2009 يوـنـسـلا رـيرــقـتلا · both iPhone 3G and 3GS in the GCC, as we did with BlackBerry in 2006. The iPhone is available in selected markets allowing customers

Annual Report 20092009 التـقــريـر الـسـنـوي

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التقارير والبيانات المالية الموحدة للسنة المنتهية في 31 ديسمبر 2009

المركز الرئيسي:بناية إتصاالت

تقاطع شارع الشيخ زايد األول مع شارعالشيخ راشد بن سعيد المكتوم

ص.ب. رقم 3838أبوظبي، اإلمارات العربية المتحدة

هاتف : 6283333 2 971+فاكس : 6317000 2 971+

تلـكس : 22135 اتكو أ.م.22135 ETCHO EM

etisalat.ae

مكاتب المناطق:أبوظبي، دبي واإلمارات الشمالية

المحتويات

2 كلمة رئيس مجلس اإلدارة 4 مجلس اإلدارة واللجنة التنفيذية 6 المؤشرات الهـامة 8 كلمـة الرئيـس التنفيـذي 10 تقريــر اإلدارة 12 المؤشرات الهـامة المحليـة 15 لمحة عن السوق 24 الشبكة 27 إتصاالت للخدمات القابضة 28 الموارد البشرية 31 المسؤولية االجتماعية للشركة 32 حوكمة الشركات

33 البيـانات المـاليـة الموحدة تقرير مدققي الحسابات المستقلين

34 إلى السادة المساهمين 35 بيان الدخل الموّحد 36 بيان الدخل الشامل الموّحد 37 بيان المركز المالي الموّحد 38 بيان التغيرات في حقوق الملكية الموّحد 39 بيان التدفقات النقدية الموّحد 40 إيضاحات حول البيانات المالية الموحدة 77 إعالن انعقاد إجتماع الجمعية العمومية

Reports and Consolidated Financial Statements for the year ended 31 December 2009

ContentsChairman’s Statement 2Board of Directors and Executive Committee 4Group Highlights 6Chief Executive Officer’s Statement 8Management Review 10 UAE Highlights 12 On the ground – a market view 15 Network 24 Etisalat Services Holding 27 Human capital 28 Corporate Social Responsibility 31 Corporate Governance 32

Financial Statements 33Independent Auditors’ Report to the Shareholders 34Consolidated Income Statement 35Consolidated Statement of Comprehensive Income 36Consolidated Statement of Financial Position 37Consolidated Statement of Changes in Equity 38Consolidated Statement of Cash Flows 39Notes to the Consolidated Financial Statements 40Notice of Meeting 77

Head Office:Etisalat BuildingIntersection of Zayed The 1st. Street andSheikh Rashid Bin Saeed Al Maktoum StreetP.O. Box 3838Abu Dhabi, UAE

Telephone: +971 2 6283333Fax: +971 2 6317000Telex: 22135 ETCHO EMetisalat.ae

Regional Offices:Abu Dhabi, Dubai, Northern Emirates

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Chairman’s Statement

Dear shareholders,

I am honoured to present to you another chapter of Etisalat’s success story, the Annual Report of 2009 that marks the Corporation’s strong operational and financial achievements. Despite the global financial crisis that intensified in the past year and left profound impacts on the world economy and spared no industry, we were able to post positive results and make strategic investments that positioned us for a better future and enhanced shareholders’ long term value.

Let me first outline to you some of the major highlights of 2009 that demonstrate our success:

• Aggregate subscribers’ base exceeded 107 million, representing an increase of 34%.

• Consolidated revenue was up more than 5% to AED 30.8 billion.

• Earnings per share (EPS) grew 4.2% to AED 1.23 per share.

• Dividends distributed to shareholders totalled AED 3.9 billion, an increase of 20% from 2008.

• Maintained strong cash balance at AED 11.3 billion driven by strong cash flow generation. This cash position allowed us to have strong credit ratings, pay dividends, continue to invest in our networks and finance our acquisitions.

• We have a negative net debt position of AED 7.5 billion that is uncommon to see in our industry.

• Capital spending amounted to AED 6.8 billion, representing an increase of 74%.

Nevertheless, this does not mean that we were immune to the economic slowdown. Our sales growth was impacted in selected markets and margins came under pressure as customers rationalised their total spending and as competition intensified across all markets including the UAE. This was further worsened by unfavourable movements in foreign exchange rates.

However, we responded by enhancing our product portfolio and adding several value-for-money offerings. In addition, we rationalised our investments and expenditure and placed more focus on solidifying our financial strength and liquidity.

More people, companies and governments place increasing importance on telecommunications services. Customers’ communication needs keep growing in terms of mobility, value added services and broadband speed. Companies are looking for ways to drive better efficiency and sustain profitability in the current market conditions and telecom services are one of the viable solutions. Governments are embracing more telecom services in their entities to modernise their operations and enhance productivity. All of these provide us with tremendous opportunities to fulfil these growing needs and consequently expand our revenue base.

We continued to differentiate ourselves and excel through our advanced networks and innovative product offerings. In 2009, we were the first mobile operator to launch both iPhone 3G and 3GS in the GCC, as we did with BlackBerry in 2006. The iPhone is available in selected markets allowing customers to access their emails, surf the internet, download music, watch video and remain connected to their social networks at their convenience - thus, fuelling the growth of mobile internet.

Furthermore, the Corporation leveraged its advanced 3G and WiMax networks to introduce attractive wireless broadband offers increasing the overall value proposition and creating new segments in the market.

We maintained our disciplined approach in our international strategy and evaluated investment opportunities more cautiously. We improved our presence in the Asian market by adding Tigo, the second mobile operator in Sri Lanka to our international portfolio. This acquisition fits into our expansion strategy and will be accretive to shareholders’ long term value. As for the rest of our portfolio, we keep investing in our networks to improve capacity, coverage and quality to enable us to build market share. We plan to continue expanding our reach in targeted regions and further establish Etisalat as a trusted brand for a global telecom service provider.

Despite the challenging market conditions, shareholders of Etisalat have been well rewarded for their investment. The Corporation has declared a total dividend of AED 0.60 per share for 2009, representing a dividend yield of 5.45%. Shareholders have also been rewarded through an increase in the share price, which grew by 33% in 2009. In addition, the Corporation will make a federal royalty payment of AED 8.8 billion to the Federal Government.

The Corporation remains committed to employee development and we continued to invest in several training programmes in the UAE and in our various operations around the world.

We are fortunate to have an experienced Board of Directors to help the Corporation address key important issues and to provide variety of thought to the management team.

I have never been prouder of this Corporation and its people than I am today. I can assure you that we are better placed to face the anticipated challenges of year 2010, given our advanced networks, broad product offerings, human and financial resources, prudent financial policies and determined management team.

Finally I would like to thank you, our shareholders for the trust you place in our Corporation, its Board, and management team.

Sincerely,

Mohammed Hassan Omran

Chairman and Managing Director22 February 2010

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left to right

H.E. Saeed Mohamed Al Sharid

Member

H.E. Abdul Rehman Al Rostomani

Member

H.E. Sheikh Ahmed Mohammad Sultan bin Suroor Al Dhaheri

Member

H.E. Mubarak Rashed Al Mansoori

MemberMember Executive Committee

H.E. Mohammad Hassan Omran

ChairmanChairman Executive Committee

H.E. Khalaf Bin Ahmed Al Otaiba

Vice Chairman

Board of Directors and Executive Committee

4

H.E. Omar Saif Bin Mohammad Al Huraiz

Member

H.E. Ahmed Eisa Bin Nasser Al Serkal


H.E. Hamad Mohammad Al Hurr Al Suweidi

Member

H.E. Dr. Omar Mohammad Bin Sulaiman


H.E. Soud Ahmad Abdulrahman Ba’alawy

Member

Mr. Isam Meccawi Suliman Akrat

Corporation Secretary

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Group Highlights

Africa

Atlantique Telecom

Canar

Etisalat Misr

Emerging Market Telecommunications Services Limited (Etisalat Nigeria)

Zantel

Middle East

Etisalat, UAEEtihad Etisalat (Mobily)

Thuraya

Etisalat Services Holding

- Etisalat Academy

- Directory Services

- Ebtikar Card Systems

- Emirates Data Clearing House (EDCH)

- E-Marine

- E-Real Estate

- Etisalat Facilities Management

- Tamdeed Project Unit

Asia

Etisalat Afghanistan

Etisalat DB Telecom Private Limited

Etisalat Software Solutions (Pvt.) Ltd. (Technologia)

PT XL Axiata Tbk

Pakistan Telecommunications Company Limited (PTCL)

TIGO (etisalat Sri Lanka)

53%

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12%

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9% Tele

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6% Inte

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Breakdown of Revenue – Group(Year Ended December 31, 2009)

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Revenue (AED millions) Net Profit (AED millions) Capex (AED millions)

05 06 07 08 0905 06 07 08 09 05 06 07 08 09

8511

8836

7297

5860

4256

3908

6798

3460

1432

1259

29360

30831

21340

16290

12866

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Fiscal year 2008 & 2009 are reported in accordance with the International Financial Reporting Standards – IFRS

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CEO’s Statement

It is my pleasure to submit to you the 2009 Annual Report of Etisalat for the financial year ended 31 December 2009. The unprecedented financial crisis has triggered recession across the globe and to a certain degree impacted the business environment in the UAE as well. Due to the worsening global economy, equity markets tumbled, real estate dropped in value, bank financing dried up, and consumers’ spending came under pressure. For Etisalat in the UAE the stance has been to remain focused and committed on improving long-term shareholder value, emphasising sustainable growth in sales and profits whilst delivering products and services in line with the economic climate, and continuing our part of being not only a profitable corporation but a sustainable entity for the country and its people.

Despite the economic slump, the mature mobile market in the UAE where the total number of subscribers surpassed 10 million with the penetration rate exceeding 200%, and the intensified competition that resulted in reduction in international tariffs, Etisalat managed to lessen the impact of these factors on its operational and financial results. This was mainly accomplished by seeking new revenue streams through improving and upgrading our network with advanced technologies to enable the offering of new products and services. These included higher speed broadband packages, improved value added services, iPhone 3G and 3GS, new promotions like “Pay AED 75 for a new Wasel Connection with 100% cash back”, “Wasel 24 millionaires’ campaign”. In addition, new distribution channels have been developed to ensure we reach customers across the UAE.

These efforts, together with implementing a combined strategy, focusing on new customer acquisitions and increasing customer loyalty proved a great success in reinforcing Etisalat’s position as the leading telecommunications provider in the UAE. Net revenue for the UAE operations marginally declined by 0.7%, however proactive cost optimisation measures resulted in net profit growth of more than 9% after normalising the 2008 result for the one-time impact from the sale of Mobily’s shares. On the operational side, Etisalat UAE continued to post growth in the number of subscribers despite the high penetration rate. Accordingly, the mobile subscriber base grew by 6% to 7.74 million and internet subscribers grew by 15% to 1.33 million.

Our commitment to offer cutting edge-technology was boosted by having completed 60% of the roll out of the Fibre-To-The-Home (FTTH) network in the UAE. We have intensified our efforts to achieve 100% coverage of the UAE by 2011 and we are close to making Abu Dhabi the first capital city in the world with 100% fibre deployment by 2010. Additionally, it was a great delight to see our Double and Triple Play services launched in the market under the name of “eLife” - services that combine broadband internet access, landline and IP TV services in one bundled offer. eLife will boost the adoption of high-speed internet services and will also enable our customers to experience service quality while running applications like video on demand and online gaming.

We are ready to launch additional mobile banking services that will enable the expatriate population in the UAE to remit money to their home country using their mobile phone anytime, anywhere without a trip to the bank or other financial exchanges. This will provide convenient and secure solutions especially to individuals without bank accounts and will also pave the way for mobile payments in new areas.

Sponsorships in 2009 helped us increase our brand awareness and demonstrated to our customers that we are capable of bringing the most exciting entertainment to their lives. As part of our commitment to bring the best of sports to the UAE, we signed a two-year agreement with FIFA, the international governing association for football, to sponsor the FIFA Club World Cup UAE tournament in 2009 and 2010 in Abu Dhabi. We also continued our sponsorships of the Abu Dhabi Golf Championship, the Dubai World Cup and the Etisalat Football league, among others.

During the year 2009 Etisalat has been recognised many times by international agencies for its accomplishments in different fields in the telecom sector. Telecoms World Middle East 2009 granted Etisalat “Best Value Added Service Award” for its internet TV platform. SAMENA Telecommunications Council awarded Etisalat “Best Content Provider of the Year”, “Best Wireless Broadband Operator of the Year”, “Best FFx/GPON Operator of the Year”, and “Best Quality of Services Operator of the Year” amongst other accolades.

Etisalat’s approach to corporate social responsibility is to support selected social and economic activities and events either through funding, technology or direct support. The main categories of Etisalat’s CSR programmes are educational, special needs and environmental where not only financial aid is contributed but also services, knowledge and expertise are shared with the organisations.

In 2009 Etisalat’s continuing support for people with special needs was a prominent part of its CSR contribution. Etisalat joined forces with the Telecommunications Regulatory Authority in the nationwide project “Echo of Silence” which aims to enable individuals with hearing or speaking impairment to communicate and interact with society while assisting them in benefiting from new channels of communications, through advanced technical programmes giving them the same opportunities as their colleagues as well as providing them with independence in living and working as full contributors to society.

Our commitment to well-established financial policies has resulted in a healthy financial position demonstrated by strong cash flow generation and a solid balance sheet. We have minimal debt and sufficient liquidity in such a critical time where many are struggling with their debt servicing.

None of this could be achieved without the dedication, professionalism and knowledge of our employees who are all contributors to our results in their daily work at all levels. Furthermore, I would like to take this opportunity to thank and value the leadership of the country and the UAE Government for taking a lead in responding to the economic slowdown by announcing stimulus packages and other efforts to support the economy and stabilise the financial market.

We do anticipate that a challenging environment will continue for some time as it is difficult to predict a rapid recovery of the economy; however we are well positioned for long-term growth given our product portfolio and commitment to a prudent investing approach in our business. We will continue to focus on strengthening our position in various business segments, delivering innovative solutions and bringing the latest technology to our enterprise customers and consumers, and creating long-term shareholder value.

Mohammed Khalfan Al Qamzi

Chief Executive Officer22 February 2010

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Financial Results

The Corporation delivered good performance in 2009. Revenue increased by 5% to AED 30.8 billion, mainly driven by data and internet growth. Operating profit before Federal Royalty was up by 16% to AED 17.6 billion and EPS increased 4% to AED 1.23.

We strived to position the Corporation for long-term sustainable growth by directing our capital spending towards higher growth areas such as Fibre-To-The-Home (FTTH), high-speed mobile broadband, data services and others. During 2009, capital expenditures increased 74% to AED 6.8 billion as the Corporation went ahead in its strategic investment and expanded the coverage of its network in most of our operations. With time, we do expect these investments to contribute to the Corporation’s bottom line.

We maintained our financial flexibility by exercising prudent financial policies. We are fortunate not to have a sizeable debt position in such market conditions. At year end, we have a debt position of AED 4.5 billion and a liquidity position of AED 11.3 billion.

We continued to create value for our shareholders by investing the cash flow generated by our business in investments and operations that support the strategic imperatives mentioned above. In addition, we use our cash flows to pay cash dividends and royalty. Net cash generated from operating activities for the year ended December 31, 2009 was AED 10.12 billion compared with AED 10.59 billion in the previous year. This marginal decrease was primarily attributable to changes in working capital.

We maintained a constructive relationship with the three rating agencies and retained investment grade ratings. As of December 2009, our long debt ratings are A+ by Standard & Poor’s; Aa2 by Moody’s; and A+ by Fitch. The unfavourable change in the long-term rating assigned by Fitch Rating Agency was due to Fitch’s revised view of the UAE sovereign ratings. However, this is still one of the highest credit ratings for telecommunications companies around the world.

The Board of Directors has recommended a final dividend for 2009 of AED 0.35 per share. Given the interim dividend of AED 0.25 per share, which was paid by the Corporation in the third quarter of 2009, the overall total dividend for the year is AED 0.60 per share. The proposed dividend will be submitted for approval at the Annual General Meeting of Shareholders (AGM) on 23 March 2010.

Although market conditions for 2010 seem difficult to predict, we will stay focused on managing our costs and driving synergies in various areas of our business. In addition, we will maintain a responsible and conservative approach to our financial strategy as we continue to pursue an optimal balance between shareholder return and financial flexibility.

Management Review

The following table shows selected historical data for the year ended December 31, 2009 and 2008.

Selected Financial Data

AED in millions except per share amounts

As of December 31 or for the year ended 2009 2008 Change (%)

Income Statement Data

Revenue 30,831 29,360 +5.0%Net Profit 8,836 8,511 +3.8%

Balance Sheet Data

Total Assets 71,379 62,918 +13.4%Total Liabilities 30,989 27,298 +13.5%Total Equity 40,389 35,620 +13.4%Net Debt (1) (7,454) (8,537) (13.0%)

Cash Flow Data

Net cash flow from operating activities 10,125 10,596 (4.4%)Net cash flow from investing activities (6,771) (2,902) +133.0%Net cash flow from financing activities (3,407) (5,642) (39.6%)

Earnings & Dividends Per Share Data

EPS 1.23 1.18 +4.2%DPS 0.60 0.60 0.0%Number of issued shares (million) 7,187.4 5,989.5 20.0%

Long-term rating of Etisalat S&P Moody’s Fitch

2008 A+ Aa2 AA-2009 A+ Aa2 A+Outlook Stable Stable Stable

(1) Net Debt represents interest-bearing debt less cash and cash equivalent.

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53%Mobile

10%Others

3%Interconnect

11%Telephones

13%Data Services

10%Internet

05 06 07 08 09 05 06 07 08 092009

Mobile Subscribers (thousand subscribers)

Breakdown of Revenue UAE

Fixed Line Subscribers (thousand subscribers)

UAE Highlights

7285

6372

5520

4534

7741 1358

1325

1285

1237

1309

12

05 06 07 08 09 05 06 07 08 09 05 06 07 08 09

Internet Subscribers (thousand subscribers)

National Calls (million minutes)

International Calls (million minutes)

1153

875

660

527

1331 4158

3989

3769

3386

3847

19410

17770

15650

13618

18252

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On the ground – a market view

Etisalat’s network today covers two continents and eighteen countries. Most of these are in large land areas in emerging markets, with low penetration, very diverse market attributes, and promising economic growth despite the prevailing challenging conditions.

Etisalat will continue to target the diverse customer base in its existing footprint with tailored promotions and packages, offering highly advanced technology with excellent service delivery. With operations in seventeen countries at the beginning of 2009, Etisalat kept its focus on the Middle East, Africa and Southeast Asia regions and completed the acquisition of Tigo, a Sri Lankan mobile operator, with a 100% ownership stake, bringing total Etisalat operations to eighteen.

In addition, the prevailing economic climate has increased our focus on controlling operating expenditures across the entire network. We are concentrating on a shorter time to market in deployment, pushing for further convergence in the networks as well as pushing for innovative and competitive market offerings.

In 2009, Etisalat UAE laid the foundations of an interaction model between all subsidiaries and associates, to increase the synergies amongst them.

During the year, common frameworks on Strategy, Product & Services and Brand Communication have been worked on, as well as initiating common procurement grounds. Etisalat has established itself as a single customer to the main vendors where applicable. Discussing common issues and sharing ideas has widened our knowledge base. Further benefits have been seen as new International Dialling Destination (IDD) offers such as in Egypt/Kingdom of Saudi Arabia and Pakistan/Afghanistan have been introduced, with great market response and increases in revenue.

This work collaboration between the operations will increasingly allow Etisalat to build a set of capabilities in all areas and give unprecedented market intelligence in the race to market. It will also increase market share and maintain a sustainable level of revenue growth.

Etisalat’s strategy for the next year is to continue its focus on expanding in high-growth regions, with emphasis on Broadband, Mobile Payment, Information and Communication Technologies (ICT) and Digital Media opportunities.

In addition, our 2010 priorities are to achieve new synergies in roaming and international pricing, leveraging on a larger scale to improve efficiencies in IT & network procurement, and progressing to becoming a global brand.

Africa

Atlantique Telecom, West Africa

In 2009 Atlantique Telecom (AT) continued to woo the market, which covers seven countries and a population of over 70 million. The countries are diverse and consumers have a choice of at least three operators including AT. During 2009, the Moov brand has strengthened further; it is now used in all seven entities, and brand recognition is increasing in all areas as a young, dynamic and innovative brand of choice.

