification of the statement of financial position by Accounts receivable include trade receivables and government business segment is based partly on estimates. The receivables : classification used is based on reasonable assumptions. • Trade receivables: These are amounts receivable from individuals, distributors, businesses and international • Geographic segment data operators ; Maroc Telecom operates in two geographic segments, i.e. • Government receivables: These are amounts receivable Morocco and Mauritania. from local authorities and the Moroccan government. An impairment is recorded if the carrying amount of the asset under consideration exceeds its recoverable value. Definition of Maroc Telecom group financial statements Revenues Contractual obligations and contingent assets and “Gross consolidated revenues” include : liabilities • Income from services provided by the Fixed-line and Once a year, Maroc Telecom and its subsidiaries prepare Internet and Mobile divisions, before adjusting for retailers’ detailed records on all contractual obligations, commercial and commissions.

106 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT GENERAL OVERVIEW

• Inter-segment transactions between the Fixed-line and incurred to enhance Maroc Telecom’s market reach and Internet segment and the Mobile segment. These amounts profile. are mainly generated by interconnection services relating to 5) Net depreciation, impairment and provisions traffic between the fixed-line and mobile networks and the supplying of leased lines by the Fixed-line and Internet Net depreciation, impairment and provisions include: segment to the Mobile segment. • Depreciation calculated on a straight-line basis over the “Consolidated revenues” are gross revenues less inter- useful lifetime of the relevant assets. Depreciation begins segment transactions. when the asset is effectively placed in service. “Revenues” correspond to revenue realized with third parties. • Net provisions and impairment relating to trade accounts receivable and related accounts, inventories and litigation. The transition to IFRS had a limited impact on the group’s financial statements at December 31, 2004: MAD -514 million on revenues, mainly due to the elimination of handset Income from equity affiliates subsidies from revenues, with no impact on earnings from operations. GSM Al Maghrib is the only company accounted for using the equity method at December 31, 2005.

Operating expenses Net financial items Operating expenses include purchases, payroll costs, taxes and Net financial items include : duties, other operating expenses and net depreciation, • Income from cash and cash equivalents (investments). impairment and provisions. Maroc Telecom’s cash assets generate income from banks or 1) Purchase the Treasury, either as interest-bearing sight deposits, or as Purchases include the cost of handsets, expenses relating to term deposits not exceeding three months. Generally, Maroc interconnection with domestic and international operators, Telecom does not make high-risk investments (investment and other purchases (fuel and electricity, top-up cards, funds, shares, bonds or derivatives). supplies and consumables). • Cost of debt: interest expense and expenses incurred for 2) Payroll and payroll-related costs early repayment. Payroll costs comprise wages, salaries and payroll taxes. Net financial items are affected by foreign exchange gains and losses as the group receives income, pays expenses and has 3) Taxes, duties and fees borrowings denominated in foreign currencies (See section This item includes taxes and duties (urban taxes, patents, 5.3.6 “Disclosure of qualitative and quantitative information taxes for occupying public land etc.) and royalties paid to about market risks”). ANRT :

• royalties related to frequency assignment in compliance Income tax with Act 24-96 and Order 310-98 of February 25, 1998 Maroc Telecom pays income tax like any other Moroccan • costs related to universal service in compliance with Act 24- corporation. The income tax rate is 35% in Morocco and 25% 96 and Order.00.1333 of October 9, 2000 in Mauritania. Tax consists of tax due and deferred taxes. Deferred taxes • contributions to research, training and standardization in reflect temporary differences between the book value and telecommunications in compliance with Act 24-96 and taxable value of assets or liabilities. Order 2.00.1333 of October 9, 2000 (IAM specifications). 4) Other operating expenses Cash flows Other operating expenses comprise commissions, • Net cash from operating activities corresponds to funds advertising, marketing and other promotional costs and from operations plus or minus the change in the Group’s other expenses (network maintenance costs, audit and working capital requirement. advisory fees, postage and the costs of leasing transportation equipment, land and buildings). They also • Net cash used in investing activities corresponds to the difference between purchases and sales of property, plant include foreign currency translation adjustments arising and equipment, changes in the scope of consolidation, from operations. proceeds from the sales of investments, and net cash flows Communication expenses comprise advertising, marketing relating to long-term loans. and other promotional and multimedia public relation costs

Document de référence 2005 - Maroc Telecom 107 • Net cash used in financing activities mainly comprises exchanges. In this context, the 2005 and 2004 consolidated repayment of long-term debt, increases in borrowings and financial statements have been prepared in accordance with the payment of dividends. IFRS. In addition, following the full consolidation of Mauritel group Comparability of Maroc Telecom financial statements since July 1, 2004, the Group has presented comparative pro forma data. Some items of the consolidated statement The consolidated financial statements have been used by the of earnings are presented on a pro forma basis, in order to company as a means of communication to financial markets eliminate the effect of changes in the scope of since its shares were listed on the Casablanca and Paris stock consolidation.

108 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

5.3 CONSOLIDATED STATEMENT OF EARNINGS

The table below sets out data regarding Maroc Telecom’s consolidated statements of earnings for the years ended December 31, 2004 and 2005.

(in millions of Moroccan dirhams) 2 005 2 004 Revenues 20,542 17,408 Cost of purchases -3,879 -3,209 Payroll and payroll-related costs -2,056 -1,688 Taxes and duties -680 -398 Other operating expenses -2,610 -1,781 Net additions to depreciation, impairment and provisions -2,639 -2,735

Earnings from operations 8,678 7,597

Other charges and income from ordinary activities 4 – Income from equity affiliates 14 30

Earnings before interest, other financial charges and income and income taxes 8,695 7,627

Financial income from cash and cash equivalents 143 200 Interest -13 -29 Interest on net debt 130 171 Other financial charges and income -18 4

Net financial items 112 175

Provision for income taxes -2,886 -2,574

Earnings 5,921 5,228

Attributable to equity holders of the parent 5,809 5,171 Minority interests 112 57

EARNINGS PER SHARE (in Moroccan dirhams)

Basic earnings per share 6.6 5.9

Diluted earnings per share 6.6 5.9

The various items of Maroc Telecom’s consolidated statements of earnings and their changes during the periods under consideration are discussed below.

Document de référence 2005 - Maroc Telecom 109 5.3.1 Comparison of 2005 with 2004

Revenues The table below shows the breakdown of revenues for the years ended December 31, 2004 and 2005.

(in millions of Moroccan dirhams) Reported Pro forma 2005 2004 2005 2004

Gross revenues Mobile 12,772 9,684 12,772 9,904

Gross revenues Fixed-line and Internet 11,949 11,133 11,949 11,296

Total consolidated gross revenues 24,721 20,817 24,721 21,200

Elimination of inter-segment transactions -4,179 -3,409 -4,178 -3,461

Total net consolidated revenues 20,542 17,408 20,542 17,739

Between 2004 and 2005, Maroc Telecom’s consolidated In 2005, consolidated revenues amounted to MAD 20,542 revenues rose significantly as a result of growth in mobile million, up 18%, compared to 2004 (up 16% on a pro forma activity, in the ADSL business and in incoming international basis). traffic.

Operating expenses Operating expenses for the years ended December 31, 2004 Purchases and 2005 were as follows. (in millions of Moroccan dirhams) Reported 2005 2004 (in millions of Moroccan dirhams) Reported Cost of handsets 1,771 1,154 2005 2004 Domestic and international Consolidated revenue 20,542 17,408 interconnection costs 1,784 1,491 Purchases 3,879 3,209 Other purchases 323 564 % 19% 18% Payroll and payroll-related costs 2,056 1,688 Total 3,878 3,209 % 10% 10% Taxes and duties 680 398 Purchases rose by 21% from MAD 3,209 million in 2004 to MAD 3,878 million in 2005, mainly due to the enlarged % 3% 2% customer base and the development of loyalty bonuses. Other operating expenses 2,610 1,781 % 13% 10% Depreciation, impairment and provisions 2,639 2,735 % 13% 16%

Total operating expenses 11,864 9,811

110 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

Payroll and payroll-related costs the sale of prepaid top-up cards along with intensive efforts to win new customers (in millions of Moroccan dirhams) Reported 2005 2004 • a rise in maintenance costs and repairs resulting from the regional extension of the network Wages 1,819 1,489 • restructuring costs amounting to MAD 468 million. Payroll taxes 227 199 Wages and taxes 2,046 1,688 Net depreciation, impairment and provisions Share-based compensation 10 The table below shows changes in net depreciation, Payroll costs 2,056 1,688 impairment and provisions for the years ended December 31, Average headcount 12,360 12,859 2004 and 2005.

(in millions of Moroccan dirhams) Reported This item includes the payroll costs for the period, excluding 2005 2004 redundancy costs, which were recognized as other operating expenses. Depreciation and impairment of fixed assets 2,673 2,666

Tax, duties and fees Impairment of trade receivables 110 103

(in millions of Moroccan dirhams) Reported Impairment of inventories 4 39 2005 2004 Impairment of other receivables 35 Taxes and duties 280 245 Provisions -184 -73 ANRT royalties 400 153 Net depreciation, amortization Total 680 398 and provisions 2,639 2,735

Other operating expenses The MAD 184 million release from provisions includes a release of MAD 155 million relating to voluntary redundancies. (in millions of Moroccan dirhams) Reported 2005 2004 Depreciation and impairment of fixed assets Advertising, marketing and other promotional costs 456 355 The table below sets out Maroc Telecom’s depreciation and impairment of fixed assets for the years ended December 31, Commissions 659 487 2004 and 2005. Other 1,495 939 (in millions of Moroccan dirhams) Reported o/w : Rental expenses 191 173 2005 2004 Network maintenance costs 476 396 Audit and advisory fees 116 134 Intangible assets 519 324 Postage costs and banking services 105 93 Buildings and civil engineering 256 256 Voluntary redundancy plan 468 30 Technical plant 1,645 1,818 Other 139 114 Other property, plant and equipment 252 269 Total 2,610 1,781 Total 2,673 2,666 Other operating expenses were up 47%, from MAD 781 million in 2004 to MAD 2,610 million in 2005. Net depreciation and impairment on fixed assets increased This was due to : from MAD 2,666 million in the year ended December 31, 2004 • higher advertising costs linked to intensive advertising to MAD 2,673 million in the year ended December 31, 2005. campaigns for the mobile business and increased corporate The change in the scope of consolidation due to the full communication consolidation of Mauritel group from July, 1, 2004 had an • increased commissions for the mobile business linked to impact of MAD 77 million in the year ended December 31, 2004.

Document de référence 2005 - Maroc Telecom 111 Net provisions and impairment Net provisions and impairment amounted to MAD -35 million in 2005, compared to MAD 69 million in 2004. This resulted The table below sets out Maroc Telecom’s net provisions and from changes in several items : impairment for the years ended December 31, 2004 and 2005. • increased impairment of trade receivables linked to the (in millions of Moroccan dirhams) Reported enlarged customer base 2005 2004 • the recognition of a provision of MAD 161 million to cover Accounts receivables 110 103 the voluntary redundancy plan launched at the end of 2004 and its release in 2005 Inventories 4 39 • MAD 237 million of releases from provisions in 2004, Other receivables 35 0 following the favorable outcome of the dispute with Meditel.

Provisions -184 -73

Total -35 69

Earnings from operations The table below shows Maroc Telecom’s earnings from operations for the years ended December 31, 2004 and 2005.

(in millions of Moroccan dirhams) Reported Pro forma 2005 2004 2005 2004

Earnings from operations 8,678 7,597 8,678 7,692

Earnings from operations rose by 14% to MAD 8,678 million On a pro forma basis, earnings from operations increased in 2005 from MAD 7,597 million in 2004. This increase 13% between 2004 and 2005. reflected substantial growth in revenues and tight cost control despite intensive efforts to win over new customers.

Income from equity affiliates At December 31, 2005, the only company accounted for by the equity method was GSM Al Maghrib. Mauritel group has been fully consolidated since July 1, 2004.

(in millions of Moroccan dirhams) Reported Income from equity affiliates amounted to MAD 14 million at 2005 2004 December 31, 2005 compared to MAD 30 million in 2004 due to a change in the consolidation method. Mauritel 33

GAM 14 -3

Total 14 30

112 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

Net financial items Income tax

(in millions of Moroccan dirhams) Reported The table below shows the breakdown of tax into income tax 2005 2004 due by Maroc Telecom and deferred taxes for the years ended December 31, 2004 and 2005 : Interest income from cash and cash equivalents 143 200 (in millions of Moroccan dirhams) Reported Interest expense on borrowings -13 -29 2005 2004

Net interest charges 130 171 Corporate income tax 2,871 2,560 Deferred taxes 15 14

Income taxes 2,886 2,574

(in millions of Moroccan dirhams) Reported Consolidated effective tax rate* 33% 33% 2005 2004 * Income taxes/pre-tax earnings. Foreign exchange gains and losses -53 -5 Other 35 9 Income tax increased in line with the rise earnings in net income from consolidated companies after deduction of Other financial income and expenses -18 4 exceptional items.

Net financial income fell from MAD 175 million at December 31, 2004 to MAD 112 million at December 31, 2005. This Earnings before minority interests decline is mainly due to a reduction in investment income and Earnings before minority interests rose 13% from MAD 5,228 to the negative impact of foreign exchange, partly offset by a million in 2004 to MAD 5,921 million in 2005. decrease in interest expense as a result of the early repayment of loans. Minority interests The foreign exchange loss at December 31, 2005 amounted to MAD 65 million, compared with a loss of MAD 5 million at Minority interests amounted to MAD 112 million in 2005, December 31, 2004. This increased loss resulted from against MAD 57 million in 2004, reflecting the interests of variations in the exchange rate of the shareholders other than Maroc Telecom in Mauritel group’s against the US dollar, against the euro and against the earnings. This is due to Mauritel group being fully consolidated Mauritanian ouguiya. only since July 1, 2004.

Earnings after minority interests Consolidated earnings after minority interests amounted to MAD 5,809 million at December 31, 2005, compared with MAD 5,171 million for the year ended December 31, 2004.

Earnings per share Based on 879,095,340 shares in issue, earnings per share amounted to MAD 5.9 for the year ended December 31, 2004 and MAD 6.6 for year ended December 31, 2005.

Document de référence 2005 - Maroc Telecom 113 5.3.2 Comparison of 2004 with 2003

Since the 2003 financial statements were prepared in accordance with French GAAP, any comparison with 2004 should be made according to the same standards. The comparison of 2004 versus 2003 is available in chapter 5.3.1 of the 2004 annual report.

5.3.3 Comparison of business segment results

Revenues and earnings from operations for the Mobile segment

(in millions of Moroccan dirhams) Reported Pro forma 2005 2004 2005 2004

Gross revenues - Mobile 12,772 9,684 12,772 9,903

• Maroc Telecom 12,198 9,444 12,198 9,441 Revenues from sale of handsets 914 562 914 562 Revenues from telecommunications services 11,284 8,882 11,284 8,879

• Mauritel 574 239 574 462

• Elimination of inter-segment transactions -2,938 -2,287 -2,938 -2,311

Earnings from operations - Mobile 5,394 3,806 5,394 3,893

• Maroc Telecom 5,146 3,714 5,146 3,714

• Mauritel 248 92 248 179

Contribution to consolidated earnings from operations 62% 50% 62% 51%

Depreciation and impairment of intangible assets and PP&E - Mobile -1,317 -1,239 -1,317 -1,269

Mobile gross revenues increased significantly between 2004 Maroc Telecom : and 2005, up 32% (up 29% on a pro forma basis). Strong revenue growth was mainly due to a 38% increase in Revenues from mobile telecommunications services rose the customer base, along with the resilience of prepaid ARPU, 27% on a pro forma basis. Eliminating the effect of the rise in which was MAD 94.1 despite the significant increase in its international call termination tariffs determined by ANRT and customer base. Postpaid ARPU declined slightly (MAD 709.8, effective from January 1, 2005, revenues increased by 21% on down 10% compared with 2004) due to Maroc Telecom’s a pro forma basis. strategy of encouraging prepaid customers to migrate to Consolidated earnings from operations in the Mobile business postpaid plans, which generate greater revenues per reached MAD 5,394 million in 2005, up 42% (up 39% on a pro subscriber. forma basis). The growth was partly due to the increase in Revenues from sales of handsets were up 63%, from MAD 562 international call termination tariffs. Stripping this out, earnings million to MAD 914 million, as a result of new packs retailing at from operations in the Mobile business would have increased MAD 290. By focusing on increasing customer loyalty, the by 27% (up 24% on a pro forma basis), due to growth in the customer churn rate only rose by 0.6 points to 12.2%. customer base to 8.8 million (+2.4 million customers over the year) and tight control of customer acquisition costs. Inter-segment transactions, which include transactions both

114 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

within Maroc Telecom and between affiliated companies, MAD 574 million at December 31, 2005, mainly due to a 41% increased by 28% from MAD 2,287 million to MAD 2,938 increase in the customer base to more than 465,000 million, due to the rise in incoming traffic (mainly international) customers to the mobile network. • a 39% pro forma increase in earnings from operations to Mauritel : MAD 248 million at December 31, 2005. In 2005, Mauritel Mobiles’ financial data showed : • 24% growth in Mobile revenues on a pro forma basis, to

Revenues and earnings from operations for the Fixed-line and internet business

(in millions of Moroccan dirhams) Reported Pro forma 2005 2004 2005 2004

Gross revenues - Fixed-line 11,949 11,133 11,949 11,296

• Maroc Telecom 11,617 10,945 11,617 10,942 Voice 6,583 6,597 6,583 6,597 Interconnection 3,145 2,760 3,145 2,757 Data 1,374 1,241 1,374 1,241 Internet 515 346 515 346

• Mauritel 332 189 332 354

• Elimination of inter-segment transactions -1,241 -1,122 -1,241 -1,149

Earnings from operations - Fixed-line 3,284 3,791 3,284 3,799

Maroc Telecom 3,265 3,756 3,265 3,756 Mauritel 18 35 18 43

Contribution to consolidated earnings from operations 38% 50% 38% 49%

Depreciation and impairment of intangible assets and PP&E – Fixed-line -1,356 -1,427 -1,356 -1,453

In 2005, consolidated revenues in the Fixed-line and internet Maroc Telecom : segment amounted to MAD 11,949 million, up 7% compared Revenues rose due to the increase in the number of fixed lines with 2004 (up 6% on a pro forma basis). (up 2.4% compared with 2004), strong growth in the ADSL In 2005 consolidated earnings from operations totaled MAD business and continuing growth in incoming international 3,284 million, down 13% (14% on a pro forma basis). traffic (up 19% compared with 2004). These positive factors Excluding the voluntary redundancy plan, which mainly offset the decline in customers’ average spending on voice concerns the Fixed-line business, and excluding the impact of calls (down 4% compared with 2004). the increase in international cal termination tariffs for mobile This increase in Fixed-line and Internet revenues can be operators effective from January 1, 2005, earnings from analyzed as follows : operations increased 8%.

Document de référence 2005 - Maroc Telecom 115 • MAD 6,583 million generated by voice traffic, compared to • Inter-segment transactions were up 11% from MAD -1,122 MAD 6,597 million in 2004. This slight decline was due to a million in 2004 to MAD -1,241 million in 2005, mainly due to decline in average use, and despite the broader customer the increase in outgoing international traffic from Maroc base. Telecom mobiles, together with leased lines for the mobile network. • MAD 3,145 million from interconnection services, up 14% from MAD 2,760 million in 2004. This increase was driven primarily by the rise in incoming international traffic (up Mauritel : 19%), partly offset by the reduction in the average price per incoming minute paid by international operators In 2005, Mauritel SA fixed-line revenues amounted to MAD 332 million, down 6% compared to 2004. In 2005, the • MAD 1,374 million for data revenues as of December 31, number of Mauritel SA fixed lines, concentrated mainly in 2005, compared to MAD 1,241 million in 2004, up 10%. Nouakchott and Nouadhibou, grew by 2.6% to nearly 40,000. • MAD 515 million from internet revenues, compared with Earnings from operations amounted to MAD 18 million. MAD 346 million in 2004 (up 49%). This strong performance was due to growth in the ADSL customer base, which grew from 60,000 at December 31, 2004 to 242,000 at December 31, 2005, stimulated by a price cut in March 2005 and by promotions at the end of the year.

116 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

5.3.4 Cash and cash equivalents

The group’s main source of liquidity has been net cash from operating activities. Maroc Telecom group funds all its capital expenditure with its operating cash flow.

Statement of cash flows The table below contains information relating to Maroc Telecom’s consolidated cash flows for the specified periods :

(in millions of Moroccan dirhams) Reported 2005 2004

Cash flows from operating activities 8,425 7,806

Cash flows used in investing activities -3,119 -2,281

Cash flows used in financing activities -5,098 -5,846

Foreign currency translation adjustments 11 -13

Net increase (decrease) in cash 219 -334

Opening cash and cash equivalents 7,366 7,700

Closing cash and cash equivalents 7,585 7,366

Cash flows from operating activities Capital expenditure In 2005, cash flows from operating activities totaled MAD The table below sets out Maroc Telecom’s capital expenditure 8,425 million, up MAD 619 million compared with 2004. This by segment for the periods specified. was mainly due to improved earnings, partly offset by an increase in working capital requirements caused primarily by (in millions of Moroccan dirhams) an increase in accounts receivable. 2005 2004 Fixed-Line 1,439 1,366

Cash flows used in investing activities Mobile 1,771 1,122 At December 31, 2005, cash flows used in investing activities Total 3,210 2,488 amounted to MAD 3,119 million as compared to MAD 2,281 million in 2004. This increase is the result of a more substantial capital expenditure program in 2005 than in 2004. Preliminary note The investments are broken down by segment below. The difference between tangible and intangible capital expenditure and net cash used in investing activities is due to Cash flows used in financing activities the latter taking into account financial investments, sales of fixed assets and the repayment of long-term loans. At December 31, 2005, cash flows used in financing activities Accordingly, in 2005, the difference between net cash used in amounted to MAD 5,098 million compared to MAD 5,846 million investing activities and tangible and intangible investments in 2004, reflecting primarily the payment of a dividend in 2004 was mainly the result of sales of property and securities (MAD (MAD 5,124 million including MAD 2,374 million in extraordinary 88 million), purchases of securities (MAD 13 million) and the dividends). The payment of ordinary dividends increased in 2005 repayment of housing loans by employees (MAD 16 million). In to MAD 4,423 million compared with MAD 2,750 million in 2004. 2005, capital expenditure amounted to MAD 3,210 million, in accordance with the budget.

Document de référence 2005 - Maroc Telecom 117 In 2004, the difference between net cash used in investing • 2004 : implementation of the first section of the Finance activities and tangible and intangible investments was mainly system (introduction of the first version of an integrated the result of sales of property and securities (MAD 29 million) management software package), overhaul of the Fixed-line and the repayment of housing loans by employees (MAD 18 system (introduction scheduled for early 2005) and million). In 2004, capital expenditure amounted MAD 2,488 optimization of data storage solutions. million, in accordance with the budget.

Non-current financial assets Capital expenditure relating to the Mobile segment At December 31, 2005, non-current financial assets included In 2005, Maroc Telecom continued to invest in enhancing the investments totaling MAD 54 million in non-consolidated mobile network’s local reach and capacity. 430 new base companies (compared with MAD 53 million in 2004) and loans transceiver stations (BTS) were placed into service over the to employees totaling MAD 82 million (compared to MAD 99 year. Base station controller (BSC) and network switching million in 2004). subsystem (NSS) capacity was reinforced following an increase in traffic and in the number of clients in 2005 (up 2.4 The Group’s various financial investments and divestments million). The group also invested in service platforms over the past two years can be summarized as follows : (including IN and SMS systems). • In 2004, Maroc Telecom sold its stake in New Skies In 2004, capital expenditure was related to network and Satellite for MAD 11 million, in accordance with the infrastructure development and construction, the decision of the extraordinary general meeting of implementation of a network monitoring center allowing shareholders approving the sale of the company to the remote inspection and supervision of all parts of the network Blackstone investment fund. (fixed-line, mobile and company networks together), and the • In 2005, Maroc Telecom sold its stake in Intelsat for MAD development of network capacity and coverage (+430 BTS). 62 million, accordingly to the decision of the extraordinary general meeting of shareholders, acquired a minority Capital expenditure relating to the Fixed-line segment stake in the Medi1 Sat fund for around MAD 12 million In 2005, the increase in ADSL users required capital and participated in the Sindibad fund capital increase expenditure in access lines, active equipment and (MAD 1.4 million). transmission capacity. These investments led to a near- doubling in backbone network capacity, a four-fold increase in Capital resources DSL connection capacity (+350,000 accesses deployed), and increased reliability of wireline access. To date, Maroc Telecom has funded its activities mainly In 2004, capital expenditure related mainly to the optimization through its surplus cash. Accordingly, Maroc Telecom has not of the switching network and the extension of ADSL capacity. taken out any loans since 1996 and adopted a policy of repaying outstanding debt ahead of schedule.

Capital expenditure on information systems Maroc Telecom repaid almost MAD 1.7 billion of outstanding debt ahead of schedule between 2001 and 2004. After Maroc Telecom’s expenditure on information systems is intended to : obtaining permission from the Minister of Finance and Privatization, Maroc Telecom repaid two loans granted by • industrialize network planning, administration and Export Development Canada (EDC) ahead of schedule for a management total of MAD 674 million. • optimize, integrate and increase the reliability of the Company’s technical, commercial, human resource, These early redemptions allowed Maroc Telecom to reduce its administrative and financial processes. foreign exchange risk. At December 31, 2005, the outstanding balance of unpaid loans was MAD 119 million including MAD In 2004 and 2005, the principal investments on information 108 million for Mauritel. systems were :

• 2005 : introduction of the Fixed-line system, changes to the The table below shows the breakdown of outstanding debt Finances, Purchasing and HR systems and installation of (excluding accrued interest) by currency for the periods cross back-up sites for Rabat-Casablanca ; specified :

118 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

in millions of Moroccan dirhams Reported with regard to its loans or would result in Vivendi Universal Years ended December 31 2005 2004 breaching its financial ratio covenants.

Euro 11 65 Not being a party to these loans or commitments, the Company is not capable of estimating the nature or the exact extent of US Dollar - 632 their restrictions or terms contained within the documents, Other currencies (mainly Mauritanian ouguiya) 105 160 other than those documents that are publicly available. Maroc Moroccan dirham - 48 Telecom cannot guarantee that the Vivendi Universal group has made other commitments that may have an impact on the Outstanding principal 116 905 activities of the Company and its financial resources (see 4.14 Interest accrued 3 11 “Risk factors”). Total borrowing 119 916 Commitments Cash flows from operating activities have enabled Maroc Telecom to have a positive cash position since 2002. The cash Maroc Telecom’s commitments include the balance of position is shown in the table below : contracts made with suppliers and commitments relating to capital increases or financing requirements for companies in in millions of Moroccan dirhams Reported which Maroc Telecom holds a stake. These commitments Years ended December 31 2005 2004 amounted to MAD 689 million at December 31, 2005. Maroc Outstanding debt and accrued Telecom also had guarantees and warranties relating to interest (a) 119 916 equipment supply contracts for MAD 236 million. Cash (b) 7,585 7,414 The table below sets out these commitments (in million of Net cash position(b) - (a) 7,466 6,498 Moroccan dirhams) :

* Investment securities are treated as cash equivalents if their maturity does not exceed three months. Commitments given in millions of Moroccan dirhams Reported Years ended December 31 2005 2004 In its reports to the market authorities, Vivendi Universal states that certain of its bank loans and/or bond issues contain Contract guarantees - - standard provisions under which Vivendi Universal undertakes Securitized receivables to ensure that its subsidiaries, including the Company, comply (Dailly receivables) - - with certain commitments such as only carrying out investments, acquisitions or sales of assets in accordance with Pledges, mortgages and real certain conditions, not granting loans to companies outside the security interests - - Vivendi Universal group and not providing security for assets in Guarantees, security excess of certain defined amounts. The thresholds below which and warranties 236 226 these operations are permitted are often determined on a global basis for all subsidiaries of the Vivendi Universal group, and the Other commitments* 689 907 Company may not be able to take full advantage of these Total 925 1 133 exclusions in the event that other subsidiaries of Vivendi * Balances of contracts with suppliers. Universal have already taken advantage of them. In addition, Vivendi Universal loans contain financial ratios that it has undertaken to comply with, such as the maximum ratio of Commitments received net debt to EBITDA, the minimum ratio of EBITDA to net in millions of Moroccan dirhams Reported financial costs and the maximum percentage of net debt taken Years ended December 31 2005 2004 out by its subsidiaries compared with the consolidated Group net debt. These ratios are determined on a consolidated basis State guarantee on loans 11 694 and take into account the indebtedness, the financial position Guarantees, security and warranties 705 598 and the results of Vivendi Universal subsidiaries, including the Company. Total 716 1 292 Consequently, Vivendi Universal may exercise its power of control over the Company to prevent it from undertaking certain In addition, the company has received an undertaking to sell operations to the extent that financing of such operations would relating to 16% of GSM Al-Maghrib’s capital (see 3.5.5 not comply with the commitments made by Vivendi Universal “Shareholders’ agreement”).

Document de référence 2005 - Maroc Telecom 119 Maroc Telecom had MAD 80 million of mortgages (collateral and pledges) at December 31, 2005 compared with MAD 96 million at December 31, 2004.

5.3.5 Contractual obligations and commercial commitments

The table below sets out the contractual obligations borne by Maroc Telecom at December 31, 2005, by maturity :

in millions of Moroccan dirhams Total Less than 1 year 1 to 5 years Over 5 years

Long-term debt 119 62 57 0

Finance lease obligations -- --

Operating leases* 107 56 51 -

Irrevocable purchase obligations -- --

Other long-term commitments -- --

Total 226 118 108 0

* Long-term vehicle leases (amounts excluding taxes).

Maroc Telecom has no lines of credit, letters of credit, Telecom from customs duty for all capital goods imported. By warranties or buy-back obligations. December 31, 2005 Maroc Telecom’s capital expenditure Maroc Telecom entered into an investment agreement with the under this program totaled MAD 7,260 million and the group public authorities of the Kingdom of Morocco in January 2003, had created 382 new jobs. This investment agreement whereby Maroc Telecom agreed to implement a capital enabled Maroc Telecom to save around MAD 170 million in expenditure program over three years in an amount of MAD duty over three years. 7,079 million and create 300 new jobs by January 2006. In Maroc Telecom has taken steps to sign a new investment return, the public authorities agreed to exonerate Maroc agreement for the three year period 2006-2008.

120 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

5.3.6 Disclosure of qualitative and quantitative information about market risks

The group is exposed to various market risks connected with In millions EURO USD Other its business. currencies (EURO Foreign exchange risk equivalent)* Maroc Telecom is exposed to changes in exchange rates as Assets 214 85 0 the breakdown of its foreign-currency receipts differs from the Liabilities (109) (41) (7) breakdown of its foreign-currency disbursements. Foreign- currency receipts and disbursements represent a significant Net assets (liabilities) 105 44 (7) portion of the company’s activity. Commitments (35) (4) (3) Maroc Telecom’s foreign-currency receipts relate to revenues from international operations and its foreign-currency Total net assets (liabilities) disbursements relate to the servicing of debt, payments to denominated in foreign currencies 70 40 (10) suppliers (in particular concerning investments and purchases * Assuming EUR 1 = MAD 10.9085 of handsets) and payment for interconnection with foreign operators. These disbursements are mainly denominated in NB : (1) ) The other main currencies are the Japanese yen (JPY)and the Swiss franc euros. The portion of foreign-currency disbursements (CHF). The Company has made the following estimates denominated in euros, excluding Mauritel, was 43% at (2) Exchange rates against the euro and US dollar are calculated by applying the December 31, 2005 (51% excluding the early repayment of currency-specific proportion of receipts and disbursements made during the EDC loan in USD), out of an aggregate of MAD 3,890 2005 to the receivables and payables of foreign operators in Special million. These foreign-currency disbursements exceed the Drawing Rights (SDR) at December 31, 2005. (3) As regards the balance of commitments relating to current agreements, the amount of foreign-currency receipts (MAD 2,786 million in breakdown by currency is based on the balance observed for such 2005). contracts. In addition, Maroc Telecom had debt of MAD 119 million at December 31, 2005, denominated mainly in Mauritanian The group does not use foreign-currency hedging ouguiyas (see 5.3.4 “Liquidity and capital resources—Capital instruments. resources”). Assets denominated in foreign currencies are mainly receivables from foreign operators. Maroc Telecom cannot net its foreign currency disbursements and receipts, as Moroccan law allows it to retain only 20% of Liabilities denominated in foreign currencies are debts to its international receipts in a foreign-currency account. The foreign operators and suppliers and loans contracted in remaining 80% are converted into Moroccan dirham. foreign currencies. Consequently, Maroc Telecom’s earnings may be affected by Commitments in foreign currencies are Maroc Telecom’s fluctuations in exchange rates, and in particular by commitments to foreign suppliers. fluctuations in the Moroccan dirham against the US dollar or the euro. Maroc Telecom is long on the two main currencies, the euro and US dollar. Most net foreign-currency assets are euro- Finally, Maroc Telecom could be exposed to risks connected denominated, and so Maroc Telecom is more exposed to with the conversion into Moroccan dirhams of the earnings fluctuations in the exchange rate between the euro and the and assets and liabilities of its non-Moroccan subsidiaries in Moroccan dirham. the event that they become significant for Maroc Telecom. A 1% rise in the euro and US dollar against the Moroccan In 2005, the euro fell 2.7% in relation to the Moroccan dirham dirham would have an impact at December 31, 2005 of : (from MAD 11.207 at December 31, 2004 to MAD 10.9085 at + MAD 32 million on assets denominated in foreign currencies, December 31, 2005). Over the same period, the US dollar rose 12.3%, from MAD 8.239 in 2004 to MAD 9.2494 in 2005. - MAD 17 million on liabilities denominated in foreign currencies, The table below sets out the Company’s net foreign-currency + MAD 16 million on net liabilities, positions at December 31, 2005. - MAD 4 million on commitments, + MAD 11 million on total liabilities denominated in foreign currencies. Conversely, a 1% decrease in the euro and US dollar against the Moroccan dirham would have an impact at December 31, 2005 of : - MAD 32 million for assets denominated in foreign currencies,

Document de référence 2005 - Maroc Telecom 121 + MAD 17 million for liabilities denominated in foreign Liquidity risk currencies, As regards the various loans taken out by the Company, it is not - MAD 16 million on net liabilities, exposed to any risk of forced early redemption resulting from + MAD 4 million on commitments, covenants or other clauses. In addition, the loans taken out by - MAD 11 million on total liabilities denominated in foreign the Company are secured by the Moroccan government. The currencies Company has not securitized any of its accounts receivable.

