Annual Report 2008 - Orascom Telecom

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Annual Report 2008 - Orascom Telecom

A N N U A L R E P O R T 2 0 0 8

Giving the world a voice


Communication is the process of transfer of information from one person to another person. Communication as an academic discipline

that relates to all the ways we communicate, so it embraces a large body of study and knowledge. Most babies are born with the physical

ability to make sounds, but must learn to speak and communicate effectively. Speaking, listening, and our ability to understand verbal

and nonverbal meanings are skills we develop in various ways. Communication: "is the process of exchanging information and ideas. An

active process, it involves encoding, transmitting, and decoding intended messages. There are many means of communicating and many

different language systems. Communication cannot be achieved without words except for a few superficial methods. Real communication,

creative communication, communication that can sustain and uplift and inspire, is only possible with words. We all need to express

CONTENTS

ourselves, to manifest or convey. In other words, to make known our feelings and opinions. If we believe in something, we need to

distribute or extend our thoughts over a wide expanse of space. By spreading our thoughts we are opening a subject to widespread

discussion and debate. To transmit is to send a message somewhere. We need to transmit our feelings and emotions to each other to feel

and be close to one another. We need to constantly interact and to reveal our emotions and the inner side of ourselves. When we talk to

one another, we are helping each other by voice interacting. We are giving each other the possibility to understand ourselves better. To

feel one another is very precious and is a great support for a good living. Let’s communicate. Let’s imparting or interchange of thoughts,

opinions, or information by speech, writing, or signs. Communication can be perceived as a two-way process in which there is an exchange

and progression of thoughts, feelings or ideas towards a mutually accepted goal or direction. Let’s give the world a voice.

Communication is the process of transfer information from one person to another person. Communication as an academic discipline that

relates to all the ways we communicate, so it embraces a large body of study and knowledge. Most babies are born with the physical ability

to make sounds, but must learn to speak and communicate effectively. Speaking, listening, and our ability to understand verbal and

nonverbal meanings are skills we develop in various ways. Communication: "is the process of exchanging information and ideas. An active

process, it involves encoding, transmitting, and decoding intended messages. There are many means of communicating and many different

language systems. Communication cannot be achieved without words except for a few superficial methods. Real communication, creative

communication, communication that can sustain and uplift and inspire, is only possible with words. We all need to express ourselves, to

manifest or convey. In other words, to make known our feelings and opinions. If we believe in something, we need to distribute or

extend our thoughts over a wide expanse of space. By spreading our thoughts we are opening a subject to widespread discussion and

debate. To transmit is to send a message somewhere. We need to transmit our feelings and emotions to each other to feel and be close

to one another. We need to constantly interact and to reveal our emotions Letter and from the the inner Chairman side of & CEO ourselves. When we 2talk to one another,

we are helping each other by voice interacting. We are giving each other the OTH possibility at a Glanceto understand ourselves better. 4 To feel one another

is very precious and is a great support for a good living. Let’s communicate. Let’s imparting or interchange of thoughts, opinions, or

information by speech, writing, or signs. Communication About OTH: can be perceived OTH’s Organization as a two-way process in which there 8is an exchange and

progression of thoughts, feelings or ideas towards a mutually accepted goal or direction. Let’s give the world a voice.

Financial Milestones 10

Communication is the process of transfer information from one person to another person. Communication as an academic discipline that

History & Evolution of OTH 12

relates to all the ways we communicate, so it embraces a large body of study and knowledge. Most babies are born with the physical ability

Board of Directors 14

to make sounds, but must learn to speak and communicate effectively. Speaking, listening, and our ability to understand verbal and

nonverbal meanings are skills we develop in various ways. Communication:

Corporate

"is the

Governance

process of exchanging

Report

information

18

and ideas. An active

process, it involves encoding, transmitting, and decoding intended messages. Corporate There Responsibility are many means Reportof communicating 20 and many different

language systems. Communication cannot be achieved without words except for a few superficial methods. Real communication, creative

communication, communication that can sustain and uplift and inspire, is only possible with words. We all need to express ourselves, to

manifest or convey. In other words, to make known GSM our Operations:

feelings and opinions. OTA If we believe in something, we need to 26distribute or extend

our thoughts over a wide expanse of space. By spreading our thoughts Mobilink we are opening a subject to widespread discussion 28 and debate.