A steady revenue stream is projected for 2010, primarily driven by continuous network expansion, launch of new services such as the BlackBerry, and planned new promotions. Working extensively on reorganising some of the distribution channels has strengthened the financial contribution by reducing overall expenditure. Moreover, per second billing, e-vouchers, and prepaid roaming were introduced into the market. These were well perceived and yielded positive results. Most outstanding, though, was the launch of ‘Moovprivilege’ for the high-value segment, where flat rate and special IDD rates for a minimum monthly consumption were used to control and reduce churn. The company also launched ‘Moov’in’ – a package tailored for youth, offering free calls and SMS for a minimum charge. In Gabon, a new On-Net tariff was introduced to increase On-Net traffic and margin per minute, to boost acquisition rate, and to reduce revenue dependency on IDD traffic. As a result the minutes of use On-Net increased by 48% and the customer base by 10%.

In 2010, new promotions will be launched in all markets, targeting various consumer segments. In addition, exciting new content provisioning will be added, utilising mobile internet and broadband facilities. We plan to further improve the commercial quality of services and implement a customer loyalty programme.

Canar, Sudan

Sudan still has massive growth potential as the teledensity is still low, especially in the fixed-line market. Much of this is due to the difficult circumstances still prevailing in the country, where the average income per capita is still amongst the lowest in the African continent. As such Canar, as one of the two fixed-line operators, not only competes with the fixed-line operator but also with all the mobile operators in the market, due to the very limited per capita income and the fixed-to-mobile substitution.

During 2009, fibre optic links between Sudan and Ethiopia were rolled out as part of overall plans to expand the Canar fibre network across all neighbouring countries. This will maximise use of the Canar submarine landing station, which is an integral part of the Canar Wholesale offer in international connectivity for the region. Moreover, Canar established STM-1 links with Flag Hong Kong, as well as provisioning seven new international interconnections.

In the enterprise market, the focus was concentrated on expanding internet broadband services – a market that is becoming of greater interest as Canar’s network expands further in Sudan. On the consumer side, the company concentrated on revamping some of the existing packages, as well as introducing a ‘Double Your Recharge’ promotion and launching the ‘Free On Net Campaign’.

Management Review continued

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Etisalat Misr, Egypt

Etisalat Misr continues to prove itself as the innovative breakthrough operator in the African market. Two years ahead of the National Telecom Regulatory Authority’s (NTRA) licence coverage obligations, Etisalat Misr now covers 98% of the entire country – less than 30 months after commercial launch. This includes both EDGE and 3.75G services in all areas enjoying 2G and 3G coverage. In addition to this, for the sixth consecutive time Etisalat Misr scored the highest in the key performance indicators in the NTRA’s benchmarking report. This recognised its excellent network reliability, with Core and Access availability maintained at 100% and 99.95% respectively. Moreover, Etisalat Misr is the only mobile operator in Egypt with an exclusive international gateway, whereby customers enjoy competitive international rates to all destinations worldwide in the Kol El Donya offer.

From a technological perspective, the most notable achievement during 2009 was Etisalat Misr’s very successful HSPA+ live trial. This succeeded in achieving average throughput of 19.2 Mbps, making Etisalat Misr the first African operator to accomplish this.

Etisalat Misr has set out to revolutionise the Egyptian market. It is breaking barriers by offering not only highly innovative corporate solutions to the ever-growing number of corporate customers, but more so by offering high-value propositions to an ever-demanding and increasingly sophisticated consumer market. Dramatically changing the market dynamics, Etisalat Misr has strived to provide products and services that are simple and transparent, while maintaining a sustainable and responsible business model that can adapt to a fast-paced and swiftly-changing marketplace, whilst continuously increasing average revenue per user (ARPU).

Putting the customer first, Etisalat Misr introduced the convenient tariff plan for Ahlan Kol El Nas that is tailor-made to best suit customers’ needs. This gives customers one flat voice minute rate for on net, cross net and landline calls. This broke the barrier preset by mobile operators who consistently restricted promotions in the on-net rate plans. The simple, straightforward Ahlan Kol El Nas tariff not only strengthened Etisalat’s image as a market pioneer, but also opened the door to a massive pool of potential customers, as well as retaining existing customers. To maintain its leadership in offering clear and simple propositions Etisalat also launched a unique tariff for the postpaid segments – ‘Green Line Unlimited’ – where the customer enjoys the luxury and freedom of making unlimited free voice calls, free SMS, and mobile internet at any time of the day. In order to capture a greater share of the youth segment, a new tailored proposition was introduced to this segment in YES, giving special rates for three on-net numbers as well as free internet during weekends up to a maximum of 5 MB per day. Prepaid mobile broadband services were also introduced to address the untapped mass market for affordable broadband service. This will ensure that the company can capitalise on the introduction of 3.75G services in the Egyptian market, and establish a position as the innovative mobile operator.

Emerging Market Telecommunications Services Limited (Etisalat Nigeria), Nigeria

Expanding EMTS coverage of major cities from seven at the end of 2008 to seventy-six in 2009,1 (which includes 34 state capitals), as well as implementing EDGE everywhere in order to launch Data Service, Etisalat Nigeria is achieving milestones in its network strategy and roll-out. The strategy for 2009 was to achieve the widest network coverage possible in the first year of operation by rolling out 1,090 cell sites and achieving a firm subscriber base, which was accomplished by the end of 2009 through its parameters of Innovation, Quality and Customer Focus.

The market propositions were continuously introduced throughout the year in a disciplined and rigorous manner: Easy Cliq, Enuff yarn+, Easy net, BlackBerry, Eliteworld Postpaid, and Eliteworld Prepaid.

In 2009, research also shows that consumers placed Etisalat second in such areas as ‘word of mouth buzz’ and ‘word of mouth advocacy’, as well as customer satisfaction – an indication that in 2010 the brand’s popularity and market share is expected to grow in leaps and bounds.

Zantel, Tanzania

As Tanzania continues to develop, the dynamics of marketplace, customer expectations and demands changed too. This necessitated a change in Zantel’s product portfolio to meet these new demands, such as in the introduction of BlackBerry and associated services. This launch of BlackBerry services was one of the major launches in Tanzania and, as in other places, an instant hit with the customers.

To combat churn in this quite volatile market, Zantel introduced an offer of 1 tsh per second billing, which resulted in a record activation of over 1 million customers both new and existing, and considerably raised the ARPU. Another notable offer from Zantel was Customer Credit Loans – a banking service building on the ‘Z Pesa’ launched in 2008, in addition to the Mkesha and Mzuka mixed bundles.

By reengineering certain processes to function more efficiently, additional revenue has been secured. The sales network and resellers’ conditions have been fully reviewed for cost optimisation. This overview will continue throughout 2010 as part of the overall cost control programme.

1 A major city is a city/town/commercial hub with a population >50,000 and strong commercial activities.

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Middle East

Etisalat, UAE

In the UAE, where mobile penetration is already among the highest in the world, the focus has been on shortening the time to market in introducing new and enhanced existing mobile services. Through upgrades and expansions in the core elements of the backbone, IP transmission is increased across the network in line with customer expectations and demands, keeping to on-time service and simplicity of use.

Etisalat also focused on continuing its strategy to maintain quality of service and on-time provisioning with greater flexibility in response to changing customer need, whilst offering cost-effective services to all its customer segments. During 2009 the Company continued looking for opportunities to reduce operating expenditures, while making progress in its network convergence with minimal capital investment in the legacy network.

Etisalat intensified its efforts to roll out its Fibre-To-The-Home (FTTH) network in the UAE. By the end of 2009 Etisalat had completed the FTTH roll-out for 85% of households in Abu Dhabi, positioning the UAE’s capital as the first in the world to be covered by fibre. The launch of eLife brought the promise of the most advanced technology applications to the UAE market. Its high-speed broadband internet enables customers to enjoy multiple high bandwidth applications such as IPTV and online gaming in an integrated single interface for landline, internet and television-based services, providing a truly converged digital home experience to its customers.

Furthermore, Etisalat strived to position itself as a leader in Digital Content & Media, and as a result won ‘The Best Value Added Service’ Award at The Telecoms World Awards Middle East. As part of the Mobile TV Consortium in the UAE, Etisalat was also awarded the Mobile TV Digital Video Broadcasting (DVB-H) Licence, with a vision to be a regional hub for delivering DVB-H/high quality Mobile TV content.

Continuing the broadband initiative, Etisalat leveraged its advanced 3G networks to introduce attractive wireless broadband offers, increasing the overall value proposition and creating new market segments. Mobile Data packages were upgraded with increased bandwidth capacity at very attractive prices, enabling customers to choose the best package for their needs and usage for both Mobile Internet and Mobile Broadband. These options were introduced with the iPhone, new BlackBerry models, and the HTC Magic, among others.

To better address the low-income segments, Etisalat launched more affordable mobile services with the first-ever Etisalat branded handset. In addition, the cost of a new SIM was reduced by more than half for a limited period for this segment.

Given the upswing in mobile internet and broadband, Etisalat worked closely with major enterprise customers in the fields of Broadband, Mobile Payment and ICT solutions in order to fulfil their customer requirements. Etisalat has confirmed its reliability as a partner in these areas in both the public and the private sector, as the number of these projects is increasing. At high-profile events such as the first-ever Formula 1 Grand Prix at Yas Island and the 2009 FIFA Club World Cup in Abu Dhabi, all media attention turned to the UAE. These were events of major importance for the nation’s reputation, and highlighted the reliance and trust both national and international entities put in Etisalat.

Etihad Etisalat (Mobily), Kingdom of Saudi Arabia

Several factors are driving the impressive growth in Saudi Arabia’s telecommunication market and its massive uptake in new services and technologies. The two most important are the gradual increase in competition and the specific demographic patterns of the Kingdom. The majority of Saudi Arabia’s population is younger than 20 years old, a very positive aspect when it comes to accepting and using new services and adopting new technologies. The massive increase in the Saudi Arabian telecommunications industry stems mainly from the major restructuring it has undergone in the past few years, mainly due to the entry of new players.

Beside the incumbent operator, Mobily is the only operator who possesses the rights to utilise mobile as well as fixed technologies in Saudi Arabia, which enables bundled offers and trend-setting services that are unique in the market.

Mobily’s customer base has improved tremendously during 2009. Its mobile broadband subscribers exceeded 1 million making Mobily the unchallenged No.1 in mobile broadband in the Kingdom. In the Middle East and North Africa region, it is the telecom operator with the largest HSPA base and the busiest worldwide mobile data network.

Furthermore, Mobily’s clear dedication to a Kingdom-wide HSPA roll-out and the introduction of innovative services had a massive impact on the share of broadband technologies in the country. Its share increased from 24% to 41% from 2008 to 2009 for HSPA versus all other available broadband technologies. Network improvements continue through the expansion of the most advanced national fibre optic network in the Kingdom of Saudi Arabia (SNFN), currently more than 12,000 km, and the Metro networks with more than 1,000 km of fibre optic infrastructure in all major cities of the Kingdom. The SNFN will be the cornerstone to leverage innovative products in order to serve Mobily’s consumer, corporate, and wholesale customers with the best service quality possible based on international benchmarks.

In the marketing mix, Mobily tailored many new products to the various demographic markets: for example, ‘Mabuhay’ – a tailored package for the Filipino community, and ‘Fallah’ – the first-ever proposition for students only. For the postpaid market 50/5 a generous offer was made for on-net and IDD calls for a limited time period. These two product offerings are just a few of the tailored portfolios on offer in the consumer segment, where content is tailored to promote mobile content as an addition to voice-only services. The company works in the same dedicated manner with business segments, encouraging them to use technology to quickly and smoothly reach customer segments in their respective markets. As the fibre optic network roll-out continues, the scene is set for new and additional services and content being made available in the Kingdom.


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Thuraya, UAE

Throughout the year a number of events took place within Africa and Asia, where Thuraya’s services were part of the solution or an instrumental part of facilitating it. The United Nations deployed a number of Thuraya IP terminals and Thuraya Satellite Only (SO) handheld phones to facilitate communications in Afghanistan during the recent presidential elections. In Mauritania and Algeria, the Ministry of Interior and Defence used Thuraya’s voice solutions (handhelds) as a line of communication between different remote regions; while in Niger, Thuraya also facilitated the parliamentary election success with its voice product range.

The role of Thuraya’s services expanded to assist in a number of peacekeeping initiatives during 2009. The company’s ability to enable communications in remote areas meant that Thuraya’s products were utilised in Africa to assist the movement of troops within war zones.

Further activities in Africa during 2009 included the launch of Thuraya’s Public Calling Office (PCO) in Zambia and Cameroon, as an easy and affordable communication solution for residential settlements and rural communities. The PCO, which is a versatile, satellite-based fixed-voice solution, addresses the need for universal access to telecommunications, and provides opportunities for small entrepreneurs in rural and underdeveloped regions.

In the Middle East, and in line with Thuraya’s strategy to focus on development agencies, the company joined with World Bank in Jordan to provide a number of Satellite and GSM (SG) handheld phones to its headquarters in the Kingdom. Following the success of the partnership in Jordan, the World Bank continues to utilise Thuraya phones in the region, to facilitate financial and technical assistance to developing countries around the world.

During 2009 a number of devastating natural disasters affected large areas in both Asia and Africa. As part of its support for global relief efforts, Thuraya worked closely with the International Telecommunication Union (ITU) to assist in disaster recovery in Indonesia, Bangladesh and Uganda.

In Queensland, Australia, the Queensland Police Service (QPS) requested extensive demonstration to further enhance its disaster management capabilities. The QPS decided to deploy Thuraya’s NettedComms solution, to accelerate the sharing of information and data amongst the organisation’s various branches.

Overall, 2009 has been a year of significant contribution and development. Thuraya’s value and position as an international player in the world’s telecom and socio-economic contexts has gained great momentum.

Asia


Etisalat Afghanistan’s strategic intent is to be perceived as the best quality yet affordable service provider, as well as being a secure, established and service-focused leader. Being the fourth entrant in a highly competitive environment, Etisalat Afghanistan has focused on new subscriber acquisitions in addition to increasing ARPU.

2009 saw Etisalat Afghanistan implementing EDGE and GPRS technology, which opens the door for new product offerings. In addition the company expanded its network coverage by adding another five provinces: Badakhshan, Bamyan, Panjsher, Hilmand and Paktika; and is planning to add 11 more provinces during 2010. A new Convergent Billing System was implemented in August, through which the company introduced additional new innovative services and promotions.

For the enterprise segment, Etisalat introduced its new postpaid plans and offers as well as corporate services like CuG, VPN and Bulk SMS service mainly targeted to corporations, Non-Government Organisations, and the UN and military segment.

In the consumer segment, three of the largest promotions secured new subscribers with increased ARPU. The ‘Mumtaz’ rate plan was launched to enhance revenue. The plan was a single flat-rate cross-net at 3.5 Afghanis for both on-net and off-net calls. Over six months the plan has generated over 680,000 gross additions.

The ‘Talk and Fly to Dubai’ promotion targeted ARPU increase, where customers entered the competition through a minimal spend of USD 3 per week during the promotion. The promotion’s success can be seen in the increased number of qualifying customers, averaging 150,000 per month.

Working with the mobile arm of PTCL – Ufone – the companies introduced a joint IDD promotion which increased traffic and thereby revenues for both parties. Non-performing rate plans have been discontinued, with customers being offered replacement plans better aligned with their needs.

For 2010, Etisalat Afghanistan will continue its focus on being the best quality yet affordable service provider, strengthening brand awareness throughout all market segments where data offering will become an integral part of the offer, capturing more of the high-end and enterprise customers.

Etisalat DB Telecom Private Limited, India

Etisalat entered the Indian telecom market through a tie-up with the Dynamix Balwas (DB) Group in September 2008 to form Etisalat DB Telecom Pvt Ltd. The company had licences to offer telecom services in 15 out of 22 circles, representing 84% of the country’s population. In most of the circles, Etisalat would be the ninth or tenth mobile phone entrant.

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The Indian mobile telecom market passed 500 million connections in November 2009, which represents an all India penetration level of approximately 43%, and is expected to pass 70% within the next 5 years. Currently, the market as a whole is adding around 15 million new connections every month (GSM + CDMA). Over 95% of the connections are prepaid, serviced through over a million retail outlets across the country.

Etisalat India’s model is geared towards leveraging the inherent strengths of the local market with the group’s international experience and knowhow. The aim is to create an asset-light model and significant chunks of the implementation and ongoing operations have been outsourced to partners such as Tech Mahindra and Reliance Infra, bringing cost savings, process efficiencies, and managerial expertise to the table.

The go-to-market strategy will ensure that network deployment will cover most of the high revenue and profitable areas, while capturing untapped markets at the same time.

The aim will be to attract churn as well as new customers across markets. Leveraging the proposed number portability regime will be a key element in attracting profitable, high-value customers. Consistently delivering a high-quality network experience will be the prime focus. Research across circles indicates that network-related issues are by far the most important reasons for churn among existing customers – a major opportunity area for Etisalat DB.

Etisalat Software Solutions Private Limited, Technologia

Technologia continues its significant role in the development of Information and Communication Technologies (ICT) related projects, and has been a major contributor to the key projects related to m-commerce and GPON.

Over the year the company has strengthened its team and knowledge base to become a complete solutions provider. Where the in-house knowledge is not available, Technologia has partnered with strong companies in the market in order to fulfil its commitments. The major overhaul in Zantel has been completed with very satisfactory results; since June 2009 it has delivered and completed over 90 ICT-related projects, closing the year with a positive result.

PT XL Axiata Tbk, Indonesia

(Formerly known as PT Excelcomindo Pratama Tbk)

XL was the first operator in Indonesia to cut tariffs significantly in 2007, and has maintained this position throughout 2008 and 2009. In order to continue to offer low tariffs to customers while outperforming industry growth, XL has implemented lean cost management.

In accordance with XL’s 2009 theme, ‘Value Beyond Price’, technology investments were made in alignment with the marketing programmes. Capital spending is now based on lines of business instead of network activities, which is more relevant in the current business model.

As an example, in order to double database capacity, Ericsson New Generation HLR FOA (First On Air) was introduced into the network. FOA enables the storage and management of both database and applications with separate devices. A Dynamic Discount System, which recognises customers’ handsets and their usage habit, gives XL the ability to offer more suitable promotions. The SIM Box EIR, which is a handset IMEI detector, is used to track and prevent fraud.

First introduced in Sumatra and Kalimantan, Green BTS Technology has been implemented. This saves energy, and cuts electricity cost by 40–50% due to its low power consumption, which also helps to keep operating expenditure down. As a step in delivering faster data speed, Hybrid Transmission Access was implemented, providing two different platforms – Time Division Multiplexing (TDM) and Internet Protocol (IP) – in one transmission link.

During 2009 the *123# portal was launched, allowing subscribers to switch between plans easily, and to choose from various promotions according to their calling habits and needs. In addition to the two main tariffs – ‘Nelpon Murah Sampe Puas’ (Affordable Call To Your Heart’s Content) and ‘Nelpon Murah Berkali Kali’ (Affordable Call as Much as You Want) – offers were tailored for the more price-sensitive customers switching to CDMA or using CDMA services aside from XL.

Two new ‘cloned’ price plans were introduced – ‘Halow Package’ (Affordable Voice Call at 20% Less Than ‘Red’), and ‘Yellow Package’ (Affordable Voice Call at 5% Less Than ‘Yellow’).

After the major earthquake in West Sumatra at the end of September 2009, XL also launched ‘emPATI Package’ – an affordable package for subscribers in West Sumatra. By choosing this package, subscribers were able to make off-net calls to the dominant market player in the area, at the same tariff as an on-net (XL-to-XL call).

With a great response to the market offers for BlackBerry users in Indonesia, XL had more than 200,000 BlackBerry customers by November 2009, making XL the No.1 brand in BlackBerry services.

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Pakistan Telecommunications Company Limited, PTCL, Pakistan

The PTCL group consists of PTCL, which operates in the fixed-line segment, and Ufone, which operates in the mobile segment. PTCL’s strategic plans in 2009 were directed at upholding market leadership and regaining traditional profitability hallmarks, to improve long-term growth and to provide significant returns on investment.

Major strategies of the year were focused on enhancing customer acquisitions, increasing loyalty to fixed line, growth of broadband, expanding the corporate customer base and service portfolio, improving operational efficiencies, optimising capital and operating expenditures, and achieving improved customer care and quality of service.