Interest-rate risk The table below sets out outstanding debt by creditor at December 31, 2005 :

(in millions of Moroccan dirhams) Interest Maturity Dec. 31, Dec. 31, Jan. 1, rate % 2005 2004 2004 ABCI EUR13.9m 08/95-02/05 6.73% 18/02/2005 8 24 ABCI EUR7.2m 09/96-03/07 7.41% 28/03/2007 7 14 21 NATEXIS EUR2.7m 12/95-06/05 6.70% 03/06/2005 2 5 HSBC CCF EUR10.5m 01/96-07/05 7.34% 11/07/2005 12 24 HSBC CCF EUR11.5m 09/95-03/05 6.50% 15/03/2005 6 19 KFWF EUR18.7m 01/97-04/06 8.07% 09/04/2006 5 23 40 SEE USD69m 07/98-01/38 0.00% 11/01/2038 476 522 SEE USD2.7m 01/01-07/40 0.00% 10/07/2040 154 168 SVENSKA USD16m 04/94-04/05 0.00% 05/04/2005 12 AFD EUR45m 12/04-12/27 2.50% 31/12/2027 604 KFWF EUR5.2m 01/96-01/04 5.60% 31/01/2004 2 SEE USD109m 01/96-01/04 8.75% 12/01/2004 50 SEE USD29.8m 01/96-01/04 9.00% 12/01/2004 13 Mauritanian government 8.00% 18/01/2008 103 170 Others 8.00% 4 3 Associated creditors 102 Bank overdrafts 48 Borrowings and other financial liabilities 119 916 1,607

The table below sets out net cash position by maturity : Year ended December 31, 2005:

(in millions of Moroccan dirhams) < 1 year 1 - 5 years > 5 years TOTAL Bank borrowings 62 57 119

Bank facilities and overdrafts

Borrowings and other financial liabilities 62 57 119

Cash and cash equivalents 7,585 7,585

Net cash position 7,523 -57 7,466

122 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED STATEMENT OF EARNINGS

Year ended December 31, 2004 :

(in millions of Moroccan dirhams) < 1 year 1 - 5 years > 5 years TOTAL Bank borrowings 148 183 537 868

Bank facilities and overdrafts 48 48

Borrowings and other financial liabilities 196 183 537 916

Cash and cash equivalents 7,414 7,414

Net cash position 7,218 -183 -537 6,498

All loans taken out by Maroc Telecom are fixed-rate loans. • Conversely, based on the 2005 average cash position at Consequently, Maroc Telecom is not exposed to any material December 31, 2005, a 1% decrease in the interest rate impact from favorable or unfavorable changes in interest would lead to a loss of income of MAD 63 million over a rates. one-year investment period. Surplus cash is invested at market rates. Changes in interest rates on credit balances therefore have a significant impact on Equity risk investment income : Maroc Telecom does not have a significant portfolio of listed • Based on the average cash position at December 31, 2005, a equities. As a result, there is no risk relating to changes in the 1% increase in the interest rate would lead to additional value of such securities. income of MAD 63 million over a one-year investment period;

5.3.7 Transition from individual financial statements to consolidated financial statements

The consolidated financial statements are derived from the • The reclassification of the Fidel provision, which is instead individual financial statements of Maroc Telecom and its netted against revenues. subsidiaries, as prepared under Moroccan and Mauritanian • The reclassification under financial income of non-current generally accepted accounting principles. A number of financial items. adjustments are made to comply with consolidation rules and to bring the individual financial statements into compliance The main adjustments to the statements of financial position with the format required by IFRS. For the details of the relate to current assets : transition to IFRS, please refer to part III of the financial • SIM cards: reclassification of inventories under fixed assets. statements below. • Non-activated handsets: handsets sold but not activated The main adjustments to the statements of earnings items are : are restated to take into account the recognition of revenues • The cancellation of revenues related to cancelled upon activation. subscriptions between the date of cancellation and the end Regarding trade payables, the main restatement entails of subscription period. recording certain operating payables as provisions for • The recognition as consolidated operating expenses of liabilities and charges. retailers’ commissions. These costs were initially netted The changes in presentation do not affect group earnings. against revenues in the individual financial statements. Other consolidation adjustments include the elimination of • The reclassification of items from ordinary income to statutory provisions, the determination of deferred taxes, and earnings from operations, with the exception of variations in all consolidation-related operations (such as the elimination of the value of fixed assets. investment securities).

Document de référence 2005 - Maroc Telecom 123 5.4 CONSOLIDATED FINANCIAL STATEMENTS

In compliance with European regulation 1606/2002 of July 19, The “IFRS 2004 transition” report was published on 2002, the consolidated financial statements of Maroc Telecom September 9, 2005. This report on the transition to IFRS as for the year ended December 31, 2005 were prepared in regards 2004 financial information set out, as preliminary accordance with IFRS as approved by or in the process of information, the expected quantifiable impact of the IFRS being approved by the European Union (EU) at year-end. The adoption on the statement of financial position at the following elements are included for reference : transition date (January 1, 2004), the financial position at • The consolidated financial statements at December 31, December 31, 2004 and financial performance in 2004. 2004 prepared under French GAAP and the related auditors’ Given the impact of change in standards during 2005, report are presented on pages 100 to 154 and on page 157 presentation reclassifications have been carried out on the respectively of the annual report no. R 05-038 filed with the financial statements, without any incidence on previously Auto rite des Marches Financiers on April 8, 2005. reported earnings. The final reconciliation of the financial • The consolidated financial statements at December 31, statements prepared under French GAAP and the 2004 IFRS 2003 prepared under French GAAP and the related auditors’ financial statements are presented in Note 33. report are presented on pages 122 to 159 and on page 208 respectively of the annual report no. I.04-198 filed with the Auto rite des Marches Financiers on November 8, 2004.

124 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Moroccan dirhams) ASSETS Note 31/12/2005 31/12/2004 01/01/2004 Goodwill 3 129 137 –

Other intangible assets 4 1,392 1,307 1,003

Property, plant and equipment 5 12,584 11,922 11,684

Investments in equity affiliates 6 22 8 475

Non-current financial assets 7 136 152 166

Deferred tax assets 8 525 495 433 Non-current assets 14,788 14,021 13,761

Inventories 9 373 420 318

Trade accounts receivable and other 10 7,115 5,829 5,081

Short-term financial assets 11 17 ––

Cash and cash equivalents 12 7,585 7,414 7,700 Current assets 15,090 13,663 13,099

TOTAL ASSETS 29,878 27,684 26,860

(in millions of Moroccan dirhams) EQUITY AND LIABILITIES Note 31/12/2005 31/12/2004 01/01/2004 Share capital 8,791 8,791 8,791

Retained earnings 4,595 3,811 8,965

Earnings for the fiscal year 5,809 5,171 – Equity attributable to equity holders of the parent 13 19,195 17,773 17,756

Minority interests 529 428 67

Total equity 19,724 18,201 17,823

Non-current provisions 14 35 32 24

Long-term borrowings and other financial liabilities 15 57 720 1 427

Deferred tax liabilities 8 172 129 47 Non-current liabilities 264 881 1,498

Trade accounts payable and other 16 9,380 7,561 6,606

Current tax liabilities 347 557 398

Current provisions 14 101 288 355

Short-term borrowings and other financial liabilities 15 62 196 180

Current liabilities 9,890 8,602 7,539 TOTAL EQUITY AND LIABILITIES 29,878 27,684 26,860

Document de référence 2005 - Maroc Telecom 125 Consolidated statement of earnings for the years ended December 31, 2005 and 2004

(in millions of Moroccan dirhams) Note 2005 2004 Revenues 17 20,542 17,408

Cost of purchases 18 - 3,879 -3,209

Payroll costs 19 - 2,056 -1,688

Sundry taxes and duties 20 - 680 -398

Other operating expenses 21 - 2,610 -1,781

Net depreciation, amortization and provisions 22 - 2,639 -2,735

Earnings from operations 8,678 7,597

Other income from ordinary activities 4 –

Income from equity affiliates 23 14 30

Earnings before interest, other financial charges and income and income taxes 8,695 7,627

Income from cash and cash equivalents 143 200

Interest on gross debt - 13 -29

Interest on net debt 130 171

Other financial income (charges) - 18 4

Net financial items 24 112 175

Income tax expense 25 -2,886 -2,574

Earnings 5,921 5,228

Attributable to the equity holders of the parent 5,809 5,171

Minority interests 26 112 57

Earnings per share (in Moroccan dirhams)

Basic earnings per share 27 6.6 5.9

Diluted earnings per share 27 6.6 5.9

126 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of cash flows for the years ended December 31, 2005 and 2004

(in millions of Moroccan dirhams) Note 2005 2004 Consolidated earnings (including minority interests) 5,921 5,228

Net depreciation, impairment and provisions 22 2,503 2,833

Non-cash expense 23 -14 -29

Capital losses -33 -23

Cash flow after interest on net debt and income tax 8,377 8,009

Interest on net debt 24 -130 -171

Income tax expense (including deferred taxes) 25 2,886 2,574

Cash flow before interest on net debt and income tax (A) 11,133 10,412

Tax paid (B) -3,084 -2,420

Change in WCR related to operating activities (C) 377 -186

Net cash provided by operating activities (D) = (A+B+C) 8,425 7,806

Purchase of PP&E and intangible assets 4&5 -3,210 -2,488

Proceeds from disposals of PP&E and intangible assets 26 18

Purchase of non-consolidated investments -13 -

Proceeds from disposals of non-consolidated investments 62 11

Proceeds from long-term debt 16 18

Effects of changes in scope of consolidation * - 160

Net cash used in investing activities (E) -3,119 -2,281

Dividends paid during the year 13 -4,424 -5,154

Principal payments on borrowings 15 -757 -853

Net interest paid 83 161

Net cash used in financing activities (F) -5,098 -5,846

Foreign currency translation adjustments (G) 11 -13

Change in cash and cash equivalents (D+E+F+G) 219 -334

* Mauritel has been fully consolidated since July 1, 2004. The amount of MAD 160 million represents cash and cash equivalents at June 30, 2004.

Document de référence 2005 - Maroc Telecom 127 Consolidated statement of changes in equity for the years ended December 31, 2005 and 2004

YEAR ENDED DECEMBER 31, 2005 Share Other Earnings Attributable (in millions of Moroccan dirhams) Note capital Adjustments (**) and retained to equity Minority earnings holders of interests Total the parent Balance at December 31, 2004 8,791 8,982 17,773 428 18,201

Dividends 13 -4,396 -4,396 -28 -4,424

Earnings for the year 5,809 5,809 112 5,921

Cumulative translation differences 16 16 22 38

Changes in scope of consolidation (*) -8 -8 -4 -12

Balance at December 31, 2005 8,791 - 10,403 19,194 529 19,724

YEAR ENDED DECEMBER 31, 2004 Share Other Earnings Attributable (in millions of Moroccan dirhams) Note capital Adjustments (**) and retained to equity Minority earnings holders of interests Total the parent Balance at January 1, 2004 8,791 8,965 17,756 67 17,823

Dividends 13 -5,124 -5,124 - -5,124

Earnings for the year 5,171 5,171 57 5,228

Cumulative translation differences -18 -18 -25 -43

Other adjustments -12 0 -12 - -12

Changes in scope of consolidation (*) 0 - 329 329

Balance at December 31, 2004 8,791 -12 8,994 17,773 428 18,201

(*) Change in scope of consolidation: Mauritel has been fully consolidated by Maroc Telecom since July 1, 2004. (**) Other restatements: gains/losses taken directly to equity.

Maroc Telecom’s share capital comprises 879,095,340 ordinary shares. Ownership of these shares is as follows : • Kingdom of Morocco: 34.1% • Vivendi Universal: 51% via its wholly owned subsidiary Société de Participation dans les Telecommunications (SPT) • Other: 14.9%.

128 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Accounting principles and valuation methods

1.SIGNIFICANT EVENTS

1-1 HIGHLIGHTS OF THE YEAR ENDED DECEMBER 31, 2005 In January 2005, the Kingdom of Morocco sold a 16% stake In July 2005, the reporting period changed and now ends at in Maroc Telecom to Vivendi Universal, which became the the end of June. A reduction in capital was completed by majority shareholder with a 51% stake. Compagnie Mauritanienne de Communication in which Maroc In April 2005, Maroc Telecom paid out MAD 4,395 million in Telecom holds an 80% stake. dividends. In January 2006, the universal service executive committee In July 2005, Maroc Telecom acquired a 24.7% stake in granted Maroc Telecom a subsidy of MAD 202 million for the Medi1 SAT for the sum of MAD 11.6 million. A capital increase completion of the universal service program proposed by is planned in 2006, which will increase Maroc Telecom’s stake Maroc Telecom for 2005. In respect of this amount, Maroc to 28%. Telecom will be bound to pay MAD 137 million to the universal In 2005, Maroc Telecom successfully completed a third service fund as its contribution for 2005. This amount was voluntary redundancy plan involving 912 employees. This plan provisioned in the financial statements at December 31, 2005. was in part covered by a provision of MAD 161 million recorded at the end of 2004. In 2005, the additional charge amounted to MAD 313 million.

1-2 PRO FORMA INFORMATION Maroc Telecom is a company domiciled in Morocco. Maroc Telecom’s consolidated financial statements for the year ended December 31, 2005 include the Company and its subsidiaries (together “the Group”) the Group’s share in equity affiliates or jointly controlled companies.

In millions Moroccan dirhams 2004 2005 Reported (1) Mauritel (2) Pro forma (1) + (2) Reported % change Consolidated revenue 17,408 331 17,739 20,542 16%

Earnings from operations 7,597 95 7,692 8,678 13%

Earnings 5,228 5,228 5,921 13%

Pro forma adjustments to revenues and earnings from operations for 2004 relate solely to the full consolidation of Mauritel (including Mauritel SA and Mauritel Mobile) over 12 months, versus 6 months in the unadjusted consolidated financial statements.

2-ACCOUNTING PRINCIPLES AND VALUATION METHODS Group companies are consolidated on the basis of the full-year financial statements at December 31, 2005. The financial statements and respective notes were approved by the executive committee on February 21, 2006. 2.1. FRAMEWORK WITHIN WHICH THE CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 2005 AND FINANCIAL STATEMENTS FOR YEAR ENDED 2004 WERE PREPARED In accordance with European regulation 1606/2002 of July 19, 2002 concerning international accounting standards, the consolidated financial statements of Maroc Telecom for the year ended December 31, 2005 were prepared in accordance with

Document de référence 2005 - Maroc Telecom 129 International Financial Reporting Standards (IFRS) decreed by estimates on past experience and on various other the International Accounting Standards Board (IASB) and assumptions that it deems reasonable under the applicable at December 31, 2005, as approved by the circumstances. These estimates permit an evaluation of the European Union (EU). The 2005 financial statements include appropriateness of book value. The figures derived from such an opening statement of financial position at January 1, 2004 estimates and assumptions could differ if other estimates or in accordance with IFRS 1 “First time adoption of IFRS” and assumptions had been used. The main items calculated on the comparative 2004 financial statements were prepared the basis of estimates are provisions for litigation, using the same basis of accounting. restructuring provisions and impairment of accounts The impact of IFRS transition and the final reconciliation of the receivable, inventories and deferred income. financial statements prepared under French GAAP and the Management reviews its estimates and evaluations regularly 2004 IFRS financial statements are presented in Note 33. based on past experience and various other assumptions that 2.2. COMPLIANCE WITH ACCOUNTING STANDARDS it deems reasonable, which constitute the basis of its evaluations of the book value of its assets and liabilities. The consolidated financial statements of Maroc Telecom group have been prepared in accordance with International 2.3.2. Principles of consolidation Financial Reporting Standards (IFRS). The generic name Maroc Telecom refers to the group of Maroc Telecom applied in its consolidated financial companies of which Itissalat Al Maghrib SA is the parent. statements at December 31, 2005 and consolidated accounts A list of Maroc Telecom’s major subsidiaries and affiliates is for 2004: presented in note 2 of “Scope of consolidation at December 1.All mandatory IFRS and IFRIC interpretations at December 31, 2005, December 31, 2004 and January 1, 2004”. 31, 2005. All these standards and interpretations have been The accounting methods described below were applied adopted by the EU. permanently to all of the periods presented in the 2.At January 1, 2004: consolidated financial statements, as well as in the preparation of the opening statement of financial position at IAS 32 and IAS 39 on financial instruments. Maroc Telecom January 1, 2004 for the purpose of the IFRS transition. is not concerned by any sections of IAS 39 not adopted by the EU. Maroc Telecom has consequently applied IAS 39 The accounting methods were applied in a uniform manner by (see note 15) in full to its 2004 comparative financial all group entities. statements and its 2005 consolidated financial statements. 3.The following option, pending publication of an IASB or Full consolidation IFRIC text on the matter: All companies in which Maroc Telecom has a controlling Pending an IASB or IFRIC interpretation, Maroc Telecom interest, specifically when it has the power to direct the does not accrue loyalty bonuses granted to customers for financial and operational policies of these companies to the replacement of their mobile phone that do not result in obtain benefit from their operations, are fully consolidated. an additional cost relative to the benefit granted to new A controlling position is assumed to exist where Maroc customers at the inception date of a contract. Loyalty Telecom holds, directly or indirectly, a voting interest bonuses convertible into free services are accrued. exceeding 50%, and where no other shareholder or group of 2.3. PRINCIPLES GOVERNING THE PREPARATION OF THE shareholders exercises a significant right that would enable it CONSOLIDATED FINANCIAL STATEMENTS to veto or to block ordinary decisions taken by Maroc Telecom. The consolidated financial statements have been prepared in accordance with the historical cost principle, with the The subsidiaries’ financial statements are included in the exception of certain asset and liability categories detailed consolidated financial statements from the date when control below, in accordance with IFRS. The consolidated financial was obtained, and ending when control ceases. statements are presented in Moroccan dirhams and all figures A controlling position also exists where Maroc Telecom holds are rounded up or down to the closest million unless an interest of 50% or less in an entity, but possesses control otherwise stated. They include Maroc Telecom’s financial over more than 50% of the voting rights by virtue of an statements as well as its subsidiaries’ financial statements agreement with other investors, has the power to direct the after elimination of the intra-group items and transactions. financial and operational policies of the entity by virtue of a 2.3.1. Use of estimates statute or contract, has the power to appoint or remove from office the majority of the members of the Board of Directors or In connection with the preparation of its financial statements, equivalent management body, or has the power to assemble Maroc Telecom must make estimates and use certain the majority of voting rights at meetings of the Board of assumptions. Maroc Telecom’s management bases its Directors or equivalent management body.

130 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Proportionate consolidation foreign currency are translated into the functional currency at Maroc Telecom uses proportionate consolidation for the period-end exchange rate. All foreign currency companies that are controlled jointly by the Group and a adjustments are expensed for the period. limited number of other shareholders under the terms of a 2.3.5. Translation of financial statements for foreign activities contractual arrangement. Assets and liabilities relating to foreign activities, including Equity accounting goodwill and fair value adjustments arising from consolidation, are translated into Moroccan dirhams at the period-end rate. Maroc Telecom accounts for affiliates over which it exercises significant influence under the equity method. Significant Income and expense items are translated into Moroccan influence is assumed to exist where Maroc Telecom holds, dirhams using rates that approximate the exchange rates at directly or indirectly, at least a 20% voting interest in an entity, the dates of the transactions. unless it can be clearly demonstrated that this is not the case. Foreign currency translation adjustments resulting from the The existence of significant influence can be proven on the application of these different rates are recorded as a separate basis of other criteria, such as representation on the Board of line item within shareholders’ equity. Directors or equivalent management body of the entity, 2.3.6. Assets participation in the process of policy definition, the existence of material transactions with the entity or exchange of 2.3.6.1. Other intangible assets management personnel. Intangible assets acquired separately are recorded at cost, Transactions eliminated when preparing the consolidated and intangible assets acquired in connection with a business financial statements combination are recorded at their fair value at the acquisition date. The historical cost model is applied to intangible assets Revenues, expenses and items on the statement of financial subsequent to their initial recognition. Assets with a finite position resulting from intra-group transactions are eliminated useful life are amortized. Useful life is reviewed at the end of when preparing the consolidated financial statements. each reporting period. 2.3.3. Goodwill and business combinations Useful life is estimated between 2 and 5 years. In accordance with the provisions of IFRS 1 “First time Trade names, subscriber bases and market shares generated adoption of IFRS”, Maroc Telecom decided not to restate internally are not recognized as intangible assets. business combinations prior to January 1, 2004. Licenses to operate telecom networks are recorded at Business combinations are recorded using the purchase historical cost and amortized on a straight line basis from the method. Under this method, the assets acquired and the effective starting date of the service until maturity. liabilities and contingent liabilities assumed are recognized at Maroc Telecom has chosen not to apply the option provided their fair value. in IFRS 1 to remeasure certain intangible assets at their fair At the acquisition date, goodwill is initially measured at cost, value at January 1, 2004. being the excess of the cost of the business combination over Subsequent expenditure on intangible assets is only added to Maroc Telecom’s interest in the net fair value of the identifiable these assets if the probable future economic benefits specific assets, liabilities and contingent liabilities. to the asset to which they relate increase. All other Subsequently, goodwill is measured at cost less accumulated expenditure is expensed in the period in which it is incurred. impairment. Goodwill is allocated to each cash-generating 2.3.6.2. Research and development costs unit, and is then subject to impairment tests each year, or more frequently when events indicate a risk of impairment. In Research costs are expensed when incurred. Development the event of a loss in value, impairment is recorded under expenses are capitalized when the feasibility and profitability “Other charges from ordinary activities”. of the project can reasonably be considered certain. In the event of acquisition of an additional interest in a In compliance with IAS 38 “Intangible assets”, development subsidiary, the excess of the acquisition cost over the carrying costs are capitalized only after the technical and financial amount of minority interests acquired is recognized as feasibility of the asset for sale or use have been established, goodwill. where it is probable that the future economic benefits attributable to the asset will flow to the company and where In accordance with IFRS 3, goodwill is no longer amortized. the cost of the asset can be measured reliably. 2.3.4. Foreign currency translation Research and development costs incurred by Maroc Telecom Foreign currency transactions are initially recorded in the are not significant. functional currency at the transaction date exchange rate. At period end, monetary assets and liabilities denominated in a

Document de référence 2005 - Maroc Telecom 131 2.3.6.3. Property, plant and equipment Assets financed by finance leases are capitalized at the lower Property, plant and equipment are carried at historical cost of the value of future minimum lease payments and fair value, less any accumulated depreciation and impairment. Historical and the related debt is recorded in “borrowings and other cost includes the acquisition cost or production cost as well financial liabilities”. These assets are depreciated on a as the costs directly attributable to bringing the asset to the straight-line basis over their estimated useful lives, with location and condition necessary for its use in operations. depreciation included in general depreciation charges. Borrowing costs are recorded as expenses for the period in Maroc Telecom has chosen not to apply the option provided which they are incurred. When property, plant and equipment by IFRS 1 to remeasure property, plant and equipment at their include significant components with different useful lives, they fair value at January 1, 2004. are recorded and depreciated separately. The book value of an item of property, plant, and equipment Property comprising “land” and “buildings” is derived in part includes the replacement cost of a component of such an from the contribution in kind granted in 1998 by the Moroccan item if this cost is incurred if it is probable that the future government in connection with the transfer from ONPT to economic benefits associated with the asset will flow to Maroc Telecom, when the latter was established. Maroc Telecom and if the cost can be measured reliably. When these assets were transferred, the property titles could All maintenance costs are expensed when they are incurred. not be registered with the property registry. 2.3.6.4. Depreciation of fixed assets This situation was still unresolved at the end of December Goodwill and intangible assets with an indefinite useful life are 2005. While this uncertainty over the title of property remains, subject to an annual impairment test and at any time that the risk is limited as the Moroccan government has there is an indication that they may be impaired. The book guaranteed that Maroc Telecom can use the transferred value of other fixed assets is also subject to an impairment property and given the lack of any significant incident to date test at any time that there is an indication that the book value The assets transferred by the Moroccan government on may not be recoverable. The impairment test compares the February 26, 1998 to set up Maroc Telecom as a public carrying amount with its recoverable amount, which is the operator were recorded as a net amount in the opening greater of its fair value less selling costs and its value in use. statement of financial position, as approved by : The recoverable amount is determined for an individual asset • the Postal Services and Information Technology Act no. 24- unless the asset does not generate cash inflows that are 96, largely independent of those from other assets or groups of assets. If this is the case, as for goodwill, the recoverable • the joint order no. 341-98 of the Telecommunications Minister and Minister of Finance, Commerce and Industry, amount is determined for the cash-generating unit. Maroc approving the inventory of assets transferred to the Maroc Telecom has determined its Fixed line and Mobile businesses Telecom group. as cash-generating units. Depreciation is calculated using the straight-line method over 2.3.6.5. Financial assets the estimated useful lives of the assets. Useful life is reviewed Financial assets with a maturity of more than 3 months and at the end of each reporting period and is determined as that do not correspond to the notion of liquidity as defined by follows : IAS 7, are classified in one of the following four categories : Buildings 20 years • assets recognized at fair value through profit and loss Civil engineering 15 years • held-to-maturity assets Network equipment : • loans and receivables Transmission (Mobile) 8 years Switching 8 years • available-for-sale assets. Transmission (Fixed line) 10 years Financial assets recognized at fair value through profit and Furniture and fittings 10 years loss Computer equipment 5 years This category comprises financial assets bought in order to be resold in the very near term, and held for trading purposes. Office equipment 10 years Transportation equipment 5 years Profits and losses arising from changes in the fair value of assets in this category are expensed in the period during Assets which have not yet been placed into service are which they arise. recorded as work-in-progress. The principal financial assets recognized at fair value through profit and loss comprise term deposits.

132 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Held-to-maturity financial assets 2.3.6.6. Inventories Held-to-maturity financial assets are non-derivative financial Inventories comprise : assets, other than loans and receivables, with fixed or • Goods held for sale to customers upon line activation, determinable payments that the group intends and is able to comprising fixed and mobile handsets and accessories. hold to maturity. These assets are initially recognized at their Inventories are accounted for using the first-in, first-out fair value including attributable transaction costs. After initial method. Mobile handsets delivered to distributors and not recognition they are measured at amortized cost using the activated at year-end are recorded as inventories. Mobile effective interest method. handsets not activated within a year from the delivery date They are subject to impairment tests in the event of objective are taken to revenues. evidence of impairment. Impairment is booked if the asset's • Equipment and supplies corresponding to non-network carrying amount is greater than the present value of estimated equipment. These inventories are measured at their average future cash flows. acquisition cost. At December 31, 2005, Maroc Telecom has no held-to- 2.3.6.7. Trade accounts receivable and other maturity financial assets. This item comprises accounts receivable and other Loans and receivables receivables, which are initially recognized at their fair value, This category comprises non-derivative assets where and then at amortized cost less impairment. payment is fixed or determinable and which are not listed on Accounts receivable include trade receivables and any active market. These assets are recognized at amortized government receivables : cost using the effective interest rate method. • Trade receivables: held against individuals, distributors, These assets are subject to an impairment test in the event businesses and international operators. that a loss in value is indicated. Impairment is booked if the carrying amount is greater than the estimated recoverable • Government receivables: held against local authorities and amount. the Moroccan government. This item includes mainly trade accounts receivable and loans Impairment is recorded if the carrying amount of the asset to employees. under consideration exceeds the present value of its estimated future cash flows. Available-for-sale financial assets 2.3.6.8. Cash and cash equivalents These assets include non-derivative assets that are classified as being either available for sale or that are not allocated to Cash and cash equivalents includes cash on hand, sight any other category of financial assets. deposits, current accounts and short-term, highly liquid investments with a maturity of three months or less. Available-for-sale assets are recognized at fair value. Profits and losses resulting from available-for-sale assets are taken to 2.3.7. Assets held for sale and discontinued operations equity until the financial asset is sold, redeemed or removed A non-current asset or a group of assets and liabilities is held from the statement of financial position in another way, or until for sale when its carrying amount will be recovered principally it can be demonstrated that the investment is impaired non- through its divestiture and not through continuing utilization. temporarily, at which time the accumulated gain or loss To meet this definition, the asset must be available for previously taken equity is expensed. immediate sale, and divestiture must be highly probable. For financial assets actively traded in organized public These assets and liabilities are recognized as assets held for markets, fair value is determined by reference to the published sale and liabilities associated with assets held for sale, and are market price at period end. not netted. The related assets recorded as assets held for sale are stated at the lower of fair value, net of divestiture fees, and If the fair value cannot be determined accurately, available-for- cost less accumulated depreciation and impairment, and are sale assets are stated at cost. In the event of objective no longer depreciated. evidence that the investment is impaired non-temporarily, irreversible impairment is expensed. An operation is considered as discontinued when the criteria for classification as an asset held for sale have been met, or When an available-for-sale financial asset generates interest, when Maroc Telecom has sold the operation. Discontinued the interest, calculated in accordance with the effective operations are presented on a single line of the statement of interest method, is taken to income. earnings, comprising the earnings after tax of discontinued The main available-for-sale assets are non-consolidated operations until divestiture and the gain or loss after tax on investments in unlisted companies. sale or fair value measurement, less costs to sell the assets and liabilities making up the discontinued operations. In

Document de référence 2005 - Maroc Telecom 133 addition, the cash flows generated by the discontinued 2.3.10. Deferred taxes operations are presented on a separate line of the statement Deferred taxes result from temporary differences arising at of consolidated cash flows. period end between the tax basis of assets and liabilities and At December 31, 2005, Maroc Telecom had no assets held for their carrying amount. They are accounted for using the sale. liability method. 2.3.8. Financial liabilities Deferred tax liabilities are recognized : Financial liabilities include borrowings, accounts payable and • for all taxable temporary differences, except where the bank overdrafts. deferred tax liability results from goodwill impairment that is Borrowings not tax-deductible, or from initial recognition of an asset or liability in a transaction which is not a business combination All borrowings are initially accounted for at cost, and which, at the transaction date, does not impact either corresponding to the fair value of the amount received, net of accounting earnings or taxable earnings or losses; costs directly relating to the borrowing. • for taxable temporary differences arising from investments The allocation of borrowings to current liabilities or non- in subsidiaries, affiliates and joint ventures, except where current liabilities is based on contractual maturity. the date on which the temporary difference reverses can be In the context of the first-time adoption of IFRS, Maroc controlled and where it is probable that the temporary Telecom did not discount borrowings with an interest rate of difference will not reverse in the foreseeable future. 0% since the company initiated talks to repay them a long Deferred tax assets are recognized for all deductible time ago and repaid them in full in July 2005. temporary differences and for carry-forwards of tax losses and The impact on financial expenses, equity and debt in 2004 and unused tax credits, if it is probable that a taxable profit will be 2005 is presented in note 15. available, or when a current tax liability exists, to make use of those deductible temporary differences, tax loss carry- Derivative financial instruments forwards and unused tax credits : Maroc Telecom currently uses no derivative financial • except where the deferred tax asset associated with the instruments and no foreign-currency hedging instruments. deductible temporary difference is generated by initial 2.3.9. Provisions recognition of an asset or liability in a transaction which is Provisions are recognized when, at the end of the reporting not a business combination, and which, at the transaction period, the Group has a legal, regulatory or contractual date, does not impact either accounting earnings, taxable obligation as a result of past events, when it is probable that earnings or tax losses. an outflow of resources (without any expected related inflow) • for deductible temporary differences arising from will be required to settle the obligation, and when the investments in subsidiaries, affiliates and joint ventures, obligation can be reliably estimated. Where the effect of the deferred tax assets are recorded to the extent that it is time value of money is material, provisions are determined by probable that the temporary difference will reverse in the discounting expected future cash flows using a pre-tax foreseeable future, and that taxable profit will be available discount rate that reflects current market assessments of the against which the temporary difference can be utilized. time value of money. If no reliable estimate can be made of the The carrying amount of deferred tax assets is reviewed at amount of the obligation, no provision is recorded and a each period end, and reduced to the extent that it is no longer disclosure is made in the Notes to the consolidated financial probable that a taxable profit will be available to allow the statements. deferred tax asset to be utilized. Restructuring provisions are recorded when the Group has Deferred tax assets and liabilities are measured at the approved a formal and detailed restructuring program and has expected tax rates for the year during which the asset will be either started to implement the program or has announced the realized or the liability settled, based on tax rates (and tax program publicly. Future operating expenses are not regulations) in force or substantially in force by the period end. provisioned. Current tax and deferred tax shall be charged or credited No provision for pensions and post-retirement benefits for the directly to equity if the tax relates to items that are credited or Group’s Moroccan companies have been recorded in the charged directly to equity. consolidated financial statements as pension expenses are covered by statutory pension plans set up for employees in 2.3.11. Trade accounts payable Morocco. Trade accounts payable include other accounts payable. They are initially measured at fair value and subsequently at amortized cost.

134 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

2.3.12. Share-based compensation When the sale is made via a third party distributor supplied by Vivendi Universal maintains stock option incentive plans that Maroc Telecom and involves a discount compared with the grant options to subscribe and purchase its common shares public sale price, revenues are recorded as gross revenues to certain senior executives and employees and also to certain and commissions granted are recognized as operating employees of its subsidiaries. expenses. The granting of stock options represents a benefit given to 2.3.14. Purchases management and employees and constitutes additional Purchases comprise mainly the purchase of mobile and fixed- compensation borne by Vivendi Universal and its subsidiaries. line handsets and interconnection costs. This compensation is measured at the fair value of the Vivendi 2.3.15. Other income (expenses) from operations Universal shares or equity derivatives issued. In the case of stock option plans granted to management or employees, the This item comprises mainly commissions to distributors, compensation expense is equal to the value of the option at network maintenance expenses, advertising, marketing and the grant date, measured using a binomial model. promotion costs and expenses linked to the voluntary redundancy plan. In accordance with IFRS 2 concerning instruments unwound through the delivery of treasury shares, Maroc Telecom 2.3.16. Cost of net debt decided to only recognize the instruments granted after Cost of net debt includes interest payable on loans calculated November 7, 2002 and had not vested at January 1, 2004. using the effective interest rate method and interest on 2.3.13. Revenues investments. Revenues from operations are reported when it is probable Investments are recognized in the consolidated statement of that future economic benefits will flow to the Group, and that earnings when they are acquired. these revenues can be reliably measured. 2.3.17. Income tax expenses Maroc Telecom group generates revenues from fixed and Income tax expenses include tax liabilities and the deferred mobile telecommunications services, internet services, and tax expense (or income). Tax is expensed unless it applies to the sale of products, which essentially comprise mobile and items recognized as equity. fixed-line handsets and multimedia equipment. Revenues from telephone subscriptions are recognized on a 2.4. PRESENTATION PRINCIPLES USED FOR FINANCIAL straight-line basis over the subscription contract period. STATEMENTS Revenues from incoming and outgoing call traffic are 2.4.1. Statement of earnings recognized when the service is rendered. For prepaid Maroc Telecom prepares its statement of earnings according services, revenues are recognized as calls are made. to a format detailing expenses and earnings by type. Revenues from Fixed-line and Internet and Mobile services 2.4.1.1. Earnings from operations and earnings before interest comprise : and other financial charges and income and income taxes • income from domestic and international outgoing and Earnings from operations include revenues, purchases, payroll incoming calls under postpaid plans, which is recorded and payroll-related costs, taxes, duties and fees, other when generated; earnings from operations and expenses, foreign exchange • income from subscriptions; gains and losses linked to the operating cycle, as well as • income from prepaid services, which is recognized as calls depreciation, impairment and net provisions for contingent are made; liabilities. • income from advertising in printed and electronic Earnings before interest and other financial charges and directories, which is recognized when the directories are income and income taxes include earnings from operations, published. other income from ordinary activities (including dividends received from non-consolidated interests as well as interest Revenues from the sale of handsets, net of point of-sale collected on advances to equity affiliates), other charges from discounts and connection charges, are recognized on ordinary activities (including impairment of goodwill and other activation of the line. Customer acquisition and loyalty costs intangible assets), and income (loss) from equity affiliates. for mobile and fixed-line services, principally consisting of rebates on the sale of equipment to customers through 2.4.1.2. Interest and other financial charges and income distributors, are recognized as a deduction from revenues. Net interest includes : Sales of services provided to subscribers managed by Maroc • gross interest, which includes interest expense on Telecom on behalf of content providers (mainly special-rate borrowings calculated at the effective interest rate, minus numbers), are accounted for net of related expenses.