To transmit is to send a message somewhere. We need to transmit our

Mobinil

feelings and emotions to each other to feel

30

and be close to one

another. We need to constantly interact and to reveal our emotions and the inner side of ourselves. When we talk to one another, we are

Tunisiana 32

helping each other by voice interacting. We are giving each other the possibility to understand ourselves better. To feel one another is very

banglalink 34

precious and is a great support for a good living. Let’s communicate. Let’s imparting or interchange of thoughts, opinions, or information

Telecel Globe 36

by speech, writing, or signs. Communication can be perceived as a two-way process in which there is an exchange and progression of

thoughts, feelings or ideas towards a mutually accepted goal or direction. Let’s give the world a voice.

Communication is the process of transfer information from one person to another person. Communication as an academic discipline that

relates to all the ways we communicate, so 2008 it embraces Financial a large Review: body of study Board and Report knowledge. Most babies are born with 40 the physical ability

to make sounds, but must learn to speak and communicate effectively. Financial Speaking, Statements listening, (EGP) and our ability to understand 56 verbal and

nonverbal meanings are skills we develop in various ways. Communication: Financial "is the Statements process of (US$) exchanging information 104 and ideas. An active

process, it involves encoding, transmitting, and decoding intended messages.

Subsequent

There

Events

are many

in 2009

means of communicating

158

and many different

language systems. Communication cannot be achieved without words except for a few superficial methods. Real communication, creative

communication, communication that can sustain and uplift and inspire, is only possible with words. We all need to express ourselves, to

manifest or convey. In other words, to make known our feelings and opinions. If we believe in something, we need to distribute or

extend our thoughts over a wide expanse of space. By spreading our thoughts we are opening a subject to widespread discussion and

debate. To transmit is to send a message somewhere. We need to transmit our feelings and emotions to each other to feel and be close to

one another. We need to constantly interact and to reveal our emotions and the inner side of ourselves. When we talk to one another, we

are helping each other by voice interacting. We are giving each other the possibility to understand ourselves better. To feel one another

is very precious and is a great support for a good living. Let’s communicate. Let’s imparting or interchange of thoughts, opinions, or

information by speech, writing, or signs. Communication can be perceived as a two-way process in which there is an exchange and

progression of thoughts, feelings or ideas towards a mutually accepted goal or direction. Let’s give the world a voice.


2

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Letter from the Chairman & CEO

3

Letter from the Chairman & CEO

OTH at a Glance

Dear Shareholders,

2008 demonstrated the strong resilience of our business in

increasingly volatile and challenging global economic conditions.

Most of our businesses, with the exception of Pakistan, have achieved

their target in terms of growth and profitability. In Pakistan the

difficult political, economical and financial conditions combined

with the dramatic devaluation of the Pakistani Rupee have negatively

impacted the strong performance of the rest of the group.

Orascom Telecom has continued to focus on its core strategic goals

of creating shareholder value through the continued growth of its

existing subsidiaries and through selective geographical expansion.

During the course of this challenging year our company has

continued to support and maximise growth for Orascom Telecom

and its main subsidiaries by providing financial, technical and

management resources.

This year Orascom Telecom has exceeded the $5.3 billion turnover

mark, an impressive result which also represents our strongest

performance to date. We have achieved this growth by maintaining

our leadership position in terms of market share in all our main

markets, with the exception of Bangladesh where we have grown

from fourth to second largest operator, and by launching innovative

products and services allowing us to increase our group revenues

and EBITDA by 13% and 15% respectively. It is important to note

however that our underlying growth in local currency terms was in

line with our guidance of 18-20% growth for the year and that the

performance in US Dollars has been negatively influenced by the

sharp devaluation of the Pakistani Rupee against the US Dollar and

by the sharp rise in cost of oil and utilities in Pakistan during Q2 and

Q3. During 2008 most of our operations have continued to exhibit

robust organic growth, with over 7.5 million net subscribers added;

in Pakistan, the slowdown of the economy coupled with our

introduction of a new three month active churn policy has eliminated

from Mobilink’s customer base approximately two million inactive

subscribers. This measure has no impact on our top line. At the end

of 2008 Orascom Telecom provides mobile communications to 78

million subscribers.