PTCL introduced bundled voice and data packages to increase retention of fixed line customers, and to acquire new customers. To sustain customer retention, unlimited on-net packages were offered without compromising the ARPU. Bundled voice and data packages were offered in addition to chalking out bundled provisions with Ufone products. To reduce the churn-out of fixed line, PTCL embarked on a differentiation strategy, introducing a higher- value proposition instead of lowering prices and entering price wars. It also introduced New Telephone Connection Orders via a single phone call, and web-based services were introduced for ease of customer use.

Synergies with Ufone were explored for sales and distribution, as well as products and services. The striking international calling rates and the significant increase in Access Promotion Contribution resulted in improved revenues and unprecedented growth of international outbound calls. Numerous value-added services, new packages in all major product lines, and product bundles were offered to better address the target segment, and to conserve declining ARPUs and mobile substitution trends.

Competing in a tight market with five other mobile operators, Ufone maintained its market position and increased its market awareness to second place in Pakistan. This was accomplished through offers such as the Valentine Day Service, daily SMS Bucket Offerings, UrSpace, and Ufone games. As in many other countries, the launch of BlackBerry products and specific related offers were also received very positively. Increasingly Ufone works on sustaining and improving its market share, particularly in cross-country connections such as the one designed with Etisalat Afghanistan, which secured a good revenue stream for both parties.

On the broadband front, DSL customers spanned 170 cities and posted a tremendous subscriber growth of 300%. This increase was made possible because of PTCL’s strategic decisions to double broadband speeds without any increase in the prevailing tariffs, and the introduction of a special 30% discount for students.

During the year PTCL renewed its focus on the corporate segment, where it has experienced immense growth both in private and public sectors, providing high-value resilient connectivity, and sophisticated network and communication technologies.

Plans are now focused on growing revenue by improving the fixed subscriber base, launching targeted new services for corporate/carrier customers, converging with Ufone to take advantage of synergies, capitalising on emerging branchless banking and financial net services, and exploring investment opportunities in content and infotainment services.

Tigo, Sri Lanka (a fully owned subsidiary of Etisalat)

The newest acquisition for the Etisalat group of operators is Tigo in Sri Lanka. This is a young, trendy and energetic predominantly prepaid operator that has been in operation since 2007. The acquisition is yet another step in the strategy of seizing opportunities in emerging markets with high growth potential. During 2010, the Etisalat brand will be introduced into the Sri Lankan market, basing the company on the same strong branding platform as is seen throughout the operations – whilst not losing the brand footprint already in existence.

Network expansion has been prioritised based on return on investment. One of the priorities was the implementation of Disaster Recovery in all Intelligent Nodes – where that application synchronises all the data at database level at pre-defined intervals to ensure the same data is residing at all 3 INs.

The decision to upgrade to Camel phase 3 for GPRS charging took away some of the limitations set for customers, as well as increasing flexibility and eliminating stability issues in the media gateways – thus all gateways were swapped. Tigo operates on a ‘Triple A principle’, making all its products and services ‘Accessible, Affordable & Available’ to its customers. This has resulted in steady growth in new acquisitions, even with increased competitive pressure from the launch of Airtel commercial operations, free connection offers by almost all competitors, and aggressive price reductions.

In the proposition of ‘best value network’, Tigo introduced per second billing, total incoming free, lifetime bonus on each reload, and call collector benefits to customers for the first time in Sri Lanka – thereby avoiding direct competition on price. This has helped to retain profitable customers in the network, and achieved growth in revenues during 2009 even as the fifth operator grabbed 11% of the market share.

Propositions were offered to consumers as part of retention schemes and attracting new customers. The launch of ‘Call Collector’ beat the competition, where the equivalent of all outgoing minutes of the previous month can be used for on-net on a given day in the following month. This was followed by Call Collector 2, where the equivalent of all outgoing minutes of the previous month can be used for one on-net number in the following month.

In 2010 the company will work to sustain its image as the most affordable, as well as to sustain the ‘stamp of quality’ brand in Sri Lanka. In addition, a dynamic campaign targeting the corporate segment (a market Tigo has not yet entered) will be launched during the year. As the country has now emerged from a three decade-long civil war, the North and the East of the country are now open for commercial development, and this is expected to provide a significant boost to almost all industries. Tigo Sri Lanka also plans to invest heavily in these regions to take advantage of the new opportunities.

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Nigeria

Misr

Africa

Atlantique Telecom, Moov, West Africa

moov.com

Operational in 7 countriesLicence type MobileEtisalat ownership 82%Population 74 millionPenetration rate 43% average across all countries Number of operators Mobile 4-6 av. per country Network coverage, population 65%

Canar, Sudan

canar.sd

Licence type Fixed Etisalat ownership 82%Population 42 million Penetration rate 35%Number of operators Fixed 2 Network coverage, population 45%

Etisalat Misr, Egypt

etisalat.com.eg

Licence type Mobile and InternetEtisalat ownership 66%Population 82 million Penetration rate 76% Number of operators Mobile 3Network coverage, population 98%

EMTS – Etisalat Nigeria

etisalat.com.ng

Licence type Mobile Etisalat ownership 40%Population 152 million Penetration rate 48%Number of operators Mobile 5 Network coverage, population 28%

Zantel, Tanzania

zantel.com

Licence type Mobile and Fixed Etisalat ownership 51%Population 42 millionPenetration rate Mobile 38%

Fixed Line 0.4% Number of operators Mobile 6

Fixed 2Network coverage, population 24%

Middle East

Etisalat, UAE

etisalat.ae

Licence type Mobile, Fixed and InternetEtisalat ownership 100%Population 5 millionPenetration rate Mobile 204%

Fixed 30% Internet 27%

Number of operators Mobile 2Network coverage, population 100%

Etihad Etisalat (Mobily), KSA

mobily.com.sa

Licence type Mobile and InternetEtisalat ownership 27%Population 28 million Penetration rate 126% Number of operators Mobile 3Network coverage, population 98%

Thuraya, UAE

thuraya.com

Licence type Satellite telecommunicationEtisalat ownership 28%Population Approx. 7 billionNumber of operators Satellite 4Network coverage, population 59%Network coverage, geographical 140 countries

Network

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Etisalat DB Telecom Private Limited

Afghanistan

Asia


etisalat.af

Licence type Mobile Etisalat ownership 100%Population 29 million Penetration rate 34% Number of operators Mobile 4Network coverage, population 66%

Etisalat DB, India

Licence type MobileEtisalat ownership 45%Population 1,600 millionPenetration rate 43%Number of operators Mobile 12Network coverage, population n/a

PT XL Axiata Tbk, Indonesia

xl.co.id

Licence type MobileEtisalat ownership 13%Population 240 million Penetration rate 78%Number of operators Mobile 11Network coverage, population 84%

Pakistan Telecommunications Company Limited, PTCL, Pakistan

ptcl.com.pk

Licence type Mobile, Fixed and InternetEtisalat ownership 26%Population 172 millionPenetration rate Mobile 59%

Fixed 2%Number of operators Mobile 6

Long distance 14 Wireless local loop 13

Local loop 32Network coverage, population 90%

Tigo, Sri Lanka (fully owned subsidary of Etisalat)

etisalat.lk

Licence type MobileEtisalat ownership 100%Population 21 million Penetration rate 38%Number of operators Mobile 5Network coverage, population 65%

Note: 1 Percentages of ownership, penetration rate and network coverage and population figures are rounded to the closest full digit. 2 Penetration and population data reflect the most recent public information.

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Etisalat Sri Lanka

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Etisalat Services Holding

Etisalat Services Holding (ESH) is the holding company for the eight entities that offer telecommunications-related (non- core) services in the UAE and the region.

During 2009, ESH has had a successful year. In keeping with the overall strategy of creating value through diversification and growth, all entities showed positive results in their separate businesses, as well as strengthening strategic capabilities and implementing new revenue sources.

The long-term strategy of building a customer base with less dependence on telecommunication companies paid off with many new customers acquired in both the governmental and private sectors, outside the telecommunications arena.

Etisalat Academy

As a single source provider, Etisalat Academy’s customers are offered a wide scope of training and development services. Over the year, the Etisalat Academy trained over 9,500 participants, with a remarkable customer satisfaction index of 83%.

The entity signed up with the ZTE University in China as an additional learning partner to further extend the portfolio offered, while continuing to facilitate learning in other Etisalat entities in both Asia and Africa.

On the home campus of the Academy, internal projects aiming to become more environmentally-friendly have been initiated throughout the year. This resulted in significant reductions, not only in carbon dioxide emissions but also in operating costs.

Directory Services

Moving away from paper-based services, Directory Services is focusing on alternatives such as phone applications and web-based directories for both PC and mobile internet environments. Studies on entertaining marketing campaigns and tailored directory services for client segments are being done as alternative ways of communicating with the market. Highlights of 2009 were the launch of new products: the compact Yellow Pages directory and the Yellow Pages application for iPhone, as well as revamping the website and launching the ‘Be found’ campaign.

Ebtikar Card Systems

Smart card manufacturer Ebtikar Card Systems provides solutions to international telecommunication operators, enabling delivery of airtime and value-added services to end users. It produces a wide variety of GSM SIM cards, scratch cards and phone cards for a diverse and expanding customer base.

SIM card products and services represented 53% of Ebtikar’s total revenue in 2009, an increase of 14% in comparison to 2008. Ebtikar’s focus on this market segment generated new customers in the Middle East and Africa, consolidating Ebtikar Card Systems’ position in these regions.

An interesting project for Ebtikar was the deployment of a recharge card solution for the Roads & Transport Authority (RTA) in Dubai, for the Salik Gate System.

Emirates Data Clearing House, EDCH

In 2009 Emirates Data Clearing House (EDCH) increased its customer base by 25%, and further strengthened its overall market position and MENA presence. EDCH also entered the European market, signing on Pannon in Hungary – an important new client.

As the customer base increased, EDCH initiated proceedings to open new facilities in India, and opened additional facilities in the UAE to ensure that customers in all three continents are fully serviced at all times. EDCH offers flexible and business-critical solutions such as Preferred Roaming Agreement Settlement, Interconnect Settlement, and Optiprizer solutions.

E-Marine

E-Marine offers its services in the fields of Marine Project Management, Consultancy, Marine Route Survey, Cable Freight Management & Storage, and Chartering. In addition to the telecommunication field, E-Marine provides a complete range of solutions to the offshore industry.

E-Marine’s current area of coverage doubled in one year, from 30,000 km of cable in 2008 to 60,000 km by the end of 2009 in the Red Sea, Indian Ocean, and East Africa, in its role as one of the main subsea cable installers with top-ranking experts and technical resources.

Working from depots at Hamriyah, Sharjah Free Zone and Salalah, Oman enables its vessels to reach as far as Mtunzini, South Africa in the south, and India in the east. In 2009 the company increased its customer base by 25%, and doubled its cable storage capability to meet rising demand, sustaining its reputation for swift operations and an excellent safety record.

E-Real Estate

Etisalat’s Real Estate unit is responsible for Etisalat’s buildings and sites, and ensures full optimisation and effective use of the properties. The entity also provides property-related services for Etisalat’s international subsidiaries for project development and management.

E-Real Estate initiated and completed several projects in other properties, where installing intelligent building technologies and energy-saving initiatives was one of the main focuses for 2009.

Etisalat Facilities Management

Etisalat Facilities Management is one of the leading companies providing integrated FM solutions. It covers facilities management operations and maintenance for hard and soft services; facilities management consultancy with clients in telecom, residential, educational, commercial and hospitality sectors, data centres and aviation, operating over 5,500 sites across the UAE. Noted new clients in 2009 were Sharjah International Airport, Al Bateen and Sir Baniyas Airports, as well as the Dubai Islamic Affairs and Charitable Department, responsible for maintaining all mosques in Dubai.

Tamdeed Project Unit

Tamdeed covers all areas in surveying, planning, execution, maintenance and project management of inside plant (ISP-FOC Network), including structure cabling (FTTH) inside buildings, and outside plant (OSP-FOC network) fibre projects. In 2009, Tamdeed was the main project leader in rolling out the FTTH project across the country.

Operational growth in 2009 was in response to the rapid changes in the marketplace, requiring more available resources to deliver results to their customers.

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Human capital

Etisalat firmly believes in the importance of attracting and retaining the best talent in all its operational areas, and with human capital of dedicated employees across two continents, Etisalat customers can enjoy a high standard of service from over fifty thousand employees. Engaged and creative teams have brought many innovative and attractive offers to the market place as well as ensuring the networks run smoothly in all operations guaranteeing high performance in both operational and financial terms.

Etisalat strives to build its human capital to continuously outperform its competitors. This is achieved not only through focused strategies and motivating individual performance goals, but also through collaborating and synergising across all operations.

During 2009, the entities have pursued their dedication to continuous learning in both external and internal training programmes, which start from the day the employee joins the Corporation. Orientation programmes are offered to make sure that newcomers are fully informed about the Corporation and what it stands for. This ensures that the employee is quickly and smoothly welcomed into the workplace. Continuous training in all areas and levels, such as in soft skills, technical training, leadership and professional certifications is a main focus for the HR departments.

In the UAE, leadership training and development has continued for all managerial staff. The Etisalat Academy, with its vast expertise and knowledge, has become the local training partner in nearly all operations. In the entities of Afghanistan and Egypt, qualifying employees also have the chance to further their education by enrolling in MBA programmes. Financial assistance from the companies is offered as a way of further increasing the pool of talent.

Aside from the formal training occasions for all staff, cross-functional teams are being developed. These serve to improve on-the-job training and knowledge-sharing between staff members. To ensure that this takes place, the Corporation has set cross-functional Key Performance Indicators – KPI’s for departments and their employees, making their work more meaningful and interesting.

Opportunities for employees to take up positions in new operations in other countries add to their experience and knowledge. This can also be seen in projects that cover more than one operation, such as the launch of special Hajj packages for pilgrims to the Kingdom of Saudi Arabia; in the IDD promotion between Ufone and Etisalat Afghanistan; and in departments such as Carrier & Wholesale, which work for more than one operation and in procurement deals for all entities.

In 2009, HR placed high priority on enhancing employee benefits and working environments, as part of its work to retain top talent across all professions, and to recognise the importance of human capital. Where possible, processes have been made more efficient to simplify organisational structures, and tasks that are not core have been outsourced.

Employees are not only engaged through training and enhanced working conditions, but also through HR being a working partner. As an example, Etisalat India has a formal employee engagement platform (SMILES) which aims for employees to ‘walk in and out with a smile’. The programme run by the HR department includes impromptu gatherings and celebrations across the organisation, which strengthens the company’s value system in an informal way. In the UAE, the brand engagement programme set out to engage employees through strengthening Etisalat’s brand platform and value system. Employees work through their processes, analyse each other’s behaviour, and award those who do well.

In summary, Etisalat’s group-wide practice is to extend beyond training to the broader and more visionary role of creating a common culture, valuing ongoing adaptive capacity, and building autonomy and empowerment.


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Corporate Social Responsibility

Etisalat values its participation in the community, and considers this a vital part of its commitment and involvement in its eighteen countries of operation. Its projects focus on four main areas: education, the environment, health, and sports.

As a corporation with skilled and professional staff it is natural for Etisalat to invest in education at a general level. It also provides scholarships for higher education, tailoring its initiatives to each country’s needs.

Etisalat Nigeria joined in the national campaign, ‘Adopt-a-School’. In partnership with local government, three schools in Lagos State were adopted by Etisalat Nigeria and the first phase of infrastructure renewal and reconstruction has started.

Zantel, XL, Tigo, Etisalat Afghanistan and Etisalat UAE worked closely with its communities, directly donating computers and laptops as well as providing connections and knowledge- sharing centres for teachers and students. Tigo’s ‘triple A’ policy – ‘Available, Affordable & Accessible’ – sums up its efforts to bridge the digital divide, and use telecommunications not only as a communication tool but for sharing information and knowledge.

Komputer untuk Sekolah (Computers for Schools) is an integrated and sustainable five- year scheme to provide computing facilities and internet connections in about 100 educational institutions and schools throughout Indonesia. The target is to assist 60 schools and up to 300 students per year. The Etisalat Merit Award Scheme in Nigeria is awarded to students with the best grades in Electrical/Electronic Engineering, Computer Science and Management Sciences. To date, 300 students have benefited from the scheme in 30 universities across the nation. In the UAE, Etisalat signed an agreement with Khalifa University to establish the telecom infrastructure for the UAE Advanced Network for Research & Education.

Etisalat will continue to work on reducing its carbon footprint and becoming more environmentally sustainable through reducing energy requirements and recycling used materials. At Etisalat Real Estate and Facility Management Companies, projects are continually introduced to reduce energy consumption. Ebtikar, the card manufacturing part of Etisalat, is successfully encouraging customers to use paper-based top-up solutions. Other entities are running campaigns encouraging customers to use e-statements, as an environmentally sound customer choice in reducing paper consumption.

In the UAE, the National Mobile Phone Recycling Campaign (Envirofone) continues to be a success for Etisalat. The campaign is the first of its kind in the Middle East, and is a partnership between Etisalat, the Telecommunications Regulatory Authority, Enviroserve and the UAE Ministry for Water and Environment.

Whilst many countries are blessed with a relatively clean and safe environment, others are not. Projects to reverse damage, educate people, and clean up the environment are an active part of the sustainability agenda, working with the governments in the countries of operation.

In March 2009 Etisalat Misr launched a nationwide campaign, ‘Origin of Life’ – with a call for action to ‘Save water…Save life’. The CSR project includes five major components that have a direct impact on people’s lives. The components include servicing 1,000+ water connections, water purification stations, irrigation projects to reduce water evaporation, and supplying dialysis machines. This initiative has earned Etisalat Misr acknowledgement and recognition in Egypt and internationally, winning the company the Global Corporate Responsibility award for ‘Best Community Programme’ at the Sixth CSR Summit in Dubai. The summit committee panel called Origin of Life ‘a strong and consistent commitment to social responsibility’.

In both Zantel and Canar, CSR projects concentrated on health campaigns to educate people on avoiding and combating malaria and HIV/AIDS, through awareness campaigns and concerts. The Canar ‘Roll Back Malaria’ campaign, which is now in its third year, is recognised as being of national importance in combating malaria – the No.1 disease in Sudan.

Etisalat has always supported people with special needs, and has demonstrated this by sponsoring events and activities such as ‘Echo of Silence’, a project to help people with impaired hearing or speech to communicate and interact with society. They are shown how to benefit from new channels of communication, through advanced technical programmes that give them the same opportunities as their peers, as well as providing them with independence in living and working. This project provides a special call centre where the conversation is transferred from the caller with a hearing or speaking impairment, and vice versa. In addition to this, Etisalat UAE’s sole branded CSR initiative, the ’Freedom Package’, is now in its third year. It is customised for people with special needs and for institutions that cater to them.

Building on the same idea, Etisalat Misr launched the ‘Ro’ya service’, where a video contact centre is available for those customers, allowing them to communicate freely with specialised customer care agents using sign language. This programme earned Etisalat its second corporate social responsibility award in 2009: the ‘Most Innovative Non-Voice Service’ by CommsMEA, as well as being awarded the ‘Most Innovative Non-Voice Service’ by the ITP Institute.

After the devastating earthquakes in Asia, PTCL and XL both contributed financial aid to the large number of displaced people. Besides installing telephone lines in the worst affected areas, PTCL donated Rs. 10 million to the victims of the earthquake in Balochistan, Pakistan. Indonesia experienced two earthquakes. As well as phone booths, XL contributed 15,000 XL starter packs, free SMS, and other logistical support to the on-ground organisations. The company also set up a special SMS number enabling customers to make SMS donations.

In these instances, as well as in the floods that hit both Bangladesh and Uganda, Thuraya was quickly at hand to assist humanitarian organisations in keeping communication channels open, in partnership with the ITU.

Sports are played and enjoyed by people all over the world. It is one area that unites people in enjoyment, not only through active participation but also by being fans and followers of great national and international sports stars.

Local entities in all eighteen countries have sports programmes on their national community agenda. Cricket is the main sport in both Afghanistan and Pakistan and is supported by Etisalat Afghanistan and PTCL at national and international tournaments. One of the Egyptian national football team’s biggest sponsors is Etisalat Misr, and in Tanzania and the UAE, Etisalat is the main sponsor of the national football leagues. Mobily has chosen to sponsor one of the Saudi Arabian national league teams - Al Hilal - as well as its school league that involves more than 780 schools. At the end of each year’s tournament, the top 20 players are selected to train with top international teams such as AC Milan and Arsenal.