Document de référence 2005 - Maroc Telecom 135 • financial income from cash and cash equivalents. of related products or services (business segment), or in Other financial charges and income primarily include providing a product or service in a specific economic foreign exchange gains and losses (other than relating to environment (geographical segment) that generates operating activities classified in earnings from operations), significant revenue from external customers, and that is and dividends received from non-consolidated interests, subject to risks and rewards that are different from those of consolidated operations or companies not qualifying as other business segments. discontinued operations. 2.6.1. Business segment data 2.4.2. Statement of financial position Revenues from each business segment include revenues Assets and liabilities expected to be realized in, or intended from the provision of telephone services to customers and for sale or consumption in the entity’s normal operating subscribers as well as inter-segment transactions. Inter- cycle, usually less than 12 months, are recorded as current segment transactions are conducted at market price. assets or liabilities. If their maturity exceeds this period, Earnings from operations reflect the difference between they are recorded as non-current assets or liabilities. operating income and expenses. Costs are allocated 2.4.3. Consolidated statement of cash flows directly to the relevant segments or alternatively by using cost allocation ratios based on economic criteria. Maroc Telecom prepares its consolidated statement of cash flows using the indirect method. Capital expenditure is directly allocated to the relevant segments. Fixed assets used by several segments are Working capital requirements of operations allocated in proportion to dedicated assets. This corresponds to variations in the statement of financial The classification of the statement of financial position by position of trade receivables, inventories, provisions for business segment was in part based on estimates. The contingent liabilities and accounts payable. classification used is based on reasonable assumptions. Trade accounts included in accounts payable are not The following items of the statement of financial position divided into payables on fixed assets and payables on are allocated proportionally between the two activities : operations. The main payables on operations concern both investment transactions and operations such as • For items comprising elements that can be allocated maintenance and purchases of inventories, which makes it directly to a segment and elements shared by both unfeasible to distinguish between payables on fixed assets segments: the shared part of these items is divided and payables on operations in the accounts. As a result, proportionally in respect of the amounts allocated Maroc Telecom has decided to present the change in trade directly to these items. accounts payable globally in net cash provided by • For items comprising solely shared elements: these operating activities. amounts are allocated in a way that takes into account the type of items involved (e.g. employee-related liabilities are divided proportionally based on the number 2.5. CONTRACTUAL OBLIGATIONS AND CONTINGENT of employees in each business segment). ASSETS AND LIABILITIES 2.6.2. Geographical data Once a year, Maroc Telecom and its subsidiaries prepare detailed records on all contractual obligations, commercial Information by geographical area is the second level of and financial commitments and contingent obligations, to segment data and comprises the two geographical areas in which they are party or exposed. These detailed records which Maroc Telecom is present: Morocco and Mauritania. are updated on a regular basis by the departments concerned and reviewed by senior management. 2.7. NET CASH FLOW Commitments arising from fixed asset contracts are based This item includes cash and cash equivalents less solely on the contracts included in the reporting system. In borrowings, and excludes short-term financial assets (term addition, commitments arising from real estate rental deposits) with a maturity exceeding three months. contracts are estimated on the basis of one month’s expense given that virtually all termination clauses require one month’s notice. 2.8. EARNINGS PER SHARE Earnings per share, as presented in the consolidated 2.6. SEGMENT DATA statement of earnings, are calculated by dividing earnings for the period by the average number of shares outstanding A segment is a distinguishable component of the group over the period. that is engaged in providing a product or service or a group

136 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Diluted earnings per share are calculated by dividing the : have been issued upon conversion of all instruments that can potentially be converted into ordinary shares. • the earnings attributable to the equity holders of the parent, At December 31, 2005, there were no instruments that could potentially be converted into ordinary shares. • by the average number of shares outstanding over the period, plus the average number of shares that would

Document de référence 2005 - Maroc Telecom 137 Note 2. Scope of consolidation at December 31, 2005, December 31, 2004 and January 1, 2004

Company name Legal form % group % capital Consolidation interest held method Address MAROC TELECOM SA 100% 100% FC Avenue Annakhil Hay Riad Rabat - Morocco

Compagnie Mauritanienne de Communication (CMC) SA December 31, 2005 80% 80% FC December 31, 2004 80% 80% FC January 1, 2004 80% 80% FC Avenue Roi Fayçal Nouakchott - Mauritania

MAURITEL SA SA December 31, 2005 40.80% 51% FC December 31, 2004 40.80% 51% FC July 1, 2004 40.80% 51% FC January 1, 2004 40.80% 51% EM Avenue Roi Fayçal 7000 Nouakchott - Mauritania

MAURITEL MOBILES SA December 31, 2005 40.80% 51% FC December 31, 2004 40.80% 51% FC July 1, 2004 40.80% 51% FC January 1, 2004 40.80% 51% EM Avenue Charles de Gaulle Ilot 37-38 Nouakchott - Mauritania

GSM Al Maghrib (GAM) SA December 31, 2005 35% 35% EM December 31, 2004 35% 35% EM January 1, 2004 35% 35% EM 17, Immeuble la Régence, Lotissement la Colline II, Sidi Maârouf - 20190 Casablanca - Morocco

Maroc Telecom is a Moroccan corporation, its main activity agreement conferring participating veto rights to the Mauritian being the sale of telecommunications goods and services. Its government. Those veto rights were effective until June 30, registered office is located at Avenue Annakhil Hay Riad Rabat, 2004. Mauritel group has been fully consolidated in the Morocco. financial statements of Maroc Telecom group since July 1, Maroc Telecom is fully consolidated by Vivendi Universal. 2004. Maroc Telecom acquired Mauritel S.A. and its subsidiary, Maroc Telecom has held a 35% stake in GSM Al Maghrib’s Mauritel Mobiles SA, in April 2001, through a shareholders’ share capital since 2003.

138 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Goodwill at December 31, 2005, December 31, 2004 and January 1, 2004

31/12/2005 31/12/2004 1/1/2004 The impairment of goodwill test compares the carrying Mauritel 129 137 – amount of each CGU with discounted expected future cash flows. CGUs correspond to businesses within each business Total net 129 137 – segment (Fixed-line and mobile). Valuations are based on the following main assumptions : Goodwill relates to Mauritel, which is fully consolidated by Maroc Telecom. • The impairment of goodwill test is based on a 3 year business plan. At January 1, 2004, Mauritel was equity-accounted, and the corresponding goodwill was recorded in “investments in • The terminal growth rate is estimated at 3%. This equity affiliates”. assumption takes into account the level of inflation in the country, the growth potential in the telecommunications Goodwill is subject to impairment tests each year or more market and in the Moroccan economy due to the oil frequently when events indicate a risk of impairment. industry. Impairment of goodwill is tested for each identifiable cash- • Mauritel’s discount rate – calculated using the weighted generating unit (CGU). average cost of capital method – is estimated at 15.9%.

YEAR ENDED DECEMBER 31, 2005

(in millions of Gross Impairment Translation Other Net carrying Moroccan dirhams) value adjustment amount December 31, 2004 137 -8 129

December 31, 2005 137 -8 129

Note 4. Other intangible assets at December 31, 2005, December 31, 2004 and January 1, 2004

in millions of Dec. 31, Dec. 31, Jan. 1, The license recorded in Maroc Telecom’s financial statements Moroccan dirhams) 2005 2004 2004 corresponds to Mauritel’s mobile license acquired in 2000 and Patents, trademarks amortized on a straight line basis over a period of 15 years. and similar rights 311 219 165 “Other intangible assets” includes primarily telecommunications Mobile License 147 154 network equipment software and goods in progress.

Other intangible assets 934 934 838

Net total 1,392 1,307 1,003

Document de référence 2005 - Maroc Telecom 139 Year ended December 31, 2005

(in millions of Moroccan dirhams) 2004 Acquisitions Disposals Translation Changes in Reclassification 2005 and additions and adjustment scope of withdrawals consolidation Gross 2,507 142 -15 11 - 482 3,128

Patents, trademarks and similar rights 395 177 572 Mobile license 215 11 226 Other intangible assets 1,898 142 -15 305 2,330

Amortization and impairment -1,200 -519 15 -3 - -29 -1,737

Patents, trademarks and similar rights -176 -85 -262 Mobile license -61 -15 -3 -79 Other intangible assets -963 -419 15 -29 -1,396

Net total 1,307 -377 - 8 - 453 1,392

Year ended December 31, 2004

(in millions of Moroccan dirhams) Jan. 1, Acquisitions Disposals Translation Changes in Reclassification Dec. 31, 2004 and additions and adjustment scope of 2004 withdrawals consolidation Gross 1,845 260 -26 -13 233 208 2,507

Patents, trademarks and similar rights 257 1 6 132 395 Mobile license -13 227 215 Other intangible assets 1,588 259 -26 76 1,898

Amortization and impairment -842 -324 25 4 -62 0 -1,200

Patents, trademarks and similar rights -92 -78 -6 -176 Mobile license -8 4 -56 -61 Other intangible assets -750 -238 25 -963

Net total 1,003 -64 -1 -9 171 208 1,307

The reclassification column concerns movements of property plant and equipment between line items.

140 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Property, plant and equipment at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004 Jan. 1, 2004

Land 975 940 886 Buildings 1,500 1,711 1,835 Technical plant, machinery and tooling 6,336 6,427 6,091 Transportation equipment 49 55 17 Office equipment, furniture and fittings 646 713 807 Other property, plant and equipment 3,078 2,076 2,048 Net total 12,584 11,922 11,684

The majority of “other property, plant and equipment” includes technical installations in progress relating to the telecommunications network.

Year ended December 31, 2005 2004 Acquisitions Disposals Translation Changes Reclassification 2005 (in millions of Moroccan dirhams) and additions and adjustment in scope of withdrawals consolidation Gross 27,432 3,067 -48 55 0 -365 30,140 Land 941 1 33 975 Buildings 3,686 5 3 39 3,733 Technical plant, machinery and tooling 18,635 107 -17 45 1,245 20,014 Transportation equipment 118 5 -5 2 1 122 Office equipment, furniture and fittings 1,736 4 -22 2 181 1,900 Other property, plant and equipment 2,316 2,946 -4 3 -1,865 3,396 Depreciation and impairment -15,510 -2,161 29 -21 0 105 -17,557 Land Buildings -1,975 -256 -1 -2,232 Technical plant, machinery and tooling -12,209 -1,567 17 -18 98 -13,678 Transportation equipment -63 -14 4 -1 -74 Office equipment, furniture and fittings -1,023 -245 8 -1 7 -1,254 Other property, plant and equipment -240 -78 -318 Net total 11,922 907 -19 34 0 -260 12,584

Year ended December 31, 2004 Jan. 1, Acquisitions Disposals Translation Changes Reclassification Dec. 31, (in millions of Moroccan dirhams) 2004 and additions and adjustment in scope of 2004 withdrawals consolidation Gross 24,762 2,228 -316 -63 1,029 -208 27,432 Land 886 -1 18 37 940 Buildings 3,543 7 -3 49 91 3,687 Technical plant, machinery and tooling 16,391 202 -195 -53 777 1,513 18,635 Transportation equipment 116 7 -39 -2 33 4 118 Office equipment, furniture and fittings 1,556 2 -28 -2 29 178 1,736 Other property, plant and equipment 2,270 2,011 -54 -3 123 -2,031 2,316 Depreciation and impairment -13,078 -2,342 258 24 -372 -15,510 Land Buildings -1,708 -256 1 -13 -1,976 Technical plant, machinery and tooling -10,300 -1,800 192 21 -322 -12,209 Transportation equipment -99 -13 66 1 -19 -63 Office equipment, furniture and fittings -749 -256 1 -19 -1,023 Other property, plant and equipment -222 -18 -240 Net total 11,684 -114 -58 -39 657 -208 11,922

The reclassification column concerns movements of property, plant and equipment between line items.

Document de référence 2005 - Maroc Telecom 141 Note 6. Investments in equity affiliates at December 31, 2005, December 31, 2004 and January 1, 2004

6.1 Principal investments in equity affiliates at December 31, 2005, December 31, 2004 and January 1, 2004

% interest Value of equity affiliates (in millions of Moroccan dirhams) Dec. 31, Dec. 31, Jan. 1, Dec. 31, Dec. 31, Jan. 1, 2005 2004 2004 2005 2004 2004 Mauritel (1) (1) 40.8% 464

GSM Al Maghrib 35.0% 35.0% 35.0% 22 811

Net total 22 8 475

(1) Mauritel has been fully consolidated since July 1, 2004. At January 1, 2004, goodwill relating to Mauritel was included in “investments in equity affiliates”. Since July 1, 2004 the goodwill has been reclassified as “goodwill”.

6.2 Financial information relating to equity affiliates at December 31, 2005 and December 31, 2004

GSM Al Maghrib In 2005, GSM Al Maghrib’s earnings, after consolidation (in millions of Moroccan dirhams) Dec. 31, Dec. 31, adjustments, recorded in Maroc Telecom’s financial 2005 2004 statements amounted to MAD 39 million, 35% of which is attributable to Maroc Telecom. Revenues 1,373 1,117

Earnings from operations 56 4

Earnings 28 NS

Total assets 149 223

Note 7. Non current financial assets at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Note Dec. 31, Dec. 31, Jan. 1, (in millions of Dec. 31, Dec. 31, Jan. 1, Moroccan dirhams) 2005 2004 2004 Moroccan dirhams) 2005 2004 2004 Non consolidated Due within one year 14 20 14 investments 7.1 54 53 53 Due between 1 and 5 years 40 47 60 Other financial assets 82 99 113 Due after 5 years 29 32 39

Net total 136 152 166 Net total 82 99 113 At end-2004, the amount due within one year (MAD 20 million) Other financial assets mainly include loans granted to assumed the early repayment of part of the loans granted to employees. employees benefiting from the voluntary redundancy plan. At December 31, 2005 financial assets had the following At end-2005, these assumptions were only partially maturities : confirmed.

142 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

7.1 Non-consolidated investments :

Year ended December 31, 2005 % Interest Gross Impairment Net carrying Earnings Total amount equity Casanet (1) 100% 18 18 5 12

Matelca (2) 50% NM NM NM NA NA

Arabsat 1% 14 0 14 544 4,548

Autoroute du Maroc NM 20 20 NM 2

Thuraya NM 10 10 NA NA

Fond d’amorçage Sindbad 10% 3 3 -1 14

Médi1 sat 25% 12 12 NA NA

Other NM NM NM NA NA

Total 77 23 54

Information concerning non-consolidated interests was not available when Maroc Telecom’s 2005 financial statements were prepared. Therefore, the data presented are for 2004.

Year ended December 31, 2004 % Interest Gross Impairment Net carrying Earnings Total amount equity Casanet (1) 100% 18 18 5 12

Matelca (2) 50% NM NM NM NA NA

Arabsat 1% 14 0 14 544 4,548

Intelsat NM 27 0 27 1,585 20,530

Autoroute du Maroc NM 20 20 NM 2

Thuraya NM 10 10 NA NA

Fond d’amorçage Sindibad 10% 1 1 -1 14

Other NM 2 2 NA NA

Total 92 39 53

(1 ) Casanet’s business activity relates to the maintenance of Maroc Telecom’s internet portal (Menara). Casanet invoices the related costs to Maroc Telecom. (2) Matelca was not included in the scope of consolidation, since it is in liquidation.

7.2 Change in non-consolidated investments in 2005. • Acquisition of 25% of the audiovisual company Médi-1-Sat (satellite TV) for MAD 11.5 million. • Sale of Maroc Telecom’s stake in Intelsat for MAD 61 million with a capital gain of MAD 32 million.

Document de référence 2005 - Maroc Telecom 143 Note 8. Change in deferred taxes at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004 Jan.1, 2004 Assets 525 495 433 Liabilities 172 129 47 Net equity 353 366 386

8.1 Change in deferred taxes :

(in millions of Jan. 1, Dec. 31, Statement Equity Change in Translation Dec. 31, Moroccan dirhams) 2004 2004 of income impact scope of adjustment 2005 impact consolidation Assets 433 495 30 1 525

Liabilities 47 129 43 172 Net assets 386 366 -13 1 353

8.2 Deferred tax asset and liability components :

(in millions of Moroccan dirhams Dec. 31, 2005 Dec. 31, 2004 Jan. 1, 2004 Deferred tax assets 526 495 433 - Dépréciation à déductibilité différée 521 495 412 - Other 5 21

Deferred tax liabilities 172 129 47 - Retraitement sur le chiffre d'affaires 84 69 12 - Other 88 60 35 Net assets 353 366 386

Note 9. Inventories at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004 Jan. 1, 2004 Inventories 445 488 345 Impairment -72 -68 -27 Net Total 373 420 317

Inventories essentially comprise mobile phones.

144 Document de référence 2005 - Maroc Telecom

5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Receivables at December 31, 2005, Prepaid expenses essentially relate to operating leases for December 31, 2004 and January 1, 2004 en millions transport equipment and insurance policies. MAD 31 déc. 31 déc. 1 jan. Advances, downpayments, trade payables, receivables from (in millions of Dec. 31, Dec. 31, Jan. 1, employees, government receivables and other receivables are Moroccan dirhams) 2005 2004 2004 due within one year. Accounts receivable 6,167 4,683 4,432 Other receivables and accruals 948 1,146 649 Note 11. Short-term financial assets at December 31, 2005, December 31, 2004 and January 1, 2004 NET TOTAL 7,115 5,829 5,081 (in millions of Dec. 31, Dec. 31, Jan. 1, Moroccan dirhams) 2005 2004 2004 10.1. Accounts receivable Term deposits > 90 days 17 (in millions of Dec. 31, Dec. 31, Jan. 1, Moroccan dirhams) 2005 2004 2004 Short-term investments

Trade receivables 8,498 7,186 6,690 TOTAL 17 Government receivables 1,363 1,075 1,140 Short term financial assets include term deposits which have Impairment of receivables -3,694 -3,578 -3,398 a maturity exceeding three months and which do not respond to the Group’s notion of liquidity. NET TOTAL 6,167 4,683 4,432

Trade account receivables include receivables collected from GAM, SFR and Casanet. The details of these transactions are Note 12. Cash and cash equivalents at December set out in note 30 concerning related parties. 31, 2005, December 31, 2004 and January 1, 2004 The accounts receivable are mainly due within one year. (in millions of Dec. 31, Dec. 31, Jan. 1, 10.2. Other receivables and prepaid expenses Moroccan dirhams) 2005 2004 2004

(in millions of Dec. 31, Dec. 31, Jan. 1, Cash 5,112 7,155 6,500 Moroccan dirhams) 2005 2004 2004 Cash equivalents 2,473 259 1,200 Trade payables, advances and downpayments 51 136 96 TOTAL 7,585 7,414 7,700 Employee accounts 21 22 11 Change in cash and cash equivalents Tax receivables 548 438 281 (in millions of Dec. 31, Dec. 31, Other receivables 8 155 3 Moroccan dirhams) 2005 2004 Accruals 320 395 258 Opening cash and NET TOTAL 948 1,146 649 cash equivalents 7,366 7,700

Employee accounts comprise advances granted to Closing bank overdrafts 48 employees, net of provisions. Closing cash and cash equivalents 7,585 7,414

Government receivables mainly comprise VAT items. Change in cash and cash equivalents 219 -334 “Other payables” essentially comprise an advance of MAD 89 million made to the Government at the end of 2004, redeemable through the withholding of dividends for 2005.

Document de référence 2005 - Maroc Telecom 145 Note 13. Dividends

13.1 Dividends

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004

Dividends received from equity affiliates - GAM NM

Dividends paid by consolidated companies to their minority shareholders (a) - Mauritel 28 - - Other - -

28 - Dividends paid by Maroc Telecom to shareholders (b) - Moroccan government 1,499 3,331 - Vivendi Universal 2,241 1,793 - Other 655 -

4,395 5,124 (*)

Total dividends paid out ( c ) = (a)+(b) 4,423 5,124

(*) includes an exceptional dividend of MAD 2,374 million for the year ended December 31, 2004.

13.2 Dividends proposed for the year ended Dec. 31, 2005.

On February 24, 2006, date of the Supervisory Board meeting Telecom’s Supervisory Board proposed the distribution of a which approved Maroc Telecom’s 2005 consolidated financial MAD 6.96 per share dividend to shareholders, corresponding statements and the appropriation of earnings, Maroc to a total payout of MAD 6,119 million.

Note 14. Provisions at December 31, 2005, December 31, 2004 and January 1, 2004

Provisions for liabilities mainly relate to disputes with employees and third parties.

They are evaluated on a case-by-case basis.

Provisions for contingent liabilities are analyzed as follows :

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004 Jan. 1, 2004

Non current provisions 35 32 24 Provisions for life annuities 25 26 24 Other provisions 10 6 Current provisions 101 288 355 Provisions for voluntary redundancy plan 6 161 Provisions for employee benefits 54 58 59 Provisions for disputes with third parties 32 59 286 Other provisions 9 11 10 TOTAL 136 320 379

146 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2005

(in millions of Moroccan dirhams) 2004 Charges Utilised Change in Translation Releases 2005 scope of adjustment consolidation Non current provisions 32 3 0 0 1 -1 35 Provisions for life annuities 26 -1 25 Other provisions 63 1 10 Current provisions 288 33 -201 0 0 -19 101 Provisions for voluntary redundancy plan 161 6 -161 6 Provisions for employee benefits 57 7 -1 -10 54 Provisions for disputes with third parties 52 4 -37 -6 13 Other provisions 18 15 -2 -3 29 TOTAL 320 36 -201 0 1 -20 136

In 2005, provisions for litigation with third parties were to other related expenses. reduced by MAD 37 million, primarily due to the settlement of The MAD 161 million reversal of restructuring provisions litigation with Continental. corresponds to the voluntary redundancy plan launched by The provision for employee-related expenses corresponds to Maroc Telecom in 2004. A change to provisions of MAD 6 Maroc Telecom’s commitment to pay life annuities to its million is recorded in the 2005 financial statements. current and former employees for work-related accidents, and

Year ended December 31, 2004

(in millions of Moroccan dirhams) Jan. 1, Charges Utilised Change in Translation Releases Dec. 31, 2004 scope of adjustment 2004 consolidation Non current provisions 24 2 0 6 0 0 32 Provisions for life annuities 24 2 26 Other provisions 66 Provisions courantes 355 174 -1 7 -1 -247 288 Provisions for voluntary redundancy plan 161 161 Provisions for employee benefits 59 8 -10 57 Provisions for disputes with third parties 286 4 -1 -237 52 Other provisions 10 2 7 -1 18 TOTAL 379 176 -1 13 -1 -247 320

In 2004, the MAD 237 million reversal of the provision for The provision for employee-related expenses corresponded to litigation with third parties concerns the settlement of litigation Maroc Telecom’s commitment to pay life annuities to its with Méditel over interconnection tariffs. Other litigation mainly current and former employees for work-related accidents, and consisted of a dispute with a supplier, and the 2004 provision to other related expenses. for the latter was justified by the state of ongoing legal The restructuring provision corresponded to the voluntary proceedings. redundancy plan launched by Maroc Telecom at the end of 2004.

Document de référence 2005 - Maroc Telecom 147 Note 15. Borrowings and other financial liabilities at December 31, 2005, December 31, 2004 and January 1, 2004

15.1. Net cash flow

(in millions of Moroccan dirhams) Dec. 31, 2005 Dec. 31, 2004 Jan. 1, 2004 Borrowings due within less than one year 62 148 180 Borrowings due within more than one year 57 720 1 427 Facilities and overdrafts 48 BORROWINGS AND OTHER FINANCIAL LIABILITIES 119 916 1 607 Cash and cash equivalents 7,585 7,414 7,700 NET CASH POSITION 7,466 6,498 6,093

15.2. Net cash flow by maturity

The breakdown by maturity is based on the contractual terms of debts.

Year ended December 31, 2005

(in millions of Moroccan dirhams) < 1 year 1 - 5 years > 5 years TOTAL Borrowings 62 57 119 Facilities and overdrafts Borrowings and other financial liabilities 62 57 119 Cash and cash equivalents 7,585 7,585 Net cash position 7,523 -57 7,466

Year ended December 31, 2004

(in millions of Moroccan dirhams) < 1 year 1 - 5 years > 5 years TOTAL Borrowings 148 183 537 868 Facilities and overdrafts 48 48 Borrowings and other financial liabilities 196 183 537 916 Cash and cash equivalents 7,414 7,414 Net cash position 7,218 -183 -537 6,498

Maroc Telecom did not discount borrowings with an interest If the debt had been discounted the impacts on the statement rate of 0% since the company initiated talks to repay them of financial position and the consolidated statement of a long time ago and repaid them in full in early August 2005. earnings would have been as follows :

(in millions of Moroccan dirhams) December 31, 2005 December 31, 2004 January 1, 2004 Statement of financial position Total equity 290 302 o/w earnings (290) (12) Deferred tax liabilities 157 163 Borrowings and other financial liabilities (447) (465) - 0- Statement of income Interest and other financial charges and income (447) (18) Income tax expense 157 6 (290) (12) -

148 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

15.3. Table of analysis

(in millions of Moroccan dirhams) Interest Maturity Dec. 31, Dec. 31, Jan. 1, rate % 2005 2004 2004 ABCI EUR13.9m 08/95-02/05 6.73% 18/02/2005 8 24 ABCI EUR7.2m 09/96-03/07 7.41% 28/03/2007 7 14 21 NATEXIS EUR2.7m 12/95-06/05 6.70% 03/06/2005 2 5 HSBC CCF EUR10.5m 01/96-07/05 7.34% 11/07/2005 12 24 HSBC CCF EUR11.5m 09/95-03/05 6.50% 15/03/2005 6 19 KFWF EUR18.7m 01/97-04/06 8.07% 09/04/2006 5 23 40 SEE USD69m 07/98-01/38 0.00% 11/01/2038 476 522 SEE USD2.7m 01/01-07/40 0.00% 10/07/2040 154 168 SVENSKA USD16m 04/94-04/05 0.00% 05/04/2005 12 AFD EUR45m 12/04-12/27 2.50% 31/12/2027 604 KFWF EUR5.2m 01/96-01/04 5.60% 31/01/2004 2 SEE USD109m 01/96-01/04 8.75% 12/01/2004 50 SEE USD29.8m 01/96-01/04 9.00% 12/01/2004 13 Mauritanian government 8.00% 18/01/2008 103 170 Others 8.00% 4 3 Associated creditors 102 Bank overdrafts 48 Borrowings and other financial liabilities 119 916 1,607

Foreign exchange risk Maroc Telecom is exposed to variations in exchange rates as Receipts in foreign currencies account for a significant portion the breakdown of its receipts in foreign currencies differs from of its revenues. the breakdown of its disbursements in foreign currencies.

Note 16. Accounts payable at December 31, 2005, December 31, 2004 and January 1, 2004

(in millions of Dec. 31, Dec. 31, Jan. 1, “Tax liabilities and other accruals” includes mainly tax and VAT Moroccan dirhams) 2005 2004 2004 payables. It also includes payables relating to obligations arising from Maroc Telecom’s corporate mission. Trade accounts payable 5,126 3,674 3,066 Deferred income mainly includes subscriptions invoiced in Employee related liabilities 555 404 458 advance, SIM cards sold but not used (whether activated or not activated), handsets sold but not activated and provisions Tax liabilities relating to loyalty programs. and other payables 2,658 2,521 2,445 Trade accounts payable and related accounts include debts Prepaid income 1,041 962 637 due from GAM, SFR, Vivendi Universal, Vivendi Telecom International and Casanet. Details of these transactions are TOTAL 9,380 7,561 6,606 presented in note 30 concerning related parties. The majority of debt has a maturity of less than one year.

Document de référence 2005 - Maroc Telecom 149 Note 17. Revenues for the years ended December Note 19. Payroll and payroll-related costs for the 31, 2005 and 2004 Exercice clos le 31 décembre years ended December 31, 2005 and 2004

(in millions of Moroccan dirhams) 2005 2004 (in millions of Moroccan dirhams) 2005 2004 Mobile gross revenues 12,772 9,684 Wages 1,819 1,489 Sale of goods 914 670 Payroll taxes 227 199 Sale of services 11,858 9,014 Wages and taxes 2,046 1,688 Fixed-line and internet gross revenues 11,949 11,133 Share-based compensation 10 Sale of goods 73 132 Payroll costs 2,056 1,688 Sale of services 11,876 11,001 Average headcount 12,360 12,859 Total consolidated gross revenues 24,721 20,817 Elimination of inter-segment transactions -4,179 -3,409 This item includes the payroll costs for the period, excluding Total consolidated revenues 20,542 17,408 redundancy costs, which are recognized as other operating expenses.

(in millions of Moroccan dirhams) 2005 2004 Maroc Telecom gross revenues 23,815 20,390 Note 20. Taxes, duties and fees for the years ended December 31, 2005 and 2004 Mauritel gross revenues 906 427 Total consolidated gross revenues 24,721 20,817 (in millions of Moroccan dirhams) 2005 2004 Elimination of inter-segment transactions -4,178 -3,409 Taxes and duties 280 245 Total consolidated revenues 20,542 17,408 ANRT royalties 400 153 Total 680 398

Revenues correspond to services provided to customers and subscribers, based on calls made and effective rates. This item Taxes, duties and fees include local taxes (patents, urban also includes reciprocal fixed/mobile services which can be taxes), the tax for occupation of public land and other taxes analyzed as inter-segment transactions that are eliminated for (registration taxes, motor tax). consolidation purposes. Fees include amounts paid to telecoms regulation agencies with respect to universal service and training. The change in fees is mainly due to contributions of MAD 137 Note 18. Purchases for the years ended December million in 2005 relating to the universal service compared with 31, 2005 and 2004 zero in 2004 and to the change in business levels that serve as the basis for calculating the research training contribution. (in millions of Moroccan dirhams) 2005 2004 Cost of handsets 1,771 1,154 Domestic and international interconnection charges 1,784 1,491 Other 323 564 Total 3,878 3,209

The item “Other” mainly includes fuel and electricity, phone cards and other purchases of consumables.

150 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 21. Other operating expenses for the years Note 24. Interest and other financial charges and ended December 31, 2005 and 2004 income for the years ended Dec. 31, 2005 and 2004 (in millions of Moroccan dirhams) 2005 2004 24.1 Cost of net debt Communication 456 355 (in millions of Moroccan dirhams) 2005 2004 Commissions 659 487 Income from cash and cash equivalents 143 200 Others including: 1,495 939 Interest expense on loans -13 -29 Rental expenses 191 173 Cost of net debt 130 171 Maintenance and repair 476 396 Audit and advisory fees 116 134 The decline in revenues from investments is due to the Postage and banking services 105 93 Voluntary redundancy plan* 468 30 reduced rate of interest on term deposits and sight deposits. Other 139 113 Due to the early repayment of financing debts, interest expense decreased in 2005 compared with 2004. Total 2,610 1,781

* Details of the voluntary redundancy plan are presented in note 29: restructuring provisions. 24.2 Other financial charges and income (in millions of Moroccan dirhams) 2005 2004 Note 22. Net depreciation, impairment and Foreign exchange gains and losses -65 -5 provisions for the years ended December 31, 2005 Other 47 9 and 2004 Other financial income and expense -18 4 (in millions of Moroccan dirhams) 2005 2004 Depreciation and The “Others” caption primarily includes income from the sale impairment of fixed assets 2,673 2,666 of the non-consolidated stake in Intelsat for MAD 32 million. Impairment of accounts receivable 110 103 Impairment of inventories 4 39 Note 25. Income taxes for the years ended Impairment of other receivables 35 December 31, 2005 and 2004 Provisions -184 -73 (in millions of Moroccan dirhams) 2005 2004 Total 2,639 2,735 Corporate income tax 2,871 2,560 Deferred taxes 15 14 Note 23. Income from equity affiliates for the years Income taxes 2,886 2,574 ended December 31, 2005 and 2004 Consolidated effective tax rate* 33% 33%

(in millions of Moroccan dirhams) 2005 2004 * Income taxes/earnings before tax. Mauritel 33 (in millions of Moroccan dirhams) 2005 2004 GAM 14 -3 Earnings 5,921 5,228 Total 14 30 Income taxes 2,886 2,574 Mauritel group has been fully consolidated since July 1, 2004. Consolidated earnings before tax 8,807 7,802 Moroccan statutory tax rate 35% 35% Theoretical provision for income taxes 3,082 2,731 Impact of change(s) in tax rates -27 -12 Other net differences -170 -145 Effective provision for income taxes 2,886 2,574

Other temporary differences primarily include the 50% tax exemption on the proportion of revenues from international activities.

Document de référence 2005 - Maroc Telecom 151 Note 26. Minority interests for the years ended December 31, 2005 and 2004

Minority interests reflect the interests of shareholders other (in millions of Moroccan dirhams) 2005 2004 than Maroc Telecom in Mauritel group’s earnings. Minority interests 112 57 The marked change between 2005 and 2004 is due to the full consolidation of Mauritel since July 1, 2004.

Note 27. Earnings per share for the years ended December 31, 2005 and 2004

27.1 Earnings per share

2005 2004 Basic Diluted Basic Diluted

Earnings (in millions MAD) 5,809 5,809 5,171 5,171

Number of shares 879.1 879.1 879.1 879.1

Earnings per share (in MAD) 6.6 6.6 5.9 5.9

27.2 Changes in the number of shares

(in number of shares) 2005 2004

Weighted average number of shares outstanding over the period 879,095,340 879,095,340

Adjusted weighted average number of shares outstanding 879,095,340 879,095,340

Potential dilutive effect of financial instruments in issue

Weighted average number of shares after potential dilutive effect 879,095,340 879,095,340

152 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 28. Segment data

28.1. Breakdown of statement of financial position by business segment

2005 (in millions of Moroccan dirhams) Fixed- Mobile Unallocated Total Maroc line (A) (B) (C) Telecom Group

Non-current assets 8,020 6,085 684 14,788

Current assets 5,064 2,397 7,629 15,090

Total assets 13,084 8,481 8,313 29,879

Shareholders’ equity 19,724 19,724

Non-current liabilities 8 1 255 264

Current liabilities 4,770 4,703 418 9,891

Total liabilities and equity 4,778 4,704 20,397 29,879

Acquisition of property, plant and equipment and intangible assets 1,439 1,771 3,210

(C) Includes taxes, cash, financial assets, loans and net financial position, borrowing and shareholders’ equity.

2004 (in millions of Moroccan dirhams) Fixed- Mobile Unallocated Total Maroc line (A) (B) (C) Telecom Group

Non-current assets 7,506 5,861 655 14,021

Current assets 3,999 2,205 7,459 13,663

Total assets 11,505 8,065 8,114 27,684

Shareholders’ equity - - 18,201 18,201

Non-current liabilities 7 - 874 881

Current liabilities 4,021 3,720 861 8,602

Total liabilities and equity 4,028 3,720 19,936 27,684

Acquisition of property, plant and equipment and intangible assets 1,366 1,122 - 2,488

(C) Includes taxes, cash, financial assets, loans and net financial position.

28.2. Breakdown of statement of financial position by geographical area

(in millions of Moroccan dirhams) 2005 2004

Segment assets (a)+(b) Morocco 20,192 18,216 Mauritania 1,375 1,355

Total 21,567 19,570

Document de référence 2005 - Maroc Telecom 153 28.3. Breakdown of segment earnings by business segment

Year ended December 31, 2005

(in millions of Moroccan dirhams) Fixed-line Mobile Eliminations Total

Consolidated revenue 11,949 12,772 -4,179 20,542

Earnings from operations 3,284 5,394 8,678

Net depreciation and impairment 1,356 1,317 2,673

Voluntary redundancy plan 216 97 313

Year ended December 31, 2004

(in millions of Moroccan dirhams) Fixed-line Mobile Eliminations Total

Consolidated revenue 11,133 9,684 -3,409 17,408

Earnings from operations 3,791 3,806 7,597

Net depreciation and impairment 1,427 1,239 2,666

Voluntary redundancy plan 111 50 161

28.4. Segment earnings by geographical area

Year ended December 31, 2005

(in millions of Moroccan dirhams) Morocco Mauritania Eliminations Total

Consolidated revenue 19,737 836 -31 20,542

Earnings from operations 8,411 267 8,678

Net depreciation and impairment 2,529 145 2,674

Voluntary redundancy plan 313 313

Year ended December 31, 2004

(in millions of Moroccan dirhams) Morocco Mauritania Eliminations Total

Consolidated revenue 17,041 382 -15 17,408

Earnings from operations 7,470 127 7,597

Net depreciation and impairment 2,589 77 2,666

Voluntary redundancy plan 161 161

154 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Note 29. Restructuring provisions for the years ended December 31, 2005 and 2004

(in millions of Moroccan dirhams) MarocTelecom Mauritel Group Total Maroc Telecom Group

Redundancy benefits Balance at January 1, 2004 -

Changes in scope of consolidation and adjustments - - - of allocation of acquisition price Addition - Utilisation - Release -

Balance at December 31, 2004 - - -

Changes in scope of consolidation and adjustments - - - of allocation of acquisition price Addition - Utilisation - Release -

Balance at December 31, 2005 - - -

Other restructuring costs Balance at January 1, 2004 -

Changes in scope of consolidation and adjustments - of allocation of acquisition price - Addition 161 161 Utilisation - Release -

Balance at December 31, 2004 161 - 161

Changes in scope of consolidation and adjustments - of allocation of acquisition price - Addition 6 6 Utilisation 468 468 Release (161) (161)

Balance at December 31, 2005 474 - 474

Restructuring costs

Balance at December 31, 2005 474 - 474

Maroc Telecom launched a voluntary redundancy plan in 2004. The initial provision totaled MAD 161 million. In 2005, the total cost amounted to MAD 474 million, MAD 468 million of which was used for 912 people and MAD 6 million in additional provisions recorded in the financial statements at December 31, 2005.

Document de référence 2004 - Maroc Telecom 155 Note 30. Transactions with related parties

30.1. Compensation of executive officers, Group management 30.3. Other related parties and directors in 2005 and 2004 Casanet For the year ended December 31, 2005, members of the During 2003, Maroc Telecom concluded several agreements Management Board received MAD 20 million. with Casanet covering: For the year ended December 31, 2004, members of the • the maintenance of Maroc Telecom’s “Menara” internet Management Board received MAD 19 million. portal

(in millions of Moroccan dirhams) Dec. 31, Dec. 31, • the supply of development services and hosting of Maroc 2005 2004 Telecom’s mobile portal

Short-term benefits (1) 20 19 • the hosting of IAM’s “El Manzil” website Post-employment benefits (2) • the maintenance of new WAP applications on the Menara portal and the production of content relating to these Other long-term benefits (3) applications Redundancy benefits (4) 26 36 • the marketing of internet access over leased lines. Equity-based compensation (5)

Total 47 55 (in millions of Moroccan dirhams) 31/12/2005 31/12/2004 (1) ) Salaries, compensation, incentive plans and bonuses and social security contributions, holiday pay, Directors’ fees and non-monetary benefits. Consolidated revenues 6 5 (2) Including pension and post-retirement benefits, life insurance and medical Expenses 16 13 care. (3) Long-service leave, sabbatical leave, long service benefits, jubilees, deferred Receivables 7 5 compensation, incentive plans and bonuses (if not payable wholly within 12 months after the end of the period). Payables 5 2 (4) Redundancy pay. (5) Stock options and other equity compensation benefits. Vivendi Universal – SFR – Vivendi Telecom International In 2001, Itissalat AM entered into a management services 30.2. Equity affiliates agreement with Vivendi Télécom International (VTI), which During 2002 and 2003, Maroc Telecom concluded agreements provides Maroc Telecom with technical assistance in the with GSM Al-Maghrib relating to the marketing of the mobile, following fields : fixed, internet and multimedia services of Maroc Telecom. • strategy and organization During 2004, the global agreement was updated though the • development execution of several amendments relating in particular to the • sales and marketing payment of fees by Maroc Telecom to GSM Al-Maghrib. • finance During 2004 and 2005, the main company related to Maroc • purchasing Telecom was GSM Al Maghrib (GAM), which has been equity- • human resources accounted since July 1, 2003. The main transactions with • information systems GAM and the sums due by the latter or by Maroc Telecom are • regulation and interconnection detailed as follows. • infrastructure and networks. In addition, with a view to further strategic cooperation, Maroc Telecom has entered into transactions with SFR (the leading (in millions of Moroccan dirhams) 31/12/2005 31/12/2004 French private mobile operator) and the Vivendi Universal group. Consolidated revenues 1,283 1,078 These transactions are summarized as follows :

Expenses 21 8 (in millions of Vivendi Universal SFR Vivendi Telecom Receivables 74 304 Moroccan dirhams) International

Payables 11 4 Consolidated revenues 413 Expenses 15 57 39 Receivables 35 Payables 14 55 8

156 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

Université Al Akhawayn The Supervisory Board meeting of December 21, 2004 agreement, each year, two scholarships will by paid by authorized Maroc Telecom to conclude an agreement with Al Itissalat Al Maghrib to two students chosen from company Akhawayn University to set up a global framework of employees’ children. cooperation to carry out joint actions in areas of common At December 31, 2005, no charge related to this agreement interest concerning scientific and technical research, in was accounted for in the company’s financial statements. particular R&D and consulting. In accordance with this

Note 31. Contractual obligations and contingent assets and liabilities

31.1. Contractual obligations and commercial commitments • Operating leases with terms of between 3 and 10 years and recorded in the statement of financial position in an amount of MAD 9 million at the end of December 2005. The amount recorded corresponds to one month’s expense (in millions of Total Due Due Due within to take into account the termination clause, which includes Moroccan dirhams) within less within 1- more than a one-month notice period. than 1 year 5 years 5 years • Sindibad investment fund in an amount of MAD 2 million in 2005 compared with MAD 4 million in 2004. Long-term debts 119 62 57 • Stake acquired in Medi-1-sat for MAD 65 million. Financial lease obligations Commitments received : Operating leases * 107 56 51 • Guarantees of MAD 705 million in 2005, compared with Irrevocable purchase MAD 598 million in 2004. obligations • Moroccan government guarantee on Group loans in an Other long-term amount of MAD 11 million at the end of 2005, compared commitments with MAD 694 million at the end of 2004. This guarantee Total 226 118 108 matures at the same time as the loans.

* long-term vehicle leases (excluding tax) Maroc Telecom is exempt from customs duty for all capital goods imported, due to an investment agreement with the 31.2. Other commitments given and received relating to public authorities of the Kingdom of Morocco, whereby Maroc operations Telecom agreed to carry out a capital expenditure program over three years from 2003 to 2005 in an amount of MAD 7 Commitments given : billion and to create 300 new jobs. At December 31, 2005, this • Guarantees on equipment sale contracts. At the end of capital expenditure program had been completed in full. 2005, these commitments amounted to MAD 236 million, compared with MAD 226 million in 2004, and are mostly current. 31.3 Collateral and pledges Collateral and pledges include mortgages in an amount of • Supplier orders, which amounted to MAD 613 million at the end of 2005, compared with MAD 903 million at the end of MAD 80 million at 31, December 2005 compared with MAD 96 2004, and are mostly current. These orders mainly relate to million at December 31, 2004. investments in property, plant and equipment.

Document de référence 2005 - Maroc Telecom 157 Note 32. Post-statement of financial position events

Mauritel will launch a voluntary redundancy plan in the first half MAD 8,790,953,400 to MAD 5,274,572,040, by reducing the of 2006, costing an estimated total of MAD 15 million. nominal value of shares from MAD 10 to MAD 6 and by paying out MAD 3,516,381,60 of cash on the 879,095,340 shares This plan was approved by the Board of Directors on December comprising the company’s share capital, with the 17, 2005 and announced shortly thereafter to employees and corresponding amendment to the articles of association, on labor unions. condition that the said reduction in capital is effectively A plan has been adopted to reduce the company’s capital from completed.

Note 33. Transition to IFRS

1. Introduction • the non-amortization of goodwill with effect from January 1, 2004 • Change of accounting standards • the application of IAS 16 regarding property, plant and This document has been prepared in accordance with the equipment. change of accounting standards made compulsory at January 1, 2005 by European regulation 1606/2002 of July 19, 2002, 2. Description of the restatements arising from the which applies to the consolidated financial statements of all application of IFRS companies listed in the European market. The European • Presentation of the financial statements Union has adopted most IFRS. Statement of earnings • Restatements associated with the first-time adoption of IFRS Given the group’s current practice and the nature of its operations, the presentation of the statement of earnings by In line with the options offered by IFRS 1 First time adoption of nature of income and expenses has been maintained. IFRS, the group has chosen for its opening statement of financial position : The main change in the presentation of the statement of earnings is the separate presentation of the Cost of financial • to maintain its property, plant and equipment at historical net debt. cost and therefore not to make any revaluations Statement of financial position • not to restate business combinations that occurred prior to January 1, 2004 The main changes are : • to reset foreign currency translation adjustments to zero at • the classification of current and non-current assets and January 1, 2004. liabilities • Financial instruments (IAS 32 and IAS 39). • the integration of minority interests in equity Maroc Telecom is not concerned by any of the sections of • the reclassification of deferred tax. IAS 39 not adopted by the EU. Maroc Telecom has Statement of cash flows consequently applied IAS 39 (see note 15) in full to its 2004 comparative financial data and its 2005 No change in the definition of net cash is required by the consolidated financial statements. change of accounting framework. The only changes compared with the prior basis of presentation consist of • Impact of the transition to IFRS reclassifications and more detailed disclosures such as the The impact of the transition to IFRS is relatively limited as classification of the cost of debt in the cash flows linked to Maroc Telecom already applies the accounting policies financing operations. recommended by Conseil National de la Comptabilité • Intangible assets (French national accounting standards board), which are in accordance with IFRS. The applicable standards are IAS 38 Intangible Assets, IFRS 3 Business Combinations and IAS 36 Impairment of Assets. The main impacts of the application of the new accounting framework, independent of the new presentation formats for Goodwill the financial statements, thus relate to : No adjustment has been made in respect of business • the conditions governing revenue recognition combinations made prior to January 1, 2004. IFRS 3 eliminates the requirement for amortization of goodwill but

158 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

requires, on an annual basis (and each time there is any Spare parts indication that impairment has occurred), an impairment test • Spare parts are judged as being useful for more than one both of intangible assets with an indefinite useful life and of financial year and tied to the equipment they relate to. As goodwill arising from business combinations. a result, in accordance with IAS 16, they must be The impact of the goodwill amortization adjustment on 2004 accounted for alongside their associated equipment. earnings is MAD 7 million. • Spare parts acquired as part of a supply contract follow Under IAS 28, goodwill in respect of equity affiliates is the same rules of activation and amortization as the recognized under “Investments in equity affiliates” and not equipment to which they are related. under goodwill. This reclassification has an impact of MAD 6 • Spare parts acquired as part of a specific contract are million on the opening statement of financial position. activated immediately and amortized over the residual life SIM cards of the equipment with which they are associated or over their initial period of amortization if this information is not SIM cards are recognized in intangible assets at the time of available. their acquisition and when activated are reclassified as intangible assets with a finite useful life, amortizable over 2 • Financial liabilities (zero-interest-rate debt) years. Maroc Telecom did not discount borrowings with an interest SIM cards meet the revised conditions of IAS 38 to be rate of 0% since the company initiated talks to repay them a considered as intangible assets : long time ago and repaid them in full in early August 2005. • Recognition of revenues • SIM cards are necessary to establish a subscription that generates future economic advantages. Revenues from handsets • The cost of SIM cards can be measured in a reliable Revenues from the sale of handsets must be recognized the manner. moment subscribers are activated on the network. • SIM cards are separable, as subscriptions can be sold, Restatement of handset subsidies granted and exchanged jointly with the subscription contract. Revenues are recognized net of subsidies. This restatement has no impact on earnings from operations, as these subsidies were • SIM cards are the property of the operator during the initially taken to income and expenses. minimum contractual period, when the subscriber is tied to the network to which he subscribed. The operator Restatement of voice services therefore owns control of the economic advantages The sale of services to subscribers by Maroc Telecom on during the contractual period of the subscription. behalf of content suppliers impacts revenues, which are • The SIM card is necessary to activate the subscription shown net of the amounts paid to these suppliers. from which the future economic advantages are Loyalty program expected. Pending an interpretation by IFRIC, Maroc Telecom does not • Property, plant and equipment accrue loyalty bonuses granted to customers for the Items of property, plant and equipment are recognized on the replacement of their mobile phone that do not result in an statement of financial position at their historical cost price. additional cost relative to the benefit granted to new They are not subject to any revaluation. customers at the inception date of a contract. Loyalty Amortization period bonuses convertible into free services are accrued. Application of IAS 16 Property, Plant and Equipment has led to • Segment data changes in the length of certain periods of amortization and the Segment data is organized by business segment (fixed-line application of a component-based approach given the nature of and mobile) and by geographical area. items of property, plant and equipment in telecommunications. Amortization is calculated on a straight-line basis over the useful life of the asset.

Document de référence 2005 - Maroc Telecom 159 3. Consolidated statement of financial position and notes at January 1, 2004

• Consolidated statement of financial position at January 1, 2004

ASSETS Note French Reclassifications Restatements IFRS (in millions of Moroccan dirhams) GAAP Goodwill 1 143 -143 - - Other intangible assets 2 553 403 47 1 003 Property, plant and equipment 3 11,963 -279 - 11,684 Investments in equity affiliates 1 332 143 - 475 Non-current financial assets 166 - - 166 Deferred tax assets 4 - 412 21 433 NON-CURRENT ASSETS 13,157 536 68 13,761 Inventories 5 365 -124 77 318 Trade receivables 6 5,483 -412 10 5,081 Cash and cash equivalents 7,700 - - 7,700 CURRENT ASSETS 13,548 -536 87 13,099 TOTAL ASSETS 26,705 - 155 26,860

EQUITY AND LIABILITIES Note French Reclassifications Restatements IFRS (in millions of Moroccan dirhams) GAAP Share capital 8,791 - - 8,791 Retained earnings 8,946 - 19 8,965 Equity attributable to equity holders of the parent 7 17,737 19 17,756 Minority interests 67 67 TOTAL EQUITY 17,804 19 17,823 Non-current provisions 8 379 -355 - 24 Long-term borrowings and other financial liabilities 9 1,607 -180 0 1,427 Deferred tax liabilities 10 - 35 12 47 NON CURRENT LIABILITIES 19,790 -500 31 19,321 Trade payables 11 6,915 -433 124 6,606 Current income tax liabilities 398 - 398 Current provisions 8 - 355 - 355 Short-term borrowings and other financial liabilities 9 - 180 - 180 CURRENT LIABILITIES 6,915 500 124 7,539 TOTAL EQUITY AND LIABILITIES 26,705 - 155 26,860

160 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

• Notes to the statement of financial position at January 1, 2004

Note Reclassifications Restatements 1 Reclassification of goodwill relating to equity affiliates under investments in equity affiliates in compliance with IAS 28. 2 Reclassification as Intangible assets of software Restatement in Intangible assets (net of amortization) relating to technical equipment (IAS38). of SIM cards initially recorded as inventories (IAS38). 3 Reclassification as Intangible assets of software relating to technical equipment (IAS38). Reclassification of spare parts inventories as property, plant and equipment (IAS16). 4 Reclassification of deferred tax assets included Deferred tax assets linked to subscriber customer loyalty initially in Other receivables and accruals as program recorded as deferred income (IAS 12). non-current assets (IAS1). 5 Reclassification of spare parts as property, Inventories of handsets sold but not activated are restated plant and equipment. to take into account the recognition of revenues upon activation. Restatement as intangible assets (net of amortization) of SIM cards initially recorded as inventories. 6 Reclassification of deferred tax assets included Deferred liabilities relating to commissions for sales of initially in other receivables and accruals as handsets sold but not activated. non-current assets (IAS1). 7 See reconciliation of equity attributable to equity holders of the parent. 8 Reclassification of provisions for third parties and employees as current liabilities (IAS1). 9 Breakdown of borrowings and financial debt due within +/- one year. 10 Reclassification of deferred tax liabilities included Deferred tax liabilities linked to sale of non-activated initially in other payables and accruals as handsets. non-current liabilities. 11 Reclassification of deferred tax liabilities included Deferred income relating to sale of non-activated handsets initially in other payables and accruals as and to the customer loyalty program (IAS 18). . non-current liabilities.

• Reconciliation of shareholders’ equity at January 1, 2004

(in millions of Moroccan dirhams) Equity attributable to equity holders of the parent – Financial statements at December 31, 2003 under French GAAP 17,737 Restatement (after tax) of handsets upon activation 23 Restatement (after tax) of activated SIM cards in fixed assets 34 Restatement (after tax) of the Fidélio provision -38 Equity attributable to equity holders of the parent at January 1, 2004 under IFRS 17,756

Document de référence 2005 - Maroc Telecom 161 4.Consolidated financial statements au December 31, 2004

• Consolidated statement of financial position at December 31, 2004

ASSETS Note French Reclassifications Restatements IFRS (in millions of Moroccan dirhams) GAAP Goodwill 1 136 -6 7 137 Other intangible assets 2 819 445 43 1 307 Property, plant and equipment 3 12,339 -445 28 11,922 Investments in equity affiliates 126-8 Non-current financial assets 152 - - 152 Deferred tax assets 4 - 449 46 495 NON-CURRENT ASSETS 13,448 449 124 14,021 Inventories 5 451 - -31 420 Trade receivables 6 6,263 -449 15 5,829 Cash and cash equivalents 7,414 - - 7,414 CURRENT ASSETS 14,128 -449 -16 13,663 TOTAL ASSETS 27,576 - 108 27,684

EQUITY AND LIABILITIES Note French Reclassifications Restatements IFRS (in millions of Moroccan dirhams) GAAP Share capital 8,791 - - 8,791 Retained earnings 3,701 - 110 3,811 Earnings for the period 5,210 - -39 5,171 Equity attributable to equity holders of the parent 7 17,702 71 17,773 Minority interests 428 428 TOTAL EQUITY 18,130 71 18,201 Non-current provisions 8 320 -288 - 32 Long-term borrowings and other financial liabilities 9 868 -148 - 720 Deferred tax liabilities 10 - 48 81 129 NON-CURRENT LIABILITIES 19,318 -388 152 19,082 Trade payables 11 8,210 -605 -44 7,561 Current income tax liabilities 557 557 Current provisions 9 - 288 - 288 Short-term borrowings and other financial liabilities 8 48 148 - 196 CURRENT LIABILITIES 8,258 388 -44 8,602 TOTAL EQUITY AND LIABILITIES 27,576 - 108 27,684

162 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

• Notes to the statement of financial position

Note Reclassifications Restatements 1 Reclassification of goodwill relating to equity affiliates Elimination of goodwill amortization in accordance with IAS under investments in equity affiliates (IAS28). 36 and 38. 2 Reclassification as Intangible assets of software Restatement as Intangible assets (net of amortization) of relating to technical equipment (IAS38). SIM cards initially recorded as inventories (IAS38). 3 Reclassification as Intangible assets of software Impact of the elimination of purchases and the provision for relating to technical equipment (IAS38). impairment of spare parts due to the reclassification as property, plant and equipment. This restatement also takes into account the depreciation of these spare parts. Impact of the change in certain depreciation periods in accordance with notion of useful life defined in IAS 16. 4 Reclassification of deferred tax assets recorded Deferred tax assets linked to the change in certain initially in other receivables and accruals as depreciation periods and to the restatement relating to spare non-current assets (IAS1). parts (IAS 12). 5 Inventories of handsets sold but not activated are restated to take into account the recognition of revenues upon activation. Restatement as property, plant and equipment of spare parts initially recorded in inventories. Restatement as Intangible assets of SIM cards initially recorded in inventories. 6 Reclassement des impôts différés actifs inclus Charges constatées d'avance relatives aux commissions intialement dans le poste autres créances et comptes sur ventes de terminaux non encore activés. de régularisation en actifs non courants (IAS1). 7 See equity attributable to equity holders of the parent 8 Reclassification of provisions for third parties and employees (including the for the voluntary redundancy plan) as current liabilities in accordance with IAS1. 9 Breakdown of borrowings and financial debt due within +/- one year. 10 Reclassification of deferred tax liabilities included Deferred tax liabilities relating to restatements of handsets initially in other payables and accruals as on activation, SIM cards and the customer loyalty program. non-current liabilities. 11 Reclassification of deferred tax liabilities included Deferred income relating to sale of non-activated handsets initially in other payables and accruals. and the customer loyalty program (IAS 18).

Document de référence 2005 - Maroc Telecom 163 • Consolidated statement of earnings at December 31, 2004

(in millions of Moroccan dirhams) Note IFRS Revenues 1 17,408 Purchases 2 -3,209 Payroll costs 3 -1,703 Sundry taxes and duties -398 Other operating income and expenses 3 -1,766 Net depreciation, impairment and provisions 4 -2,735 Earnings from operations 7,597 Income from equity affiliates 30 Earnings before interest, other financial charges and income and income taxes 7,627 Financial income from cash and cash equivalents 200 Interest on gross debt -29 Interest on net debt 171 Other charges and financial income 4 Net financial items 175 Tax expense 5 -2,574 Earnings 6 5,228 Attributable to the equity holders of the parent 5,171 Minority interests 57 Basic earnings per share 5.9 Diluted earnings per share 5.9

• Notes to the statement of earnings (in millions of Moroccan dirhams)

Note Reclassifications Amount Restatements Amount 1 Elimination of subsidies -523 Elimination of French GAAP loyalty impact recognition of customer loyalty program under IFRS 30 Recognition of revenues upon activation -21 2 Restatement of SIM cards 36 Restatement of handsets upon activation 47 Restatement of spare parts 76 3 Elimination of subsidies 523 Restatement of charges linked to activation of handsets 5 4 Depreciation of spare parts -76 Depreciation of SIM cards -35 Impact of change in certain depreciation periods -133 5 Impact of deferred tax linked to activation, customer loyalty program, SIM cards and change in depreciation periods 25 6 Other than the adjustments mentioned above, earnings includes elimination of goodwill amortization 7 Total reclassifications 0 Total restatements -39

164 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

• Statement of cash flows at December 31, 2004 (in millions of Moroccan dirhams) French Reclassifications Restatements IFRS GAAP Consolidated earnings (including minority interests) 5,244 30 -46 5,228 Changes in provisions 2,314 310 209 2,833 Other non-cash items -102 -30 103 -29 Gains and losses on disposals of assets -23 - - -23 Cash flow after interest on net debt and tax 7,433 310 266 8,009 Interest on net debt - -171 - -171 Income tax expense (including deferred taxes) -12 2,561 25 2,574 Cash flow after interest on net debt and tax (A) 7,421 2,700 291 10,412 Tax paid (B) - -2,420 - -2,420 Change in WCR related to operating activities ( C) 326 -330 -182 -186 Cash flows from operating activities (D) = (A+B+C) 7,747 -50 109 7,806 Payments for acquisitions of PP&E and intangible assets -2,265 -114 -109 -2,488 Proceeds from disposals of PP&E and intangible assets 18 - - 18 Proceeds from disposals of financial assets (non-consolidated investments) 11 - - 11 Proceeds from long-term debt 18 - 18 Effects of changes in scope of consolidation 115 45 - 160 Net cash flow from investing activities (E) -2,103 -69 -109 -2,281 Dividends paid during the year -5,124 -30 -5,154 Principal payments on borrowings -854 1 -853 Net interest paid - 161 161 Cash flows from financing activities (F) -5,978 132 -5,846 Foreign currency translation adjustments (G) -13 -13 Net increase (decrease) in cash (D+E+F+G) -334 0 0 -334

Document de référence 2005 - Maroc Telecom 165 • Statement of changes in shareholders’ equity at December 31, 2004

Share Other Reserves & Attributable Minority (in millions of Moroccan dirhams) capital adjustments consolidated to equity interests Total earnings holders of the parent

Total equity at January 1, 2004 under IFRS 8,791 8,965 17,756 67 17,823 Dividends -5,124 -5,124 -5,124 Earnings for the period 5,171 5,171 57 5,228 Cumulative translation differences -18 -18 -25 -43 Other adjustments -12 -12 -12 Changes in scope of consolidation 329 329 Total equity at December 31, 2004 under IFRS 8,791 8,994 17,773 428 18,201

• Reconciliation of shareholders’ equity at December 31, 2004

(in millions of Moroccan dirhams) Equity attributable to equity holders of the parent - Financial statements December 31, 2004 under French GAAP 17,702 Restatement (after tax) of handsets on activation 23 Restatement (after tax) of activated SIM cards in fixed assets 22 Restatement (after tax) of the Fidélio provision 65 Impact on earnings -39 Equity attributable to equity holders of the parent at December 31, 2004 under IFRS 17,773

166 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS

STATUTORY AUDITORS’ REPORTS These are free translations into English of the auditors’ reports to the consolidated financial statements issued in the French language and are provided solely for the convenience of English speaking readers. The auditors’ reports to the consolidated financial statements include information specifically required by French law in all audit reports, whether qualified or not, and this is presented below in the opinion on the consolidated financial statements. This information includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion and review report on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account line items or on information taken outside of the consolidated financial statements. These reports should be read in conjunction with, and construed in accordance with, French law and international generally accepted auditing standards. The management report of the group referred to in the final paragraph of the auditors’ reports to the consolidated financial statements is not included in this document.

YEAR ENDED DECEMBER 31, 2005 To the Shareholders, In compliance with the assignment entrusted to us in your general meetings, we have audited the accompanying consolidated financial statements of ALMAGHRIB SA (IAM) for the year ended December 31, 2005. The consolidated financial statements have been approved by the Management Board. Our role is to express an opinion on these consolidated financial statements based on our audit. These financial statements have been prepared for the first time in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). They include comparative information restated in accordance with the same standards in respect of financial year 2004.

I - OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS We conducted our audit in accordance with international generally accepted auditing standards. These standards require us to plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements’ presentation. We believe that our audit provides a reasonable basis for our opinion set out hereafter. We certify that the consolidated financial statements give a true and fair view of the assets and liabilities, and of the financial position as well as the results of operations of the Group of individuals and entities included in the consolidation, in accordance with IFRS, as adopted by the EU. Without prejudice to the opinion above, we draw your attention to the following items explained in the notes to the consolidated financial statements:

• the estimates used for segment information (notes 2.6.1 and 28). • the estimates used for part of off-balance sheet commitments (notes 2.5 and 31) ; • on Note 2 (§ 2.3.6.3) and Note 5 related to « Property, Plant and Equipment »: Although the process has been initiated, some of the land and buildings have not yet been registered with the property office.

II - SPECIFIC VERIFICATION We have also carried out the verification of the information given in the management report of the group. We have no comments to make as to its fair presentation and its conformity with the consolidated financial statements.

Casablanca, February 24, 2006

Statutory Auditors

ABDELAZIZ ALMECHATT SAMIR AGOUMI

Document de référence 2005 - Maroc Telecom 167 5.5 INDIVIDUAL FINANCIAL STATEMENTS

Balance sheet

ASSETS Gross Acc. Depr. Amort. Net (in Moroccan dirhams) & provisions 2005 2004

CAPITALISED COSTS (A) 0.00 0.00 0.00 0.00 . Start up costs 0.00 0.00 0.00 0.00 . Deferred costs 0.00 0.00 0.00 0.00 . Bond redemption premiums 0.00 0.00 0.00 0.00 INTANGIBLE ASSETS (B) 2,711,711,635.58 1,563,714,633.66 1,147,997,001.92 663,672,623.91 . Research and development costs 0.00 0.00 0.00 0.00 . Patents, trademarks, rights and related assets 2,584,116,878.88 1,549,035,816.56 1,035,081,062.32 218,769,786.57 . Goodwill 19,307,100.00 14,678,817.10 4,628,282.90 7,953,838.52 . Other intangible assets 108,287,656.70 0.00 108,287,656.70 436,948,998.82 PROPERTY, PLANT AND EQUIPMENT (C) 29,875,959,211.04 18,034,324,638.79 11,841,634,572.25 11,579,535,573.60 . Land 956,276,938.66 0.00 956,276,938.66 923,206,429.16 . Buildings 3,674,846,339.34 2,214,023,369.88 1,460,822,969.46 1 673 647 885.41 . Plant and machinery 19,749,644,394.10 13,943,895,567.03 5,805,748,827.07 6,323,553,274.10 . Vehicles 78,109 431.40 70,902,569.24 7,206,862.16 11,874,090.88 . Furniture and fittings 2,129,703,333.38 1,451,683,880.26 678,019,453.12 730,368,170.53 . Other property, plant and equipment 11,047,827.04 0.00 11,047,827.04 11,047,827.04 . Work in progress 3,276,330,947.12 353,819,252.38 2,922,511,694.74 1,905,837,896.48 FINANCIAL ASSETS (D) 561,256,696.85 41,886,400.00 519,370,296.85 549,187,862.48 . Long term loans 80,100,880.63 0.00 80,100,880.63 96,159,072.60 . Other long term receivables 1,966,634.23 0.00 1,966,634.23 1,967,745.23 . Equity investments 479,189,181.99 41,886,400.00 437,302,781.99 451,061,044.65 . Other investments and securities UNREALIZED FOREIGN EXCHANGE LOSSES (E) 2,802,284.12 0.00 2,802,284.12 3,573,710.01 . Decrease in long term receivables 2,461,758.49 0.00 2,461,758.49 0.00 . Increase in long term debt 340,525.63 0.00 340,525.63 3,573,710.01 TOTAL I (A+B+C+D+E) 33,151,729,827.59 19,639,925,672.45 13,511,804,155.14 12,795,969,770.00 INVENTORIES (F) 337,682,528.24 73,530,356.88 264,152,171.36 539,674,649.32 . Merchandise 243,053,890.34 48,413,855.78 194,640,034.56 283,635,354.89 . Raw materials and supplies 94,628,637.90 25,116,501.10 69,512,136.80 256,039,294.43 . Work in progress 0.00 0.00 0.00 0.00 . Intermediary and residual goods 0.00 0.00 0.00 0.00 . Produits Finis CURRENT RECEIVABLES (G) 10,771,466,324.47 3,975,198,170.46 6,796,268,154.01 5,537,046,367.05 . Trade receivables, prepaids 49,675,633.94 0.00 49,675,633.94 135,353,435.56 . Accounts receivable 9,856,252,472.52 3,935,928,873.07 5,920,323,599.45 4,505,133,208.88 . Employees 13,634,140.50 4,119,937.31 9,514,203.19 13,164,168.61 . Tax receivable 535,004,357.42 0.00 535,004,357.42 416,778,716.38 . Shareholders' current accounts 0.00 0.00 0.00 89 696 992.72 . Other receivables 69,570,941.62 35,149,360.08 34,421,581.54 65,217,852.97 . Prepaid expenses 247,328,778.47 0.00 247,328,778.47 311,701,991.93 MARKETABLE SECURITIES (H) 5,041,340,710.00 0.00 5,041,340,710.00 200,000,000.00 UNREALIZED FOREIGN EXCHANGE LOSSES (I) 0.00 0.00 0.00 0.00 (Current items) 97,935,884.66 0.00 97,935,884.66 78,825,087.02 TOTAL II (F+G+H+I) 16,248,425,447.37 4,048,728,527.34 12,199,696,920.03 6,355,546,103.39 CASH AND CASH EQUIVALENTS 2,232,865,119.58 0.00 2,232,865,119.58 6,998,031,890.73 . Checks 225,598,665.67 0.00 225,598,665.67 7,340,136.98 . Bank deposits 1,996,827,547.33 0.00 1,996,827,547.33 6,979,847,088.26 . Petty cash 10,438,906.58 0.00 10,438,906.58 10,844,665.49 TOTAL III 2,232,865,119.58 0.00 2,232,865,119.58 6,998,031,890.73 TOTAL I+II+III 51,633,020,394.54 23,688,654,199.79 27,944,366,194.75 26,149,547 764.12

168 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

SHAREHOLDERS' EQUITY & LIABILITIES 2005 2004 (in Moroccan dirhams)

SHAREHOLDERS' EQUITY (A) 18,334,674,256.34 16,858,251,005.67 . Share capital (1) 8,790,953,400.00 8,790,953,400.00 . less: capital subscribed and not paid-in 0.00 0.00 . Additional paid-in capital 0.00 0.00 . Revaluation difference 0.00 0.00 . 0.00 0.00 . Statutory reserve 879,095,340.00 650,805,518.98 . Other reserves 2,792,725,565.67 1,688,018,596.88 . Retained earnings (2) 0.00 0.00 . Unallocated income (2) 0.00 0.00 . Net income of the year (2) 5,871,899,950.67 5,728,473,489.81

QUASI EQUITY (B) 0.00 265,331,741.39 . Investment subsidies 0.00 0.00 . Regulated provisions 0.00 265,331,741.39

LONG TERM DEBT (C) 11,370,738.52 693,814,963.20 . Debenture bonds 0.00 0.00 . Other long term debt 11,370,738.52 693,814,963.20

PROVISIONS (D) 27,484,779.35 29,077,265.67 . Provisions for contingencies 2,802,284.12 3,573,710.01 . Provisions for losses 24,682,495.23 25,503,555.66

UNREALIZED FOREIGN EXCHANGE GAINS (E) 68,064.22 122,291,186.60 . Increase in long term receivables 68,064.22 0,00 . Decrease in long term debt 0.00 122,291,186.60

TOTAL I (A+B+C+D+E) 18,373,597,838.43 17,968,766,162.53

CURRENT LIABILITIES (F) 8,955,489,859.96 7,557,244,630.26 . Trade accounts and related accounts payable 4,891,925,001.50 3,485,422,742.37 . Accounts payable, prepaids 89,697,423.00 0.00 . Payroll costs 493,067,236.61 345,538,803.91 . Social security contribution 53,919,748.64 54,374,540.48 . Tax payable 2,324,952,602.01 2,404,551,893.57 . Shareholders' current accounts 300.00 0.00 . Other payables 396,564,067.35 520,351,454.19 . Accruals and deferred income 705,363,480.85 747,005,195.74

OTHER PROVISIONS FOR CONTINGENCIES AND LOSSES (G) 460,206,600.87 551,675,152.01

UNREALIZED FOREIGN EXCHANGE GAINS (CURRENT ITEMS) (H) 155,071,895.49 24,089,842.92

Total II (F+G+H) 9,570,768,356.32 8,133,009,625.19

BANK OVERDRAFTS 0.00 47,771,976.41 . Discounted bills 0.00 0.00 . Treasury loans 0.00 0.00 . Bank loans and overdrafts 0.00 47,771,976.41

Total III 0.00 47,771,976.41

TOTAL I+II+III 27,944,366,194.75 26,149,547,764.12

Document de référence 2005 - Maroc Telecom 169 Income statement (excluding VAT)

(in Moroccan dirhams) 2005 2004

I- OPERATING INCOME (I - II) 19,882,076,745.41 17,656,644,060.32 Sales of goods 954,215,435.91 609,804,417.28 Sales of manufactured goods and services rendered 18,355,381,817.12 16,154,812,522.50 Operating revenues 19,309,597,253.03 16 764 616,939.78 Change in inventories (1) 0.00 0.00 Self-constructed assets 9,710,308.00 97,917,282.59 Operating subsidies received 0.00 0.00 Other operating income 24,138,378.53 34,516,602.92 Operating write-backs; expense transfers 538,630,805.85 759,593,235.03 TOTAL I 19,882,076,745.41 17,656,644,060.32 II- OPERATING EXPENSES 11,108,858,362.89 9,851,037,706.97 Cost of merchandise sold 1,817,713,538.72 1,193,679,738.37 Cost of goods sold (2) 2,063,516,306.18 2,187,874,023.29 Other external expenses 2,245,697,488.90 1,775,006,215.78 Taxes (except corporate income tax) 267,785,343.56 243,586,345.62 Payroll costs 1,946,026,171.36 1,604,512,805.97 Operating allowances 2,336,351,765.67 2,272,029,339.84 Operating provisions 431,767,748.50 574,349,238.10 TOTAL II 11,108,858,362.89 9,851,037,706.97 III- OPERATING INCOME (I - II) 8,773,218,382.52 7,805,606,353.35 IV- FINANCIAL INCOME 374,659,066.11 382,590,533.55 Income from equity investments 9,553,442.37 848,037.88 Foreign exchange gains 121,681,206.99 53,232,345.69 Interest and other financial income 142,851,819.72 203,341,602.43 Financial write-backs; expense transfers 100,572,597.03 125,168,547.55 TOTAL IV 374,659,066.11 382,590,533.55 V- FINANCIAL EXPENSES 180,217,624.61 209,823,316.11 Interest on loans 2,293,268.39 25,022,879.02 Foreign exchange losses 75,779,987.44 96,945,096.57 Other financial expenses 0.00 53.50 Financial allowances 102,144,368.78 87,855,287.02 TOTAL V 180,217,624.61 209,823,316.11 VI- FINANCIAL INCOME (EXPENSE) (IV - V) 194,441,441.50 172,767,217.44 VII- ORDINARY INCOME (III + VI) 8,967,659 824.02 7,978,373,570.79 VIII- EXTRAORDINARY INCOME 806,500,261.17 984,371,236.53 Proceeds from disposal of fixed assets 61,849,448.40 28,841,786.47 Subsidies received 0.00 0.00 Write-backs of investment subsidies 0.00 0.00 Other extraordinary revenues 94,361,707.96 82,862,512.02 Extraordinary write-backs; expense transfers 650,289,104.81 872,666,938.04 TOTAL VIII 806,500,261.17 984,371,236.53 IX- EXTRAORDINARY EXPENSES 1,121,088,643.58 716,939,932.03 Net book value of disposed assets 43,576,762.66 5,545,647.03 Subsidies granted 0.00 0.00 Other extraordinary expenses 484,061,356.12 77,756,209.88 Regulated provisions 0.00 0.00 Extraordinary allowance for depreciation and provisions 593,450,524.80 633,638,075.12 TOTAL IX 1,121,088,643.58 716,939,932.03 X- EXTRAORDINARY INCOME (EXPENSE) (VIII - IX) -314,588,382.41 267,431,304.50 XI- INCOME BEFORE CORPORATE INCOME TAX (VII + X) 8,653,071,441.61 8,245,804,875.29 XII- CORPORATE INCOME TAX 2,781,171,490.94 2,517,331,385.48 XIII- NET INCOME (XI - XII) 5,871,899,950.67 5,728,473,489.81 XIV- TOTAL INCOME ( I+IV+VIII) 21,063,236,072.69 19,023,605,830.40 XV- TOTAL EXPENSES ( II+V+IX+XII) 15,191,336,122.02 13,295,132,340.59 XVI- NET INCOME 5,871,899,950.67 5,728,473,489.81

170 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

Statement of operating data

OPERATING STATEMENT (in MAD) 2005 2004

1 Revenues 954,215,435.91 609,804,417.28 2- Cost of goods sold 1 817,713,538.72 1,193,679,738.37

I = GROSS MARGIN ON SALES -863,498,102.81 -583,875,321.09

II + PRODUCTION FOR THE YEAR (3+4+5) 18,365,092,125.12 16,252,729,805.09 3 Sales of manufactured goods and services rendered 18,355,381,817.12 16,154,812,522.50 4 Change in inventories 0.00 0.00 5 Self-constructed assets 9,710,308.00 97,917,282.59

III - COST OF CURRENT YEAR PRODUCTION 4,309,213,795.08 3,962,880,239.07 6 Raw materials and supplies 2,063,516,306.18 2,187,874,023.29 7 Other external expenses 2,245,697,488.90 1,775,006,215.78

IV = ADDED VALUE (I+II-III) 13,192,380,227.23 11,705,974,244.93 8+ Operating subsidies 0.00 0.00 9- Taxes 267,785,343.56 243,586,345.62 10 - Payroll costs 1,946,026,171.36 1,604,512,805.97

V=GROSS OPERATING SURPLUS 10,978,568,712.31 9,857,875,093.34

= NET LOSS FROM OPERATIONS 0.00 0.00 11 + Other operating income 24,138,378.53 34,516,602.92 12 - Other operating expenses 0.00 0.00 13 + Operating write-backs; expense transfers 538,630,805.85 759,593,235.03 14 - Operating allowances 2,768,119,514.17 2,846,378,577.94

VI = OPERATING INCOME 8,773,218,382.52 7,805,606,353.35

VII + / - FINANCIAL INCOME (EXPENSE) 194,441,441.50 172,767,217.44

VIII = ORDINARY INCOME 8,967,659,824.02 7,978,373,570.79

IX + / - EXTRAORDINARY INCOME (EXPENSE) -314,588,382.41 267,431,304.50

15 - CORPORATE INCOME TAX 2,781,171,490.94 2,517,331,385.48

X=NET INCOME 5,871,899,950.67 5,728,473,489.81

CASH EARNINGS (in MDH) 2005 2004

1 Net income + Profit 5,871,899,950.67 5,728,473,489.81 - Loss 0.00 0.00 2+ Operating allowances (1) 2,336,351,765.67 2,273,629,922.52 3 + Financial allowances (1) 4,208,484.12 9,030,200.00 4+ Extraordinary allowances (1) 587,250,524.80 314,622,825.12 5 - Operating write-backs (2) 821,060.43 1,189,290.59 6- Financial write backs (2) 21,747,510.01 66,745,792.37 7- Extraordinary write-backs (2) (3) 489,789,104.81 872,666,938.04 8- Profit on disposal of fixed assets 61,849,448.40 28,841,786.47 9 + Net book value of disposed assets 43,576,762.66 5,545,647.03

I CASH EARNINGS 8,269,080,364.27 7,361,858,277.01

10 - Dividends 4,395,476,700.00 5,123,557,418.00

II NET CASH EARNINGS 3,873,603,664.27 2,238,300,859.01

(1) Excluding allowances related to current assets and liabilities and cash. (2) Excluding write-backs relating to current assets and liabilities and cash. (3) Including write-backs of investment subsidies.