Etisalat’s position as an international sponsor of FC Barcelona is by far the company’s biggest involvement in sports. FC Barcelona is one of the fastest-growing clubs in terms of followers and won a record six titles including the 2009 FIFA Club World Cup played in Abu Dhabi. However, FC Barcelona is more than football. The club’s firm belief in being more than a club has in turn involved it in major community projects. In a unique policy, the club donates 0.7% of its ordinary income to the FC Barcelona Foundation to set up international cooperation programmes for development. The team also supports UN Millennium Development goals, as well as pledging 1.5 million euros for the next five years to UNICEF’s humanitarian aid programme.


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Corporate Governance

The General Assembly

The General Assembly is composed of all shareholders of the Corporation. The General Assembly is entrusted with approving the Board’s Annual Report on the Corporation’s activities and financial position during the preceding financial year. The Assembly is also entrusted with approving the report of the external auditors, discussing and approving the balance sheet and the profit and loss account for the previous financial year, appointing external auditors and approving the Board’s recommendations regarding the allocation of profit. The General Assembly exercises all powers of the Corporation within the limits of the law and the Articles of Association.

The Board of Directors

The Emirates Telecommunications Corporation (Etisalat) is managed by a Board of Directors presided over by the Chairman and consists of eleven members, including the Chairman, seven of whom are appointed by Presidential Decree to represent the Federal Government of the United Arab Emirates, and the remaining four elected by the 40% non-government shareholders of the Corporation. The term of the Board of Directors is three years, as applicable to each group of members according to the date of their appointment or election. The Board of Directors carries out the Corporation’s business and for that purpose, exercises all powers of the Corporation, except those reserved by Law or the Articles of Association for the General Assembly of the Corporation.

The Executive Committee

The Executive Committee is appointed by the Board of Directors in accordance with Section 20 of the Articles of Association. It is empowered to take decisions on behalf of the Board and/or to make certain recommendations to it concerning particular matters.

The Executive Committee’s functions and powers include organisational matters of the Corporation (such as overseeing statutory, organisational and employment matters and corporate performance), planning and development (overseeing development plans and projects, and approval of the budget prior to submission to the Board), operations (reviews efficiency of service and lays down policies concerning investments of surplus funds), projects (sets the terms for the project agreements, approves relevant tenders over AED 50 million, and approves project overruns and variations over AED 10 million), procurement (approves purchases over AED 50 million), and investments (including international investments and expansion projects).

The Audit Committee

The Audit Committee is established as a subcommittee of the Board of Directors. It consists of three members, two of whom are Board members, and the third who is an external non-Board member, and meets at least four times a year. The primary responsibility of the Audit Committee is to monitor the Corporation’s overall financial performance and the integrity of its financial statements. It also assesses the adequacy and application of financial governance internal control policies and procedures, and oversees the Corporation’s financial risks. It also oversees and monitors the effectiveness of the internal audit function, and monitors the performance and independence of the external auditors, recommending their appointment or removal to the Board. In fulfilling its role, the Committee maintains free and open communications with the directors, the external auditors, the internal auditors, and the financial management of the Corporation.

The Compensation Committee

The Compensation Committee is a subcommittee of the Board of Directors. It is composed of four members, including three Board members, and a senior member of the management team of the Corporation. The Committee’s primary responsibility is to provide comprehensive direction on all compensation and beneficial matters for Etisalat’s staff. It aims to ensure that its employment packages are externally competitive and internally equitable to support the Corporation’s strategy to attract, retain and motivate a competent and result-oriented workforce.

The Risk Management Committee

The Risk Management Committee is a subcommittee of the Board of Directors. It consists of two Board members, and a senior member of the management team of the Corporation. The main objective of this committee is to recommend to the Board an effective risk management strategy, and to oversee its implementation.

Ad hoc Committees

The Board of Directors has the power under the Articles of Association of the Corporation to set up committees from time to time to deal with specific business issues. During the year, two ad hoc (or short-term) committees were established by the Board consisting of several of its members, whose respective terms came to an end upon the fulfilment of the primary functions for which they were created.

The Operating Structure of the Corporation

In 2009 Etisalat implemented a group structure to manage its international expansion strategy, protect value from the Corporation’s United Arab Emirates operations, secure value creation from its seventeen international operations, and to gain the trust of its stakeholders by putting in place a solid structure and governance and adherence to best practices.

At the level of the United Arab Emirates, the Group organisation structure features two autonomous Operating Units: Etisalat UAE Unit (which is entrusted with provisioning Licensed Telecom Services in the United Arab Emirates); and the Etisalat Services Unit (a wholly owned holding company entrusted with providing certain non-core, non-telecom services to the Corporation, as well as to third parties).

The Group exercises and sets its various activities and responsibilities and sets its key corporate policies, prepares plans, and monitors the operational and financial performance of its operating companies, and reports the same to the Board of Directors and the Executive Committee on a regular basis.

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Financial Statements

Independent auditors’ report to the shareholders 34Consolidated income statement 35Consolidated statement of comprehensive income 36Consolidated statement of financial position 37Consolidated statement of changes in equity 38Consolidated statement of cash flows 39Notes to the consolidated financial statements 40Notice of Meeting 77

33

Independent auditors’ report to the shareholders

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Emirates Telecommunications Corporation (“the Corporation”) and its subsidiaries (together “the Group”) which comprise the consolidated statement of financial position as of 31 December 2009 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory Requirements

We have obtained all the information and explanations considered necessary for the purposes of our audit. The Corporation has maintained proper books of account and has carried out physical verification of stores in accordance with properly established procedures and the financial information included in the Chairman’s statement is consistent with the books of account of the Corporation. Nothing has come to our attention, which causes us to believe that the Corporation has breached any of the applicable provisions of the UAE Federal Act No. (1) of 1991 as amended by Decretal Federal Code No. 3 of 2003, or its Articles of Association, which would materially affect its activities or financial position at 31 December 2009.

DELOITTE & TOUCHE PRICEWATERHOUSECOOPERSAbu Dhabi, United Arab Emirates Abu Dhabi, United Arab EmiratesSaba Y. Sindaha (Reg. No. 410) Jacques E. Fakhoury (Reg. No. 379)

22 February 2010

34

Consolidated income statementfor the year ended 31 December 2009

Notes2009

AED’0002008

AED’000

Revenue 30,831,390 29,359,666

Operating expenses 5 (13,862,132) (14,615,414)

Share of results of associates and joint ventures 14, 15 682,051 472,694

Operating profit before federal royalty 17,651,309 15,216,946

Federal royalty 5 (8,836,346) (8,664,984)

Operating profit 8,814,963 6,551,962

Gain on disposal of shares in an associate 6 - 1,783,686

Finance income 7 583,055 415,340

Finance costs 8 (571,493) (563,786)

Profit before tax 8,826,525 8,187,202

Taxation 9 (243,792) (187,007)

Profit for the year 8,582,733 8,000,195

Non-controlling interests 253,613 510,639

Profit for the year attributable to the equity holders of the Corporation 8,836,346 8,510,834

Earnings per share

Basic and diluted 36 AED 1.23 AED 1.18

The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements. The Independent auditors’ report is set out on pages 34.

Mohammad Hassan Omran Khalaf Bin Ahmed Al OtaibaChairman Vice Chairman

35

Consolidated statement of comprehensive income for the year ended 31 December 2009

2009AED’000

2008AED’000

Profit for the year 8,582,733 8,000,195

Exchange differences on translation of foreign operations 54,183 (183,662)Gain/(loss) on revaluation of available-for-sale investments 10,706 (214,587)

Other comprehensive income/(loss) 64,889 (398,249)

Total comprehensive income for the year 8,647,622 7,601,946

Non-controlling interests 205,189 572,495

Total comprehensive income attributable to the equity holders of the Corporation 8,852,811 8,174,441


36

Consolidated statement of financial positionas at 31 December 2009

Notes As at 31 December 1 January 2008

AED’0002009

AED’0002008

AED’000

Non-current assetsGoodwill 10 3,127,914 2,915,190 1,455,107Other intangible assets 10 13,650,474 13,288,528 13,209,891Property, plant and equipment 11 17,585,386 13,100,969 11,128,933Investment property 12 162,800 175,700 -Investment in associates and joint ventures 14, 15 15,722,411 15,264,092 13,501,906Other investments 16 493,507 602,338 710,769Advances to associates 17 912,275 10,287 -Finance lease receivables 18 24,753 36,268 47,245Deferred tax asset 9 136,491 101,356 -

51,816,011 45,494,728 40,053,851

Current assetsInventories 19 272,410 183,273 147,859Trade and other receivables 20 7,638,302 5,438,708 3,740,203Due from associates and joint ventures 17 331,173 495,380 210,470Finance lease receivables 18 11,515 10,977 10,464Cash and cash equivalents 21 11,309,185 11,294,868 9,432,564

19,562,585 17,423,206 13,541,560

Total assets 71,378,596 62,917,934 53,595,411

Current liabilitiesTrade and other payables 22 19,389,237 18,684,813 15,176,425Borrowings 23 1,079,387 722,305 343,000Payables related to investments and licences 24 2,902,961 2,002,465 1,013,334Finance lease obligations 25 56,709 - 22,493Provisions 26 60,086 6,815 52,770

23,488,380 21,416,398 16,608,022

Non-current liabilitiesTrade and other payables 22 2,118,289 857,691 756,220Borrowings 23 3,421,704 2,644,420 5,387,343Payables related to investments and licences 24 42,318 944,942 1,804,626Derivative financial instruments 27 333,134 293,805 -Deferred tax liabilities 9 538,464 326,007 157,317Finance lease obligations 25 124,781 - -Provisions 26 39,894 23,711 17,353Provision for end of service benefits 28 882,334 791,198 533,808

7,500,918 5,881,774 8,656,667

Total liabilities 30,989,298 27,298,172 25,264,689

Net assets 40,389,298 35,619,762 28,330,722

EquityShare capital 29 7,187,400 5,989,500 4,991,250Reserves 30 26,636,679 22,887,502 19,222,145Retained earnings 2,567,530 2,554,971 2,248,013

Equity attributable to the equity holders of the Corporation 36,391,609 31,431,973 26,461,408Non-controlling interests 3,997,689 4,187,789 1,869,314

Total equity 40,389,298 35,619,762 28,330,722

Mohammad Hassan Omran Khalaf Bin Ahmed Al OtaibaChairman Vice Chairman


37

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38

Consolidated statement of cash flows for the year ended 31 December 2009

Notes 2009AED’000

2008AED’000

Operating profit 8,814,963 6,551,962Adjustments for: Depreciation 11 1,603,920 1,591,639 Amortisation 10 930,581 892,569 Dividend income from other investments (21,121) (23,497) Share of results of associates and joint ventures 14, 15 (682,051) (472,694) Provisions and allowances (281,922) 825,182

10,364,370 9,365,161Changes in working capital: Inventories (90,193) (34,523) Due from associates and joint ventures (92,865) (256,616) Trade and other receivables (1,524,788) (699,700) Trade and other payables 1,554,219 2,310,047

Cash generated from operations 10,210,743 10,684,369 Income taxes paid (75,301) (62,371) Payment of end of service benefits 28 (10,747) (25,554)

Net cash generated from operating activities 10,124,695 10,596,444

Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired (320,391) (231,297)Acquisition of associates - (1,779,280)Acquisition of other investments (9,053) (117,619)Purchases of property, plant and equipment (5,546,483) (3,836,802)Proceeds on disposal of property, plant and equipment 34,283 246,784Purchase of other intangible assets (1,251,666) (71,177)Proceeds on disposal of shares in an associate - 2,324,993Dividend income received from associates & other investments 244,860 136,371Proceeds on maturity of investments classified as held-to-maturity 128,590 -Advances to associates (644,916) -Finance income received 594,032 425,804

Net cash used in investing activities (6,770,744) (2,902,223)

Cash flows from financing activitiesProceeds from bank borrowings 980,104 1,994,939Repayments of bank borrowings (560,361) (4,159,485)Proceeds from other borrowings 451,671 180,665Finance costs paid (400,618) (413,563)Dividends paid (3,893,175) (3,244,312)Contributions from non-controlling interests 15,089 -

Net cash used in financing activities (3,407,290) (5,641,756)

Net increase in cash and cash equivalents (53,339) 2,052,465

Cash and cash equivalents at the beginning of the year 11,294,868 9,432,564Effect of foreign exchange rate changes 67,656 (190,161)

Cash and cash equivalents at the end of the year 21 11,309,185 11,294,868


39

Notes to the consolidated financial statementsfor the year ended 31 December 2009

1. General information

The Emirates Telecommunications Corporation Group (“the Group”) comprises the holding company Emirates Telecommunications Corporation (“the Corporation”) and its subsidiaries. The Corporation was incorporated in the United Arab Emirates (“UAE”), with limited liability, in 1976 by UAE Federal Government decree No. 78, which was revised by the UAE Federal Act No. (1) of 1991 and further amended by Decretal Federal Code No. 3 of 2003 concerning the regulation of the telecommunications sector in the UAE. In accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The address of the registered office is P.O. Box 3838, Abu Dhabi, United Arab Emirates. The Corporation’s shares are listed on the Abu Dhabi Securities Exchange.

The principal activity of the Group is to provide telecommunications services, media and related equipment including the provision of related contracting and consultancy services to international telecommunications companies and consortia. These activities are carried out through the Corporation (which holds a full service licence from the UAE Telecommunications Regulatory Authority valid until 2025), its subsidiaries, associates and joint ventures.

These financial statements were approved by the Board of Directors and authorised for issue on 22 February 2010.

2. Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below.

Basis of preparationThe financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments and in accordance with the accounting policies set out herein.

Adoption of IFRSThe consolidated financial statements of the Group for the year ended 31 December 2008 were prepared in accordance with the Group’s previous accounting policies which are described in the audited consolidated financial statements for the year then ended. The Group’s previous accounting policies differ in some areas from IFRS, as summarised in note 37. In preparing the financial statements, management has amended certain accounting, valuation and consolidation methods applied in the consolidated financial statements for the year ended 31 December 2009, to comply with IFRS. Accordingly these consolidated financial statements have been prepared in accordance with IFRS.

In accordance with the requirements of IFRS 1 (revised 2007) three statements of financial position have been presented including related notes impacted by the transition to IFRS, as summarised in note 37. The comparative disclosures as at 1 January 2008 relate to the statement of financial position of the Group at the date of IFRS adoption (1 January 2008) and is prepared in accordance with IFRS. The effect of adopting IFRS at the transition date is set out in note 37. In preparing these financial statements the Group’s disclosure of related parties has been impacted by the early adoption of the amendments to IAS 24 (revised 2009) Related Party Disclosures. This is the only standard that the Group has early adopted that has resulted in a significant effect to the presentation and disclosure of financial information in the current period.

At the date of the consolidated financial statements, the following Standards, Amendments and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

Effective for annual periods beginning on or after

IFRS 2 (revised 2009) Group Cash-settled Share-based Payment Transactions 1 January 2010IFRS 3 (revised 2008) Business Combinations 1 July 2009IFRS 9 Financial Instruments 1 January 2013IAS 27 (revised 2008) Consolidated and Separate Financial Statements 1 July 2009IAS 32 (revised 2009) Classification of Rights Issues 1 February 2010IAS 39 (revised 2008) Eligible Hedged Items 1 July 2009IFRIC 14 (revised 2009) Prepayments of a Minimum Funding Requirement 1 January 2011IFRIC 17 Distributions of Non-cash Assets to Owners 1 July 2009IFRIC 18 Transfers of Assets from Customers 1 July 2009IFRIC 19 Extinguishing Liabilities with Equity instruments 1 July 2010Amendments to IFRS 2, IFRS 5, IAS 21, IAS 28, IAS 31, IAS 38, IAS 39, IFRIC 9 and IFRIC 16

resulting from the 2007, 2008 and 2009 Annual Improvements to IFRSs1 January 2009/1 July 2009

Amendments to IFRS 8, IAS 1, IAS 7, IAS 17 and IAS 36 resulting from the 2008 and 2009 Annual Improvements to IFRSs 1 January 2010

The directors are currently assessing the impact that the adoption of these Standards, Amendments and Interpretations will have on the consolidated financial statements of the Group.

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2. Significant accounting policies (continued)

Basis of consolidationThese consolidated financial statements incorporate the financial statements of the Corporation and entities controlled by the Corporation up to 31 December 2009. Control is achieved where the Group has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has the power to control another entity.

Non-controlling interests (previously referred to as minority interests) in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are excluded from consolidation from the date that control ceases.

Intercompany transactions, balances and any unrealised gains/losses between Group entities have been eliminated in the consolidated financial statements.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of an acquisition is measured as the aggregate of the fair value, at the date of exchange, of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributed to the acquisition. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations, are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated income statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Associates and joint venturesAssociates and joint ventures are those companies which the Group jointly controls or over which it exercises significant influence but it does not control. Investments in associates and joint ventures are accounted for using the equity method of accounting. Investments in associates and joint ventures are carried in the consolidated statement of financial position at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associates and joint ventures less any impairment in the value of individual investments. Losses of the associates and joint ventures in excess of the Group’s interest are not recognised unless the Group has an obligation to fund such losses. The carrying values of investments in associates and joint ventures are reviewed on a regular basis and if an impairment in the value has occurred, it is written off in the period in which those circumstances are identified.

Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the associates at the date of acquisition is recognised as goodwill and included as part of the cost of investment. Any deficiency of the cost of acquisition below the Group’s share of the fair values of the identifiable net assets of the associates at the date of acquisition is credited to the consolidated income statement in the year of acquisition.

The Group’s share of associates’ and joint ventures’ net income is based on the most recent financial statements or interim financial statements drawn up to the Group’s statement of financial position date. Accounting policies of associates and joint ventures have been adjusted, where necessary, to ensure consistency with the policies adopted by the Group.

Where a Group company transacts with an associate or joint venture of the Group, unrealised gains and losses are eliminated to the extent of the Group’s interest in the relevant entity. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.

Dilution gains and losses arising on deemed disposal of investments in associates and joint ventures are recognised in the consolidated statement of changes in equity.

Revenue Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for telecommunication products and services provided in the normal course of business. Revenue is recognised net of sales taxes, discounts and rebates. Revenue from telecommunication services comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision and fees for connecting users of other fixed line and mobile networks to the Group’s network.

Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as revenue over the related access period, with unbilled revenue resulting from services already provided from the billing cycle date to the end of each period accrued and unearned revenue from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires.

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Revenue (continued)

Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service.

Incentives are provided to customers in various forms and are usually offered on signing a new contract or as part of a promotional offering. Where such incentives are provided on connection of a new customer or the upgrade of an existing customer, revenue representing the fair value of the incentive, relative to other deliverables provided to the customer as part of the same arrangement, is deferred and recognised in line with the Group’s performance of its obligations relating to the incentive.

In revenue arrangements including more than one deliverable, the arrangement consideration is allocated to each deliverable based on the fair value of the individual element. The Group generally determines the fair value of individual elements based on prices at which the deliverable is regularly sold on a standalone basis.

Contract revenue is recognised under the percentage of completion method. Profit on contracts is recognised only when the outcome of the contracts can be reliably estimated. Provision is made for foreseeable losses estimated to complete contracts.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount.

LeasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Revenues from the sale of transmission capacity on terrestrial and submarine cables are recognised on a straight-line basis over the life of the contract.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as lessee

Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Foreign currencies

Functional currencies

The individual financial statements of each of the Group’s subsidiaries, associates and joint ventures are presented in the currency of the primary economic environment in which they operate (its functional currency). For the purpose of the financial statements, the results, financial position and cash flows of each Group company are expressed in UAE Dirhams, which is the functional currency of the Corporation, and the presentation currency for the financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency are recorded at exchange rates prevailing at the dates of the transactions. At each year end, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the entity’s functional currency at rates prevailing at the statement of financial position date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Consolidation

On consolidation, the assets and liabilities of the Group’s foreign operations are translated into UAE Dirhams at exchange rates prevailing on the date of the consolidated statement of financial position. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are also translated at exchange rates prevailing on the statement of financial position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising are classified as a separate component of equity. Such translation differences are recognised as income or as expense in the period in which the operation is disposed of.

Foreign exchange differences

Exchange differences are recognised in the consolidated income statement in the period in which they arise except for exchange differences that relate to assets under construction for future productive use. These are included in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency borrowings. Exchange differences on transactions entered into to hedge certain foreign currency risks; and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation are recognised in the foreign currency translation reserve and recognised in the consolidated income statement on disposal of the net investment.

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Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the consolidated income statement in the period in which they are incurred.

Government grants Government grants relating to non-monetary assets are recognised at nominal value. Grants that compensate the Group for expenses are recognised in the consolidated income statement on a systematic basis in the same period in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in the consolidated income statement on a systematic basis over the expected useful life of the related asset upon capitalisation.