Document de référence 2005 - Maroc Telecom 171 Statement of cash flows

SELECTED BALANCE SHEET DATA

Year Year Change (a-b) LINE ITEMS 2005 2004 Uses Sources (in MAD) (a) (b) (c) (d)

1 Equity and long-term liabilities 18,373,597,838.43 17,968,766,162.53 404,831,675.90 2 Less long term assets 13,511,804,155.14 12,795,969,770.00 715,834,385.14 3 LONG TERM FINANCING SURPLUS (A) (1-2) 4,861,793,683.29 5,172,796,392.53 311,002,709.24 4 Current assets 7,158,356,210.03 6,155,546,103.39 1,002,810,106.64 5 Less current liabilities 9,570,768,356.32 8,133,009,625.19 1,437,758,731.13 6 TOTAL WORKING CAPITAL (B) (4-5) -2,412,412,146.29 -1,977,463,521.80 434,948,624.49 7 Net cash (A-B) 7,274,205,829.58 7,150,259,914.32 123 945 915.26

USES AND SOURCES

I - LONG TERM FINANCING SOURCES 2005 2004 (in MAD) USES SOURCES USES SOURCES

NET CASH (A) 3,873,603,664.27 2,238,300,859.01 Net cash 8,269,080,364.27 7,361,858,277.01 Dividends 4,395,476,700.00 5,123,557,418.00

DISPOSALS AND REDUCTIONS OF FIXED ASSETS (B) 82,238,393.14 95,244,657.23 Disposal of intangible assets 0.00 1 026 867.39 Reduction of property, plant and equipment 4,329,641.77 57,687,390.09 Disposal of property, plant and equipment 1,833,720.60 17,753,768.59 Disposal of financial assets 60,015,727.80 11,088,017.88 Write-backs of long term receivables 16,059,302.97 7,688,613.28

INCREASE IN SHAREHOLDERS' EQUITY AND QUASI EQUITY(C) 0.00 0,00 Increases in equity, capital contribution 0.00 0,00 Investment subsidies 0.00 0,00

INCREASE IN LONG TERM DEBT (D) 0.00 0,00 (net of redemption premiums)

TOTAL (I) LONG TERM RESOURCES (A+B+C+D) 3,955,842,057.41 2,333,545,516.24

II - LONG TERM USES FOR THE YEAR

ACQUISITIONS & AUG. D'IMMOBILISATIONS (E) 3,465,342,539.75 2,366,898,414.99 Acquisitions of intangible assets 83,304,156.31 181,640,677.04 Acquisitions d'immobilisations corporelles 2,902,906,602.12 2,100,586,851.66 Acquisitions of financial assets 12,970,900.00 0.00 Increase in long term receivables 0.00 84,670,886.29 Acquisitions of property, plant and equipment (*) 466,160,881.32 0.00

REIMBURSEMENT OF EQUITY (F) 0.00 0,00

REIMBURSEMENT OF LONG TERM DEBT (G) 801,502,226.90 747,969,275.70

CAPITALIZED COSTS (H) 0.00 0.00

TOTAL (II) STABLE USES (E+F+G+H) 4,266,844,766.65 3,114,867,690.69

III - CHANGE IN NET FINANCING SHORTFALL 0.00 434,948,624.49 0.00 249,689,390.96

IV - CHANGE IN CASH AND CASH EQUIVALENTS 123,945,915.26 0.00 0.00 531,632,783.49

TOTAL 4,390,790,681.91 4,390,790,681.91 3,114,867,690.69 3,114,867,690.69

(*) reclassification of advances and prepaids from 3411 account to 2397 account reclassification of cables and spare parts.

172 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

ADDITIONAL DISCLOSURES

ACCOUNTING POLICIES

The company’s financial statements have been prepared in Whenever necessary, an additional provision is recorded for accordance with generally accepted accounting principles, technical obsolescence, reduction in the estimated useful life and in particular with principles related to historical cost, or impairment of the asset. independence, conservatism, consistency of methods and no Assets which have not yet been brought into service are offsetting. recorded as work-in-progress.

Property, plant and equipment and intangible assets Financial assets The assets transferred by the Moroccan government on Non-consolidated investments are reported at their February 26, 1998, to set up Maroc Telecom as a public operator, were recorded as a net amount in the opening acquisition value. A provision for impairment is recorded statement of financial position, which was approved by : whenever the carrying value is higher than the value in use. The provision is determined based on the Group’s • the Postal Services and Information Technology Act N° 24- proportionate share in the equity of the non-consolidated 96 and, investment, which is adjusted, where appropriate, to account • the joint order no. 341-98 of the Telecommunications for the company’s growth and earnings outlook. Minister and Minister of Finance, Commerce and Industry, Other financial assets, which include receivables, loans and approving the inventory of assets transferred to Maroc deposits, are recorded on the basis of their nominal value, with Telecom group. provisions recorded, where appropriate, for collection risk. Assets acquired subsequently are recorded at their acquisition or production cost, which for networks essentially comprises design and planning costs, construction costs, site Inventories development cost, network rollout costs, customs duties and Inventories consist of : internal costs related to network development. • mobile and fixed-line telephones and accessories held for Financial expenses corresponding to interest payments on sale to customers upon line activation loans to finance the production of property, plant and equipment are not included in production costs during the • technical equipment required for network rollout and construction period. maintenance other than cable and spare parts. Network maintenance charges are expensed. Inventories of mobile and fixed-line telephones and accessories are accounted for using the first-in, first-out Assets are depreciated in a consistent way according to their method and a provision for impairment is recorded for both the nature (intangible vs. tangible) and their use (e.g. transmission, risk of obsolescence and excess inventory. network equipment). Depreciation and amortization is calculated using the straight- Technical equipment inventories are measured at their average line method over the estimated useful lives of the assets, acquisition cost (including customs duties and other costs) and which are as follows : are written down based on their value in use or obsolescence. . Intangible assets : 4 to 5 years except goodwill (no amortization) Accounts receivable . Property, plant and equipment : Accounts receivable are reported at nominal value. . Buildings 20 years . Civil engineering 15 years • Trade receivables: Impairment provisions are recorded to . Network equipment : cover collection risk, which is estimated based on the age of the receivable. - Transmission (Mobile) 8 years - Switching 8 years • Government receivables: Provisions are recorded to cover - Transmission (Fixed-line) 10 years the risk of the Moroccan government not recognizing these . Other plant and equipment receivables. These provisions are evaluated statistically. . Furniture and fittings 10 years • Other receivables: Where appropriate, other receivables are . Computer equipment 5 years provisioned in line with the estimated collection risk. . Office equipment 10 years . Transportation equipment 5 years

Document de référence 2005 - Maroc Telecom 173 Accruals (assets) Revenues This caption mainly includes prepaid expenses. Revenues are recorded on the basis of consumption by subscribers and customers at the end of the period, excluding revenues from cancelled customers, and are net of customer Cash and investment securities acquisition and loyalty costs. Cash and investment securities are made up of immediately Sales of goods and services are related to outgoing and available liquid assets and short-term investments, and are ingoing communications at the time they take place recognized at cost. (communication and access charges). Subscription fees are recognized every month in advance under deferred income on the statement of financial position, then reported in revenues Regulated provisions for the period. For prepaid services, revenues are recognized Regulated provisions comprise : as and when consumption takes place.

• provisions for employee housing They also include revenues from advertisements in paper and electronic telephone directories, which are recognized when • provision for investments in capital goods and machinery, the advertisements are published. in accordance with the fiscal regulations at the end of the year. Sales of merchandise relate to revenues from handset sales, which are recognized at the time of delivery or line activation. Provisions for contingent liabilities Customer acquisition and loyalty costs include discounts to new customers and promotions (free airtime granted to new These include other-than-temporary provisions for contingent customers). Discounts on mobile phones are deducted from liabilities and other provisions for contingent liabilities. revenues at the time the mobiles are delivered to the customer Other-than-temporary provisions for liabilities and charges or the distributor. Discounts granted to distributors as correspond to provisions related to translation adjustments and remuneration for services rendered are mainly recognized in life annuities. revenues at the time of delivery. Other provisions for contingent liabilities include provisions for reorganization and loyalty programs, and provisions to cover liabilities or litigation outstanding at period end. These provisions Other income are evaluated on the basis of the state of procedures underway Other income from operations include : and estimated risks at period end. • Expense transfers xxx transferts de charges xxx (mainly No provision for pension and post-retirement benefits has been telecommunication costs specific to IAM, recognized under recorded in the consolidated financial statements as pension Other operating expenses) expenses are covered by statutory pension plans set up for • Reversal of operating provisions (provisions for impairment employees in Morocco. of inventories and provisions for liabilities and charges).

Accruals (liabilities) Other expenses That item mainly contains deferred income concerning Aside from rental expenses, maintenance charges, advertising prepaid subscriptions and unused prepaid minutes sold. expenses and general expenses, other expenses include:

• ANRT royalties related to frequency assignment in Payables and debts in foreign currencies compliance with act 24-96 order 310-98 of February 25, 1998 Payables in foreign currencies are translated into the reporting currency using the exchange rate at the transaction date. At • costs related to the universal service obligation in period end, payables and debts on foreign currency are accordance with act 24-96 and order 2.00.1333 of October translated using the exchange rate at the closing date, and the 9, 2000 unrealized gain or loss is entered on the statement of financial • costs related to research, training and telecommunication position under ‘Accruals’ (assets or liabilities). Unrealized standardization in accordance with act 24-96 and order losses are accrued in full. 2.00.1333 of October 9, 2000.

174 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

Financial instruments

Maroc Telecom does not use financial instruments or currency hedges.

Document de référence 2005 - Maroc Telecom 175 A1 : MAIN VALUATION METHODS USED BY THE COMPANY

VALUATION METHODS USED BY THE COMPANY YEAR ENDED December 31, 2005

I- FIXED ASSETS A. ENTRY VALUATION 1. Capitalized costs 2. Intangible assets 3. Property, plant ane equipment 4. Financial assets B. VALUE ADJUSTMENTS 1. Depreciation methods 2. Methods used to calculate provisions for depreciation 3. Methods used to calculate unrealized foreign exchange losses

II- CURRENT ASSETS A. ENTRY VALUATION 1. Inventories 2. Receivables 3. Investment securities B. VALUE ADJUSTMENTS SEE NOTES TO FINANCIAL 1. Methods used to calculate provisions for depreciation 2. Methods used to calculate unrealized foreign exchange losses STATEMENTS

III- EQUITY AND LONG TERM LIABILITIES 1. Revaluation methods 2. Methods used to calculate regulated provisions 3. Long term debt 4. Methods used to calculate provisions for contingencies and losses 5. Methods used to calculate unrealized foreign exchange gains

IV- CURRENT LIABILITIES (excluding bank overdrafts) 1. Revaluation methods 2. Methods used to calculate provisions for contingencies and liabilities 3. Methods used to calculate unrealized foreign exchange gains

V- CASH AND CASH EQUIVALENTS 1. Cash 2. Bank overdrafts 3. Methods used to calculate provisions for depreciation

A2 : EXCEPTIONS

YEAR ENDED December 31, 2005

JUSTIFICATION EFFECT OF EXCEPTIONS TYPE OF EXCEPTION OF EXCEPTION ON ASSETS AND LIABILITIES, FINANCIAL POSITION AND NET INCOME

I- EXCEPTIONS FROM ACCOUNTING PRINCIPLES NONE NONE

II- EXCEPTIONS FROM VALUATION METHODS NONE NONE

III- EXCEPTIONS FROM PREPARATION AND PRESENTATION RULES FOR SELECTED DATA NONE NONE

176 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

A3 : CHANGES IN METHODS

YEAR ENDED December 31, 2005

JUSTIFICATION EFFECT OF EXCEPTIONS DESCRIPTION OF CHANGES OF CHANGES ON ASSETS AND LIABILITIES, FINANCIAL POSITION AND NET INCOME

Changes affecting valuation methods

- Change of depreciation periods This change generated a cost of MAD 133 million as of December 31, 2005.

Changes affecting presentation rules

- Reclassification of cables from inventory to assets MAD 147 million - Reclassification of spare parts from inventory to assets MAD 119 million

B1 : CAPITALIZED COSTS

YEAR ENDED December 31, 2005

MAIN ACCOUNT HEADING AMOUNT

2110 Start up costs NONE

2116 Prospecting costs NONE

2118 Other start up costs NONE

2120 Deferred costs NONE

TOTAL NONE

Document de référence 2005 - Maroc Telecom 177 B2 : NON-FINANCIAL ASSETS

YEAR ENDED December 31, 2005 (in MAD) INCREASE DECREASE GROSS BALANCE Self-constructed GROSS BALANCE DESCRIPTION CARRIED FORWARD Acquisition assets Wire transfer Disposal Withdrawal Wire transfer YEAR END

CAPITALIZED COSTS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

. Start up costs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 . Deferred costs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

. Bond redemption premiums 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

INTANGIBLE ASSETS 1,468,054,409.94 83,304,156.31 0.00 2,958,764,088.56 0.00 0.00 1,798,411,019.23 2,711,711,635.58

. Research and development costs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

. Patents, bonds, rights 389,030,180.45 0.00 0.00 2,195,086,698.43 0.00 0.00 0.00 2,584,116,878.88 and related rights . Goodwill 18,799,600.00 0.00 0.00 507,500.00 0.00 0.00 0.00 19,307,100.00 . Other intangible assets 1,060,224,629.49 83,304,156.31 0.00 763,169,890.13 0.00 0.00 1,798,411,019.23 108,287,656.70

PROPERTY, PLANT 27,696,471,876.51 2,893,196,294.12 9,710,308.00 2,117,267,892.99 22,503,743.54 4,329,641.77 2,813,853,775.27 29,875,959,211.04 AND EQUIPMENT . Land 923,206,429.16 0.00 0.00 33,070,509.50 0.00 0.00 0.00 956,276,938.66 . Buildings 3,635,407,198.04 0.00 0.00 39,439,141.30 0.00 0.00 0.00 3,674,846,339.34 . Plant and machinery 19,011,722,267.98 0.00 0.00 1,510,473,893.70 17,257,433.04 0.00 755,294,334.54 19,749,644,394.10

. Vehicles 80,985,363.42 0.00 0.00 1,410,078.74 4,286,010.76 0.00 0.00 78,109,431.40 . Furniture and fittings 1,942,344,843.03 0.00 0.00 188,318,790.09 960,299.74 0.00 0.00 2,129,703,333.38

. Other property, plant 11,047,827.04 0.00 0.00 0.00 0.00 0.00 0.00 11,047,827.04 and equipment . Work in progress 2,091,757,947.84 2,893,196,294.12 9,710,308.00 344,555,479.66 0.00 4,329,641.77 2,058,559,440.73 3,276,330,947.12

178 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

B2 Cont. : DEPRECIATION SCHEDULE

YEAR ENDED December 31, 2005 (in MAD)

OPENING ALLOWANCE DEPRECIATION OF ACCUMULATED DESCRIPTION BALANCE OF THE YEAR DISPOSED ASSETS DEPRECIATION YEAR END

CAPITALIZED COSTS 0.00 0.00 0.00 0.00 * Start up costs 0.00 0.00 0.00 0.00 * Deferred costs 0.00 0.00 0.00 0.00 * Bond redemption premiums

INTANGIBLE ASSETS 804,381,786.03 759,332,847.63 0.00 1,563,714,633.66

* Research and development costs 0.00 0.00 0.00 0.00 * Patents, bonds, rights and related rights 170,260,393.88 1,378,775,422.68 0.00 1,549,035,816.56 * Goodwill 10,845,761.48 3,833,055.62 0.00 14,678,817.10 * Other intangible assets 623,275,630.67 -623,275,630.67 0.00 0.00

PROPERTY, PLANT AND EQUIPMENT 15,783,682,683.66 1,810,450,190.46 22,423,743.54 17,571,709,130.58

* Land 0.00 0.00 0.00 0.00 * Buildings 1,894,759,312.63 252,264,057.25 0.00 2,147,023,369.88 * Plant and machinery 12,607,835,425.99 1,311,502,100.52 17,238,215.31 13,902,099,311.20 * Vehicles 69,111,272.54 6,076,188.89 4,284,892.19 70,902,569.24 * Furniture and fittings 1,211,976,672.50 240,607,843.80 900,636.04 1,451,683,880.26 * Other property, plant and equipment 0.00 0.00 0.00 0.00 * Work in progress 0.00 0.00 0.00 0.00

O/W extraordinary allowances :

- Asset retirements 18 Mdh - Delayed placing in service 55 Mdh - Catching up of spare parts 27 Mdh - Change of depreciation period 133 Mdh Total 233 Mdh

B3 : GAINS OR LOSSES ON DISPOSALS OR WITHDRAWALS OF FIXED ASSETS

YEAR ENDED December 31, 2005 (in MAD)

Disposal or Main Gross Accumulated Net book Proceeds from Gains Losses withdrawal date account amount depreciation value disposal of assets

2005 251 43,496,762.66 0.00 43,496,762.66 60,015,727.80 16,518,965.14

2005 233 17,257,433.04 17,238,215.31 19,217.73 440,215.14 420,997.41

2005 234 4,286,010.76 4,284,892.19 1,118.57 1,378,284.00 1,377,165.43

2005 235 960,299.74 900,636.04 59,663.70 15,221.46 44,442.24

TOTAL 66,000,506.20 22,423,743.54 43,576,762.66 61,849,448.40 18,317,127.98 44,442.24

Document de référence 2005 - Maroc Telecom 179 B4 : EQUITY INVESTMENTS

YEAR ENDED December 31, 05 In MAD million % Derived from latest selected Business Share Interest in Overall Net financial data of issuer company Income segment capital share capital acquisition book recorded in price value Closing Net Net Income date equity income Statement 123456789

MATELCA Study and realization of submarines cables 300 50 50 0 Dec. 31, 05 - ARABSAT Operation and commercialization of telecommunication systems 5,094,637 0,61 6,454 6,454 Dec. 31, 05 - ADM Building and operation of Moroccan road network 3,467,629 0,57 20,000 0 Dec. 31, 05 - THURAYA Regional satellite operator 4,610,850 0,20 9,872 9,872 Dec. 31, 05 - CASA@NET Internet Service Provider 14,414 100,00 18,174 18,174 Dec. 31, 05 - CMC Financial Holding 396,546 80 399,469 380,469 Dec. 31, 05 9 553 FONDS AMORCAGE "capital- amorçage " fund SINDIBAD 27,230 10 2,836 0 Dec. 31, 05 - GAM Exclusive distributor of MT products and services 12,769 35 10,769 10,769 Dec. 31, 05 - Médi1 sat Media ( company) 46,223 25 11,565 11,565 Dec. 31, 05 - TOTAL 479,189 437,303 9,553

B5 : PROVISIONS

YEAR ENDED December 31, 2005 (in MAD)

DESCRIPTION Opening Allowances Write-backs Closing balance operating financial extraordinary (*) operating financial extraordinary (*) balance

1- Provisions for depreciation of inventories 391,907,619.25 0.00 1,406,200.00 353,819,252.38 0.00 18,173,800.00 224,457,363.42 504,501,908.21 2-Regulated provisions 265,331,741.39 0.00 0.00 0.00 0.00 0.00 265,331,741.39 0.00 3-Provisions for contingencies and losses 29,077,265.67 0.00 2,802,284.12 0.00 821,060.43 3,573,710.01 0.00 27,484,779.35 SOUS TOTAL (A) 686,316,626.31 0.00 4,208,484.12 353,819,252.38 821,060.43 21,747,510.01 489,789,104.81 531,986,687.56 4-Provisions for depreciation of current assets 3,919,059,855.48 297,070,004.29 0.00 0.00 167,401,332.43 0.00 0.00 4,048,728,527.34 (excluding cash and cash equivalents) 5-Other contingencies and loss provisions 551,675,152.01 134,697,744.21 97,935,884.66 6,200,000.00 90,977,092.99 78,825,087.02 160,500,000.00 460,206,600.87 6-Provisions for depreciation of cash and cash equivalents 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 SOUS TOTAL (B) 4,470,735,007.49 431,767,748.50 97,935,884.66 6,200,000.00 258,378,425.42 78,825,087.02 160,500,000.00 4,508,935,128.21 TOTAL (A+B) 5,157,051,633.80 431,767,748.50 102,144,368.78 360,019,252.38 259,199,485.85 100,572,597.03 650,289,104.81 5,040,921,815.77

( * ) of which: ( * ) of which: Amortization MAD m 39 Depreciation of inventory class 2 MAD m 111 Spare parts MAD m 22 Delayed placing in service of work in progress MAD m 243 Delayed placing in service of work in progress MAD m 164 Total MAD m 354 MAD m 225

180 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

B6 : RECEIVABLES

YEAR ENDED December 31, 2005 (in MAD)

RECEIVABLES TOTAL BREAKDOWN BY MATURITY OTHER BREAKDOWN Due in more Due in less Matured Amounts in Amounts due: Amounts due: Amounts than one year than one year but foreign Government & related in notes not recovered currency social security parties FIXED ASSETS 82,067,514.86 70,601,735.56 11,465,779.30 0.00 Long term loans 80,100,880.63 68,635,101.33 11,465,779.30 Other financial receivables 1,966,634.23 1,966,634.23 0.00

CURRENT ASSETS 10,771,466,324.47 51,415,382.64 5,953,418,972.76 4,766,631,969.07 0.00 1,819,743,305.29 . Trade accounts receivable, prepaids 49,675,633.94 49,675,633.94 . Trade accounts and notes receivable 9,856,252,472.52 5,133,137,824.84 4,723,114,647.68 1,284,738,947.87 . Employees 13,634,140.50 9,514,203.19 4,119,937.31 . Tax payable 535,004,357.42 535,004,357.42 535,004,357.42 . Shareholders' current accounts 0.00 0.00 . Other payables 69,570,941.62 30,173,557.54 39,397,384.08 . Accruals and deferred income 247,328,778.47 51,415,382.64 195,913,395.83

B7 : LIABILITIES YEAR ENDED December 31, 2005 (in MAD)

LIABILITIES TOTAL BREAKDOWN BY MATURITY OTHER BREAKDOWN Due in more Due in less Matured Amounts in Amounts due: Amounts due: Amounts than one year than one year but foreign Government & related in notes not recovered currency social security parties LONG TERM LIABILITIES 11,370,738.52 898,768.52 10,471,970.00 . Debenture bonds . Other long term debt 11,370,738.52 898,768.52 10,471,970.00

CURRENT LIABILITIES 8,955,489,859.96 8,918,613,140.78 36,876,719.18 2,324,952,602.01 115,187,066.13 . Trade payables and related accounts 4,891,925,001.50 4,891,925,001.50 115,187,066.13 . Accounts payable, prepaids 89,697,423.00 89,697,423.00 . Employees 493,067,236.61 493,067,236.61 . Social security 53,919,748.64 53,919,748.64 . Tax payable 2,324,952,602.01 2,324,952,602.01 2,324,952,602.01 . Shareholders' current accounts 300.00 300.00 . Other payables 396,564,067.35 359,687,348.17 36,876,719.18 . Accruals and deferred income 705,363,480.85 705,363,480.85

B8 : GUARANTEES GIVEN OR RECEIVED

YEAR ENDED December 31, 2005 (in MAD)

Amount covered Description Date and place Purpose Net book value THIRD PARTIES by guarantee (1) of registration (2) (3) of the guarantee given at closing date

. Guarantees given

. Guarantees received Guarantees received are Long term loans 80,100,880.63 (1) from employees

(1) (1) Collateral 1- mortgage 2- Pledge 3- Warrant 4- Others : 5- Specify (2) State if the guarantee is given to a company(ies) or to a person(s) (guarantees given) (related parties, associates, employees) (3) State if the guarantee is received from a person other than the debtor (guarantees received)

Document de référence 2005 - Maroc Telecom 181 B9 : FINANCIAL COMMITMENTS RECEIVED OR GIVEN EXCLUDING LEASING TRANSACTIONS

YEAR ENDED December 31, 2005 (in MAD)

Amounts Amounts COMMITMENTS GIVEN Year end Previous year

- Investments not yet realized * Investment commitment 0.00 2,804,675,999.90 * Property, plant and equipment 562,711,679.20 0.00

562,711,679.20 2,804,675,999.90

- Guarantees from banks * Documentary credit 175,288,320.80 158,611,828.89 * Endorsements 60,842,111.00 65,375,911.00 * Guarantees 0.00 0.00

236,130,431.80 223,987,739.89

- Equity investments * Fonds Amorçage SINDIBAD 2,163,600.00 3,569,800.00 * Médi 1 Sat (capital increase) 34,464,150.00 0.00 * Médi 1 Sat ( quasi capital) 30,634,800.00

67,262,550.00 3,569,800.00

- Partenership commitment with ASSOCIATION FORUM DE CASABLANCA 12,000,000.00

12,000,000.00 0.00

- Commitment for simple rent (*) 9,013,820.11

TOTAL 887,118,481.11 3,032,233,539.79

(*) 3 to 10 year rent contract with tacit renewal. The amount indicated is related to one month notice.

Amounts Amounts COMMITMENTS RECEIVED Year end Previous year

. Endorsements and guarantees 688,217,822.13 572,916,163.66 . Other commitments received . Commitment by the Moroccan Government to social welfare . Commitment on payment of arrears by the Moroccan Government . Commitment on the sale of 16% of its capital by GAM . Commitments on loans by the Moroccan Government 11,370,738.52 693,814,963.20

TOTAL 699,588,560.65 1,266,731,126.86

B10 : ASSETS LEASED

YEAR ENDED December 31, 2005

Items Date of Duration Est. value Theoretical Accumulated Installments Installments Residual Comments first of contract of asset asset installments of outstanding price installment in months at date depreciation current less than more than at end of of contract period year one year one year contract ( 1) ( 2) ( 3) ( 4) ( 5) ( 6) ( 7) ( 8) ( 9) ( 10) ( 11)

VOID VOID

182 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

B11 : INCOME STATEMENT ACCOUNTS

Fiscal year from 1/1/05 to 31/12/05 (in MAD)

Account CURRENT YEAR 2005 PREVIOUS YEAR 2004

OPERATING REVENUES 19,882,076,745.41 17,656,644,060.32 711 . Sales of goods . Sales of goods in Morocco 954,215,435.91 609,804,417.28 . Sales of goods abroad 0.00 0.00 . Other sales of goods

Total 954,215,435.91 609,804,417.28

712 . Sales of manufactured goods and services rendered . Sales of manufactured goods in Morocco . Sales of manufactured goods abroad . Sales of rendered services in Morocco 18,355,381,817.12 16,154,812,522.50 . Sales of rendered services abroad . Royalties for patents, brands, rights… . Other sales of manufactured goods and services rendered 0.00 0.00

Total 18,355,381,817.12 16,154,812,522.50

713 Change in inventories 0.00 0.00 . Change in manufactured goods inventory (+/-) 0.00 0.00 . Change in rendered services inventory (+/-) 0.00 0.00 . Change in product inventory WIP (+/-) 0.00 0.00

Total 0.00 0.00

714/718 Other operating revenues . Directors' fees received 0.00 0.00 . Rest of line item (other revenues) 33,848,686.53 132,433,885.51

Total 33,848,686.53 132,433,885.51

719 Operating write-backs, expense transfers . Recoveries 259,199,485.85 496,655,944.85 . Expense transfers 279,431,320.00 262,937,290.18

Total 538,630,805.85 759,593,235.03

FINANCIAL REVENUES 738 . Interest and other financial income . Interest and similar income 63,368,015.76 190,726,918.37 . Revenues from receivables from controlled entities 0.00 0.00 . Net revenues from disposal of marketable securities 76,391,215.13 11,874,883.07 . Other interest and financial income 3,092,588.83 739,800.99

Total 142,851,819.72 203,341,602.43

Document de référence 2005 - Maroc Telecom 183 B11 : INCOME STATEMENT ACCOUNTS

Fiscal year from 1/1/05 to 31/12/05 (in MAD)

Account CURRENT YEAR 2005 PREVIOUS YEAR 2004

OPERATING EXPENSES 611 Cost of goods sold . Cost of goods 1,708,732,820.96 1,339,335,865.95 . Change in inventory (+/-) 108,980,717.76 -145,656,127.58 Total 1,817,713,538.72 1,193,679,738.37

612 Raw materials and supplies . Raw materials 0.00 0.00 . Change in raw materials inventory . Supplies and packaging 208,403,081.02 486,075,412.09 . Change in supplies and packaging inventory (+/-) -6,165,074.04 81,621,036.32 . Cost of materials and supplies not stocked 145,950,604.86 138,756,099.51 . Cost of works, studies and services 1,715,327,694.34 1,481,421,475.37 Total 2,063,516,306.18 2,187,874,023.29

613/614 Other external expenses . Rent and rental expenses 243,243,212.69 216,032,144.16 . Leasing installments 0.00 0.00 . Maintenance and repair 452,493,899.99 384,977,297.22 . Insurance premiums 31,445,356.69 13,859,204.98 . Payments for external staff 42,922,422.31 25,064,537.08 . Payments for intermediaries and fees 222,518,215.83 213,800,274.70 . Royalties for patents, brand names, rights… 366,003,145.31 139,444,560.53 . Transportation 6,771,640.97 14,217,279.84 . Travel and entertainment expenses 53,506,584.74 52,429,241.66 . Other external expenses 826,793,010.37 715,181,675.61 Total 2,245,697,488.90 1,775,006,215.78

617 Payroll and payroll-related costs . Payroll 1,724,380,186.52 1,397,124,577.81 . Social security 221,608,107.31 195,873,216.89 . Other payroll-related costs 37,877.53 11,515,011.27 Total 1,946,026,171.36 1,604,512,805.97

618 Other operating expenses . Director's fees 0.00 0.00 . Losses on uncollectible receivables 0.00 0.00 . Other operating expenses 0.00 0.00 Total 0.00 0.00

638 FINANCIAL EXPENSES Other financial expenses 0.00 0.00 . Net losses on diposal of marketable securities 0.00 0.00 . Other financial expenses 0.00 53.50 Total 0.00 53.50

658 EXTRAORDINARY EXPENSES . Other extraordinary expenses 472,691,741.68 5,333,632.15 . Contract cancallation payments and forfeiture of deposit 0.00 0.00 . Paid back taxes (other than income tax) 0.00 0.00 . Penalities and tax fines 3,830,223.70 1,474,982.05 . Uncollectible receivables 0.00 0.00 . Other extraordinary expenses 7,539,390.74 70,947,595.68 Total 484,061,356.12 77,756,209.88

184 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

B12 : RECONCILIATION OF NET INCOME AND TAX INCOME

YEAR ENDED December 31, 2005 (in MAD)

TITLE AMOUNT AMOUNT

I NET INCOME . Net profit 5,871,899,950.67 . Net loss

II TAX ADJUSTMENTS TO ADD 3,340,081,668.58 1. Recurring 2,788,710,881.68 - Income tax 2005 2,781,171,490.94 - Prior period expenses 7,539,390.74

2. Non-recurring 551,370,786.90 - Provisions & amortization 389,084,882.62 - Amortization exceeding 200,000 Moroccan dirhams 540,184.54 - Unrealized foreign exchange gains 2005 155,139,959.71 - Tax penalities 3,830,223.70 - Gifts exceeding 100 Moroccan dirhams per unit 2,513,236.33 - Grants in cash or in kind 262,300.00

III TAX DEDUCTIONS 655,669,883.47 1. Recurring 14,607,356.29 - Allowance on capital gains 5,053,913.92 - Revenues from equity interests 9,553,442.37

2. Non-recurring 641,062,527.18 - Unrealized foreign exchange losses 2003 146,381,029.52 - Provisions & amortization 229,349,756.27 - Reversal of provision for restructuring 265,331,741.39

TOTAL 3,340,081,668.58 655,669,883.47

IV GROSS TAX INCOME - Gross profit 8,556,311,735.78 - Gross tax loss

V LOSS CARRIED OVER 0.00

VI TAX INCOME - Net tax profit 8,556,311,735.78 - Net tax loss

Exemption of 50% of export revenues 213,537,616.59

* CORPORATE INCOME TAX 2,781,171,490.94

Document de référence 2005 - Maroc Telecom 185 B13 : DETERMINATION OF ORDINARY INCOME AFTER TAX

YEAR ENDED December 31, 2005 (in MAD)

I DETERMINATION OF INCOME AMOUNT

Ordinary income from income statement (+) 8,967,659,824.02 Add-backs on recurring operations 7,539,390.74 Deduction of current operations 14,607,356.29

Ordinary income theoretically taxable (=) 8,960,591,858.47

Theoritical tax on ordinary income ( - ) 3,136,207,150.46 Exemption of 50% on export revenues -223,627,129.04

Ordinary income after tax (=) 6,055,079,802.60

II - INDICATION OF THE TAX STATUS AND ADVANTAGES GRANTED

IAM has an income tax exemption on 50% of its international revenues

BY THE INVESTMENT CODES OR BY SPECIFIC LEGAL REGULATIONS

B14 : VALUE ADDED TAX

YEAR ENDED December 31, 2005 (in MAD)

Opening Operations VAT returns Closing DESCRIPTION balance balance 1 2 3 (1+2-3)

A / Invoiced VAT 1,773,947,483.62 3,215,197,126.41 3,002,017,913.14 1,987,126,696.89

B / Recoverable VAT 340,882,060.22 1,162,095,577.20 1,069,360,577.36 433,617,060.06

* On expenses 227,967,876.80 925,212,900.99 872,700,600.57 280,480,177.22 * On assets 112,914,183.42 236,882,676.21 196,659,976.79 153,136,882.84

C / VAT PAYABLE (VAT CREDIT) 1,433,065,423.40 2,053,101,549.21 1,932,657,335.78 1,553,509,636.83 VAT = (A-B)

186 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

C1 : SHAREHOLDING STRUCTURE

At 31/12/2005

Surname, first name or Address Stocks held Par value Capital amount (in MAD) business name of Previous Current of each stock Subscribed Called Fully paid main shareholders(1) year year or share 1 2345678

1°/ Kingdom of Morocco represented by 440,426,710 299,771,480 10,00 2,997,714,800.00 2,997,714,800.00 2,997,714,800.00 Mr. , Minister of the Economy, Finance and Privatization

2°/ Société de Participation dans les Télécom- 307,683,330 448,338,570 10.00 4,483,385,700.00 4,483,385,700.00 4,483,385,700.00 munications represented by Mr. Jean Bernard Levy

3°/ Mr. Fathallah Oualalou 10 10 10.00 100.00 100.00 100.00

4°/ Mr. Jean Bernard levy 10 10 10.00 100.00 100.00 100.00

5°/ Mr. El Mostafa Sahel 10 10 10.00 100.00 100.00 100.00

6°/ Mr. Rachid Talbi El Alami 10 0 10.00 0.00 0.00 0.00

7°/ Mr. Abderrazak El Mossadeq 10 0 10.00 0.00 0.00 0.00

8°/ Mr. Rachid Belmokhtar 10 0 10.00 0.00 0.00 0.00

9°/ Mr. Jacques Paul Espinasse 10 10 10.00 100.00 100.00 100.00

10°/ Mr. Robert de Metz 10 10 10.00 100.00 100.00 100.00

11°/ Mrs. Françoise Colloc'H 10 10 10.00 100.00 100.00 100.00

12°/ Mr. Franck Esser 0 10 10.00 100.00 100.00 100.00

13°/ Mr. Jean-Rene Fourtou 0 10 10.00 100.00 100.00 100.00

14°/ Other shareholders 130,985,210 130,985,210 10.00 1,309,852,100 1,309,852,100 1,309,852,100

(1) If the number of shareholders is less than or equal to 10, the company should list all the shareholders. Otherwise, the company may list only the 10 major shareholders.

C2 : APPROPRIATION OF YEAR-END INCOME

At 31/12/2005 (in MAD)

AMOUNT AMOUNT

A. ORIGIN OF INCOME B. NET INCOME APPROPRIATION (Decision of April 8, 2005)

. Statutory reserve 228,289,821.02 . Retained earnings as at December 31, 2004 0.00 . Other reserve 1,104,706,968.79 . Net income to be allocated 0.00 . Directors' profit sharing 0.00 . Net income of year 5,728,473,489.81 . Dividends 4,395,476,700.00 . Retained reserves (*) 0.00 . Other allocations 0.00 . Other reserves 0.00 . Retained earnings 0.00

TOTAL A 5,728,473,489.81 TOTAL B 5,728,473,489.81

Document de référence 2005 - Maroc Telecom 187 C3 : INCOME AND OTHER SIGNIFICANT CHARACTERISTICS OF COMPANY OVER THE LAST THREE YEARS

(in MAD)

DESCRIPTION YEAR YEAR YEAR 2003 2004 2005

NET EQUITY OF THE COMPANY Shareholders' equity and quasi equity 17,203,334,933.86 17,123,582,747.06 18,334,674,256.34 less capitalized costs

OPERATIONS AND INCOME FROM PERIOD

Revenues excluding tax 15,220,400,640.05 16,764,616,939.78 19,309,597,253.03 Income before tax 6,023,707,734.57 8,245,804,875.29 8,653,071,441.61 Income tax 2,021,196,008.63 2,517,331,385.48 2,781,171,490.94 Dividends (including directors' profit sharing) from previous year 2,500,000,000.00 5,123,557,418.00 4,395,476,700.00

Unappropriated income 1,187,513,250.59 1,252,511,725.94 1,332,996,789.81 (reserves or to be allocated)

EARNINGS PER SHARE Earnings per share for period 45.53 6.52 6.68 (*) Dividends per share of previous period (*) 28.44 58.28 5.00

(*) The nominal value decreased from MAD 100 in 2003 to MAD 10 in 2004.

188 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

C4 : TRANSACTIONS IN FOREIGN CURRENCIES DURING THE PERIOD

As of 31/12/2005 (in MAD)

DESCRIPTION Entry Out-going Exchange value Exchange value

. Permanent financing . Gross assets 1,498,537,711.23 . Inflow of assets . Repayment of long term debt 748,901,808.95 . Dividends

. Revenues 2,786,451,523.65

. Expenses 1,642,814,023.58

TOTAL IN-FLOWS 2,786,451,523.65 TOTAL OUT-FLOWS 3,890,253,543.77 FOREIGN CURRENCY BALANCE 1,103,802,020.12 TOTAL 3,890,253,543.77 3,890,253,543.77

C5 : DATE OF FINANCIAL STATEMENTS AND SUBSEQUENT EVENTS

I. DATATION

. Closing date (1) 31/12/2005 . Date of the financial statements (2) 16/01/2006

(1) Proof in case of change in closing date

(2) Proof in case regulated delay of three months is extended forecast for preparation of the financial statements

II. II. EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS RELATED TO THIS PERIOD AND KNOWN BEFORE THE FIRST RELEASE OF THE FINANCIAL STATEMENTS

Dates Indication of event

NONE

Document de référence 2005 - Maroc Telecom 189 REPORT OF THE MANAGEMENT BOARD TO THE SHAREHOLDERS’ MEETING OF MARCH 30, 2006

In accordance with article 141 of act 17-95 of August 30, 1996 the early repayment of two foreign-currency loans for a total and with the agenda that has been communicated to you, we of MAD 674 million. are honored to present the report of the Management Board On the regulatory side, 2005 saw the award of two new fixed- of Itissalat Al-Maghrib (‘Maroc Telecom’), with the aim of line telecommunications licenses, the modification of the presenting the company’s business activity and financial implementing decrees for act 24-96 and clarifications results for 2005, submitting for your approval the financial concerning the timetable of liberalization in the telecoms statements for the period ended December 31, 2005, and sector : submitting to you a proposal to reduce the share capital by reducing the nominal share value and by making a cash • On February 24, 2005, ANRT launched a new invitation to distribution. tender for fixed-line telephone licenses, with a view to awarding licenses for domestic, international and local loop services. Two new licenses were attributed to Médi Telecom 2005 HIGHLIGHTS and Maroc Connect in July and September 2005. According to the latest estimates, Morocco’s real GDP growth • Decrees relating to interconnection and to the general terms was 1.6% in 2005, despite unfavorable weather conditions. of operation of the public telephony networks were revised The 16% decline in value added by the agriculture industry and supplemented, respectively, by decrees 2-05-770 and 2- was offset by strong impetus in mining and energy, 05-771 of July 13, 2005. These two decrees, as well as a construction, tourism and telecommunications. Excluding new decree 2-05-772 of July 13, 2005 relating to ANRT’s agriculture, GDP grew by 4.4%. new powers of monitoring compliance with the law on the freedom of pricing and competition, were published in the By developing innovative solutions that meet customer Bulletin Officiel no. 5336 dated July 21, 2005. expectations and by using state-of-the-art technology, Maroc • On December 23, 2005 the ANRT’s Board of Directors Telecom has strengthened its leadership and its role in the published a timetable for forthcoming regulatory development of information and communication technologies developments : in Morocco : • Invitation to tender for the granting of 3G mobile licenses, • The Mobile segment maintained its leadership and showed with three licenses to be granted : May 2, 2006. renewed potential. Its customer base grew by more than • Carrier pre-selection: July 8, 2006. 38% to nearly 8.8 million (+2.4 million) and its market share • Partial local loop unbundling: January 8, 2007. was 66.7%(1) compared with 67.5% at December 31, 2004. • Full local loop unbundling: July 8, 2008. • The Fixed-line segment saw its subscriber base rise to more • As a result of the ANRT decision dated July 20, 2005, the than 1.341 million, up 2.4%. This growth was mainly due to 7% mobile termination tariff was reduced at September 1, the development of public telephone subscriptions (+28,000 2005. lines). • ANRT’s universal service executive committee only • The number of internet users rose sharply from 105,000 to validated MAD 201 million of the program proposed by 252,000 at December 31, 2005, up 141%, with ADSL Maroc Telecom for 2005, out of a total proposal of MAD 338 accounting for 96% of total users. million (2% of 2005 revenues), relating to mobile and ADSL In 2005, Maroc Telecom continued the implementation of access projects. Maroc Telecom will therefore be bound to various projects in areas such as human resources, pay the remaining sum of MAD 137 million to the universal information systems and finance : service fund by April 30, 2006 at the latest.

• A third voluntary redundancy plan was successfully completed with the departure of 912 employees. BUSINESS ACTIVITY • The integration of information systems continued, with the Customer base roll out of SAP and the WIAM sales system for the fixed-line business. Maroc Telecom’s main achievements in 2005 were the slight growth in its fixed-line customer base and the strong growth • Maroc Telecom’s consolidated financial statements were in its mobile and internet customer bases. prepared for the first time in compliance with IFRS.

• Maroc Telecom also continued reducing debt levels, with (1) Source: ANRT (at December 31, 2005) (2) Information received orally from ANRT

190 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

The table below shows the development of Maroc Telecom’s various customer bases :

December 31 – in thousands 2003 2004 2005 04/03 % change

Number of Mobile customers* 5,214 6,361 8,800 +38.3% Prepaid 5,005 6,105 8,472 +38.8% Postpaid** 209 256 328 +28.1%

Number of fixed-line subscribers*** 1,219 1,309 1,341 +2.4%

Number of internet customers**** 47 105 252 +140.0% o/w ADSL 360242 +303.3%

* Mobile customers include customers with prepaid cards and postpaid subscribers.

** Including “no commitment” rate plans in 2005.

*** Not including Maroc Telecom in-house lines.

**** Internet customers are IP accounts opened with Maroc Telecom (subscribers and pay-as-you-go customers).

Mobile 2005 was a year of strong growth for the mobile business : customers to benefit from the range of GPRS services free from any subscription or commitment. In 2005, the total • The customer base gained 3.4 million customers gross 2.4 number of outgoing SMS messages on the Maroc Telecom million net to reach 8.8 million, corresponding to a market network reached more than 1.1 billion against 656 million in share of 66.7%, compared with 67.5% at December 31, 2004. 2004. • Gross revenues(1) in the mobile business were almost MAD Fixed-line and Internet 12.2 billion, an increase of 29% compared with 2004. The number of fixed lines increased by 32,000 lines to 1.341 After interconnection costs and cost of sales, gross profit was million at December 31, 2005, a rise of 2.4% compared with more than MAD 9.0 billion, up 28% relative to 2004. the previous year. This was mainly due to the growth in public ARPU fell by 3.8% to MAD 119, primarily due to the increase telephony. in termination tariffs for international calls. In 2005, Maroc Telecom continued to launch innovative new Maroc Telecom continued to improve its commercial offering products such as the unlimited “Blahssab” rate plan and a and introduce new services in order to retain existing multi-line rate plan for businesses. It also reviewed its tariffs customers and attract new ones. In 2005, innovations and reduced the cost of calls for phone-shop customers. included a more comprehensive handset range, a reduction in pack prices starting at MAD 290, the introduction of MAD 50 In 2005, the company stepped up its actions to promote the cards, a broader range of rate plans with the introduction of internet use in Morocco. The reduction in ADSL tariffs and “no commitment” plans and the development of its loyalty regular promotional offers boosted the number of internet program with the remuneration of incoming traffic with loyalty users to 252,000 at December 31, 2005, 242,000 of which points. were ADSL subscribers. At December 31, 2005 the number of The churn rate was 12.2% in 2005, compared with 11.6% in ADSL lines accounted for more than 21% of fixed lines 2004, in spite of significant growth in the customer base. (excluding public telephony). Maroc Telecom remains the leading player for text messaging In 2005, Fixed-line and Internet gross revenues(1) totaled MAD (SMS) and multimedia messaging (MMS) in Morocco and 11.9 billion, up 7% compared with 2004. This growth was offers MMS and GPRS roaming to postpaid customers. In mainly due to the increase in the customer base, growth in 2005, Maroc Telecom introduced the first SMS/MMS rate incoming international traffic and the confirmed success of plans and the “GPRS Free Access” offer, which allows ADSL services, which offset the decline in ARPU.

(1) Gross revenues include intercompany transactions (including interconnection and leased lines) between Maroc Telecom’s Fixed-line and Mobile businesses.

Document de référence 2005 - Maroc Telecom 191 Human resources Maroc Telecom also participated in the MAD 1.4 million capital increase of the Sindbad investment fund. Maroc Telecom’s headcount fell by 8% to 11,178 at December 31, 2005, from 12,204 at December 31, 2004, due Maroc Telecom’s investments at December 31, 2005 can be to the completion of the third voluntary redundancy plan summarized as follows : which saw the departure of 912 employees. Company Gross investment Stake To improve operating profitability and to enhance (in thousands (%) competitiveness, Maroc Telecom launched this third of MAD) voluntary redundancy plan at the end of 2004 using incentive Compagnie Mauritanienne measures. This led to the departure of 912 employees in de Communications 399,469 80 2005, who benefited from redundancy pay, fixed at 2 months salary per year of effective service, up to a maximum of 48 Casanet 18,174 100 months. The cost of this plan is in the region of MAD 473 GSM Al Maghrib 10,769 35 million, MAD 160 million of which was provisioned in 2004. 87% of the departures concerned technical and Autoroutes du Maroc (ADM) 20,000 0.57 administrative staff, with average length of service of 26 Médi1Sat 11,565 25 years and an average age of 50. Thuraya 9,872 0.20 The human resources modernization plan, launched in 2001, created a new set of management rules based on skill Arabsat 6,454 0.61 improvement and performance recognition. This plan Sindbad Investment Fund 2,836 10 continued in 2005 with a skills management initiative, including the introduction of standards by which to evaluate Matelca 50 50 each employee’s skills and the implementation of personal development plans in order to respond to the Group’s Earnings from operations from the main subsidiaries and business needs. investments :

The company pursued its training efforts with 16,959 • Mauritel : participants benefiting from 44,469 training days. In 2005, CMC-Mauritel’s revenues increased by 19% to 24.96 Finally, Maroc Telecom signed a new agreement with unions billion Mauritanian ouguiyas (MAD 836 million), whilst earnings concerning in particular the travel allowances, reduced from operations rose by 22% to 7.95 billion Mauritanian interest rates on housing loans and the implementation of a ouguiyas (MAD 266 million). support system to help employees acquire means of • Fixed-line: the customer base amounted to 39,920 lines, up transport. 3%, whilst revenues dropped by 3% to 10.0 billion Mauritanian ouguiyas (MAD 335 million). Subsidiaries and investments • Mobile: the customer base grew sharply, by almost 41%, to more than 465,000 customers. Mobile revenues amounted In 2005, Maroc Telecom sold its stake in Intelsat for MAD 45 to 17.3 billion Mauritanian ouguiyas (MAD 581 million), up million, generating a capital gain of MAD 22 million. 28% compared with 2004. Mauritel Mobiles’ market share was estimated at around 70% at December 31, 2005. In addition, Maroc Telecom acquired a 25% stake in Medi 1 Sat which is setting up a television channel in Tangiers • Casanet : offering continuous news in Arabic and in French. In 2005, the Menara portal, which is maintained by Casanet, was the preferred point of internet access for Moroccans, with This project is financed by Moroccan and French capital. more than 290 million page views. Menara ranks 43rd Maroc Telecom is one of the Moroccan partners of this project amongst the top 100 francophone sites according to ALEXA with a investment of MAD 11.6 million, together with Caisse (Amazone.com). de Dépôt et de Gestion (CDG), Radio Méditerranée Casanet’s provisional 2005 revenues were MAD 28.8 million Internationale (RMI) and Compagnie Internationale de Radio and its provisional earnings were MAD 4 million. Télévision (CIRT). In participating in this project, Maroc Telecom intends to establish closer links with the media industry, and particularly to develop the content of its ADSL “triple play” offering.

192 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

• GSM Al Maghrib : In addition, Maroc Telecom exercised its call option with respect to Maroc Telecom acquired a 35% stake in distributor GSM Al-Magrib 16% of GSM Al-Maghrib’s capital on December 29, 2005 in 2003. The unit generated provisional revenues of MAD 1,373 increasing its stake to 51%. Maroc Telecom is also in discussions million in 2005, up by almost 23%, and provisional earnings of with the company’s other shareholder concerning the possible sale MAD 27.8 million versus a loss of MAD 0.03 million in 2004. of the latter’s stake.

Changes in the individual company financial statements and earnings The presentation rules and valuation methods used to prepare these documents comply with current regulations and generally accepted accounting principles. The table below presents a summary of changes in Maroc Telecom’s main financial indicators : in millions of Moroccan dirhams 2003 2004 2005 % Change 2005/2004

Revenue 15,220 16,765 19,310 +15.2%

Earnings from operations 6,794 7,806 8,773 +12.4%

Income tax 2,021 2,517 2,781 +10.5%

Earnings 4,003 5,729 5,872 +2.5%

Capital expenditure 1,991 2,282 2,986 +30.9%

Statement of earnings data Statement of financial position data Once again, Maroc Telecom posted excellent results. Revenue At December 31, 2005, total assets were MAD 27,944 million, amounted to MAD 19.3 billion, whilst earnings from operations compared with MAD 26,150 million a year earlier. reached MAD 8.8 billion and earnings totaled MAD 5.9 billion. • Assets • Revenue At December 31, 2005, net fixed assets amounted to MAD Maroc Telecom’s revenue for the year ended December 31, 2005, 13,512 million, representing 48% of total assets and compared amounted to MAD 19,310 million, up 15.2% compared with 2004. with MAD 12,796 million a year earlier.

• Earnings from operations and earnings Gross tangible assets increased by 8% and investments amounted to MAD 2,986 million, up 31% compared with 2004. Earnings from operations increased by 12.4% compared with Net tangible assets rose by MAD 262 million, from MAD 11,580 2004 from MAD 7,806 million to MAD 8,773 million. billion in 2004 to MAD 11,842 billion in 2005. Net financial income increased from MAD 173 million in 2004 Financial assets fell by 5% to MAD 519 million due to the sale to MAD 194 million MAD in 2005, due to favorable changes in of the stake in Intelsat. exchange rates and lower loan interest payments. Current assets were up 16% to MAD 7,159 million compared Net extraordinary items were negative at MAD 315 million, with MAD 6,156 million in 2004. The increase was mainly due mainly due to expenses linked to the voluntary redundancy to the rise in receivables, and despite a drop in inventories. plan. Accounts receivable amounted to MAD 5,920 million. Income before corporate income tax amounted to MAD 8,653 Cash, including short-term investments, remains significant million, resulting in earnings of MAD 5,872 million. despite the early repayment of two Export Development Bank of Canada (EDC) loans in a total amount of MAD 674 million. At December 31, 2005, cash amounted to MAD 7,274 million compared with MAD 7,198 million in 2004.

Document de référence 2005 - Maroc Telecom 193 • Liabilities and shareholders’ equity Taking into account 2005 earnings of MAD 5,872 million, At December 31, 2005, current liabilities represented 34% of Maroc Telecom’s net equity was MAD 18,335 million at total liabilities and were up 18% to MAD 9,571 million, mainly December 31, 2005. due to the MAD 1,407 million increase in trade accounts payable, the MAD 148 million increase in payroll costs and the Long-term debt fell by MAD 683 million to MAD 11 million, due MAD 131 million increase in unrealized foreign exchange to the early repayment of the Export Development Bank of gains. Canada (EDC) loans.

Changes in the consolidated financial statements and earnings Scope of consolidation The scope of consolidation for the Maroc Telecom group’s financial compliance with IFRS, and comparable IFRS-compliant 2004 statements includes Maroc Telecom and the following companies: figures are also prepared.

• Mauritel SA and Mauritel Mobiles, in which Maroc Telecom The impact of the transition to IFRS is relatively limited as holds a 51% stake via the holding company Compagnie Maroc Telecom already applies the accounting policies Mauritanienne de Communications (“CMC”). Since July 1, recommended by Conseil National de la Comptabilité (French 2004 – on which the Mauritanian government’s veto rights national accounting standards board), which are in expired – Mauritel has been fully consolidated in Maroc accordance with IFRS. The main impacts of the new Telecom’s financial statements. accounting framework, independent of the new presentation formats for the financial statements, thus relate to : • GSM Al Maghrib, an exclusive distributor of Maroc Telecom products and services. Maroc Telecom has owned 35% of • revenue recognition GSM Al Maghrib’s since July 8, 2003 and has accounted for • the non-amortization of goodwill with effect from January 1, it under the equity method since July 1, 2003. 2004

• Casanet, which is wholly-owned by Maroc Telecom. • the application of IAS 38 regarding intangible assets However, since the main part of Casanet’s activity, which • the application of IAS 16 regarding property, plant and concerns the maintenance of Maroc Telecom’s Menara equipment. internet portal, is carried out with Maroc Telecom, Casanet is not consolidated. The full consolidation of Mauritel at July 1, 2004 also makes it necessary to present harmonized comparative data. Comparability of financial statements In 2005, Maroc Telecom made the following reclassifications: Foreign exchange gains and losses relating to Maroc The consolidated financial statements have been used by the Telecom’s operating trade accounts receivable and payable company as a means of communication with financial markets were previously recorded in interest and other financial since its shares were listed on the Casablanca and Paris stock charges and income. Henceforth, they are recorded in exchanges. earnings from operations, to give a better reflection of the In accordance with the change of accounting standards made destination of such income and expenses. The net foreign compulsory as of January 1, 2005 by European regulation exchange gain for the year ended December 31, 2005, 1606/2002 of July 19, 2002 which applies to the consolidated reclassified in earnings from operations, amounted to MAD accounts of all EU listed companies, Maroc Telecom’s 105 million. The net foreign exchange loss for the year ended consolidated financial statements are prepared in compliance December 31, 2004, recorded in interest and other financial with applicable International Financial Reporting Standards charges and income, amounted to MAD 36 million. (IFRS). The financial statements for 2005 are reported in

194 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

Summary of the consolidated statement of earnings The table below sets out Maroc Telecom’s main consolidated indicators :

In millions of Moroccan dirhams (IFRS) 2004* 2005 Change Change on a (%) comparable basis (4) (%) Consolidated revenues 17,408 20,542 18.0% 16.0%

Earnings from operations 7,597 8,678 14.2% 13.0%**

Interest and other financial charges and income 175 112 -36.1%

Earnings 5,228 5,921 13.3%

Earnings attributable to the equity holders of the parent 5,171 5,809 12.3%

Net cash 6,498 7,466 14.9%

* excluding CMC-Mauritel for the first six months of the year ** 11.6% on a comparable basis and excluding the impact of the reclassification of foreign currency translation adjustments arising from operations.

In 2005, Maroc Telecom’s consolidated revenues totaled MAD revenues and 3% of consolidated earnings from operations. 20,542 million, up 16.0% on a comparable basis(4). Its contribution to earnings amounted to MAD 73 million. Fixed-line and Internet gross revenues(3) for the year ended GSM Al Maghrib’s contribution to Maroc Telecom’s earnings December 31, 2005 rose 7.3% to MAD 11,949 million (up amounted to MAD 14 million. 5.9% on a comparable basis(4)). Mobile gross revenues(3) amounted to MAD 12,772 million, up Outlook for 2006 31.9% (up 29.2% on a comparable basis(4)). Excluding the impact of the increase in termination tariffs on international Based on current market conditions and insofar as no major calls as of January 1, 2005, gross revenues rose 26.2% (up event of an extraordinary nature disrupts Maroc Telecom’s 23.6% on a comparable basis(4)). business, consolidated revenues should grow by between 6% Operating expenses increased 21% to MAD 11,864 million and 8% and consolidated earnings from operations by mainly due to : between 12% and 14% in 2006.

• a 21% increase in purchases, due to a rise in handsets purchased along with customer acquisition and customer Proposal of allocation of earnings loyalty costs We put forward for your approval the following allocation of • a 47% increase in other operating expenses, due to the earnings : costs of the voluntary redundancy plan and a rise in commissions and communication costs as a result of strong Allocation of earnings for the year ended December 31, market growth 2005 (in Moroccan dirhams)

• a MAD 137 million charge relating to the Maroc Telecom’s Earnings for the year 5,871,899,950.67 contribution to the universal service fund. Legal reserve - Maroc Telecom’s consolidated earnings from operations rose 14.2% (up 13.0% on a comparable basis(4)) to MAD 8,678 Regulated reserve 265,331,741.39 million. Optional reserve - Earnings attributable to the equity holders of the parent rose came in at MAD 5,809 million in 2005, up 12.3% compared Dividend 5,606,568,209.28 with 2004. The group’s net cash totaled MAD 7,466 million. We also propose the withdrawal of the sum of MAD 512,906,728.65 from optional reserves, i.e. MAD 0.58 per As regards subsidiaries, Mauritel accounted for 4% of share.

(4) The comparable basis shows the impact of the full consolidation of CMC-Mauritel as if it had actually occurred at the beginning of 2004 and of a constant MAD / Mauritanian ouguiya exchange rate.

Document de référence 2005 - Maroc Telecom 195 The total dividend payment is MAD 6.96 for each share with The statutory auditors have been informed that these dividend rights. agreements continued over the past year, and they state so in their special report. Ordinary dividends paid out with respect to the previous three The statutory auditors state, in their general report, that they years were as follows : have conducted the assignment entrusted to them. 2002 2003 2004

Number of shares 87,909,534 87,909,534 879,095,340 Proposed reduction in capital by reducing the nominal share value Dividend (MAD per share) 28.44 31.28 5.00 We submit for your approval a plan to reduce the share capital Total payout 2,500,000,000 2,750,000,000 4,395,476,700 from MAD 8,790,953,400 to MAD 5,274,572,040, through a (MAD) repayment in cash of MAD 4 on each of the 879,095,340 shares comprising the company’s share capital and by reducing the nominal share value from MAD 10 to MAD 6, and The nominal share value was reduced in 2004 from MAD 100 by making the corresponding amendment to the articles of to MAD 10. association on condition that the said reduction in capital has become effective.

Regulated related-party agreements in accordance We also propose that you grant the Management Board full with article 95 of act 17-95 authority to certify, after the opposition period provided for in article 212 of the Act, that the reduction in capital has become We also ask you to approve transactions carried out during effective, the year ended December 31, 2005 in view of fulfilling regulated related-party agreements provided for in article 95 Your Board recommends that you adopt the resolutions of the Moroccan act 17-95 on limited-liability corporations, submitted to you for approval. properly authorized by your Supervisory Board and that Management Board continued over the past year.

Management report addendum.

To retain Maroc Telecom’s senior executives and best talents, Pursuant to this authorization, the Management Board will be by giving them an interest in the company’s success via its given the necessary powers to determine : share price performance, it is proposed that the shareholders’ • the beneficiaries and the number of options granted meeting, in accordance with the seventh resolution, grant the Management Board the authorization to implement a stock • the grant date, along with terms and practicalities relating to option plan the granting, exercise and temporary suspension of options; A stock option plan is a system by which a company grants its • the exercise price for the subscription of new shares, which employees and/or corporate officers options to purchase must not be lower than the closing price as reported on the existing shares or subscribe new shares, during a given period stock exchange on the last trading day prior to the date on of time, at a price that is set at the time of the grant and which the stock options are granted; remains fixed for the entire period. • the exercise price for the purchase of existing shares, which It is proposed that the Management Board be authorized to must not be lower than the weighted average cost of the grant options – on shares not exceeding 1% of the company’s shares purchased by the Company. share capital on the grant date – on one or more occasions The options granted must be exercised within a maximum over a period of three years. period of ten years from the grant date. Shares subscribed or purchased must be in registered form.

196 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

REPORT OF THE STATUTORY AUDITORS ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005

In compliance with the assignment entrusted to us, we have audited the accompanying financial statements of ITISSALAT AL-MAGHRIB (IAM) for the fiscal year ended December 31, 2005, which include the balance sheet, the income statement, the management accounts, the cash flow statement and the additional disclosures for the year. These financial statements, which show capital and reserves of MAD 18,334,674 thousand, including a net profit of MAD 5,871,900 thousand, are the responsibility of the Management of the company. It is our responsibility, based on our audit, to express an opinion on these financial statements. We conducted our audit in accordance with the auditing standards generally accepted in Morocco. These standards require that we plan and perform such tests and procedures so as to obtain reasonable assurance that the financial statements are free from material misstatement. An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the accounting policies used and significant estimates made by Management in the preparation of the financial statements, and an evaluation of the overall adequacy of the presentation of these statements. We believe that our audit provides a reasonable basis for the opinion expressed below.

I - OPINION ON THE FINANCIAL STATEMENTS In our opinion, the financial statements referred to in the first paragraph give a true and fair view of ITISSALAT AL-MAGHRIB’s assets, liabilities and financial position as of December 31, 2005, as well as of its results and cash flows for the year then ended, in accordance with the accounting principles generally accepted in Morocco. Without prejudice to the opinion above, we draw your attention to the following items:

• As indicated in table A3 of the additional disclosures, retrospective change of depreciation period of certain property, plant and equipment caused the observation of exceptional depreciation for an amount of MADm 133 on the exercise ;

• As indicated in table A3 of the additional disclosures, inventories of spare parts and cables dedicated to network initially entered in invetories were reclassified during 2005 on property, plant and equipment for an amount of approximately MADm 266;

• Although the process has been initiated, some of the land and building brought by ONPT at the time of IAM constitution has not yet been registered with the property office;

• On the partly estimated character, of the contingent liabilities related to the contracts of property, plan and equipment indicated in B9 table of the additional disclosures.

II - SPECIFIC CONTROLS AND INFORMATION We also performed the specific verifications required by law. In particular, we ensured that the information contained in the Management Board’s Report to the Supervisory Board was consistent with the Company’s financial statements. We bring to your attention that during 2005, company ITISSALAT AL-MAGHRIB (IAM) carried out the acquisition of 25% of the titles of the audio-visual company Medi1 Sat (company of satellite television) for an amount of MADm 11.5.

Casablanca, February 24, 2006

Statutory Auditors

ABDELAZIZ ALMECHATT SAMIR AGOUMI

Document de référence 2005 - Maroc Telecom 197 SPECIAL REPORT OF THE STATUTORY AUDITORS ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005

As statutory auditors of the company, we present our report on related-party transactions. In compliance with Article 58 of Moroccan Law n°17-95, we have been informed of all the related- party transactions that are subjet to the prior approval of the Supervisory Board.

1. Related-party transactions concluded during 2005 fiscal year 1.1. Repayment of EDC loans by transfer to the Kingdom of Morocco In line with Maroc Telecom’s ongoing debt-reduction policy, Maroc Telecom transferred to the Kingdom of Morocco totality of two "EDC" loans for an amount of MADm 674 during 2005.

2. Related-party transactions concluded in previous years that are still effective during this year 2.1 Management services’ Agreement with Vivendi Telecom international (VTI) During 2001, Maroc Telecom entered into a Management Services’ Agreement with Vivendi Telecom international (VTI), under which the latter and its subsidiaries provides Maroc Telecom, with technical assistance in the following fields: • Strategy and organization, • development, • sales and marketing, • finance • purchasing, • human resources, • information systems, • regulation and interconnection, • infrastructure and networks. This related-party transaction concerns also Vivendi group and its subsidiaries. In accordance with the terms of this agreement, the fees (exclusive of tax) agreed to be paid by Maroc Telecom to VTI amounted to MADm 69 in 2005.

2.2 Agreement with MAURITEL SA During fiscal year 2001, Mauritel S.A concluded an agreement with Maroc Telecom under which the latter provides services, technical assistance and transfer of equipment to Mauritel S.A. The amount charged by Maroc Telecom to Mauritel S.A was MAD 13,898,516 exclusive of tax for 2005. As of December 31, 2005, the balance of Mauritel’s account in IAM’s books was negative and amounted to a liability of MAD 19,931,969.

2.3 Agreement with Casanet During fiscal year 2003, Maroc Telecom concluded several agreements with Casanet that related to: • the maintainance of Maroc Telecom’s Internet portal “Menara”, • the supply of development services and hosting of Maroc Telecom’s Mobile portal, • hosting of Maroc Telecom’s website “El Manzil”, • the maintenance of new WAP applications on the Menara portal • the production of content, and the marketing of internet access over leased lines. The amounts charged by Casanet to Maroc Telecom under these agreements for fiscal year 2005 was MAD 17,111,846.29.

198 Document de référence 2005 - Maroc Telecom 5. FINANCIAL REPORT INDIVIDUAL FINANCIAL STATEMENTS

As of December 31, 2005, the balance of Casanet’s account in IAM’s books was negative and amounted to a liability of MAD 5,148,279.

2.4 Agreement with GSM Al-Maghrib (GAM) During fiscal years 2002 and 2003, Maroc Telecom had concluded agreements with GSM Al-Maghrib relating to the marketing of the mobile, fixed, internet and multimedia services of Maroc Telecom. During fiscal year 2004 and 2005, the global agreement was updated though the execution of several amendments relating in particular to the payment conditions of the fees by Maroc Telecom to GSM Al-Maghrib. The amount charged by Maroc Telecom to GAM amounted to MAD 1,282,932,857 (VAT exclusive) for fiscal year 2005. The amount charged by GAM to Maroc Telecom amounted to MAD 20,575,327.05 (VAT exclusive) for fiscal year 2005. As of December 31, 2005, the balance of GSM Al-Maghrib’s accounts in IAM’s books was positive and amounted to MAD 10,870,951, and negative and amounted to MAD 73,470,364.

2.5 Related-party transactions with Al Akhawayn University The Supervisory Board of December 21, 2004, authorized Maroc Telecom to conclude with Al Akhawayn University, an agreement to set up a global framework of cooperation to carry out joint actions in domains of common interest of scientific and technical research, in particular those of Research and Development and Research and Consulting. In accordance with this agreement, each year, two scholarships will by paid by ITISSALAT AL MAGHRIB to two students chosen from childeren of the company’s employees. As of December 31, 2005, no charge related to this agreement was accounted for in the company’s financial statements.