End of service benefitsPayments to defined contribution schemes are charged as an expense as they fall due. Payments made to state-managed pension schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution scheme.

Provision for employees’ end of service benefits for non-UAE nationals is made in accordance with the Projected Unit Cost method as per IAS 19 Employee Benefits taking into consideration the UAE Labour Laws. The provision is recognised based on the present value of the defined benefit obligations.

The present value of the defined benefit obligations is calculated using assumptions on the average annual rate of increase in salaries, average period of employment of non-UAE nationals and an appropriate discount rate. The assumptions used are calculated on a consistent basis for each period and reflect management’s best estimate. The discount rates are set in line with the best available estimate of market yields currently available at the statement of financial position date.

TaxationThe tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method.

Deferred tax is calculated using relevant tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that sufficient taxable profits will be available in the future against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor the accounting profit.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Property, plant and equipmentProperty, plant and equipment are stated at cost, less accumulated depreciation and any impairment. Cost comprises the cost of equipment and materials, including freight and insurance, charges from contractors for installations and building works, direct labour costs and asset retirement costs.

Assets in the course of construction are carried at cost, less any impairment. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets commences when the assets are ready for their intended use.

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Property, plant and equipment (continued)

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to income during the period in which they are incurred.

Other than land, the cost of property, plant and equipment is depreciated on a straight line basis over the estimated useful lives of the assets as follows:

Buildings

Permanent - the lesser of 20 - 50 years and the period of the land lease.

Temporary - the lesser of 4 years and the period of the land lease.

Plant and equipment Years

Submarine - fibre optic cables 20 - coaxial cables 10Cable ships 15Coaxial and fibre optic cables 15Line plant 15Exchanges 5 – 10Switches 5 – 10Radios/towers 10 – 15Earth stations/VSAT 5 – 10Multiplex equipment 10Power plant 5Subscribers’ apparatus 3 – 8General plant 2 – 5

Other assets Years

Motor vehicles 3 – 5Computers 4 – 5Furniture and fittings 4 – 10

The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in consolidated income statement.

Investment propertyInvestment property, which is property held to earn rentals and/or for capital appreciation, is carried at cost less accumulated depreciation and impairment loss. Investment property in the course of construction is included in property, plant and equipment.

Investment properties are depreciated on a straight-line basis over the lesser of 20 years and the period of the lease.

Intangible assets

(I) Goodwill

Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs) expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other non financial assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or joint venture, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

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Intangible assets (continued)

(II) Licences

Acquired telecommunication licences are initially recorded at cost or, if part of a business combination, at fair value. Licences are amortised on a straight line basis over their estimated useful lives from when the related networks are available for use. The estimated useful lives range between 10 and 25 years and are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and whether licences are dependent on specific technologies.

(III) Internally-generated intangible assets

An internally-generated intangible asset arising from the Group’s IT development is recognised only if all of the following conditions are met:

• anassetiscreatedthatcanbeidentified(suchassoftwareandnewprocesses);• itisprobablethattheassetcreatedwillgeneratefutureeconomicbenefits;and• thedevelopmentcostoftheassetcanbemeasuredreliably.

Internally-generated intangible assets are amortised on a straight-line basis over their useful lives of 3-10 years. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

(IV) Indefeasible Rights of Use (“IRU”)

IRUs correspond to the right to use a portion of the capacity of a terrestrial or submarine transmission cable granted for a fixed period. IRUs are recognised as an asset when the Group has the specific indefeasible right to use an identified portion of the underlying asset, generally optical fibres or dedicated wavelength bandwidth, and the duration of the right is for the major part of the underlying asset’s economic life. They are amortised on a straight line basis over the shorter of the expected period of use and the life of the contract which ranges between 10 to 15 years.

Impairment of tangible and intangible assets excluding goodwillThe Group reviews the carrying amounts of its tangible and intangible assets whenever there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life (including goodwill) is tested for impairment annually.

Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

InventoryInventory is measured at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Allowance is made, where appropriate, for deterioration and obsolescence. Cost is determined in accordance with the weighted average cost method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Financial instrumentsFinancial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

(I) Fair value

The fair values of financial assets and financial liabilities are determined as follows:

• thefairvalueoffinancialassetsandfinancialliabilitieswithstandardtermsandconditionsandtradedonactiveliquidmarketsaredetermined with reference to quoted market prices; and

• thefairvalueofotherfinancialassetsandfinancialliabilitiesaredeterminedinaccordancewithgenerallyacceptedpricingmodelsbasedondiscounted cash flow analysis using prices from observable current market transactions.

(II) Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

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Financial instruments (continued)

(III) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments that are held-to-maturity, are available-for-sale, or are loans and receivables.

(IV) Held-to-maturity investments

Bonds and Sukuks bonds with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. The Group considers the credit risk of counterparties in its assessment of whether such financial instruments are impaired.

(V) Available-for-sale financial assets (“AFS”)

Listed securities held by the Group that are quoted in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investment revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in the consolidated income statement.

Dividends on AFS equity instruments are recognised in the consolidated income statement when the Group’s right to receive the dividends is established.

The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate prevailing at the statement of financial position date. The foreign exchange gains/losses that are recognised in the consolidated income statement are determined based on the amortised cost of the monetary asset. Other foreign exchange gains/losses are recognised in equity.

The Group assesses at each statement of financial position date whether there is objective evidence that AFS assets are impaired. In the case of equity securities, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement.

(VI) Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated income statement where there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The allowance for doubtful debts reflects estimates of losses arising from the failure or inability of the Group’s customers to make required payments. The estimates are based on the ageing of customer’s accounts and the Group’s historical write-off experience.

(VII) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

(VIII) Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ (“FVTPL”) or other financial liabilities.

(IX) Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:

• theamountoftheobligationunderthecontract,asdeterminedinaccordancewithIAS37Provisions, Contingent Liabilities and Contingent Assets; and

• theamountinitiallyrecognisedless,whereappropriate,cumulativeamortisationrecognisedinaccordancewiththerevenuerecognitionpolicies set out above.

(X) Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as such. A financial liability is classified as held for trading if it has been incurred principally for the purpose of disposal in the near future or it is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the consolidated income statement.

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Financial instruments (continued)

(XI) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

(XII) Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

(XIII) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including forward foreign exchange contracts, interest rate swaps and cross currency swaps.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The Group does not designate any financial instruments as hedging instruments, and accordingly all resulting gains or losses arising from the remeasurement of derivatives are recognised in the consolidated income statement immediately.

(XIV) Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in the consolidated income statement.

(XV) Put option arrangements

The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary.

The amount that may become payable under the option on exercise is initially recognised at fair value within borrowings with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries. For options that involve a fixed amount of cash for a fixed number of shares in the subsidiary, the Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration received, as a financing cost.

Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.

(XVI) Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset or substantially all the risk and rewards of ownership to another entity. If the Group neither transfer nor retains substantially all the risks and reward of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.

Transactions with non-controlling interestsThe Group applies a policy of treating transactions with non-controlling interest holders as transactions with parties external to the Group. Disposals to non-controlling interest holders result in gains and losses for the Group and are recorded in the consolidated income statement. Purchases from non-controlling interest holders result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

DividendsDividend distributions to the Group’s shareholders are recognised as a liability in the financial statements in the period in which the dividends are approved.

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3. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed below.

(I) Fair value of other intangible assets

On the acquisition of mobile network operators, the identifiable intangible assets may include licences, customer bases and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset, where no active market for the assets exist. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets.

The relative size of the Group’s intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives critical to the Group’s financial position and performance.

The useful lives used to amortise intangible assets relate to the future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset.

(II) Impairment of goodwill and associates

Determining whether goodwill is impaired requires an estimation of the fair value less cost to sell of the cash-generating unit to which the goodwill has been allocated. The fair value less cost to sell calculation for goodwill and associates requires the Group to calculate the net present value of the future cash flows for which certain assumptions are required, including management’s expectations of:

• longtermgrowthratesincashflows;• timingandquantumoffuturecapitalexpenditure;• sellingpricesanddirectcosts;and• theselectionofdiscountratestoreflecttherisksinvolved.

(III) Property, plant and equipment

Property, plant and equipment represents a significant proportion of the total assets of the Group. Therefore, the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Group’s financial position and performance. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the consolidated income statement.

4. Segmental information

Information regarding the Group’s operating segments is set out below in accordance with IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Group’s chief operating decision maker and used to allocate resources to the segments and to assess their performance.

Products and services from which reportable segments derive their revenuesThe Group is engaged in a single line of business, being the supply of telecommunications services and products. The majority of the Group’s revenues, profits and assets relate to its operations in the UAE. Outside of the UAE, the Group operates through its subsidiaries and associates in eighteen countries, the majority of which are considered by the Group to be one international operating segment. Revenue is attributed to an operating segment based on the location of the Group company reporting the revenue. Inter-segment sales are charged at arms’ length prices.

Segment revenues and results Segment results represent operating profit before federal royalty and the impact of IFRS adjustments earned by each segment without allocation of finance income and finance costs. This is the measure reported to the Group’s board of directors (“Board of Directors”) and the Executive Committee for the purposes of resource allocation and assessment of segment performance.

48


4. Segmental information (continued)

The following is an analysis of the Group’s revenue and results by reportable segment:

UAEAED’000

InternationalAED’000

EliminationsAED’000cc

Effect ofIFRS

adjustmentsAED’000

ConsolidatedAED’000

31 December 2009RevenueExternal sales 23,171,051 3,761,895 - 3,898,444 30,831,390Inter-segment sales 25,910 - (25,910) - -

Total revenue 23,196,961 3,761,895 (25,910) 3,898,444 30,831,390

Segment result 8,843,233 (238,213) 66,607 143,336 8,814,963Finance income 583,055Finance costs (571,493)

Profit before tax 8,826,525Taxation (243,792)

Profit for the year 8,582,733

31 December 2008RevenueExternal sales 23,789,408 2,329,726 - 3,240,532 29,359,666

Inter-segment sales 28,769 - (28,769) - -

Total revenue 23,818,177 2,329,726 (28,769) 3,240,532 29,359,666

Segment result 7,481,213 (1,023,225) 89,232 4,742 6,551,962Finance income 415,340Finance costs (563,786)Gain on disposal of shares in an associate 1,783,686

Profit before tax 8,187,202Taxation (187,007)

Profit for the year 8,000,195

49


4. Segmental information (continued)

Segment assetsFor the purposes of monitoring segment performance and allocating resources between segments, the Group’s Board of Directors and the Executive Committee monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments.

2009AED’000

2008AED’000

2007AED’000

UAE 64,176,768 58,103,966 51,252,695International 25,525,299 22,164,601 17,227,852

Total segment assets 89,702,067 80,268,567 68,480,547Eliminations (19,299,658) (18,196,689) (16,032,889)Effect of IFRS adjustments 976,187 846,056 1,147,753

Consolidated total assets 71,378,596 62,917,934 53,595,411

Other segment information

Depreciation and amortisation Capital additions

2009AED’000

2008AED’000

2009AED’000

2008AED’000

UAE 1,297,628 1,425,121 2,577,613 3,401,620International 1,257,409 1,094,920 5,143,561 3,683,962Effect of IFRS adjustments (18,564) (33,364) (57,338) (131,441)Eliminations (1,972) (2,469) - -

2,534,501 2,484,208 7,663,836 6,954,141

“Effects of IFRS adjustments” and their nature are disclosed in detail in note 37 to these consolidated financial statements”.

5. Operating expenses and federal royalty

(a) Operating expenses (before federal royalty)

2009AED’000

2008AED’000

Staff costs 3,919,638 3,811,465Interconnect costs 3,840,355 3,319,473Depreciation (Note 11) 1,603,920 1,591,639Amortisation (Note 10) 930,581 892,569Regulatory expenses 489,731 667,488Other operating expenses 3,077,907 4,332,780

Total operating expenses (before federal royalty) 13,862,132 14,615,414

“Other operating expenses (before federal royalty)” include foreign exchange gains of AED 45.4 million (2008: losses of AED 99 million) and operating lease rentals of AED 94.8 million (2008: AED 98 million).

(b) Federal royalty In accordance with the Cabinet decision No. 558/1 for the year 1991, the Corporation was required to pay a federal royalty, equivalent to 40% of its annual net profit before such federal royalty, to the UAE Government for use of federal facilities. With effect from 1 June 1998, Cabinet decision No. 325/28M for 1998 increased the federal royalty payable to 50%.

The federal royalty has been treated as an operating expense in the consolidated income statement on the basis that the expenses the Corporation would otherwise have had to incur for the use of the federal facilities would have been classified as operating expenses. For the year ended 31 December 2008, the federal royalty has been calculated using the results prepared under the Corporation’s previous accounting policies.

6. Gain on disposal of shares in an associate

In the prior year the Corporation reduced its equity interest in Etihad Etisalat Company (“EEC”) which resulted in a gain of AED 1,783.7 million. This disposal was in accordance with the Saudi Royal Decree establishing EEC.

50


7. Finance income

Investment income earned on financial assets is as follows:

2009AED’000

2008AED’000

Interest on bank deposits and held-to-maturity financial investments 583,055 415,340

8. Finance costs

2009AED’000

2008AED’000

Interest on bank overdrafts and loans 383,165 331,031Interest payable on other borrowings 9,949 30,277Unwinding of discount on payables related to investments and licences 134,754 140,524Other finance costs 43,625 61,954

571,493 563,786

Total borrowing costs 580,586 593,024Less: amounts included in the cost of qualifying assets (9,093) (29,238)

571,493 563,786

All interest charges are generated on the Group’s financial liabilities measured at amortised cost. Borrowing costs included in the cost of qualifying assets during the year arose on specific and general borrowing pools. Borrowing costs attributable to general borrowing pools are calculated by applying a capitalisation rate of 7.92% (2008: 9.52%) to expenditure on such assets. Borrowing costs have been capitalised in relation to loans by certain of the Group’s subsidiaries.

9 Taxation

2009AED’000

2008AED’000

Current tax expense 50,237 17,186Deferred tax expense 193,555 169,821

243,792 187,007

Current tax

Corporate income tax is not levied in the UAE for telecommunication companies and accordingly the effective tax rate for the Corporation is 0% (2008: 0%). The table below reconciles the difference between the expected tax expense of nil (2008: nil) (based on the UAE effective tax rate) and the Group’s tax charge for the year.

2009AED’000

2008AED’000

Profit before tax 8,826,525 8,187,202Tax at the UAE corporation tax rate of 0% (2008: 0%) - -Effect of different tax rates of subsidiaries operating in other jurisdictions 50,237 17,186

Current tax expense for the year 50,237 17,186

Deferred tax

Accelerated tax depreciation

AED’000

At 1 January 2008 157,317Charge to the consolidated income statement 169,821Exchange differences (1,131)

At 31 December 2008 326,007Charge to the consolidated income statement 193,555Exchange differences 18,902

At 31 December 2009 538,464

51


9 Taxation (continued)

Deferred tax (continued)

At the 31 December 2009, the Group has unused tax losses of AED 5,428 million (2008: AED 4,488 million) available for offset against future profits. A deferred tax asset has been recognised in respect of AED 652 million (2008: AED 435 million) of such losses. No deferred tax asset has been recognised in respect of the remaining AED 4,776 million (2008: AED 4,053 million) due to the unpredictability of future taxable profit streams. Included in unrecognised tax losses are losses of AED 2,137 million that will expire within the next three years, AED 1,922 million (2008: AED 2,134 million) that will expire in the next four years and AED 717 million (2008: AED 1,919 million) that will expire within the next five years. Other losses may be carried forward indefinitely.

10. Goodwill and other intangible assets

GoodwillAED’000

Other intangibleassets

AED’000Total

AED’000

CostAt 1 January 2008 1,455,107 14,245,789 15,700,896Additions - 40,903 40,903Acquired on acquisition of subsidiaries 1,524,473 1,332,858 2,857,331Disposals (64,390) (347,277) (411,667)

Exchange differences - (80,341) (80,341)

At 31 December 2008 2,915,190 15,191,932 18,107,122

AmortisationAt 1 January 2008 - 1,035,898 1,035,898

Charge for the year - 892,569 892,569

Disposals - (56,378) (56,378)

Exchange differences - 31,315 31,315

At 31 December 2008 - 1,903,404 1,903,404

Carrying amount

At 31 December 2008 2,915,190 13,288,528 16,203,718

At 31 December 2007 1,455,107 13,209,891 14,664,998

Cost

At 1 January 2009 2,915,190 15,191,932 18,107,122Additions 3,048 1,217,485 1,220,533Acquired on acquisition of subsidiaries 362,635 34,432 397,067Changes to provisional fair values (Note 31) (120,726) - (120,726)Disposals - (9,006) (9,006)Exchange differences (32,233) 64,833 32,600

At 31 December 2009 3,127,914 16,499,676 19,627,590

Amortisation

At 1 January 2009 - 1,903,404 1,903,404Charge for the year - 930,581 930,581Changes to provisional fair values (Note 31) 33,793 33,793Disposals - (7,637) (7,637)Exchange differences - (10,939) (10,939)

At 31 December 2009 - 2,849,202 2,849,202

Carrying amount

At 31 December 2009 3,127,914 13,650,474 16,778,388

52


10 Goodwill and other intangible assets (continued)

Other intangible assets include licences, software and IRUs having net book values of AED 12,817 million (2007: AED 12,215 million, 2008: AED 12,658 million), AED 424 million (2007: AED 506 million, 2008: AED 210 million), and AED 409 million (2007: AED 489 million, 2008: AED 420 million), respectively.

The amortisation of intangible assets has been included within operating expenditure in the consolidated income statement.

Analysis of goodwillGoodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill (all relating to operations within the Group’s International reportable segment) is allocated as follows:

2009AED’000

2008AED’000

2007AED’000

Atlantique Telecom, S.A. (“AT”) 1,268,474 1,295,217 1,073,081Etisalat DB Telecom Private Limited 1,242,530 1,086,017 -Canar Telecommunications Co. Limited 337,130 337,130 337,130Etisalat Misr (Etisalat) S.A.E 28,762 151,930 -Zanzibar Telecom Limited (“Zantel”) 44,896 44,896 44,896Tigo Private Limited (“Tigo”) 206,122 - -

3,127,914 2,915,190 1,455,107

ImpairmentThe Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from fair value less cost to sell calculations. The key assumptions for the value in use calculations are:

Discount rates

The discount rates applied to the cash flows of each of the Group’s operations are based on an external third party study conducted by the Group’s bankers. The study utilised market data and information from comparable listed mobile telecommunications companies and where available and appropriate, across a specific territory. The rates use a forward looking equity market risk premium and range between 8% and 22% (2007 and 2008: 10% and 22%).

Long term cash flows

The Group prepares cash flow forecasts derived from the most recent annual business plan approved by management for each location for the next five years. These cash flows are sometimes extrapolated beyond this period, up to a maximum of ten years, based on estimated growth rates of between 4% and 5% (2007 and 2008: 4% and 5%) and/or an exit EBITDA multiple of between 7 to 9 times (2007 and 2008: 7 to 9 times) in the terminal year. This rate does not exceed the average long-term growth rate for the relevant markets. Cash flows incorporate management fees and roaming synergies to be realised from each location.

Capital expenditure

The cash flow forecasts for capital expenditure are based on past experience and include the ongoing capital expenditure required to roll out networks in emerging markets, to provide enhanced voice and data products and services and to meet the population coverage requirements of certain licences of the Group. Capital expenditure includes cash outflows for the purchase of property, plant and equipment and computer software.

Selling prices and direct costs

Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

Reasonable changes to these assumptions would not cause the aggregate of the units’ carrying amounts to exceed the aggregate of their recoverable amounts.

53


11. Property, plant and equipment

BuildingsAED’000

Plant and equipment

AED’000

Motor vehicles,

computers, furnitureAED’000

Assets Under

constructionAED’000

TotalAED’000

CostAt 1 January 2008 3,004,506 16,405,016 1,600,461 2,862,244 23,872,227Additions 7,208 1,261,412 84,452 2,681,955 4,035,027Acquisition of subsidiaries - - 1,492 19,388 20,880Transfers 449,029 1,179,991 95,240 (1,724,260) -Transfer - investment property (181,000) - - - (181,000)Exchange differences 413 (34,364) (2,594) - (36,545)Disposals (11,720) (240,902) (23,589) (13,308) (289,519)

At 31 December 2008 3,268,436 18,571,153 1,755,462 3,826,019 27,421,070

Accumulated depreciationAt 1 January 2008 1,581,352 9,992,722 1,169,220 - 12,743,294Charge for the year 157,128 1,277,459 157,052 - 1,591,639Transfer - investment property (5,300) - - - (5,300)Exchange differences - 33,203 - - 33,203Disposals (11,438) (8,083) (23,214) - (42,735)

At 31 December 2008 1,721,742 11,295,301 1,303,058 - 14,320,101

Carrying amount

At 31 December 2008 1,546,694 7,275,852 452,404 3,826,019 13,100,969

At 31 December 2007 1,423,154 6,412,294 431,241 2,862,244 11,128,933

CostAt 1 January 2009 3,268,436 18,571,153 1,755,462 3,826,019 27,421,070Additions 7,946 583,876 32,056 4,847,077 5,470,955Acquisition of subsidiaries 921 483,992 23,512 82,872 591,297Transfers 80,215 2,181,289 287,060 (2,548,564) -Transfer - investment property 5,400 - - - 5,400Exchange differences 8,720 (464) 1,920 21,978 32,154Disposals (1,604) (263,247) (45,032) (38,271) (348,154)

At 31 December 2009 3,370,034 21,556,599 2,054,978 6,191,111 33,172,722

Accumulated depreciationAt 1 January 2009 1,721,742 11,295,301 1,303,058 - 14,320,101Charge for the year 165,212 1,208,367 230,341 - 1,603,920Transfer - investment property (7,500) - - - (7,500)Exchange differences (677) 1,568 (1,431) - (540)Disposals (4,134) (198,400) (126,111) - (328,645)

At 31 December 2009 1,874,643 12,306,836 1,405,857 - 15,587,336

Carrying amount

At 31 December 2009 1,495,391 9,249,763 649,121 6,191,111 17,585,386

The carrying amount of the Group’s buildings includes a nominal amount of AED 1 (2007 and 2008: AED 1) in relation to land granted to the Group by the Government. An amount of AED 9 million (2008: AED 29 million) is included in property, plant and equipment on account of capitalisation of borrowing costs for the year. There are no contingencies attached to this grant and as such no additional amounts have been included in the consolidated income statement or the consolidated statement of financial position in relation to this.

Borrowings are secured against property, plant and equipment with a net book value of AED 2,511 million (2008: AED 1,864 million).

12. Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at depreciated cost and included separately under non-current assets in the consolidated statement of financial position.

54


12. Investment property (continued)

AED’000

CostTransfer from property, plant and equipment 181,000

At 31 December 2008 181,000Transfer to property, plant and equipment (5,400)

At 31 December 2009 175,600

Accumulated depreciationTransfer from property, plant and equipment 5,300

At 31 December 2008 5,300Charge for the year 7,772Transfer to property, plant and equipment (272)

At 31 December 2009 12,800

Carrying amount

At 31 December 2009 162,800

At 31 December 2008 175,700

Fair value

At 31 December 2009 212,307

At 31 December 2008 261,151

The fair value of the Group’s investment property at 31 December 2009 has been arrived at on the basis of a valuation carried out by internal valuers that are not independent from the Corporation.

The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to AED 38.1 million (2008: AED 18.0 million).

13. Subsidiaries

The Group’s principal subsidiaries at 31 December 2009 and 31 December 2008 were as follows:

Name Country of incorporation Principal activityPercentage

shareholding

Emirates Telecommunications and Marine Services FZE

Jebel Ali Free Zone, Dubai Telecommunications services 100%

Emirates Cable TV and Multimedia LLC UAE Cable television services 100%Etisalat International Pakistan LLC UAE Holds investment in Pakistan Telecommunication

Company Ltd 90%

Etisalat International Egypt LLC UAE Holds investment in Etisalat Misr 100%Etisalat International Afghanistan Limited Jebel Ali Free Zone, Dubai Holds investment in Etisalat Afghanistan 100%E-Marine PJSC UAE Submarine cable activities 100%EDCH FZE Jebel Ali Free Zone, Dubai Data management services 100%Etisalat Services FZE Jebel Ali Free Zone, Dubai Management services 100%Etisalat Services Holding LLC Abu Dhabi Infrastructure services 100%Etisalat Software Solutions (Private) Limited India Technology solutions 100%Etisalat International Atlantique Limited Jebel Ali Free Zone, Dubai Holds investment in Atlantique Telecom S.A. 100%Etisalat International Zantel Limited Jebel Ali Free Zone, Dubai Holds investment in Zanzibar Telecom Ltd 100%Canar Telecommunications Co. Limited Republic of Sudan Telecommunications services 82%Etisalat International Nigeria Limited Jebel Ali Free Zone, Dubai Holds investment in Emerging Market

Telecommunications Services Ltd through its shareholding in MDC NG B.V.

100%

Etisalat International India Limited Jebel Ali Free Zone, Dubai Holds investment in Etisalat DB Telecom Private Ltd 100%Etisalat International Indonesia Limited Jebel Ali Free Zone, Dubai Holds investment in PT XL Axiata TBK (formerly

known as PT Excelcomindo Pratama TBK)100%

Etisalat International Benin Limited Jebel Ali Free Zone, Dubai Holds investment in Etisalat Benin 100%* Etisalat International Sri Lanka Limited Jebel Ali Free Zone, Dubai Holds investment in Tigo Private Ltd through its

shareholding in Sark Corporation N.V.100%

* Subsidiary acquired during the year ended 31 December 2009 (Note 31).

55


13. Subsidiaries (continued)

The Group owns 45% of the share capital of Etisalat DB Telecom Private Limited Group through its 100% holding in Etisalat International India Limited (through its 100% holding of Etisalat International Mauritius Ltd). The Group accounts for the investment as a subsidiary as it exercises control.

14. Investments in associates

The movement in the Group’s investments in associates is as follows:

AED’000

Net book amount at 1 January 2008 13,451,906Additions during the year 1,809,656Dividends (74,293)Disposal of interest in an associate (541,307)Gain on increase in investment in an associate 40,436

Share of results 475,693

Net book amount at 31 December 2008 15,162,091Share of results 684,131Dividends (223,732)

Net book amount at 31 December 2009 15,622,490

The Group’s associates at 31 December 2009 are as follows:


shareholding

Pakistan Telecommunication Company Limited (“PTCL”) Pakistan Telecommunications services 26%Etihad Etisalat Company Saudi Arabia Telecommunications services 27%

Thuraya Telecommunications Company PJSC (“Thuraya”) UAE Satellite communication services 28%PT XL Axiata TBK (“PEPT”) Indonesia Telecommunications services 13%Emerging Markets Telecommunications Services Limited (“EMTS”)

Nigeria Telecommunications services 40%

The latest set of consolidated financial statements used to assess the carrying value of the investment in PTCL is for the year ended 30 June 2009. The remaining period for PTCL has been assessed using unaudited interim consolidated financial information.

2009AED million

2008AED million

2007AED million

Aggregated amounts relating to AssociatesTotal assets 58,280 50,639 41,414Total liabilities (35,902) (31,997) (24,648)

Net assets in associates 22,378 18,642 16,766

Total revenue 23,041 19,737 16,502

Total profit of associates 3,303 1,415 2,460

The aggregation above comprises the results and financial position of all associated undertakings as at 31 December 2009, with the exception of PTCL whose results and financial position for the year ended 30 June 2009 have been included.

Net book amount is represented by the following investments:

2009AED’000

2008AED’000

2007AED’000

i. Pakistan Telecommunication Company Limited 9,443,491 9,405,333 9,268,941

56


14. Investments in associates (continued)

During 2006, the Corporation, through its majority owned subsidiary Etisalat International Pakistan LLC (“EIP”), acquired the entire 1.326 billion Class B shares of PTCL for a total consideration of US$ 2,598,960,000 (AED 9,548,579,040). These Class B shares represent 26% of PTCL’s issued capital and, in accordance with PTCL’s Articles of Association, provide the Corporation with 53% of the voting rights. Under the terms of the Shareholders Agreement between EIP and the Government of Pakistan (“GOP”), EIP has the right to appoint five of the nine Board of Directors of PTCL in addition to the appointment of certain key management personnel. However, management believes that there are certain control impediments, including but not limited to restrictions on the Corporation’s financial and operating decision making ability, and because of these, PTCL has been accounted for as an associate using the equity method. Management believes that some or all of these control impediments may be alleviated in the future which may result in the consolidation of PTCL.

2009AED’000

2008AED’000

2007AED’000

ii. Etihad Etisalat Company 3,580,503 2,899,041 2,123,415

The Corporation is one of seven founding shareholders of a Saudi Arabian joint stock company which was incorporated on 14 December 2004. EEC owns and operates a mobile cellular network in the Kingdom of Saudi Arabia using GSM and 3G networks.

According to the requirements of the Communications and Information Technology Commission (“CITC”) in Saudi Arabia, the Corporation as the operator of EEC must maintain a 15% equity interest in EEC for the duration of the management agreement (Note 17). The corporation has 27.459% equity interest in EEC at 31 December 2009. (2008: 27.459%; 2007: 35%)

The market value of the Corporation’s shares in EEC at 31 December 2009 was AED 8,225 million (2008: AED 5,823 million, 2007: AED 12,798 million).

2009AED’000

2008AED’000

2007AED’000

iii. Thuraya Telecommunications Company (formerly known as “Thuraya Satellite Telecommunications Company PJSC”) 446,565 504,244 449,630

The Corporation holds a 28.042% interest in Thuraya which is incorporated in the UAE as a private joint stock company.

2009AED’000

2008AED’000

2007AED’000

iv. PT XL Axiata Tbk (formerly known as PT Excelcomindo Pratama TBK) 1,700,292 1,612,399 1,609,920

On 12 December 2007, the Group acquired 15.97% of the issued equity shares in PEPT, a GSM operator in Indonesia, for consideration of AED 1,610 million. As a result of a rights issue made by PT XL Axiata Tbk during the year, the Group reduced its shareholding to 13.31% at 31 December 2009 (2008: 15.97%). The Group is in the process of acquiring these shares back.

Although the Corporation holds 13.31% of the paid-up capital of PEPT, it exercises significant influence by virtue of its representation on the Board of Directors of this Company. Accordingly, PEPT is accounted for as an associate.

Although the shares of PEPT are listed, trading in the shares is minimal, therefore the market value of AED 854 million (2008: AED 358 million) at 31 December 2009 does not represent the fair value to the Group.

2009AED’000

2008AED’000

2007AED’000

(v) Emerging Markets Telecommunications Services Ltd 451,639 741,074 -

On 11 February 2008, the Group acquired a 40% interest in MDC-NG B.V., a company registered in the Netherlands. The primary business of MDC-NG B.V. is to hold the investment in EMTS, an entity incorporated in Nigeria. Consideration of AED 969.94 million was paid which relates to the purchase of shares in MDC-NG B.V. and assignment of the right to receive 40% of the loan provided by Mubadala Holdings Cyprus Limited to MDC-NG B.V amounting to AED 1,176 million. EMTS has been granted a Unified Access Service Licence by the Nigerian Communications Commission. The capital structure of EMTS has not yet been finalised. Upon finalisation this may result in the reclassification of a portion of this investment in an associate to long term advances or loans.

57


15. Investments in joint ventures

The movement in the Group’s investments in joint ventures is as follows:

2009AED’000

2008AED’000

Net book amount at 1 January 102,001 50,000Additions during the year - 55,000Share of results (2,080) (2,999)

Net book amount at 31 December 99,921 102,001

The Group’s joint ventures at 31 December 2009 are as follows:


shareholding

Ubiquitous Telecommunications Technology LLC UAE Installation and management of network systems

50%

Smart Technology Services DWC – LLC DWC free zone, Dubai,UAE ICT services 50%

2009AED’000

2008AED’000

Aggregated amounts relating to joint venturesGroup’s share of current assets 40,445 55,056Group’s share of non-current assets 64,734 56,783

Group’s share of current liabilities (5,258) (9,838)

Group’s share of net assets in joint ventures 99,921 102,001Group’s share of income in joint ventures 6,112 7,247

Group’s share of expenditure in joint ventures (8,192) (10,246)

Group’s share of results in joint ventures (loss) (2,080) (2,999)


2009AED’000

2008AED’000

(i) Ubiquitous Telecommunications Technology LLC 59,899 56,665

The Corporation and Seven Emirates for Investment and International Trade LLC entered into a Memorandum of Association to set up Ubiquitous Telecommunications Technology LLC. The objectives of the company include installing infrastructure and managing home network systems.

2009AED’000

2008AED’000

(ii) Smart Technology Services DWC – LLC 40,022 45,336

On 3 May 2007, the Corporation entered into an agreement with Dubai Aviation Corporation to establish a joint venture company to offer a range of non-regulated ICT services and to own an Open Access Network within Dubai World Central (“DWC”). On 23 September 2008, the Corporation contributed an amount of AED 55 million towards its 50% equity interest in Smart Technology Services DWC - LLC. The joint venture was incorporated in Dubai as a DWC - free zone company on 25 September 2008.

16. Other investments

2009AED’000

2008AED’000

2007AED’000

Investments in equities classified as available-for-sale 345,995 335,289 490,329

Other investments classified as available-for-sale 55,662 46,609 -

Bonds and Sukuks bonds classified as held-to-maturity 91,850 220,440 220,440

493,507 602,338 710,769

58


16. Other investments (continued)

The shares included above represent investments in listed equity securities that present the Group with opportunity for return through dividend income and fair value gains. These shares are not held for trading and accordingly are classified as available-for-sale. The fair values of all equity securities are based on quoted market prices.

Sukuks are bonds structured to conform with the principles of Islamic Sharia law.

The movement in the Group’s other investments is as follows:

AED’000

Net book amount at 1 January 2008 710,769

Investment revaluation and additions (108,431)

Net book amount at 31 December 2008 602,338Investment revaluation and additions 19,759

Proceeds on maturity of investments classifieds as held-to-maturity (128,590)

Net book amount at 31 December 2009 493,507


2009AED’000

2008AED’000

2007AED’000

(i) Qatar Telecom QSC 211,493 172,920 235,000

The total number of shares held by the Corporation at the end of the year was 1,466,666 (2007: 1,000,000 and 2008: 1,466,666) shares.

2009AED’000

2008AED’000

2007AED’000

(ii) Sudan Telecommunications Company Limited 125,827 152,341 238,000

This represents the Corporation’s investment in 38.60 million (2007 and 2008: 29.24 million) shares (4%, 2007 and 2008: 4% holding) in Sudan Telecommunications Company Limited, Sudan.

2009AED’000

2008AED’000

2007AED’000

(iii) Dubai Global Sukuk FZCO - 128,590 128,590

This represents the Corporation’s investment of US$ 35 million in certificates (Sukuk Al-Ijara) issued by the Government of Dubai, Department of Civil Aviation. These certificates yielded an annual rental in relation to six month US$ LIBOR plus 0.45% and matured in November 2009.

2009AED’000

2008AED’000

2007AED’000

(iv) Wings FZCO 91,850 91,850 91,850

This represents the Corporation’s investment of US$ 25 million in Trust Certificates (Sukuk Al- Musharaka) issued by Wings FZCO, a limited liability company incorporated in Dubai Airport Free Zone. These certificates bear a return based on US$ LIBOR plus 0.75% and mature in June 2012. The first distribution was made in June 2006 based on 12 months US$ LIBOR.

Further distributions are made every six months based on six months US$ LIBOR. The Sukuk Al-Musharaka is guaranteed by the Emirates Group. The approximate market value of these certificates at 31 December 2009 was AED 78.9 million (2008: AED 68.9 million).

2009AED’000

2008AED’000

2007AED’000

(v) Bank of Khartoum 6,306 7,550 10,356

This represents the Corporation’s investment in 3.2 million (2007 and 2008: 2.5 million) shares in the Bank of Khartoum (formerly known as Emirates-Sudan Bank).

59


16. Other investments (continued)

2009AED’000

2008AED’000

2007AED’000

(vi) New ICO Global Communications (Holdings) 2,369 2,478 6,973

The Corporation had held a 7.34% interest in ICO Global Communications (Holdings) Limited (“ICO”), which filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in August 1999. Upon gaining exit from Chapter 11 in May 2000, ICO was re-established as New ICO Global Communications (Holdings) Limited (“New ICO”) under the laws of Delaware, USA. New ICO has been listed on the NASDAQ stock market in New York. The Corporation holds 596,864 (2007 and 2008: 596,864) Class A shares (0.30%, 2008: 0.30% interest) in New ICO.

2009AED’000

2008AED’000

2007AED’000

vii. Other investmentsClassified as available-for-sale

Telecel Faso 54,261 43,537 -

Etisalat Misr investment 1,401 3,072 -

55,662 46,609 -

Other investments held by the Corporation’s subsidiaries include Telecel Faso (see below) and an investment by Etisalat Misr.

Due to a conflict between a subsidiary of AT (Telecel Faso) and its minority shareholder, AT has temporarily lost control over the subsidiary based on the decision made by the jurisdiction authorities. Accordingly this has been deconsolidated from the date AT ceased to exercise control. The matter is currently under arbitration.

17. Related party transactions and balancesTransactions between the Corporation and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below.

As stated in note 1, in accordance with Federal Law No. 267/10 for 2009, the Federal Government of the UAE transferred its 60% holding in the Corporation to the Emirates Investment Authority with effect from 1 January 2008, which is ultimately controlled by the UAE Federal Government. The Group provides telecommunication services to the Federal Government (including Ministries and local bodies). These transactions are at normal commercial terms. The credit period allowed to Government customers ranges from 90 to 120 days. At 31 December 2009, trade receivables include an amount of AED 398 million (2008: AED 198 million), receivable from Federal Ministries and local bodies. See note 5 for disclosure of the royalty payable to the Federal Government of the UAE.

In accordance with IAS 24 (revised 2009) Related Party Disclosures the Group has elected not to disclose transactions with the UAE Federal Government and other entities over which the Federal Government exerts control, joint control or significant influence. The nature of the transactions that the Group has with such related parties is the provision of telecommunication services.

The Corporation entered into the following significant related party transactions with joint ventures and associates:

(i) Etihad Etisalat Company Pursuant to the Communications CITC’s licensing requirements, EEC (then under incorporation) entered into a management agreement (“the Agreement”) with the Corporation as its operator from 14 August 2004. The Corporation charged an amount of AED 63.9 million (2008: AED 78 million) for annual management fees, fees for staff secondments and other services provided under the Agreement. The term of the Agreement is for a period of seven years and can be automatically renewed for successive periods of five years unless the Corporation serves a 12 month notice of termination or EEC serves a 6 month notice of termination prior to the expiry of the applicable period. Amounts owed by EEC to the Group at 31 December 2009 are AED 84.2 million on account of voice traffic and leased circuit services.

(ii) Thuraya Telecommunications Company PJSC The Corporation has provided a primary gateway facility to Thuraya including maintenance and support services. A total amount of AED 29.4 million (2008: AED 21 million) was charged to Thuraya for the use of this facility and other services. Amounts owed to Thuraya by the Group at 31 December 2009 are AED 26.3 million on account of voice traffic and leased circuit services.

(iii) Pakistan Telecommunication Company Limited Pursuant to the shareholders agreement entered into between Etisalat International Pakistan and the Government of Pakistan dated 12 April 2006, the Corporation entered into an agreement for the provision of technical services and know-how (“the PTCL Agreement”) with PTCL with effect from 10 October 2006. Under the terms of the PTCL Agreement, the Corporation is entitled to an annual service fee of 3.5% of the gross consolidated revenue of PTCL for that year. The Agreement is valid for a period of 5 years and limits the fee to US$ 50 million per annum. During the current year service fee income of AED 124 million (2008: AED 143 million) was recognised in the consolidated income statement. Amounts owed to PTCL by the Group at 31 December 2009 are AED 64.7 million on account of voice traffic and leased circuit services.

(iv) Emerging Markets Telecommunications Services Ltd The Corporation has paid an amount of AED 645 million (2008: AED 257 million) to EMTS as advance and an amount of AED 96.42 million was charged as annual management fees, fees for staff secondments and other services. Amounts owed by EMTS to the Group at 31 December 2009 are AED 3.4 million on account of voice traffic and leased circuit services.

60


17. Related party transactions and balances (continued)

Trading transactionsBalances with associates and joint ventures at 31 December 2009 are disclosed below:

Associates Joint ventures

2009AED’000

2008AED’000

2009 AED’000

2008AED’000

Amounts owed by related parties 1,242,894 505,588 554 79

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the above balances.

Remuneration of key management personnelThe remuneration of the Board of Directors, who are the key management personnel of the Group, is set out below in aggregate for the category specified in IAS 24 Related Party Disclosures.