Casablanca, February 24, 2006

Statutory Auditors

Samir AGOUMI Abdelaziz ALMECHATT

Document de référence 2005 - Maroc Telecom 199 6 MANAGEMENT

6.1 MANAGEMENT AND SUPERVISORY BOARDS

6.1.1 Composition and functioning of the Management Board

Name (Age) Current office Date of appointment Expiry of term of office and main duties

Abdeslam AHIZOUNE Chairman First appointed February 20, 2001 2007 (50) Renewed on March 4, 2005

Larbi GUEDIRA Managing Director First appointed February 20, 2001 2007 (51) Mobile Segment Renewed on March 4, 2005

Mohammed HMADOU Managing Director First appointed February 20, 2001 2007 (52) Network and Services Renewed on March 4, 2005

François LUCAS Managing Director First appointed October 9, 2001 2007 (48) Fixed-line and Internet Segment Renewed on March 4, 2005

Mikael TIANO Managing Director First appointed February 15, 2004 2007 (51) CFO Administration and Finance Renewed on March 4, 2005

Biographies and duties of the members of the Management Board

Mr. Abdeslam AHIZOUNE Mr. Abdeslam Ahizoune was appointed Chairman of the Mr. Ahizoune holds an engineering degree from the École Management Board of Maroc Telecom in February 2001. He is also Nationale Supérieure des Télécommunications in Paris, France a member of the Management Board of Vivendi Universal (since (1977). April 2005). Mr. Ahizoune is a member of the Board of Directors of the following organizations: Mohammed V Foundation for Solidarity, Mohammed VI Foundation for the Environment, the Mr. Larbi GUEDIRA Salma Association Against Cancer and Al Akhawayne University. Mr. Larbi Guedira is Managing Director of Maroc Telecom’s In addition, Mr. Ahizoune has a part time employment contract Mobile Segment, and served previously as Executive Director with Vivendi Universal, and takes part in determining Vivendi of the Commercial Segment, Executive Director of Universal’s international development strategy. Telecommunications and Chief Financial Officer and Regional Mr. Ahizoune served as Chairman and Chief Executive Officer of Director for Casablanca. In addition, Mr. Guedira serves as Maroc Telecom (between February 1998 and 2001), He held the Director of CMC, Mauritel S.A., Mauritel Mobiles and Matelca. position of Minister of Telecommunications (between August He also served as President of the National Association of 1997 and 1998), Managing Director of the Office National des Telecommunications Engineers (Association Nationale des Postes et Télécommunications (ONPT) (between February 1995 Ingénieurs des Télécommunications) between 2000 and 2002. and August 1997), Minister of Postal and Telecommunications Mr. Guedira holds a Diplôme d’Etudes Supérieures Services and Managing Director of the ONPT (between August Spécialisées (DESS) in Management from the University of 1992 and February 1995) and Director of Telecommunications Lille, and he is a Fellow of the Ecole Nationale Supérieure des in the Ministry of Postal and Telecommunications Services Télécommunications in Paris, having received his Master’s (between 1983 and 1992). From 1982, Mr. Ahizoune held a Degree in Mathematics from Paris XI (Orsay). number of positions in the Postal and Telecommunications Services department and then in the ONPT.

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Mr. Mohammed HMADOU Deputy Managing Director of Development for the Tobacco Mr. Mohammed Hmadou is Managing Director, Network and Division of the same group, and more recently, Administrator Services, of Maroc Telecom. He previously served as Director of and Managing Director of Geodis Overseas France (part of the Subsidiaries and Interests, Director of Operations and Executive Geodis group). Mr. Lucas holds an engineering degree from Director of Infrastructure Segment until 2001. In addition, he the Ecole Centrale in Paris and a Master’s Degree in serves as a Director (administrateur) at CMC, Mauritel S.A., Management from Stanford University. Mauritel Mobiles, Casanet and Matelca. Previously, Mr. Hmadou served as Managing Director of the Mr. Mikael TIANO National Company of Telecommunications (Société Nationale Mr. Mikael Tiano is Managing Director, Administration and des Télécommunications). Mr. Hmadou is an engineer with an Finance, of Maroc Telecom since April 2004. Before joining Maroc engineering degree from the Ecole Nationale Supérieure des Telecom, Mr. Tiano served as Chief Financial Officer of the Télécommunications in Paris. Systems and Networks Branch of the SFR Cegetel group. Mr. Tiano was previously within the SEB group, where he was Group Chief Financial Officer. He also served as Director of the Finance Mr. François LUCAS Division of Ernst & Young Conseil, after serving as International Mr. François Lucas is Managing Director of Maroc Telecom’s Treasurer and Director of Market Operations within the Danone Fixed-line and Internet segment since October, 2001. In group. He also served as managing Director of Alfabanque. Mr. addition, Mr. Lucas serves as a Director of GSM Al Maghrib Tiano began his professional career at Banque Nationale de and Casanet. Previously, he served in various management Paris, first in France and then in Australia. In addition, he serves positions within the Bolloré group, where he was Chief as an Director of GSM Al Maghrib, as a representative of Maroc Financial Officer of the Organization and Transportation Telecom. Mr. Tiano holds a degree from the Institut d’Etudes Division and Chairman and Chief Executive Officer of Tous Politiques of Paris, as well as a Master’s of Economic Sciences Transports Aériens SA, having previously filled the positions of from the Université de Paris. Chief Financial Officer, Deputy Chief Financial Officer and

Duties and responsibilities of the Management Board

The Management Board is responsible for managing and and Mikael Tiano represent the interests of Vivendi Universal. conducting the operations of the Company, under the Within a period of three months following the close of the supervision of the Supervisory Board. fiscal year, the Management Board must prepare the financial The Board is composed of five members who collectively statements and deliver them to the Supervisory Board, so that manage the Company’s operations. The Board members may the latter may conduct its audit procedure. allocate management tasks among them, subject to the Likewise, the Management Board must provide a approval of the Supervisory Board. Its decisions are taken by management report to the Supervisory Board before a majority of the votes of its members that are present or presenting the same to the ordinary general shareholders’ represented. Messrs. Larbi Guedira and Mohammed Hmadou meeting, so that the Supervisory Board may provide its represent the interests of the Government of the Kingdom of comments, if any, on the report. Morocco , while Messrs. Abdeslam Ahizoune, François Lucas

Rights and obligations of the members of the Management Board

In accordance with Moroccan law, the Management Board is action was outside such purpose or, taking the circumstances vested with the most comprehensive powers to act in all into account, it could not have ignore it; the publication of the circumstances on behalf of the Company; the Board exercises bylaws alone is sufficient to constitute such proof. these powers within the limits of the Company’s corporate The provisions of the Company’s bylaws limiting the powers of purpose and subject to those powers that legally belong to the its Management Board are not opposable to third parties. Supervisory Board and to the shareholders’. Except with the special waiver granted by the Supervisory With respect to relationships with third parties, the Company Board, the members of the Management Board, upon the vote remains bound by the actions of the Management Board that of a qualified majority of three-fourth of its members, are do not diverge from the Company’s corporate purpose, unless required to be employees of the Company and present in the Company can prove that the third party knew that such Morocco for more than 183 days each year.

Document de référence 2005 - Maroc Telecom 201 6.1.2 Composition and roles of the Supervisory Board

Composition of the Supervisory Board as at March 8, 2006

Name (Age) Current Office Date of appointment Expiry of term of office Principal post or occupation

Fathallah OUALALOU Chairman General Shareholders Ordinary General Assembly of Minister of Finance (63) Meeting of February 20, 2001 Shareholders called to approve and Privatization the financial statements for 2006

Jean-Bernard LEVY Vice-Chairman Supervisory Board Meeting Ordinary General Assembly of Chairman of the (51) of December 17, 2002 Shareholders called to approve Management Board of the financial statements for 2006 Vivendi Universal

Chakib BENMOUSSA Member Supervisory Board Meeting Ordinary General Assembly of Minister of the Interior (48) of February 24, 2006* Shareholders called to approve the financial statements for 2006

Abdelaziz TALBI Member Supervisory Board Meeting Ordinary General Assembly of Director of State Owned (56) of March 4, 2005 Shareholders called to approve Entreprises at the Ministry the financial statements for 2006 of Finances and Privatization. Secretary General of the National Accounting Council

Jean-René FOURTOU Member Supervisory Board Meeting Ordinary General Assembly of Chairman of the (66) of January 4, 2005 Shareholders called to approve Supervisory Board of the financial statements for 2006 Vivendi Universal

Jacques ESPINASSE Member Supervisory Board Meeting Ordinary General Assembly of Chief Financial Officer (62) of December 17, 2002 Shareholders called to approve of Vivendi Universal the financial statements for 2006 Member of the Management Board of Vivendi Universal

Frank ESSER Member Supervisory Board Meeting Ordinary General Assembly of CEO of SFR group (47) of March 4, 2005 Shareholders called to approve Member of the the financial statements for 2006 Management Board of Vivendi Universal

Robert de METZ Member Supervisory Board Meeting Ordinary General Assembly of Deputy Managing, (54) of December 17, 2002 Shareholders called to approve Director for divestitures, the financial statements for 2006 mergers, and acquisitions of Vivendi Universal

Françoise COLLOC'H Member General Assembly Ordinary General Assembly of Retired (62) of Shareholders Meeting Shareholders called to approve of March 1, 2004 the financial statements for 2009

* Mr. was co-opted to replace Mr. El Mustapha Sahel, who was appointed Ambassador and Permanent Representative of the Kingdom of Morocco to the United Nations.

202 Document de référence 2005 - Maroc Telecom 6. MANAGEMENT MANAGEMENT AND SUPERVISORY BOARDS

Biographies and duties of the members of the Supervisory Board

Mr. Fathallah OUALALOU - Chairman Planning, Director of Roads in the Infrastructure Ministry, Since 2002, Mr. Fathallah Oualalou has been Minister of Secretary General to the Prime Minister and Chairman Finance and Privatization. Mr. Oualalou was formerly Minister Delegate of and of Tangier Free Zone. of Economics and Finance from 1998 to 2002. He also heads Mr. Benmoussa has also served as Director and Chief the parliamentary group of the Socialist Union of Popular Operating Officer of the Brasseries du Maroc Group, as Forces (Union Socialiste des Forces Populaire) (“USFP”) in the Member of the General Confederation of Moroccan Chamber of Representatives. Mr. Oualalou has been a Businesses (CGEM), of the CGEM Foundation for Enterprise member of the political bureau of the USFP since 1989, and and of COSEF (Special Commission for Education and he was elected several times as a city councilman of Rabat Training), and as Secretary General to the Minister of the and as deputy in the Chamber of Representatives. Interior. Chakib Benmoussa graduated from Ecole Polytechnique in Mr. Oualalou joined the teaching staff of the law school of 1979 and from Ecole Nationale des Ponts and Chaussées in Rabat, of the law school of Casablanca, and of the Ecole 1981. He graduated with a Master of Science degree in Civil Nationale d’Administration (“ENA”), after having defended his Engineering from Massachusetts Institute of Technology in thesis for a Doctorate in Economics in Paris in 1968. 1983 and holds a post-graduate diploma (DESS) in Project He is the author of several books and works about political Management (I.A.E, Lille). economy, international economic relations, particulalry focusing on relationships between Europe and Maghreb. Mr. Abdelaziz TALBI For several years he chaired the Association des économistes Mr. Abdelaziz Talbi was appointed in 2005 Director of State marocains (association of Moroccan economists) and l’Union Owned Entreprise and privatization (DEPP) at the Ministry of des économistes arabes (Union of the Arabic economists). Finances and Privatization. He had previously assumed Fathallah Oualalou, as a representative of the Moroccan various responsibilities within the DEPP, overseeing the Government, is a member of the Supervisory Board of Credit service of the accounting revision then the division of audit du Maroc, Holding Al Omrane and Maroclear and a member of and accounting normalization then he occupied deputy the Board of Directors of the Agency for the de-densification director's post. Before his entry to the public Administration, and rehabilitation of the Fes Medina (ADER). he was CFO of a company in Rabat within an accounting in Paris. In parallel to its activity within the DEPP, Abdelaziz Talbi Mr. Jean Bernard LEVY – Vice- Chairman is also General Secretary of the National Accounting Concil. Mr. Jean-Bernard Levy is Chairman of the Management Board of Mr. Abdelaziz Talbi is a chartered accountant graduate by the the Vivendi Universal group. He previously served as Chief French State and a holder of a diploma in administration of Operating Officer of the Vivendi Universal group, Chairman and companies and state, regional and local authorities of the Chief Executive Officer of Matra Communication and Managing University of Nancy. Partner at Oddo Pinatton. Mr. Abdelaziz Talbi, as a representative of the Moroccan From 1988 to 1993, he was Director of Telecommunications government, is a member of the Supervisory Boards of the Satellites at Matra Marconi Space. Regie des Tabacs, Atlas Blue and Credit Agricole du Maroc. He also serves on the Board of Directors of , Mr. Lévy also served as the technical advisor and chief of staff to Mr. of the Moroccan Navigation Company (COMANAV), of the Gérard Longuet, the French Minister for Industry, Postal Services, National Radio and Television Company (SNRT) and of the Telecommunications and Foreign Trade in 1993 and 1994. National Local Planning Company (SONADAC). Jean-Bernard Levy is a Member of the Supervisory Board of Over the past five years, as a representative of the Moroccan Canal+ Group, Director of SFR, Vivendi Universal Games, Inc government, he has also been a member of the Supervisory (US) and NBC Universal, Inc (US) Board of the Agricultural Development Society (SODEA), of the Over the past five years, Mr. Lévy has served as Chairman and Management of Agricultural Land Society (SOGETA) of the Chief Operating Officer of Vivendi Universal Net and Vivendi Audiovisual Studies Society (SOREAD) and of the Management Telecom International. He was also a Member of the Supervisory Board of the Commercial Coal Company (Sococharbo). Board of Cegetel, Director of UGC and HCA. Mr. Lévy is a graduate of the École Polytechnique and the École Mr. Jean-René FOURTOU Nationale Supérieure des Télécommunications. Mr. Jean-René Fourtou was appointed to the board of directors of Vivendi Universal in July 2002 and served as Chairman. He Mr. Chakib BENMOUSSA joined Bossard & Michel as a consultant in 1963. In 1972, he Mr. Chakib Benmoussa has been Minister of the Interior since became Chief Operating Officer of the Rhône-Poulenc Group. February 15, 2006. Previously, he served as Director of From December 1999 to May 2002, he served as Vice

Document de référence 2005 - Maroc Telecom 203 Chairman and Chief Operating Officer of Aventis. Mr. Frank ESSER Since April 28, 2005, he Mr. Fourtou has been Chairman of the Mr. Frank Esser holds a doctorate in economics from the Supervisory Board of Vivendi Universal, after having served as University of Economic Science of Fribourg. He was appointed Chairman and Chief Executive Officer of Vivendi Universal, member of the Management Board of Vivendi Universal in April Chairman of the Supervisory Board of Canal+ Group and 2005. Mr. Esser was appointed Chairman of SFR in December Director of NBC Universal (US). 2002 and has been with the group since September 2000, when Mr. Jean-Rene Fourtou the Honorary Chairman of the he was appointed Chief Executive Officer. Mr. Esser has been a International Chamber of Commerce. He is the Co-chairman member of the Board of Directors of the GSM Association since of the Franco-Moroccan impetus group created in September February 2003 and became Chairman of its Public Policy 2005. This working group aims to propose any measure likely Committee in 2004. Prior to joining SFR, Mr. Esser was Executive to improve economic relations between the two countries. Vice President at Mannesmann, in charge of international Mr. Fourtou is Vice Chairman of the Supervisory Board of AXA, business and business development. Member of the Executive Committee of AXA Millesimes SAS, Mr. Esser is also Chairman and Chief Operating Officer of SHD and Director at Cap Gemini and Sanofi Aventis. and Director of Neuf Telecom, Vivendi Telecom International Over the past five years, he has served as Chairman of the and Faurecia. He is also Chairman of the Board of Directors of Supervisory Board of Vivendi Environment, Chief Operating Vizzavi France, Permanent Representative of SFR to the Officer of USI Entertainment Inc. (US), Vice-Chairman of the Board of Directors of LTB-R and Member of the Supervisory Board of Directors of AXA Assurances IARD Mutuelle and Board of Vodafone D2. Permanent Representative on the Board of AXA, of Finaxa (AXA Assurances IARD Mutuelle). Over the past five years, Mr. Frank Esser has held the following He is also a Director of EADS (Netherlands), of Rhône Poulenc Directorships : Pharma, of Rhône- Poulenc AGCO Ltd, of Schneider Electric, • Chairman and Chief Operating Officer of Cegetel of Pernod Ricard and of La Poste. • Chief Operating Officer of Cegetel Group • Director of Cegetel Entreprises Mr. Jacques ESPINASSE • Director of Cofira Jacques Espinasse holds an MBA from the University of Michigan. • Director d’Omnitel • Director of Infostrada. Mr. Espinasse was appointed Chief Financial Officer of Vivendi Universal in July 2002, and appointed to the Management Board of Vivendi Universal on April 28, 2005. He had Mr. Robert de METZ previously been Chief Operating Officer of TPS, a French Mr. Robert de Metz has been Deputy Managing Director for satellite television service, since 1999 and became a Member divestitures, mergers, and acquisitions of the Vivendi of the Board of Directors of TPS in 2001 Universal group since September 2002. He previously Previously, Mr. Espinasse held a variety of senior management involved in the management of private funds. Mr. de Metz was positions in major French companies, including CEP also a member of the executive board of directors of Paribas Communication and Group Larousse Nathan, where he was from 1997 to 2000. Mr. Robert de Metz is graduate form appointed Senior Executive Vice President in 1984. In 1985, Institut d’Etudes Politiques in Paris and from ENA. he became Chief Financial Officer of the Havas group. He was appointed Senior Executive Vice President of the group when Ms. Françoise COLLOC'H it was privatized in May 1987 and held this position until Until May 2003, Ms. Françoise Colloc'h served as a Member of the January 1994. Management Board of AXA Group and as Director of Human He is a Director of SES Global, Member of the Supervisory Resources, Brand and Communications of AXA Group. Ms. Board of Canal+ Group and of SES Global (Luxembourg) and Colloc’h served as Chief Operating Officer of AXA Group in 1996, Director of SFR, Vivendi Universal Games Inc (US), Veolia after becoming Director in 1984 and Executive Assistant to the Environment and Vivendi Universal Net. Chairman in 1981 (at Mutuelles Unies, which later became AXA Over the past five years, Mr. Jacques Espinasse has been a Group). Previously, Ms. Françoise Colloc'h held several positions Director of Vivendi Universal Publishing, Cegetel Group, of including Director of Communications at Slater Walker Finance TPS and Multithemes SA. He has also been : (1974-1981). In addition, Mrs. Colloc’h is Chairman of the Board of • Chairman of Light France Acquisition SAS Directors of AXA Millesimes, a holding company which groups • Permanent representative of Vivendi Universal, UGC together the wine producing activities of AXA Group in the Bordeaux region. Mrs. Colloc’h acts as Director of AXA Assurances Maroc and • Permanent representative of Vivendi Universal to the Board of is Member of the Board of the Mulliez family association. Directors, Sogecable (Spain) Ms. Colloc'h holds a Masters in Economics from the University • Permanent representative of SAIGE to the Board of Directors, Dauphine. SFR. Ms. Colloc’h has been nominated Knight of the Legion of Honor, • Chairman and Chief Operating Officer of J.E.D Conseil. of the National Order of Merit and of the Order of Agricultural Merit.

204 Document de référence 2005 - Maroc Telecom 6. MANAGEMENT MANAGEMENT AND SUPERVISORY BOARDS

Duties and responsibilities of the Supervisory Board Pursuant the Articles of association, the Supervisory Board decision-making process, see section 3.1 “General may be composed of a minimum of eight members and a information regarding the Company—Administration of the maximum of 15 members since the listing of shares of the Company—Supervisory Board”.) Company. In 2005, the Supervisory Board met six times to approve the Among its members, the Board elects a Chairman and a Vice Company’s performance as well as its perspectives on Chairman, who are in charge of convening the Board and medium- and long-term, with an average attendance rate of leading its discussions. The Supervisory Board appoints the 62%. members of the Management Board for a renewable term of As of today, three members of the Supervisory Board— two years, appoint the Chairman amoung the member of the Messrs. Fathallah Oualalou, Chakib Benmoussa, and Management Board. Abdelaziz Talbi—were appointed upon proposal of the Depending on the matters and in accordance with the terms Government of the Kingdom of Morocco and 6 members— of the Amended Sharholders’ Agreement, decisions of the Messrs. Jean Bernard Lévy, Jean-René Fourtou, Jacques Supervisory Board are validly taken whether at a simple Espinasse, Frank Esser and Robert de Metz—were appointed majority or, subject to a qualified majority of three-fourths of upon proposal of Vivendi Universal. its members. One member of the Supervisory Board may be deemed as The Supervisory Board exercises permanent control of the independent, pursuant to the French Bouton report: Ms. Company’s management by the Management Board. For Colloc’h. information on the composition of the Supervisory Board, the Each member of the Supervisory Board must hold at least one periods of service and the duties of its members, and the share, which share must be in registered form.

Rights and obligations of the members of the Supervisory Board In accordance with Moroccan law, the Supervisory Board Company proves that such parties knew or could not have exercises permanent control over the management of the ignored such requirement. Company by the Management Board. Throughout the year, the Supervisory Board carries out the The Company’s bylaws may require the prior approval of the verifications and monitoring that it deems appropriate, and it Supervisory Board for carrying out certain types of actions. may require to be provided with the documents it deems When an operation requires approval from the Supervisory useful in accomplishing its mission. Board and the Board refuses to grant such approval, the The members of the Supervisory Board may have access to Management Board may submit the disagreement to the all information relating to the Company’s activities. At least general shareholders’ meeting for the latter to decide. once each quarter, the Management Board provides a report The disposal of property, the full or partial disposal of to the Supervisory Board. Within three months following the shareholdings and the pledging of collateral, guarantees, close of each financial year the Management Board provides security and warranties are subject to authorization by the the documents covered under the Law 17-95 concerning Supervisory Board.The Board determines the amount for each corporations to the Supervisory Board, for the purpose of transaction. Nevertheless, the Management Board may be verification and review. entitled to grant, endorsements and guaranties to customs The Supervisory Board may provide to the general and tax authorities, without any limit on the amount. shareholders’ meeting its comments on the report from the Whenever a transaction exceeds the amount determined as Management Board, as well as its comments on the financial mentioned above, the approval of the Supervisory Board is statements for the fiscal year. required. The Management Board may delegate the power The members of the Supervisory Board are not employee of that it has received pursuant to the preceding paragraphs. The the Company. absence of approval is void as against third parties, unless the

Document de référence 2005 - Maroc Telecom 205 6.2 CORPORATE GOVERNANCE

6.2.1 Audit Committee

Maroc Telecom has enhanced its corporate governance by creating an Audit Committee, which is responsible for making recommendations and/or giving advice on accounting procedures governing the operations of the group.

Composition The Audit Committee is composed of the following members:

Name (Age) Current office Date of appointment Principal post or occupation

Jacques ESPINASSE Chairman 2003 Chief Financial Officer of Vivendi Universal (62) Member of the Management Board of Vivendi Universal

Noureddine BOUTAYEB Member 2003 Director of Rural Affairs (48) of the Ministry of Interior

Abdelaziz TALBI Member 2004 Director of State Owned Entreprises (56) at the Ministry of Finances and Privatization. Secretary General of the National Accounting Council

Bousselham HILIA Member 2003 Secretary General of the Ministry of (46) Industry, Commerce and Economic Development

Robert de METZ Member 2003 Deputy Managing Director for Divestitures, (54) Mergers, and Acquisitions of Vivendi Universal

Pierre TROTOT Member 2003 Senior Executive Vice President, Administration (51) and Finance and Director of SFR

Biographies and duties of the members of the Audit Committee Mr. Noureddine BOUTAYEB Mr. Nour-eddine Boutayeb was appointed as Director of Rural In addition, he holds a Master’s of Business Administration Affairs at the Ministry of the Interior in 2003. Mr. Boutayeb is and an engineering degree from the Ecole Nationale des also a member of the Supervisory Board of Crédit Agricole. Ponts et Chaussées. Finally, Mr. Boutayeb also has a higher Previously, Mr. Boutayeb served as Deputy Managing Director degree (Diplôme d’Etudes Approfondies) in Soil Mechanics. of Maghrebi Consulting Engineers (Société Maghrébine d’Ingénierie (INGEMA SA)), after he served as an Engineer at the Ministry of Equipment (Ministère de l’Equipement) and in a Mr. Bousselham HILIA consulting firm in Paris. Mr. Bousselham Hilia is Secretary General of the Ministry of Mr. Boutayeb holds a degree from the Ecole Centrale in Paris. Industry, Commerce and Telecommunications. He is also a

206 Document de référence 2005 - Maroc Telecom 6. MANAGEMENT CORPORATE GOVERNANCE

member of the boards of directors of various state-owned and the Company or could result in the malfunction of auditing para-governmental companies. Previously, Mr. Hilia served as procedures. Head of the division on electrical and electronics industries, Director of Domestic Trade, and Director of General Affairs. Internal Control Mr. Hilia holds a degree from the Mohammadia School of Engineering. The internal control procedures in force within the Maroc Telecom group have the following objectives : Mr. Pierre TROTOT • on the one hand, to ensure that the actions of management and the execution of operations, as well as the employees’ Mr. Pierre Trotot is the Senior Executive Vice President, behaviour, are within the framework defined by guidelines Administration and Finance and Director of SFR. for corporate business operations by the management and Previously, Mr. Trotot served as Chargé de Mission, then by applicable laws and regulations; and Director of Financial Management at Compagnie Générale des • on the other hand, to check that the accounting, financial Eaux, after having been Chargé de Mission reporting to the and management information provided to the management President of Compagnie de Navigation Mixte (1982-1988). of the Company accurately reflect the Company’s Before then, Mr. Trotot was a Chargé de Mission at Arthur operations and financial position. Andersen Audit (1978-1982). The objectives of the internal control’s process are to avoid Mr. Trotot is a graduate of Hautes Etudes Commerciales (HEC) and to control risks arising from corporate undertakings, error in Paris. and fraud, in particular in the financial and accounting areas. As is the case for all audit systems, however, they cannot provide an absolute guarantee that these risks will be Operations of the Audit Committee completely eliminated. Created by the Supervisory Board in 2003, the Audit In order to carry out its task of assessing and validating Committee responds to the will of the shareholders to adopt Company internal audits, the Audit Committee relies on the international standards for the corporate governance and Internal Audit and Inspection departments. The Audit internal controls of Maroc Telecom. Committee defines the Internal Audit and Inspection The Audit Committee is composed of a Chairman and five departments’ mandates and analyzes their findings. permanent members, with three representatives of the In 2005, the average attendance rate at the Audit Committee’s Government of the Kingdom of Morocco and three of Vivendi meetings exceeded 75%. Universal, including the Chair. The Audit Committee was convened for the first time in May 2004, and held four meetings in 2005. The Committee’s role is to give Internal Audit and Inspection recommendations and opinions to the Supervisory Board on matters such as : Internal Audit

• the individual financial statements and consolidated The Internal Audit department of Maroc Telecom is an financial statements, before they are presented to the independent function that has direct access to the Audit Supervisory Board ; Committee. Its functions are governed by a charter approved by the Audit Committee. • the consistency and efficiency of the Company’s internal audit process ; The Internal Audit department’s role is to ensure that the Company has control over its operations and to monitor the • review of the work programs of internal and external quality of internal control at each level of the Company’s auditors and the examination of the results of their audits; organization. The Internal Audit department assists the • accounting principles and methods, and consolidation Management in achieving its objectives by assessing its risk scope; management and control procedures and corporate • the Company’s off-balance sheet risks and commitments; governance.

• establishing procedures for selecting statutory auditors, The efficacy of the internal audit process is assessed by the reviewing the amounts of the fees solicited for the Internal Audit department, according to an annual audit plan performance of their audit duties, and monitoring approved by the Audit Committee. Synopses of the compliance with the rules guaranteeing auditor comments and recommendations formulated by the Internal independence ; and Audit department are provided to the Audit Committee so that the latter can assure its compliance and guarantee its • considering all issues that, in its judgment, present risks for execution.

Document de référence 2005 - Maroc Telecom 207 The audit plan is defined according to an analysis of company At their request or its own initiative, the Inspection department risks, which covers both financial risks, information systems conducts regular audits, specific and unannounced, for the risks, and risks particular to the operational units of the following purposes : Company. • to protect the assets, property, resources and means used ; For the purpose of meeting this double target, the Internal Audit department is composed of two segments which have • to check that management procedures, instructions, the following complementary missions : policies and rules are observed ;

• financial audit (15 auditors, as of December 31, 2005) part • to ensure the quality, sufficiency and reliability of data and of the Administration and Finance Department for matters optimization of the allocation of resources; and having an accounting and financial impact, and • to demonstrate and determine the possible liabilities in the • operational audit (18 auditors, as of December 31, 2005) event the Company became aware of malfunctions, part of the General Control Department (Presidency) that irregularities or fraud. focus on the operational units (Sale Agencies and Regional headquarters). This audit proceeds with a review of the The Inspection department may assist the Internal Audit procedures for managing resources, networks and department in the implementation of specific missions, to customer services. determine a program of study and analysis, and to provide proposals on the Company’s operations. The annual audit plan is comprised of a program of missions, the implementation of which is entrusted to the Internal Audit department. The missions have the following main objectives : Sarbanes-Oxley • ascertain the existence and adequacy of controls in the areas of finance, data processing and operations, to ensure For the needs of Vivendi Universal, since the parent company that the main risks are identified and suitably covered; is listed on the New York Stock Exchange, Maroc Telecom, as a subsidiary of the group, initiated work in 2003 to prepare to • review the integrity of the financial information, including the comply with section 302 of the Sarbanes-Oxley Act, by controls relating to security of communicating, recording and backing up information; assessing the quality of processes that might effect the reliability of its financial information. • review the operational units and systems for ensuring adequacy with respect to policies, procedures and legal and This assessment constitutes the basis of the certification regulatory requirements; letters established by the Chairman and the CFO of Maroc Telecom’s with the aim of certifying compliance with the • review the means of safeguarding assets and advising management as to the efficiency and effectiveness of its use procedures relating to the preparation of the financial of resources; and statements and other financial information elements.

• assure that recommendations are carried out within the The objective of the certifications is to allow the Chairman of framework of follow-up tasks. the Management Board and CFO of Vivendi Universal SA to sign certificate incorporated in annual reports (Document de Finally, the Internal Audit department communicates and coordinates with the Company’s external auditors, to Référence and Form 20F), filed by Vivendi Universal with the maximize the effectiveness of the scope of the audit’s Autorité des Marché Financiers (AMF) in France and the coverage. Securities and Exchange Commission (SEC) in the United States. Internal audits performed in 2005 involved the main items of the statement of financial position and the consolidated Under section 404 of the Sarbanes-Oxley Act, to which statement of income, i.e. revenues, inventories and fixed Vivendi Universal is subject as of 2006, Vivendi Universal's assets. management is required to implement a formal evaluation of internal control and financial reporting procedures. Inspection For the needs of Vivendi Universal Group, under section 404 of the Sarbanes-Oxley Act, in 2003 Maroc Telecom initiated Together with the Internal Audit department, the Inspection work which will continue in 2006 to identify the processes department (12 inspectors, as of December 31, 2005) likewise which have an impact on the preparation of the financial takes part in the assessment and approval of Company statements and financial information, to identify the risks and internal controls. The department reports to the General Control Departement (Presidency) and to the Audit to formalize the related key controls. Phases of tests allowing Committee. actions plans to be implemented will be carried out during fiscal year 2006.

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6.2.2 Code of Ethics

Maroc Telecom has drawn up a Code of Ethics in order to among company employees, and to assist them in adjusting comply with requirements concerning fairness, transparency, their professional behavior to those best practices. market integrity, and primacy of the client’s interests. It also includes rules for dealing with real or apparent conflicts This Code is not intended to replace existing rules, but of interest in order to avoid insider trading or the suspicion of outlines the ethical principles and rules that are generally such. applicable and the need to comply with them scrupulously. Employees may also consult the person responsible for ethical standards, who is in charge of ensuring compliance It aims to make each member of the Company accountable, with the rules of the Code of Ethics, and with all rules and setting out the principal rules governing the use of privileged regulations as defined by law. information, in order to increase awareness of best practices

Document de référence 2005 - Maroc Telecom 209 6.3 INTERESTS OF THE CORPORATE EXECUTIVES

6.3.1 Compensation of the Management and Supervisory Boards

The Supervisory Board sets, as part of its appointment Some companies in the Vivendi Universal group cover part of decisions, the form and the amount of compensation paid to these payments to certain members of the Management Board. each member of the Management Board. That information is In addition, certain members of the Management Board are then stated in the employment contract of the respective eligible for Vivendi Universal’s stock option plans. Based on member. A compensation committee comprised of the compensation for 2005, the minimum amount to be paid by the Chairman and the Vice Chairman of the Supervisory Board Company in event of termination of the employment contract of meets each year to examine the total compensation of the the members of the Management Board would amount to members of the Management Board, including any variable portion, and submits its proposal to the Supervisory Board. around MAD 26.5 million in total, except for dismissal for serious misconduct. Furthermore representation and travel The total gross compensation paid by the Company, its expenses incurred by the members of the Management Board subsidiaries and all controlling companies to members of the in the performance of their functions are borne by the company. Management Board for fiscal year 2005 amounted to approximately MAD 20.2 million, of which 33% represented The Shareholders’ Meeting on October 28, 2004 decided to variable compensation. Some companies of the Vivendi group allocate the total annual sum of two million dirhams (MAD pay part of these sums to certain members of the Management 2,000,000) for the payment of directors’ fees for the members Board. Variable compensation for the members of the of the Supervisory Board. This decision is valid until a new Management Board for 2005 was determined on the basis of: decision is made by the Shareholders’ Meeting. The conditions (a) Vivendi Universal group and/or Maroc Telecom’s financial and means of payment are to be determined each year by the targets and (b) priority developments in their business areas. Supervisory Board. The following table sets out the compensation for the past three At the Supervisory Board meeting held on July 1, 2005, the fiscal years : members of the Board decided to waive the payment of In millions of Directors’ fees that were due in respect of 2004 and chose for Moroccan dirhams 2003 2004 2005 these fees to be awarded by Maroc Telecom in the form of Gross compensation 17.9 19.4 20.2 grants to Moroccan students of merit studying at university in Morocco or abroad, in a subject relating to one of Maroc Variable compensation (in%) 28% 31% 33% Telecom or Vivendi Universal’s activities. Minimum amount in the event of termination of contract 26.8 35.6 26.5

6.3.2 Participation of Management structures and Supervisory Board in the Company’s share capital

As of December 31, 2005, the members of the Supervisory Board and the Management Board held respectively, directly or indirectly, 7,355 and 154, 495 shares of Maroc Telecom.

210 Document de référence 2005 - Maroc Telecom 6. MANAGEMENT INTERESTS OF THE CORPORATE EXECUTIVES

6.3.3 Conflict of interests

Over the past five years, no conviction in relation to fraudulent Supervisory Board, except Mr. Larbi Guedira, Chief Operating offences has been delivered against any member of Maroc Officer of the Mobile business, who is the husband of the sister Telecom’s Management Board or Supervisory Board, none of of Mr. Fathallah Oualalou, Chairman of the Supervisory Board. the members of the Management Board or the Supervisory Mr. Guedira already acted as Director of Telecommunications Board have been associated with a bankruptcy, receivership or when Mr. Oualalou was appointed as Chairman of the liquidation while serving on an administrative, management or Supervisory Board and was previously Regional Director of supervisory body, and no official public incrimination and/or Telecommunications for Casablanca (1988-1993) and CFO sanction has been delivered against any members of the (1993-1996). Management Board or the Supervisory Board by statutory or Finally, members of the Management Board and of the regulatory authorities. Supervisory Board are appointed by the Shareholders’ Furthermore, there are no family relations between the Agreement according to the conditions set out in paragraph members of the Management Board and those of the 3.5 “Shareholders’ Agreement”.

6.3.4 Interests of corporate executives in significant customers and suppliers of the Company

None

6.3.5 Service contracts

To date, with the exception of employment contracts between Board or the Supervisory Board and the Company and/or any members of the Management Board and Maroc Telecom, of its subsidiaries, which bestow any individual benefits. there are no contracts between members of the Management

6.3.6 Stock options

As of the date of this annual report, no director and/or grant stock options, under the conditions provided for by law, employee owns stock options. on one or more occasions, for a period of three years from the Nonetheless, a proposal was made to the Extraordinary and date of authorization, to members of the Board, directors, Ordinary General Shareholders’ Meeting of March 30, 2006, in senior executives, or in exceptional cases to non-executive the eighth resolution, to authorize the Management Board to Group employees.