2009AED’000

2008AED’000

Short-term benefits 51,123 61,520

18. Finance lease receivables

2009AED’000

2008AED’000

2007AED’000

Amounts receivable under finance leases:Minimum lease payments: Within one year 13,294 13,294 13,294 In the second to fifth years inclusive 26,588 39,882 53,176

39,882 53,176 66,470Less: unearned finance income (3,614) (5,931) (8,761)

Present value of minimum lease payments receivable 36,268 47,245 57,709

Present value of minimum lease payments:Within one year (current) 11,515 10,977 10,464In the second to fifth years inclusive (non-current) 24,753 36,268 47,245

36,268 47,245 57,709

The Group holds a finance lease arrangement in relation to building and installations in the UAE leased out to Thuraya Telecommunications Company PJSC, an associate of the Group.

The interest rate inherent in the leases is fixed at the contract date for all of the lease term. The average effective interest rate contracted approximates to 4.9% per annum (2007 and 2008: 4.9% per annum).The directors consider that the carrying amount of the Group’s finance lease receivables approximates to their fair value.

19. Inventories

2009AED’000

2008AED’000

Subscriber equipment 171,482 82,834Maintenance and consumables 100,928 100,439

272,410 183,273

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20. Trade and other receivables

2009AED’000

2008AED’000

Amount receivable for the services rendered 4,130,137 3,818,040Allowance for doubtful debts (865,995) (1,318,983)

3,264,142 2,499,057Amounts due from other telecommunication administrations 2,185,098 1,876,939Prepayments 293,675 241,543Accrued income 206,254 233,568Other debtors 1,689,133 587,601

7,638,302 5,438,708

The Group’s credit period ranges between 30 and 120 days (2008: 30 and 120 days).

The Group provides for all past due trade receivables and as such there were no past due receivables not considered for impairment as at 31 December 2009. Out of the past due receivables of AED 2,900 million (2008: AED 2,669 million), the Group provided for an amount of AED 865 million (2008: AED 1,319 million) based on its assessment of the credit quality of the amounts due. It was assessed that a portion of the past due receivables is expected to be recovered.

The other classes within trade and other receivables do not contain any impaired amounts.

No interest is charged on the receivables. With respect to the amount receivable from the services rendered the Group holds AED 295 million (2008: AED 281 million) of collateral in the form of cash deposits from customers.

2009AED’000

2008AED’000

Movement in allowance for doubtful debtsOpening balance as at 1 January 1,318,983 778,410Net (decrease)/increase in allowance for doubtful debts (452,988) 540,573

Closing balance as at 31 December 865,995 1,318,983

21. Cash and cash equivalents

2009AED’000

2008AED’000

Cash and cash equivalents 11,309,185 11,294,868

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. These are denominated primarily in UAE Dirham, with financial institutions and banks. The carrying amount of these assets approximates to their fair value.

Interest is earned on these deposits at prevailing market rates. Cash and cash equivalents include an amount of AED 1,892 million (2008: AED 2,616 million) representing bank and cash balances of the Corporation’s subsidiaries maintained overseas.

22. Trade and other payables

2009AED’000

2008AED’000

Included within current liabilities:Federal royalty 8,836,346 8,664,984Trade payables 2,205,041 2,623,483Amounts due to other telecommunication administrations 1,484,563 1,637,545Deferred revenue 987,913 839,960Other payables 5,875,374 4,918,841

19,389,237 18,684,813

Included within non-current liabilities:Trade payables 1,796,728 840,080Other payables 321,561 17,611

2,118,289 857,691

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22. Trade and other payables (continued)

Amounts due to other telecommunication administrations and trade and other payables, principally comprising of amounts outstanding for trade purchases and ongoing costs are expected to be settled within 12 months of the statement of financial position date. Federal royalty for the year ended 31 December 2009 is paid on a monthly basis to the Ministry of Finance and Industry, UAE after the first quarter of 2010.

Trade and other payables disclosed under non-current liabilities are due for settlement after one year from the statement of financial position date.

23 Borrowings

a) Bank borrowingsThe carrying value and estimated fair value of the Group’s bank borrowings (measured at amortised cost) are as follows:

Fair value Carrying value

2009AED’000

2008AED’000

2009 AED’000

2008AED’000

Bank overdrafts 85,916 64,530 85,916 64,530Bank loans 3,067,850 2,473,835 2,829,341 2,306,086

3,153,766 2,538,365 2,915,257 2,370,616

The fair values of the Group’s bank borrowings are calculated using discounted cash flows using an appropriate discount factor that includes credit risk.

(i) Bank overdrafts

Zantel has an amount of AED 24.6 million (2008: AED 64.5 million) representing a bank overdraft which is utilised for the purpose of non-operating activities. The remainder of the balance (AED 61.3 million) relates to overdraft balances held by Atlantique Telecom.

(ii) Bank loans

On 17 July 2006, the Corporation entered into an agreement for a line of credit from a consortium of 22 banks amounting to US$ 3 billion. The Corporation repaid the outstanding loan balance under this facility amounting to AED 2,755 million on 14 July 2008. Accordingly, all borrowings as at 31 December 2009 are held by the Group’s subsidiary entities, as discussed below.

Etisalat Misr signed an agreement for syndicated interest bearing loans on 13 December 2007, for:

• alongtermloanfacilityamountingtoLE2billion(AED1.4billion)(PortionA);• arevolvingcreditfacilityamountingtoLE1.0billion(AED0.7billion)(PortionB);and• alongtermloanfacilityamountingtoUS$300million(AED1,102million)(PortionC).

The syndicated loan is repayable in full on 13 January 2011. The syndicated loan bears interest at mid-corridor plus 0.5% for the Egyptian Pound Portion and LIBOR plus 0.75% for the US Dollar Portion. Etisalat Misr utilised an amount of AED 595.4 million (2008: AED 468.1 million) from Portion A and AED 1,102 million (2008: AED 1,102 million) from Portion C and is included in non-current borrowings. The syndicated loan is secured by a commercial mortgage over Etisalat Misr’s property, plant and equipment a pledge over its bank accounts, real estate mortgage and an insurance assignment.

Zantel has a number of loans totalling AED 499.3 million (2008: AED 70 million), of which AED 271.7 million (2008: nil) is due within one year. Loans obtained at fixed rates carry interest at rates of 14.0% (2008: 14.5% per annum) (reducing balance), whereas the loans obtained at variable rates carry interest ranging from US LIBOR plus 4.5% to 5.5% per annum (2008: 2.75% to 5.5% per annum). Bank borrowings are secured by a fixed and floating charge over the company’s property, plant and equipment, both present and future, including a charge over the escrow accounts.

Atlantique Telecom has Euro denominated loans of AED 667.2 million (2008: AED 525 million). AED 559 million of the loan relates to short term borrowings which are repayable in December 2010. The short term loan has a floating interest rate of EURIBOR plus 8.72%. The remaining borrowings comprise overdrafts of AED 61.3 million (fixed interest of 11.0 – 14.8%) as well as short term loans of AED 16.2 million and a non-current loan of AED 30.8 million, which bear a fixed rate of interest of 10.0%.

2009AED’000

2008AED’000

Maturity of bank borrowings The borrowings are repayable as follows:On demand or within one year 956,360 740,999In the second year 2,269,330 67,469In the third to fifth years inclusive - 1,820,924

3,225,690 2,629,392

The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

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23 Borrowings (continued)

a) Bank borrowings (continued)

2009 2008

The weighted average interest rates paid were as follows:

Bank borrowings 8.99% 5.08%

The US$ borrowings are aggregated with AED because the AED is pegged to the US$. At 31 December 2009, the Group had available AED 1,127 million (2008: AED 2,678 million) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

b) Other borrowingsThe carrying value and estimated fair value of the Group’s other borrowings (measured at amortised cost) are as follows:

2009AED’000

2008AED’000

2007AED’000

Carrying value:Loans from non-controlling interests 525,300 387,246 1,642,955Advances from non-controlling interests 600,975 608,863 608,863Vendor financing 414,307 - -Other 45,252 - -

1,585,834 996,109 2,251,818

Fair value (excluding advances from non-controlling interests, see below):Loans from non-controlling interests 574,350 507,580 1,995,104Vendor financing 411,940 - -Other 44,370 - -

1,030,660 507,580 1,995,104

Maturity – the borrowings are repayable as follows:On demand or within one year 56,940 - -In the second year 1,025,360 - 60,775In the third to fifth years inclusive 600,975 1,151,010 2,832,000

1,683,275 1,151,010 2,892,775

The fair value of advances from non-controlling interests is not equivalent to its carrying value due to the fact that it is non-interest bearing. However, as there is no repayment date, a fair value cannot be reasonably determined.

2009 2008 2007

The weighted average interest rates paid were as follows:

Other borrowings 4.13% 3.90% 7.22%

(i) Loans from non-controlling interests

Loans from non-controlling interests includes the minority share of a shareholders’ loan advanced to Etisalat Misr amounting to AED 525.3 million (2008: AED 387.2 million). This loan carries interest at a fixed rate of 10% per annum. In 2007, the shareholders of Etisalat Misr resolved to extend the loan repayment to 2011 and accordingly this is now classified as a non-current liability.

(ii) Advances from non-controlling interests

Advances from non-controlling interests of AED 601 million (2007 and 2008: AED 608.9 million) represents advances paid by the minority shareholder of Etisalat International Pakistan LLC towards the Group’s acquisition of its 26% stake in PTCL, net of repayments. The amount is interest free, does not have any fixed repayment terms, and is not repayable within 12 months of the statement of financial position date and accordingly, the full amount is carried in non-current liabilities.

(iii) Vendor financing

Vendor financing includes AED 403.1 million in respect of Etisalat Misr relating to the acquisition of network equipment. The financing is due to expire in 2011 and interest is payable at a fixed rate of 3.0%.

64


23 Borrowings (continued)

b) Other borrowings (continued)

(iv) Other

The balance of other borrowings is made up of non-interest bearing, corporate loans made to Etisalat DB Telecom Private Limited which are due for repayment within one year.

2009AED’000

2008AED’000

2007AED’000

Total borrowings

Amount due for settlement within 12 months 1,079,387 722,305 343,000Amount due for settlement after 12 months 3,421,704 2,644,420 5,387,343

4,501,091 3,366,725 5,730,343

Analysis of total borrowings by currency

AED andUS$

AED’000

EgyptianPounds

AED’000Euro

AED’000

IndianRupees

AED’000Total

AED’000

31 December 2009Bank borrowings 1,632,291 615,686 667,280 - 2,915,257Other borrowings 1,015,282 525,300 - 45,252 1,585,834

2,647,573 1,140,986 667,280 45,252 4,501,091

31 December 2008Bank borrowings 1,236,641 468,000 665,975 - 2,370,616Other borrowings 608,863 387,246 - - 996,109

1,845,504 855,246 665,975 - 3,366,725

31 December 2007Bank borrowings 2,826,525 343,000 309,000 - 3,478,525Other borrowings 608,863 1,587,960 54,995 - 2,251,818

3,435,388 1,930,960 363,995 - 5,730,343

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24. Payables related to investments and licences

CurrentAED’000

Non-currentAED’000

TotalAED’000

31 December 2009Investments

Etisalat International Pakistan LLC 2,882,060 - 2,882,060Licences

Republic of Benin 20,901 42,318 63,219

2,902,961 42,318 2,945,279


Etisalat International Pakistan LLC 1,899,776 887,746 2,787,522Atlantique Telecom, S.A 83,767 - 83,767

LicencesRepublic of Benin 18,922 57,196 76,118

2,002,465 944,942 2,947,407


Etisalat International Pakistan LLC 949,712 1,717,096 2,666,808Atlantique Telecom, S.A 41,890 - 41,890

LicencesRepublic of Benin 21,732 87,530 109,262

1,013,334 1,804,626 2,817,960

According to the terms of the shareholders’ agreement between Etisalat International Pakistan LLC and the Government of Pakistan (“GOP”) payments of AED 6,612 million (2007 and 2008: AED 6,612 million) have been made to GOP with the balance of AED 2,937 million (2007 and 2008: AED 2,937 million) to be paid in 6 equal semi-annual instalments of AED 489 million each. The amounts payable are withheld pending completion of certain conditions in the shareholders’ agreement.

All amounts payable on acquisitions are financial liabilities measured at amortised cost and are mostly denominated in either US$ or AED and thus do not result in significant exchange rate risk

25. Obligations under finance leases

Minimum lease payments

Present value of minimum lease payments

2009AED’000

2008AED’000

2009 AED’000

2008AED’000

Amounts payable under finance leasesWithin one year 58,267 - 56,709 -In the second to fifth years inclusive 139,077 - 124,781 -After five years - - - -

197,344 - 181,490 -Less: future finance charges (15,854) - - -

Present value of lease obligations 181,490 - 181,490 -

Analysed as:Amounts due within 12 months 56,709 -Amounts due after 12 months 124,781 -

181,490 -

It is the Group’s policy to lease certain of its plant and machinery under finance leases. The average lease term is 2 years. For the year ended 31 December 2009, the average effective borrowing rate was 5.1%. The fair value of the Group’s lease obligations is approximately equal to their carrying value.

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26. Provisions

Assetretirementobligations

AED’000

RetirementprovisionAED’000

OtherAED’000

TotalAED’000

At 1 January 2008 17,353 48,300 4,470 70,123Additional provision in the year 5,026 - 1,114 6,140Utilisation of provision - (47,069) - (47,069)

Unwinding of discount 1,332 - - 1,332

At 31 December 2008 23,711 1,231 5,584 30,526Acquisition of a subsidiary 9,469 - 286 9,755Additional provision in the year 6,711 494 67,895 75,100Utilisation of provision - - (15,401) (15,401)Unwinding of discount - - - -

At 31 December 2009 39,891 1,725 58,364 99,980

Included in current liabilities 60,086Included in non-current liabilities 39,894

99,980

Asset retirement obligations relate to certain assets held by Atlantique Telecom and Tigo Private Limited that will require restoration at a future date that has been approximated to be equal to the end of the useful economic life of the assets. There are no expected reimbursements for these amounts.

The retirement provision relates to an early retirement incentive package for the UAE national staff who have opted for early retirement.

27. Financial instruments

Capital managementThe Group’s capital structure is as follows:

2009AED’000

2008AED’000

2007AED’000

Bank borrowings (2,915,257) (2,370,616) (3,478,525)Other borrowings (1,585,834) (996,109) (2,251,818)Cash and cash equivalents 11,309,185 11,294,868 9,432,564

Net funds 6,808,094 7,928,143 3,702,221Total equity (40,389,298) (35,619,762) (28,330,722)

Capital (33,581,204) (27,691,619) (24,628,501)

The capital structure of the Group consists of bank borrowings disclosed in note 23, cash and cash equivalents and total equity comprising share capital, reserves and retained earnings as disclosed in notes 21, 29 and 30, respectively.

The Group monitors the balance between equity and debt financing and establishes internal limits on the maximum amount of debt relative to earnings. The limits are assessed, and revised as deemed appropriate, based on various considerations including the anticipated funding requirements of the Group and the weighted average cost of capital. The overall objective is to maximise returns to its shareholders through the optimisation of the net debt and equity balance.

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27. Financial instruments (continued)

Categories of financial instrumentsThe Groups’ financial assets and liabilities consist of the following at 31 December 2009:

2009AED’000

2008AED’000

2007AED’000

Financial assetsLoans and receivables, held at amortised cost:Advances to/due from associates and joint ventures (Note 17) 1,243,448 505,667 210,470Finance lease receivables (Note 18) 36,268 47,245 57,709Trade and other receivables, excluding prepayments (Note 20) 7,344,627 5,197,165 3,740,203

8,624,343 5,750,077 4,008,382Available-for-sale financial assets (Note 16) 401,657 381,898 490,329Held-to-maturity investments (Note 16) 91,850 220,440 220,440Cash and cash equivalents (Note 21) 11,309,185 11,294,868 9,432,564

20,427,035 17,647,283 14,151,715

Financial liabilitiesOther financial liabilities held at amortised cost:

Trade and other payables, excluding deferred revenue (Note 22) 20,519,613 18,702,544 15,932,645Borrowings (Note 23) 4,501,091 3,366,725 5,730,343Acquisition payments (Note 24) 2,945,279 2,947,407 2,817,960Obligations under finance leases (Note 25) 181,490 - 22,493Derivative financial instruments (see below) 333,134 293,805 -

28,480,607 25,310,481 24,503,441

Derivative financial instruments represent the fair value of the written put option over the equity of an overseas subsidiary.

Financial risk management objectives The Group’s corporate finance function has overall responsibility for monitoring the domestic and international financial markets and managing the financial risks relating to the operations of the Group. Any significant decisions about whether to invest, borrow funds or purchase derivative financial instruments are approved by either the Executive Committee or the Board of Directors of either the Corporation or of the individual subsidiary. The Group’s risk includes market risk, credit risk and liquidity risk.

Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and price risks on equity investments.

There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk during the year.

Foreign currency risk

The Group has limited transactional exposure to exchange rate risk as it generally enters into contracts in the functional currency of the entity. These currencies include Indian Rupee, Egyptian Pounds and CFA Francs. The Group also enters into contracts in USD in the UAE and in Euros as the currencies of these countries (AED and CFA Francs, respectively) are pegged to the USD and Euro and therefore result in limited exposure. At 31 December 2009, the Group did have financial assets and liabilities in Egypt that were in USD and other limited financial liabilities in Tanzania that are in currencies other than its respective functional currency. In instances where the Group has a foreign currency transactional exposure, such as Egypt, it considers whether to purchase derivative financial instruments to manage the exposure and reassess this conclusion based on the level of exposure. The Group’s exposure to transactional exchange rate risk has not historically resulted in material impacts on profitability.

In addition to transactional foreign currency exposure, the Group is exposed to risk upon the translation of the Group’s foreign subsidiaries into AED. The Group recognises the impact of the translation as a movement in equity.

68


27. Financial instruments (continued)

Market risk (continued)

Foreign currency sensitivityAs discussed above, the Group’s only significant exposure to transactional foreign exchange risk is in Egypt. The following table presents the Group’s sensitivity to a 10 per cent change in the Dirham against the Egyptian Pound. The impact has been determined by assuming the change in the rate of 10% occurred at the beginning of the period and was held constant throughout the reporting period. A positive number indicates an increase in profit and equity, if the AED /USD were to strengthen against the Egyptian Pound.

Egyptian pounds2009

AED’0002008

AED’000

Profit for the year 43,588 127,763

Equity 43,588 127,763

The Group’s sensitivity to foreign currency has not changed significantly during the year.

Interest rate riskThe Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates, detailed at note 23. The Group monitors the market interest rates in comparison to its current borrowing rates and determines whether or not it believes it should take action related to the current interest rates. This includes a consideration of the current cost of borrowing, the projected future interest rates, the cost and availability of derivate financial instruments that could be used to alter the nature of the interest and the term of the debt and, if applicable, the period for which the interest rate is currently fixed.

Interest rate sensitivityBased on the borrowings outstanding at 31 December 2009, if interest rates had been 2% higher or lower during the year and all other variables were held constant, the Group’s net profit and equity would have decreased or increased by AED 18 million (2008: AED 47 million). This impact is primarily attributable to the Group’s exposure to interest rates on its variable rate borrowings.

The Group’s sensitivity to interest rate has not changed significantly during the year.

Other price riskThe Group is exposed to equity price risks arising from its equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments. See note 16 for further details on the carrying value of these investments.

The Group’s sensitivity to other prices has not changed significantly during the year.

Credit risk managementCredit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group and arises principally from the Group’s bank balances and trade and other receivables. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

For its bank balance, the Group considers various factors in determining with which banks to invest its money including whether the bank is owned by and/or has received government support, the rating of the bank by rating agencies and the level of security by way of governmental deposit guarantees. In addition, the Group establishes a policy of not investing more than a set amount in any individual bank, which at 31 December 2009 was AED 1 billion (2008: AED 1 billion). The assessment of the banks and the amount to be invested in each bank is assessed annually or when there are significant changes in the marketplace.

At 31 December 2009, the Group’s bank balances were invested 83% (2008:77%) in the UAE and 17% (2008:23%) outside of the UAE. Of the amounts in the UAE, an aggregate of AED 2.9 billion (2008: AED 2.5 billion) was with banks rated A+ by Fitch, AED 1 billion with banks rated A by Fitch and AED 743 million (2008: AED 2.8 billion) rated A - by Standard and Poor’s.

In relation to its trade receivables, the trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, collateral is received from customers usually in the form of a cash deposit.

The carrying amount of consolidated financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The details of the available undrawn facilities that the Group has at its disposal at 31 December 2009 to further reduce liquidity risk is included in note 23.

The majority of the Group’s financial liabilities as detailed in the consolidated statement of financial position are due within one year. Further information related to the borrowings due in more than one year is provided in note 23.

Fair value of financial instrumentsExcept for all financial liabilities classified as held at amortised cost and advances from non-controlling interests, the carrying amounts of financial assets and financial liabilities recorded in the financial statements approximate their fair values.

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28. Provision for end of service benefits

The movement in the provision for end of service benefits is as follows:

AED’000

Balance as at 1 January 2008 533,808Charge for the year 282,944Payments during the year (25,554)

Balance as at 31 December 2008 791,198Charge for the year 101,883Payments during the year (10,747)

Balance as at 31 December 2009 882,334

The above provision was based on the following significant assumptions:

2009 2008 2007

Discount rate 4.25% 4.79% 2.24%Average annual rate of salary increase 7.27% 5.18% 6.01%Average period of employment 16 years 16 years 16 years

29. Share capital

2009 2008

Authorised:8,000 million (2008: 8,000 million) ordinary shares of AED 1 each 8,000,000 8,000,000

Issued and fully paid:7,187.4 million (2008: 5,989.5 million) ordinary shares of AED 1 each 7,187,400 5,989,500

Reconciliation of movement in share capitalAt 1 January 5,989,500 4,991,250Bonus issue of 1,197,900 (2008: 998,250,000) fully paid Shares 1,197,900 998,250

At 31 December 7,187,400 5,989,500

On 23 March 2009, the shareholders at the Extraordinary General Meeting approved the issue of one bonus share for every five shares held. The Corporation has one class of ordinary shares which carry no guaranteed dividend rights.

The bonus shares distributed for the year 2008 do not qualify for dividends for that year.

30. Reserves

2009AED’000

2008AED’000

2007AED’000

Development reserve 6,950,000 6,000,000 5,000,000Asset replacement reserve 7,098,000 6,124,000 5,124,000Statutory reserve 6,714 3,408 3,408Translation reserve 272,782 267,023 388,829General reserve 12,167,505 10,362,099 8,360,349Investment revaluation reserve 141,678 130,972 345,559

26,636,679 22,887,502 19,222,145

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30. Reserves (continued)

Development reserve, asset replacement reserve and general reserve

These reserves are all distributable reserves and comprise amounts transferred from unappropriated profit at the discretion of the Group to hold reserve amounts for future activities including the issuance of bonus shares.

Statutory reserve

In accordance with the UAE Federal Law No.8 of 1984, as amended, and the respective Memoranda of Association of Etisalat International Pakistan LLC and E-Marine PJSC, 10% of their respective annual profits should be transferred to a non-distributable statutory reserve. The Corporation’s share of the reserve has accordingly been disclosed in the consolidated statement of changes in equity.

Translation reserve

Cumulative foreign exchange differences arising on the translation of overseas operations are taken to the translation reserve.

Investment revaluation reserve

The cumulative difference between the cost and carrying value of available-for-sale financial assets is recorded in the Investment revaluation reserve.

31. Acquisition of subsidiaries

(i) Sark Corporation N.V.

On 15 October 2009, the Group signed a definitive agreement to acquire a 100% equity interest in Sark Corporation N.V. (“Sark”) for a value of USD 207 million (AED 761 million). The amount comprises USD 40 million (AED 147 million) as consideration to acquire equity interest and remaining USD 167 million (AED 614 million) as a settlement against certain liabilities owed by Tigo and Sark. Sark is the holding company of Tigo Private Limited, a mobile telecoms operator in Sri Lanka. The provisional fair value for the acquisition has been recorded based on the historical book value.

Provisional fair valueAED’000

Net assets acquiredIdentifiable intangible assets 13,688Property, plant and equipment 591,208Inventory 604Trade and other receivables 54,213Cash and cash equivalents 4,243Trade and other payables (567,902)Obligations under finance leases (1,774)Bank loans (136,518)Provisions (14,366)

Net identifiable liabilities acquired (56,604)

Share of net identifiable liabilities acquired (100%) (56,604)Goodwill 206,122

Total consideration (satisfied by cash) 149,518

Net cash inflow arising on acquisition:Cash and cash equivalents acquired 4,243

The goodwill arising on the acquisition of Tigo is attributable to the expected profitability of the distribution of the Group’s products in the new markets and the expected future operating synergies from the combination relating to the CGU of Tigo. Tigo contributed AED 69 million of revenue and incurred a loss of AED 20 million for the period between the date of acquisition by the Group and the year end. The Group’s revenue and profit would have been increased by AED 199 million and decreased by AED 34 million respectively if the Tigo was acquired on 1 January 2009.

(ii) Allianz Infratech Private Limited

On 17 March 2009, Etisalat DB Telecom Private Limited (formerly Swan Telecom Private Limited (“Swan Telecom”)) acquired 100% of Allianz Infratech Private Limited, a company incorporated in India for a cash consideration of AED 79.9 million. The acquisition resulted in the recognition of goodwill of AED 14.7 million and the assumption of the assets and liabilities of the acquiree.

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(iii) Etisalat DB Telecom Private Limited (formerly Swan Telecom Private Limited (“Swan Telecom”))

On 16 December 2008, the Corporation acquired a 44.7% controlling interest in Swan Telecom, an entity incorporated in India. There is no difference between the provisional fair values and final fair values determined based on purchase price allocation exercise carried out by the Group.

Fair valueAED’000

Net assets acquiredIdentifiable intangible assets 1,181,349Property, plant and equipment 1,359Assets under construction 18,865Trade and other receivables 465,199Cash and cash equivalents 57,544Trade and other payables (2,050)Bank loans (1,051,252)Cash retained in the business 2,430,695

Net identifiable assets acquired 3,101,709

Share of net assets acquired 1,387,332Goodwill 1,086,017

Total consideration 2,473,349

Satisfied by:

Equity contribution 2,473,349

Net cash inflow arising on acquisition:

Cash and cash equivalents acquired 57,544

Swan Telecom is a start-up with no customers or brands and thus no other intangible assets were identified on acquisition.

The goodwill arising on the acquisition of Swan Telecom is attributable to the expected profitability of the distribution of the Group’s products in the new markets and the expected future operating synergies from the combination.

Swan Telecom did not contribute revenue to the Group for the period between the date of acquisition and the statement of financial position date.

(iv) Etisalat Misr

On 1 October 2008, Etisalat Misr acquired 99.99% of Egyptian Company for Internet and Digital Infrastructure (N.O.L.) S.A.E. and Egyptian Company for Networks (Egy Net) S.A.E. and its subsidiaries Soficom SAE, all registered in the Arab Republic of Egypt and are internet service providers. The acquisition resulted in the recognition of goodwill of AED 152 million. Etisalat Misr completed the purchase price allocation for the acquisition during 2009 (Note 10).

(v) Iran licence

On 13 January 2009, the Group won the third mobile network license for 2G and 3G in the Islamic Republic of Iran in a consortium with Tamin Telecom. However, the Group has now been withdrawn from the proposed investment plan in the Islamic Republic of Iran.

32. Commitments

Capital commitmentsThe Group has approved future capital projects and investments commitments to the extent of AED 6,787 million (2008: AED 6,142 million) of which AED 3,351 million (2008: AED 1,803 million) had been committed at 31 December 2009.

Lease commitments

The Group as lessee

2009AED’000

2008AED’000

Minimum lease payments under operating leases recognised as an expense in the year 94,777 20,715

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32. Commitments (continued)

Lease commitments (continued)

The Group as lessee (continued)

At the statement of financial position date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2009AED’000

2008AED’000

Within one year 240,268 15,050In the second to fifth years inclusive 1,947,534 3,604

2,187,802 18,654

Operating lease payments represent rentals payable by the Group for certain of its office and retail properties. Leases are negotiated for an average term of two years and rentals are fixed for an average of two years.

The Group as lessor

Property rental income earned during the year was AED 38.1 million (2008: AED 18.0 million). All of the properties held have committed tenants for the next 2-5 years.

At the statement of financial position date, the Group had contracted with tenants for the following future minimum lease payments:

2009AED’000

2008AED’000

Within one year 29,951 39,669In the second to fifth years inclusive 188 30,303

30,139 69,972

33. Contingent liabilities

At 31 December 2009, the Group’s bankers had issued performance bonds and guarantees for AED 774 million (2008: AED 93 million) in relation to contracts. Guarantees relating to the Corporation’s overseas investments amounted to nil (2008: AED 271 million).

34. Events after the reporting period

In February 2010, the Group acquired additional shares representing 18% shareholding of Atlantique Telecom, thus increasing the total shareholding from 82% to 100% for a consideration of USD 75 million (AED 276 million).

35. Dividends

AED’000

Amounts recognised as distributions to the equity holders:31 December 2009Final dividend for the year ended 31 December 2008 of AED 0.35 per share 2,096,325Interim dividend for the year ended 31 December 2009 of AED 0.25 per share 1,796,850

3,893,175

31 December 2008Final dividend for the year ended 31 December 2007 of AED 0.35 per share 1,746,937Interim dividend for the year ended 31 December 2008 of AED 0.25 per share 1,497,375

3,244,312

A final dividend of AED 0.35 per share was declared by the Board of Directors on 23 February 2009 and approved by the Shareholders in the Annual General Meeting held on 23 March 2009, bringing the total dividend to AED 0.60 per share for the year ended 31 December 2008.

An interim dividend of AED 0.25 per share was declared by the Board of Directors on 17 July 2009 for the year ended 31 December 2009.

A final dividend of AED 0.35 per share was declared by the Board of Directors on 23 February 2010, bringing the total dividend to AED 0.60 per share for the year ended 31 December 2009.

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36. Earnings per share

2009 2008

Earnings (AED’000)Earnings for the purposes of basic earnings per share being the profit attributable

to the equity holders of the Corporation 8,836,346 8,510,834

Number of shares (‘000)Weighted average number of ordinary shares for the purposes of basic earnings per share 7,187,400 7,187,400

The Group does not have potentially dilutive shares and accordingly, diluted earnings per share equals to basic earnings per share. Earnings per share for 2008 was adjusted for bonus shares issued in 2009 as approved by the shareholders at the Extraordinary General Meeting held on 23 March 2009.

37. First-time adoption of International Financial Reporting Standards

Basis of preparation of IFRS financial statementsFor the purposes of these consolidated financial statements the date of transition to IFRS for the Group is 1 January 2008 (the “transition date”).

The Group has applied IFRS 1 First-time Adoption of International Financial Reporting Standards in preparing these financial statements. IFRS 1 sets out the procedures that must be followed when adopting IFRS for the first time as the basis for preparing the Group’s consolidated financial statements. The Group is required to establish its IFRS accounting policies and, in general, apply these retrospectively to determine the IFRS opening statement of financial position at the date of transition, 1 January 2008. In accordance with IFRS 1 (revised 2007) the Group has prepared two comparative statements of financial position as well as related notes where applicable.

IFRS 1 exemptionsIFRS 1 provides a number of optional exemptions in the retrospective application of IFRS. The most significant of these are set out below, together with a description, in each case, of the exemption adopted by the Group.

Business Combinations (IFRS 3, Business Combinations and IAS 28 Investments in Associates)

The Group has elected not to restate the accounting for business combinations completed before the date of transition (1 January 2008). As a result, in the opening consolidated statement of financial position, goodwill arising from past business combinations remains as stated under the Group’s previous accounting policies at 31 December 2007.

Cumulative translation differences (IAS 21, The Effects of Changes in Foreign Exchange Rates)

The Group has elected to deem all cumulative translation differences of all foreign operations to be nil at the date of transition.

The following is a detailed description of the main differences between the two sets of accounting principles as applied by the Group and the impact on equity shareholders’ funds and net profit. There were no significant differences between IFRS and Group’s previous accounting policies on the Group’s consolidated statement of cash flows for the year ended 31 December 2008.

Reconciliation of consolidated shareholders’ equity

Note1 January 2008

AED’00031 December 2008

AED’000

Total shareholder’s equity under previous accounting policies 24,056,986 29,044,508

Revenue recognition a (34,724) (83,221)Available-for-sale financial assets b 345,559 130,972Financial liabilities c 242,862 129,409Derivative financial instruments d - (44,900)Lease classification e 5,838 (757)Proposed dividend f 1,746,937 2,096,325Put options g - (1,205)Other adjustments 97,950 160,842

Total adjustments 2,404,422 2,387,465

Equity attributable to shareholders of the Corporation 26,461,408 31,431,973

Non-controlling interests 1,869,314 4,187,789

Consolidated equity under IFRS 28,330,722 35,619,762

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37. First-time adoption of International Financial Reporting Standards (continued)

Basis of preparation of IFRS financial statements (continued)

Reconciliation of the profit for the year

Note AED’000

Profit for the year under previous accounting policies 8,166,416

Revenue recognition a (49,816)Financial liabilities c (125,524)Derivative financial instruments d (44,900)Lease reclassification e (6,657)Put options g (1,205)Other adjustments 61,881

Total adjustments (166,221)

Profit for the year under IFRS 8,000,195

The amounts in the preceding table were calculated after taxes and non-controlling interests.

Principal differences between the Group’s previous accounting policies and IFRSThe significant differences between the Group’s previous accounting policies and IFRS impacting the results and net assets of the Group are described below. These differences affect the 2008 comparative information and, unless otherwise stated, have been applied retrospectively in arriving at the transition statement of financial position under IFRS.

Measurement and recognition differences

a) Revenue recognition IAS 18 Revenue states that revenue should be measured at the fair value of the consideration received or receivable. Based on the requirements of IAS 18 the Group now spreads the value of discounts, customer incentives and other promotional offers relating to certain customer contracts over the life of the contractual period or average customer relationship. Under the previous accounting policies the Group recognised these discounts and incentives in the period that they were granted to the customer.

b) Available-for-sale financial assetsIAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement addresses the accounting for, and reporting of, financial instruments. IAS 39 sets out detailed accounting requirements in relation to the financial assets and liabilities.

Upon adoption of IFRS, the Group has classified its investments in equity instruments as ‘available-for-sale’ financial assets as defined by IAS 39. These assets are measured at fair value at each reporting date with movements in fair value taken directly to equity. At 1 January 2008, a cumulative increase of AED 346 million in the fair value over the carrying value of these investments was recognised.

Under previous accounting policies, the Group measured the carrying value of these investments at cost.

c) Financial liabilities IAS 39 Financial Instruments: Recognition and Measurement requires financial liabilities to be classified as either fair value through profit and loss or other financial liabilities.

The Group has two separate amounts payable on the acquisition of investments and licences which were previously held at cost but have now been classified as other financial liabilities upon adoption of IFRS. In accordance with IAS 39 other financial liabilities are held at amortised cost.

d) Derivative financial instrumentsIAS 39 Financial Instruments: Recognition and Measurement sets out detailed accounting requirements in relation to financial assets and financial liabilities. During the year ended 31 December 2008 the Group took out a derivative financial instrument to hedge the foreign currency exchange risk of the acquisition of an investment.

Under previous accounting policies, the loss made on the hedge was included within goodwill, however, given that the Group had not designated a formal hedging relationship in respect of this transaction the loss has been taken to the consolidated income statement on transition to IFRS.

e) Lease classification IAS 17 Leases states that leases should be classified as finance leases if they transfer substantially all of the risks and rewards incidental to ownership based on the substance of the transaction rather the legal form of the contract.

Upon adoption of IFRS the Group reclassified a building that it leases to one of its associates from an operating lease to a finance lease. The recognition of this finance lease increased lease receivables by AED 58 million and reduced property, plant and equipment by AED 51 million at 1 January 2008.

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37. First-time adoption of International Financial Reporting Standards (continued)

Principal differences between the Group’s previous accounting policies and IFRS (continued)

Measurement and recognition differences (continued)

f) Proposed dividendIAS 10 Events after the Statement of financial position date requires that dividends declared after the statement of financial position date are not recognised as a liability in the financial statements, as there is no present obligation at the statement of financial position date.

Under the Group’s previous accounting policies, the Group recognised a liability for dividends that were proposed in respect of a prior accounting period, even if the formal authorisation of the dividend did not take place until after the year end.

Accordingly, no accrual is required for the final dividend declared for 2007 of AED 1,747 million and for 2008 of AED 2,096 million.

g) Put optionsThe Group has issued written put options over the equity of certain of its subsidiaries. Under IAS 39 Financial Instruments: Recognition and Measurement, the Group treats such options as financial liabilities at fair value through the profit and loss. Under its previous accounting policies the Group did not recognise such options in its financial statements.

Presentation differences

RevenueIAS 18 requires that revenue relates to the gross inflows of economic benefits received and receivable by the entity on its own account. Accordingly, the Group now recognises revenues from certain customers on a gross basis which were previously recognised net of costs paid or payable to those customers.

TaxationIAS 1 Presentation of Financial Statements requires expenses in relation to taxation (comprising both income tax and deferred tax) to be disclosed as a separate line in the consolidated statement of comprehensive income. IAS 12 Taxation defines taxable profit as the profit determined in accordance with the rules established by taxation authorities upon which income taxes are payable.

Cash flow statementWithin the consolidated cash flow statement, dividend income has been presented under ‘investing activities’ whereas it was previously presented within ‘operating activities’. No other significant changes have been made to the presentation of the consolidated cash flow statement.

Intangible assetsIAS 38 Intangible Assets requires the presentation of fixed assets that lack physical substance as intangible assets on the face of the consolidated statement of financial position. Accordingly, software costs and IRUs that were previously included under property, plant and equipment are now presented as intangible assets.

Deferred revenueIAS 32 Financial Instruments: Presentation requires that financial assets and liabilities may only be offset only where a legally enforceable right to offset exists. In the absence of such a right, deferred revenue balances related to deposit rentals collected in advance have been classified as a current liability in the statement of financial position whereas previously the Group’s policy was to offset these against receivables.

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Notice is hereby given that the General Annual Shareholders’ Meeting will be held at 5.00 p.m., Tuesday 23rd March, 2010 at the Etisalat Head Office Building, Abu Dhabi, and will be followed directly by an Extraordinary Meeting to be held on the same date and in the same place for the purpose of transacting the following ordinary and special business;

GENERAL ANNUAL SHAREHOLDERS’ MEETING

1. To note the minutes of the Annual Shareholders Meeting held on Monday 23 March 2009.

2. To listen to the report of the Board of Directors on the Corporation’s activities and financial position and to consider and adopt the Corporations audited consolidated financial statements for the year ended 31 December 2009 as well as the external auditor’s report.

3. To look into the Board of Directors recommendation on the distribution of dividends.

4. To absolve Members of the Board of Directors of liability in respect of the year ending 31 December 2009.

5. To absolve the external auditors of liability in respect of the year ending 31 December 2009.

6. To appoint the auditors for the current financial year.

Extraordinary General Assembly Meeting

To approve and declare the issue of bonus shares recommended by the Board of Directors and in this respect to pass the following Resolution:

“Resolved that pursuant to Section 40.2 of Chapter Eleven of the Corporation’s Articles of Association a sum of AED 718,740,000 (Seven hundred eighteen million and seven hundred forty thousand Dirham) out of the General Reserve as on 31 December 2009 be capitalised and distributed by issuing 718,740,000 fully paid shares of AED 1 each as bonus shares in the ratio of One share for every registered shares held ranking pari passu with the existing shares of the Corporation.

It will be noted that bonus shares so distributed shall not qualify for dividends for the year 2009.

Further resolved that in the event of any member holding shares which are not an exact multiple of 10 the Board of Directors be and is hereby authorised to sell on his behalf such fractional entitlement and distribute the sale proceeds thereof in proportion to their respective entitlement.

Further resolved that the Board of Directors be and is hereby authorised and empowered to give effect to this resolution and to do or cause to be done all acts, deeds and things that may be required for the issue and distribution of 718,740,000 shares.“

Subject to approval by the General Assembly, Bonus Shares shall be allocated to the Shareholders registered on the Shareholders’ Register by the close of day on Sunday 4th April 2010.

By Order of the BoardCorporation Secretary

Notes:

i. A shareholder entitled to attend and vote at the annual shareholders’ meeting is entitled to appoint a proxy to attend and vote on his/her behalf. Such a proxy need not be a shareholder of the Corporation.

ii. Proxy forms may be obtained from Etisalat’s offices during official working hours

iii. Shareholders are requested to notify Abu Dhabi Securities Exchange (“ADX”) of any change in address.

Notice of Meeting

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Documents

2009 يوـنـسـلا رـيرــقـتلا · both iPhone 3G and 3GS in the GCC, as we did with BlackBerry in 2006. The iPhone is available in selected markets allowing customers