6.3.7 Loans and guarantees granted to corporate executives

None

Document de référence 2005 - Maroc Telecom 211 6.4 RELATED PARTY TRANSACTIONS

As Maroc Telecom is incorporated under Moroccan law, the the Supervisory Board. The same applies for agreements French commercial code is not applicable to it. entered into between the Company and another company, if However, under Article 95 of Moroccan law 17-95 relating to one of the members of the Management or Supervisory Corporations, any agreement entered into, directly or Board, is an owner, a partner, a manager, an administrator, a indirectly, between the Company and one of the Management director or a member of the Management or Supervisory or Supervisory Board members, is subject to prior approval by Board of the said company.

6.4.1 Management Services’ Agreeement

In June, 2001, Maroc Telecom entered into a Management implementation of these services can be made through Services’ Agreement with Vivendi Universal, under which the expatriated employees. latter provides Maroc Telecom, directly or via its subsidiaries, and in particular Vivendi Télécom International (VTI), technical In accordance with the terms of this agreement, the fees assistance in the following fields: Strategy and organization, (exclusive of tax) paid by Maroc Telecom to Vivendi Universal development, commercial and marketing, finances, purchases, amounted to 69 million Moroccan dirhams in 2005 and human resources, information systems, regulation and approximately 88 million Moroccan dirhams and 141 million interconnection, and infrastructures and networks. The Moroccan dirhams for 2004 and 2003.

6.4.2 Agreement with Al Akhawayn University

The Supervisory Board of December 21, 2004, authorized actions in domains of common interest of scientific and Maroc Telecom to conclude an agreement with Al Akhawayn technical research, in particular those of Research and University, of which Mr Rachid Benmokhtar is the President, to Development and those of Studies and Consulting. set up a global framework of cooperation to carry out joint

6.4.3 Agreement with the Moroccan government

The Government of the Kingdom of Morocco decided to grant dividends returning to him in conformance with past fiscal an exceptional contribution to the employees in service having year ended December 31, 2004. worked more than one year at Maroc Telecom to allow them Maroc Telecom did not conclude any other agreements with to acquire the company’s shares, in connection with its listing the Moroccan government. Maroc Telecom sells, as to other on the Stock Exchange. customers, products and services to the administration and To finance this operation, Maroc Telecom granted an advance the state, regional and local authorities within the framework not paid in current account of associated to government. This of operations concluded under normal market terms and advance has been paid off by the government by taking on conditions.

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6.4.4 Management Services Agreement with Mauritel

During the fiscal year 2001, the company Mauritel S.A The amount charged by Maroc Telecom to Mauritel S.A was concluded an agreement with Maroc Telecom under which the 13.9 million Moroccan dirhams exclusive of tax in 2005, 16.8 latter provides services, technical assistance and transfer of and 23.7 million Moroccan dirhams in 2004 and 2003. material to Mauritel S.A.

6.4.5 Contract with Casanet

During fiscal year 2003, Maroc Telecom concluded several and the production of the content relative to these modules, agreements with Casanet related to the maintainance of the as well as the marketing of internet access over leased lines. Maroc Telecom internet portal “Menara”, the supply of The amount charged by Casanet to Maroc Telecom by virtue development services and the hosting of Maroc Telecom ‘s of these agreements for the fiscal years 2005, 2004 and 2003 Mobile portal, hosting of Maroc Telecom’s website “El Manzil”, was 17.1, 13.2 and 13.8 million Moroccan dirhams the maintenance of new WAP modules on the Menara portal respectively.

6.4.6 Contract with GSM Al-Maghrib (GAM)

During fiscal years 2002 and 2003, Maroc Telecom concluded The amount charged by Maroc Telecom amounted to 1,282.9 agreements with GSM Al-Maghrib relating to the marketing of million Moroccan dirhams for fiscal year 2005 and 1,077.6 the mobile, fixed, internet and multimedia services of Maroc million Moroccan dirhams for fiscal year 2004. Telecom. During fiscal year 2004, the framework agreement The amounts charged by GAM in Maroc Telecom for fiscal was updated through several amendments relating especially years 2005 and 2004, amounted to 20.6 million Moroccan to the payment conditions of the fees paid by Maroc Telecom dirhams and 28.3 million Moroccan dirhams respectively. to GSM Al-Maghrib.

6.4.7 Early repayment of EDC loans by transfer to the Kingdom of Morocco

In line with Maroc Telecom’s ongoing debt-reduction policy, at On July 29, 2005, Vivendi Universal and the Kingdom of the beginning of 2005 the Company asked to make an early Morocco signed a letter of commitment in which they repayment of the loans contracted with Export Development approved the transfer of these loans to the Moroccan Canada (EDC). government. This proposal was ratified unanimously by the On May 25, 2005, the Treasury and External Finance voting members at the Supervisory Board meeting held on Department requested that Maroc Telecom transfer these September 9, 2005. loans to the Treasury.

Document de référence 2005 - Maroc Telecom 213 7 RECENT DEVELOPMENTS AND OUTLOOK

7.1 RECENT DEVELOPMENTS

Universal service The ANRT’s executive committee responsible for approving the Telecom for 2005, out of an overall proposal of MAD 338 million universal service programs proposed by the operators in (2% of revenues net of interconnection charges, handset sales compliance with the regulatory provisions in force (“pay or play” and income from value added services), relating to Mobile and principle), delivered its decision on January 3, 2006 as to the ADSL service projects. Maroc Telecom must therefore pay the universal service program proposed by Maroc Telecom. remaining sum of MAD 137 million to the universal service fund The universal service executive committee only accepted MAD by April 30, 2006 at the latest. 201 million of the universal service program proposed by Maroc

GSM Al Maghrib Maroc Telecom sold its minority shareholding in GSM Al Maghrib to Air Time on March 28, 2006. This disposal has no significant operational or financial impact on Maroc Telecom.

Shareholder’s Meeting held March 30, 2006 Maroc Telecom’s Annual General Shareholders’ Meeting was The Extraordinary Shareholders’ Meeting approved, by more held on Thursday, March 30, 2006 at the Mohammed VI Palais than 99% of votes : des Congrès in Skhirat. • the reduction of capital not prompted by losses through a The Ordinary Shareholders’ Meeting approved, by more than reduction in the nominal share value 99% of votes : • the amendment of article 4 of the Company’s by-laws • the Reports and Financial Statements for the year ended accordingly December 31, 2005 • the authorization for the Management Board to grant options • the Consolidated Financial Statements for the year ended to buy or subscribe to the Company’s shares. On this point, December 31, 2005 and on the Supervisory Board’s request, only options to buy the Company’s shares will be granted so as not to dilute • the agreements referred to in the Statutory Auditors special existing shares. report • the powers to carry out any formalities required by law. • the allocation of net income for the year ended December Maroc Telecom’s individual and consolidated financial 31, 2005 statements, audited and closed as of December 31, 2005, and • the ratification of the co-option of Mr. Chakib Benmoussa as the Statutory Auditors’ reports, as published, have not been a member of the Supervisory Board until the next Ordinary modified since their publication. Shareholders’ Meeting in 2007. The report of voting results is available on Maroc Telecom’s website www.iam.ma

New appointment to Maroc Telecom’s Management Board Mr. Arnaud Castille has been appointed member of Maroc Telecom’s Management Board, and Chief Financial Officer of Administration and Finance, replacing Mr. Mikael Tiano.

214 Document de référence 2005 - Maroc Telecom 7. RECENT DEVELOPMENTS AND OUTLOOK PERSPECTIVES DU MARCHE

7.2 MARKET OUTLOOK

The discussion herein relating to market outlook contains On the Mobile segment, revenue growth is expected to derive forward-looking statements, and information relating to the mainly from the increase in the penetration rate of mobile Company’s expectations. Such forward-looking statements telecommunications in Morocco. On the basis of research involve risks and uncertainties inherent to forecasts, and are conducted for Maroc Telecom by independent experts in based solely on evaluations made as of the date on which such 2002, the rate of mobile penetration in Morocco could reach statements are made. The Company warns investors that a approximately 40% of the Moroccan population in the significant number of factors could result in the actual results medium term. Given the growth recorded in 2005, the differing materially from those expected, including the factors penetration rate could exceed 60% in the medium term. In listed in “section 4.4”. addition, the Company hopes to benefit from the growth in The telecommunications market in Morocco offers large usage, owing mainly to a migration of prepaid customers to potential for growth, owing to the following economic and postpaid subscriptions and the increased use of data services social factors, which favor the further penetration of new in the medium term. Regarding its competitive position in this information and telecommunications technologies : market, Maroc Telecom considers that is possible that a new operator, holding a new license as a Mobile Virtual Network • the population’s overall youth (51% aged under twenty five)*; Operator (MVNO) or through other means, may enter the • population growth of 1.4% per year; market in the near future.

• the fact that the population is increasingly living in urban areas On the Fixed-line and Internet segments, Maroc Telecom (with the rate of urbanization rise from 43% in 1982 to 55% in intends to pursue its efforts, initiated in 2002, in order to 2004)*; expand its fixed-line business, and expects moderate growth in the number of fixed lines in Morocco. Regarding the • sustained growth in GDP (5% annual average growth between internet, the strong growth posted since the beginning of 2004 2001 and 2004)* and completion in the medium term of is expected to continue within next years, in particular due to programs for the development of road and tourism the development of broadband. The Company also expects infrastructures, and electrification of rural areas; the liberalization of the market in the near future. This could • The National Initiative for Human Development (INDH) was result in the Company losing market share in the short term. launched in 2005 and aims to set up programs which aim to However, the fixed-line market might benefit from this combat poverty and exclusion, along with liberalization and from the competition incurred by new entrants, as it has been the case in other countries that • the establishment of free-trade agreements with the European Union, the United States and Arab countries. liberalized their telecommunications sector.

* Census 2004.

Document de référence 2005 - Maroc Telecom 215 7.3 OBJECTIVES

This section contains information regarding the Company’s herein may affect the Company’s operations and its ability to objectives for the fiscal year 2006. The Company warns achieve its targets (see also section 7.2 “market outlook”). potential investors that these forward-looking statements are Given continuing growth in the mobile and ADSL markets and dependent on circumstances and events which are expected to occur in the future. These statements do not reflect historical Maroc Telecom’s capacity to maintain leadership in the fixed- data and are not to be interpreted as warranties that the facts line segment, the Company’s growth targets for 2006 are as and data mentioned will occur or that the targets will be follows : achieved. By their nature, these are targets and it is therefore • Consolidated revenues should grow by between 6% and 8% possible that they may not be achieved, and the assumptions compared with 2005. on which they are based may be found to be erroneous. Investors are invited to take into consideration the fact that • Consolidated earnings from operations should grow by some of the risks described in section 4.14 “Risk factors” between 12% and 14% compared with 2005.

216 Document de référence 2005 - Maroc Telecom 7. RECENT DEVELOPMENTS AND OUTLOOK OBJECTIVES

REPORT OF THE STATUTORY AUDITORS ON THE FORECASTS OF PROFIT

As statutory auditors and in accordance with Commission Regulation (CE) N° 809/2004, we have prepared this report on the forecasts of profit of Itissalat-Al-Maghrib in part 7, section 7.3 of its Document de Référence. These forecasts and underlying significant assumptions were prepared under the responsibility of the Management Board of Itissalat-Al-Maghrib, in accordance with the provisions of Commission Regulation (CE) N° 809/2004 and the CESR advice on forecasts. It is our responsibility to express, in accordance with the terms required by annex I, item 13.3 of Commission Regulation (CE) N° 809/2004, our conclusions on the appropriateness of the preparation of such forecasts. We conducted our work in accordance with international auditing standards. Our work included an assessment of the procedures implemented by management to prepare the forecasts, as well as the performance of procedures to obtain assurance about whether the accounting methods used are consistent with those used for the preparation of historical data of Itissalat-Al-Maghrib. They also involved collecting data and explanations we deemed necessary in order to obtain reasonable assurance about whether the forecasts are appropriately prepared on the basis of the specified assumptions. We remind you that, as this concerns forecasts, which are uncertain by nature, actual results may differ significantly from the forecasts presented and so, we do not express any conclusion as to the potential realisation of such forecasts.

In our opinion: • The forecasts have been appropriately prepared on the basis indicated ; • The accounting basis used for the purposes of these forecasts is consistent with the accounting methods used by Itissalat-Al-Maghrib.

This report is issued for the sole purpose of publication of these forecasts in the Document de Référence and may not be used in any other context.

Casablanca, February 24, 2006

Statutory Auditors

Abdelaziz ALMECHATT Samir AGOUMI

Document de référence 2005 - Maroc Telecom 217 TABLE OF CONCORDANCE

Schedules from appendix 1 of the European regulation 809/2004 Page number of the annual report 1. PERSONS RESPONSIBLE 6 2. STATUTORY AUDITORS 7 3. SELECTED FINANCIAL INFORMATION 3.1. Selected historical financial information 4 / 98 3.2. Selected financial information for interim periods NA 4. RISK FACTORS 93 to 97 5. INFORMATION ABOUT THE ISSUER 5.1. History and development of the Issuer 10 to 12 / 40 5.2. Investments 117 to 118 6. BUSINESS OVERVIEW 6.1. Principal activities 42 to 76 6.2. Principal markets 42 to 76 / 104 / 114 to 116 / 153 to 154 6.3. Information given pursuant to items 6.1. and 6.2. that has been influenced by exceptional events NA 6.4. Extent to which the issuer is dependent on patents or licenses, industrial commercial or financial contracts or new manufacturing processes 84 6.5. The basis for any statements made by the issuer regarding its competitive position. 72 to 74 7. ORGANIZATIONAL STRUCTURE 7.1. Description of the group 41 to 42 7.2. Significant subsidiaries 41 to 42 / 67 to 68 8. PROPERTY, PLANT AND EQUIPMENT 8.1. Existing or planned material tangible fixed assets 89 8.2. Environmental issues that may affect the issuer’s utilization of tangible fixed assets NA 9 OPERATING AND FINANCIAL REVIEW 98 to 116 9.1. Financial condition 98 to 108 9.2. Operating results 109 to 116 10. CAPITAL RESOURCES 117 to 123 10.1. Information concerning the issuer’s capital resources (both short- and long-term) 128 / 146 / 161 / 166 10.2. Cash flows 117 10.3. Information on the borrowing requirements and funding structure of the issuer 118 to 123 10.4. Information regarding any restrictions on the use of capital resources NA 10.5. Information regarding the anticipated sources of funds needed to fulfill commitments referred to in items 5.2.3 and 8.1 NA 11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES 75 12. TREND INFORMATION 215 13. PROFIT FORECASTS OR ESTIMATES 216 14. ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY BODIES AND SENIOR MANAGEMENT 14.1. Administrative, management or supervisory bodies 200 to 211 14.2. Administrative, management, and supervisory bodies and senior management conflicts of interests 211 15. REMUNERATION AND BENEFITS 210 to 211 15.1 Remuneration paid and benefits in kind 210 15.2. Pension, retirement and similar benefits 210

218 Document de référence 2005 - Maroc Telecom TABLE OF CONCORDANCE

Schedules from appendix 1 of the European regulation 809/2004 Page number of the annual report 16. BOARD PRACTISES 16.1. Date of expiration of the current term of office 200 / 202 16.2. Information about members of the administrative, management or supervisory bodies’ service contracts 211 16.3. Audit committee and remuneration committee 206 to 209 16.4. Statement as to whether or not the issuer complies with its country’s of incorporation corporate governance regime NA 16.5. Report of the chairman of the supervisory board on internal control NA 16.6. Statutory auditors’ report on the chairman’s report NA 17. EMPLOYEES 17.1. Human resources 85 to 88 17.2. Shareholdings and stock options 211 17.3. Description of any arrangements for involving the employees in the capital of the issuer. 35 18. MAJOR SHAREHOLDERS 34 to 35 18.1. Breakdown of capital and voting rights 34 to 35 18.2. Different voting rights NA 18.3. Control of the issuer 35 to 38 18.4. A description of any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change of control of the issuer 35 to 38 19. RELATED PARTY TRANSACTIONS NA 20. FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES 98 to 199 20.1. Historical financial information 98 to 123 20.2. Pro forma financial information 98 à 99 / 110 / 112 / 114 to 115 20.3. Financial statements 124 to 199 20.4. Auditing of financial information 167 / 197 to 199 20.5. Age of latest financial information 98 20.6. Interim and other financial information NA 20.7. Dividend policy 31 20.8. Legal and arbitration proceedings 92 20.9. Significant change in the issuer’s financial or trading position 214 21. ADDITIONAL INFORMATION 21.1. Share capital 26 to 38 21.2. Memorandum and articles of association 10 à 25 / 37 22. MATERIAL CONTRACTS NA 23. THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATION OF ANY INTEREST NA 24. DOCUMENTS ON DISPLAY 7 25. INFORMATION ON HOLDINGS 38 / 67 to 68

In compliance with article 28 of European Commission regulation December 31, 2003, the relevant Statutory Auditors’ report and (EC) no. 809/2004 dated April 29 2004, the following information the Group financial report on pages 160, 122 and 208 of the is included for reference in the present annual report: annual report recorded with the AMF on November 8, 2004 (I 04-198). • The consolidated financial statements for the year ended December 31, 2004, the relevant Statutory Auditors’ report and The chapters of the annual report no. R 05-038 and of the draft the Group financial report on pages 157, 131 and 100 of the prospectus no. I 04-198 that are not referred to above are either annual report filed with the AMF on April 8, 2005 (R 05-038) not relevant for the investor, or are covered elsewhere in this annual report. • The consolidated financial statements for the year ended

Document de référence 2005 - Maroc Telecom 219 ANNEXES

MAROC TELECOM’S COMBINED ORDINARY AND EXTRAORDINARY GENERAL MEETING, MARCH 30, 2006

PROPOSED RESOLUTIONS As an Ordinary Shareholders’ Meeting • First resolution decides to allocate the net income of MAD 5,871,899,950.67 for the year ended December 31, 2005 as follows : Approval of the Reports and Financial Statements for the year ended December 31, 2005 • Regulated reserve MAD 265,331,741.39 • Distributable income MAD 5,606,568,209.28 The Shareholders’ Meeting, having satisfied the quorum and majority requirements for Ordinary Shareholders’ Meetings, • Transfer from discretionary reserve MAD 512,906,728.65 after reviewing : • Total distributable amount MAD 6,119,474,937.93

• the Management Board’s report and the comments of the • Total dividend MAD 6,118,503,566.40 Supervisory Board on the said report, • Balance carried forward MAD 971,371.53

• and the Auditors’ Report on the Financial Statements for the The Shareholders’ Meeting also notes that given the transfer of year ended December 31, 2005. the sum of MAD 512,906,728.65 from the discretionary reserve, the latter is reduced to MAD 0. approves the Financial Statements for the said fiscal year as well as the transactions presented in these statements or The Shareholders’ Meeting sets the total dividend at MAD 6.96 summarized in these Reports. per share for each of the shares making up the share capital Consequently, the Shareholders’ Meeting decides to give final held on the record date. This dividend will be paid on April 30, 2006. discharge to the members of the Supervisory and Management Board for the performance of their term of office The ordinary dividends paid over each of the past three fiscal for the fiscal year 2005. years were as follows, in Moroccan dirhams per share :

Fiscal year 2004 2003 2002 • Second resolution Number of shares 879,095,340 87,909,534 87,909,534 Approval of the Consolidated Financial Statements for the year ended December 31, 2005 Dividend/share (MAD) 5.00 31.28 28.44 The Shareholders’ Meeting, having satisfied the quorum and Adjusted dividend /share* (MAD) 5.00 3.128 2.844 majority requirements for Ordinary Shareholders’ Meetings, Total dividend 4,395,476,700 2,750,000,000 2,500,000,000 approves where necessary the consolidated financial statements for the year ended December 31, 2005, such as * Adjusted: the nominal value per share was reduced from MAD 100 to MAD 10 in 2004 following the obligatory conversion of one old share into 10 new shares. they have been presented.

• Fifth resolution • Third resolution Ratify the co-option of Mr. Chakib Benmoussa as a member Approval of the regulated related-party agreements of the Supervisory Board The Shareholders’ Meeting, having satisfied the quorum and The Shareholders’ Meeting, in accordance with the proposal majority requirements for Ordinary Shareholders’ Meetings, by the Supervisory Board, decides to ratify the co-option of Mr. after having heard a reading of the Statutory Auditors’ Special Chakib Benmoussa to replace Mr. El Mustapha Sahel for the Report on the agreements referred to in article 95 of Act no. 17- remaining period of his mandate, namely until the end of the 95, approves all the transactions and regulated related-party Ordinary Shareholders’ Meeting to be held in 2007. agreements described in this report. As an Extraordinary Shareholders’ Meeting • Fourth resolution • Sixth resolution Allocation of net income and payment of dividend Reduction of capital not prompted by losses through a reduction in the nominal share value The Shareholders’ Meeting, having satisfied the quorum and majority requirements for Ordinary Shareholders’ Meetings, The Shareholders’ Meeting, having satisfied the quorum and

220 Document de référence 2005 - Maroc Telecom ANNEXES MAROC TELECOM’S COMBINED ORDINARY AND EXTRAORDINARY GENERAL MEETING, MARCH 30, 2006

majority requirements for Extraordinary Shareholders’ • Eighth resolution Meetings, after having heard a reading of the Management Board’s Report and read the Statutory Auditors’ Report, Authorization for the Management Board to grant options to decides that the share capital, which is currently MAD buy or subscribe the Company’s shares 8,790,953,400, divided into 879,095,340 fully paid up shares of The Shareholders’ Meeting, having satisfied the quorum and MAD 10 each, will be reduced by a total of MAD majority requirements for Extraordinary Shareholders’ Meetings, 3,516,381,360.00 to MAD 5,274,572,040.00, through a authorizes the Management Board, within the framework of the reduction in the nominal value and the repayment of MAD 4 in current legal provisions, to grant on one or more occasions, over cash on each of the 879,095,340 shares. a period of three years as of today, for the benefit of members of As a result, the nominal value of each of the 879,095,340 the Board, managers, senor executives or, in exceptional cases, shares making up the capital will be reduced from MAD 10 to non-executive members of the Company, options to subscribe MAD 6. The new capital of MAD 5,274,572,040.00 will thus be new shares in the company to be issued via a capital increase or divided into 879,095,340 fully paid up shares with a nominal options to acquire own shares bought back by the company, value of MAD 6 each,. limited to 1% of the share capital on the day the options are allocated by the Management Board. In accordance with the provisions of article 212 of Act no. 17- 95, the repayment of the sum of MAD 3,516,381,360.00, or The exercise price for the subscription of shares will be set by the MAD 4 on each share, cannot be performed until the period of Management Board and must not be lower than the closing price thirty days provided for creditors to object to the President of on the last trading day prior to the date on which the stock the Court has expired and, in case of objection, before a ruling options are granted. The exercise price for the purchase of shares has been made. will be set by the Management Board and must not be lower than the weighted average cost of the shares purchased by the The Shareholders’ Meeting grants the Management Board full Company. authority, which may be delegated, to carry out any and all actions, formalities or declarations necessary to effect the In the event of the attribution of options to subscribe for shares, capital reduction and take all measures to ensure the partial the current authorization automatically causes existing repayment of the shares. shareholders to waive their preferential rights to subscribe to shares as and when options are exercised. The options granted must be exercised within a maximum period • Seventh resolution of ten years from the date on which they are granted. Related amendment to article 4 of the Company’s articles of Shares subscribed through the exercise of these options must be association in registered form. As a result of the adoption of the previous resolution and on The Shareholders’ Meeting grants the Management Board full condition that the said reduction in capital becomes effective, authority, on one or more occasions, under the conditions the Shareholders’ Meeting, having satisfied the quorum and established in the articles of association, to define the majority requirements for Extraordinary Shareholders’ beneficiaries and set the number of options granted to each of Meetings, decides to amend article 4 of the Company’s by- them, set the vesting date for the options, set the terms and laws as follows : conditions for the attribution, exercise and temporary suspension ARTICLE 4 – CAPITAL of options granted, perform all necessary transactions, The first paragraph of article 4.1 is removed and replaced by implement all other new legal measures that may become the following text: applicable during the period of the current authorization and whose application does not require an express decision by the "4.1. The share capital of Itissalat Al-Maghrib is fixed at the Shareholders’ Meeting and delegate to its President full authority amount of five billion two hundred and seventy four million five to carry out any and all actions or formalities. hundred and seventy two thousand and forty Moroccan dirhams (MAD 5,274,572,040), divided into eight hundred and seventy nine million ninety five thousand three hundred and • Ninth resolution forty shares (879,095,340) with a nominal value of six (6) Moroccan dirhams each, all of the same category and fully Powers for formalities paid up." The Shareholders’ Meeting, having satisfied the quorum and (the rest of the article remains unchanged) majority requirements for Ordinary Shareholders’ Meetings, gives full powers to the bearer of an original, copy or extract of the minutes of this Meeting for the purposes of carrying out any formalities required by law.

Document de référence 2005 - Maroc Telecom 221 GLOSSARY

Trunked private mobile radio networks : Mobile radio networks where Radio-relay link : Technology used for radio signal transmission (voice, frequencies are shared by the users of several companies or organizations data or video). Relays are installed on pylons or highpoints, which are for internal communications. The sharing of frequencies is limited to the deployed to carry signals from one point to the next, creating the link. duration of each call. Fidelio : Fidelio is the first point-based loyalty program introduced in ADSL (Asymetrical Data Subscriber Line) : Technology enabling users to Morocco. It is reserved for post-paid customers and was launched on receive high bandwidth services through their existing phone lines while June 1, 2002. The program allows points to be collected based on being able to make a phone call at the same time. The transmission expenditure, and provides advantages in the form of free or cut-price capacity going from the network to the customer is greater than that from handsets, and free calls and SMS messages. the customer to the network, hence Asymmetric. Inter-segment revenues : Inter-segment revenues are mainly generated ANRT (Agence Nationale de Réglementation des Telecoms) : The from interconnection services relating to traffic between the fixed-line and Moroccan telecommunications regulator mobile networks and the provision to the Mobile segment of leased lines by the Fixed-line and Internet segment. Since July 1, 2004, they also ARPU (average revenue per user) : ARPU corresponds to the revenues include revenues from the provision of services to Mauritel. generated (prepaid and postpaid) for a given period, excluding roaming-in revenues (incoming and outgoing calls, revenues from value added Frame Relay : Technology used to send high bandwidth data over long services) divided by the average number of customers (prepaid and distances enabling the transmission of large amounts of information, the postpaid) over the same period, on a monthly basis. The average number handling of fluctuations in data flows and voice transmission. of customers is the average of average monthly customer base (prepaid and postpaid) figures. The monthly average customer base corresponds to GMPCS (Global Mobile Personal Communications by Satellite) : the mean number of customers per month (prepaid and postpaid) taken at Personal communications system providing cross-border, regional or the beginning and at the end of each month. worldwide coverage via a network of satellites accessible using small easily transportable handsets. ATM (Asynchronous Transfer Mode) : Network technology that accommodates the simultaneous transmission of data, voice, and video. It GPRS (General Packet Radio Service) : Packet switching system is based on asynchronous transmission of short packets of fixed length. enabling enhanced data rates over GSM networks.

Optical local loop : Optical Fiber Cable-based access network used for Maroc Telecom group : Indicates all the companies fully consolidated connecting broadband customers. within the scope of consolidation.

Base Transeiver Station (BTS) : Component of the mobile radio network GSM (Global Systems for Mobile communications) : European digital comprising antennas and radio transmitters/receivers (TRX). It provides radio transmission standard for mobile telephony, known as 2G (2nd GSM network coverage within a given range. generation), adopted in 1987 and devised by the ETSI (European Telecommunications Standard Institute). It is the most widely used standard Self-Routing Switch : A switch is a piece of equipment used to establish in the world. In operation since 1992, this technology uses two band a temporary link or connection between an incoming path and an outgoing frequencies: 900 and 1,800 MHz, and can transmit voice as well as data. path on a line or circuit. Interconnexion : Reciprocal service offered by the operators of two CAIR : Virtual call center solution offered by Maroc Telecom, aimed at different telecommunications networks enabling all subscribers within the companies for which customer relationship management is strategically two groups to communicate freely with each other. crucial. This solution enables businesses to set up customer-response solutions with minimum investment.All call center functions can be IP (Internet Protocol) : Telecommunications protocol used on networks managed within Maroc Telecom’s network. used to carry internet traffic and based on the technique of transmission of data packets. SIM (Subscriber Identity Module) : Without a SIM card, calls cannot be made from a mobile phone. In particular, the SIM card stores the user’s Kbits/s (Kilobits per seconde) : Unit of measurement used to express the personal profile and a PIN code protecting access to the card. speed at which data can be transmitted along a line.

Mobile Switching Center (MSC) : A central switching point that controls Leased line : Every part of the network, including an access line to the the routing of calls. network, that is supplied as a dedicated channel with all of its capacity available exclusively to the user and on which there are no controls or International transit center : A switch that carries international calls to foreign signaling. operators’ networks. LO BOX (GSM Gateways) : Terminal equipment, compatible with the GSM DSLAM (Digital Subscriber Line Access : ADSL device located at a standard, that has been designed to act as an interface between the GSM telephone exchange. It is an electronic assembly holding several cards that network and terminal equipment that is normally meant to be connected to are equivalent to the client filter and modem. The filter separates incoming the fixed public telecommunications network (such as private switching phone and data signals and the modem translates back the ATM cells systems (PABX) or ordinary telephones). (small packets transported over ATM connections. MENA (Middle East and North Africa) : Region including the following ISP (Internet Service Provider) : A company or an organization offering countries: Algeria, Bahrain, Egypt, Gaza and the West Bank, Iran, Iraq, internet access to household, professional and business users. Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi

222 Document de référence 2005 - Maroc Telecom GLOSSARY

Arabia, Syria, Tunisia, Turkey, UEA, Yemen. SMSC (Short Message Service Center) servers : Service allowing the sending and reception of written messages containing a maximum of 160 PCM (Pulse Code Modulation) : Process used to transmit the spoken characters. Messages can be sent via an operator, via the internet or word involving the sampling and digital coding of the signal. The PCM directly using the keyboard on a mobile phone. If the recipient’s phone is circuit is the circuit at the heart of the 2 Mbps telephone network. turned off the messages are still saved at the operator’s message center. The length of time these messages are stored for varies depending on the MMS (Multimedia Messaging Service) : Multimedia version of SMS operator. Nonetheless, in order for messages to be received, the maximum enabling real multimedia files to be attached to text messages: videos, storage capacity of the handset must not have been attained. audio, high-resolution images. SMS (Short Message Service) : Written message, limited to 160 Multiplexer: A piece of telecom network equipment enabling the insertion characters, exchanged between mobile telephones. or extraction of data packages. SMW3 (SEA-ME-WE3 / South East Asia – Middle East – Western NORME NMT (Nordic Mobile Telephone) : Mobile network launched by Europe) : Fiber optic sub-sea cable linking 4 continents. Maroc Telecom, based on analogue technology operating in the 450 Mhz frequency band. SSNC (Signalling System Network Control) : A new component developed by Siemens for controlling signaling traffic for MSCs (mobile PABX (Private Automatic Branch eXchange) : Equipment capable of switching centers), enabling handling capacity to be increased. establishing temporary connections between inbound and outbound lines in order to route communications. Signaling Transfer Point (STP) : Signaling transfer point for SS7 signaling systems. The STP allows for the routing and transfer of signaling IN platform (Intelligent Network) : Platform allowing value-added messages using the SS7 protocol. services to be made available (prepaid card, prepaid line, kiosk, capped- rate plan, etc.). Churn rate : An indicator that is calculated by dividing the number of contracts terminated over a given period by the average customer base Segments : Refers to the Mobile segment or the Fixed-line and Internet over the same period, expressed on an annualized basis. The average segment of Maroc Telecom. customer base corresponds to the mean number of clients taken at the beginning and at the end of each month. Postpaid (services) : Method of paying for services after they have been used (free services can also be included in this method). Average churn rate : An indicator that is calculated by dividing the number of contracts terminated (by clients subscribing to prepaid and Power CP : New more powerful processor for MSC mobile switches postpaid offers) over a given period by the average total customer base based on Siemens technology. (prepaid and postpaid) over the same period, expressed on an annualised basis. The average customer base is based on the average monthly figures PPT : Intelligent Network service allowing the marketing of capped-rate plans, not with a line number (CLI) but any virtual phone number. (prepaid and postpaid) for the period. The average monthly customer base corresponds to the mean number of clients (prepaid and postpaid) at the Prepaid (services) : Formula whereby services are paid for prior to being beginning and at the end of the month. used (free services can also be included in this formula). Dropped call rate : A quality indicator that measures, across the whole of Radio paging : Transmission of numeric or alphanumeric messages to a the existing mobile subscriber base, the number of disconnected calls in mobile handset or a group of mobile handsets. proportion to all the calls made on the network.

NSS (Network Sub-System) : All elements / equipment, notably Successful connections rate : A quality indicator that measures, during switchgear, required to make up a GSM network. peak periods on the network, the number of calls successfully established emanating from the existing mobile subscriber base (on the BSS radio SS7 (Signaling System 7) : American name for the CCITT 7 network part), in relation to all calls made on the network. signaling protocol. Fault report rate : Generic term, applicable to different services, ISDN (Integrated Services Digital Network) : Entirely digital telecom illustrating the number of faults reported on lines or for services over a network enabling the simultaneous transmission of voice and data (fax, certain period in proportion to the total number of lines or services on offer internet etc.). over the same period.

Roaming : When a user is abroad, this function enables a user to make Success rate : A quality indicator that measures the number of SMS and receive calls via an operator other than the one to which he/she is a successfully sent by the existing mobile subscriber base in relation to the subscriber. total number of SMS sent over the network.

PSTN (Public Switched Telephone Network) : This is the traditional two- CAMEL technology (Customised Applications for Mobile networks wire network. This network is switched in so far as the connection with the Enhanced Logic) : A technology that enables a user to call his home person being called is temporary as opposed to cable where the country without needing an area code. The technology works for short connection is permanent. messages (SMS) as well as voice calls.

SDH (Synchronous Digital Hierarchy) : Digital method of transmission SDH technology (Synchronous Digital Hierarchy) : High throughput used to optimize transmissions over optic fiber and radio systems. technology based on a “ring”. This type of structure allows for a different

Document de référence 2005 - Maroc Telecom 223 geographical trace to be made available, providing a back-up path when VPN (Virtual Private Network) : A VPN is a private communications the primary route becomes unavailable. network used for the internal needs of a closed group of users to communicate over one or a number of public networks. This product fulfils Phone shops : Commercial outlet managed by a third party not both the internal and external communication requirements of businesses. employed by Maroc Telecom, open to the public and containing a certain number of payphones, providing telecom services to VSAT (Very Small Aperture Terminal) : System of satellite transmission consumers. using small antennas. A VSAT base equates to a micro-station made up of antennae with a diameter of 0.9 to 3.5 m. A VSAT network is a satellite Digital network termination : Device used to connect ISDN clients. network enabling communications, via a hub, with a group of sites equipped with micro-stations (VSAT) linked to a central system by a star TRX (Transceiver Receiver) : The part of the BTS that emits and receives topology. the GSM signal. WAP (Wireless Application Protocol) : Standard adapting the internet to UMTS (Universal Mobile Telecommunications System) : 3G (3rd the constraints of mobile telephony, notably through the use of an generation) standard used for the transfer of voice and data. This appropriate content format. technology, based on the WCDMA-CDMA standards, allows for throughput in excess of 2Mbps. WiFi (Wireless Fidelity) : Commercial brand name for a data transmission system based on the IEEE 802.11 standard that allows wireless access to Billing unit (BU) : Unit used for billing calls, the duration of which varies an Ethernet network from up to a few hundred metres away at a speed of according to the type of call made (local, national, international, fixed-to- 11 Mbits/s. mobile). X 25 : Protocol used to manage packet switched networks. Used by Maroc VMS (Voice Mail System) : Name given to the voice messaging system. Telecom through Maghripac.

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Maroc Telecom Moroccan Corporation with a share capital of MAD 8,790,953,400 Registred Office : Avenue Annakhil – Hay Riad – Rabat – Morocco Tel. : + 212 (0)37 71 21 21 Fax : + 212 (0)37 71 48 60 www.iam.ma RCS Rabat 48 947