This year Orascom Telecom has

exceeded the $5.3 billion turnover mark,

an impressive result which also represents

our strongest performance to date.


We have continued to actively explore new business opportunities and

have invested only in those where the return on equity is above our

target threshold. The launch of our commercial operations in North Korea,

our participation in the spectrum auction in Canada and recent acquisitions

in Africa through our subsidiary Telecel Globe clearly demonstrate our

drive to continue our long term growth. In December, we launched our

services in North Korea, only 11 months after we were awarded the

license. Our strategy to penetrate countries with high population and

low penetration was also at the base of our decision to participate in

a consortium for the spectrum bid in Canada, which we won in July.

The Canadian market has a mobile penetration level below that of Tunisia

and Algeria and a high population distributed in few large cities. It also

enjoys a cozy competitive environment with very high ARPUs which will

allow us to be highly effective with our low cost pre-paid business model.

Through our dedicated subsidiary Telecel Globe, we have also continued

to actively pursue niche opportunities in countries with low population

and low penetration, and have acquired operations in Burundi, Central

African Republic and, more recently, Namibia. Our strategy to manage

these smaller operations through Telecel Globe has allowed Orascom

Telecom’s management to focus on its core operations while allowing

these smaller operations to benefit from the strong purchasing synergies

of the Weather group. As we had announced at the beginning of the

year, we are also going ahead with our plan to focus on our GSM operations

and to dispose of our non-core assets: the sale of OrasInvest and the

recent sale of M-Link are a part of this strategy and have generated

shareholder value by monetizing assets undervalued by the market.

In 2008 we continued to pursue our strategy of shareholder remuneration

through two tender offers and a buyback program for Orascom Telecom

shares. Including the dividend distribution in May Orascom Telecom

returned over US$2 billion to its shareholders this year.

2009 is a challenging year with economic growth slowing further across

the globe. The markets in which OTH operates will suffer from the

economic downturn but probably less so than the more mature and

developed economies as a result of lower penetration levels and limited

fixed-line coverage which will ensure the mobile remains the key

communication means for large portions of the population.

In 2009, we believe that all our markets, except Pakistan, will continue to

show robust performance. In Pakistan we will remain cautious in our

investments in the country until we see early signs of recovery. We are

on track for the implementation of our $1 billion Free Cash Flow

optimization program that we have announced last quarter. In addition

we have recently initiated a cost reduction program aiming at reducing

operating expenses by 10% across the group which would further solidify

our Free Cash Flow optimization program and strengthen our margins.

The main areas of savings are expected in network, marketing,

administration expenses and human resources.”

Naguib Sawiris, Chairman and CEO


4

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Letter from the Chairman & CEO

5

OTH at a Glance

OTH at a Glance

Financial Highlights

Shareholder Information

Subscribers

+11%

in millions

78

70

2007 2008

Revenues

in US$ millions

+13%

5,327

4,727

2007 2008

EBITDA

in US$ millions

+15%

2,384

2,073

2007 2008

* Management View

Main Financial Data

(according to IFRS)

2007 2008

in US$ million in US$ million

Revenues 4,727 5,327

EBITDA 2,073 2,384

EBITDA Margin 43.8% 44.7%

Net Income 2,021 431

Earnings per GDR (US$) (1) 9.69 2.30 (1)

CAPEX 1,565 1,576

Net Debt 3,980 5,084

(1) Based on a weighted average for the outstanding number of Shares

of 187,335,132 GDRs in 2008

Ownership Structure

Weather Investments S.p.A. directly and indirectly owns approximately

52.1% of the shares of OTH, and 47.9% is public free float.

Buyback Shares & Cancellation of Shares

In April 2008, the Company announced a share buyback program

of up to 106 million of its ordinary shares, including those represented

by GDRs. OTH completed this announced buyback by purchasing

105,999,773 ordinary shares (equivalent to 21,199,955 GDRs) in May

2008. In June 2008, the Company announced a share buyback

program of up to 12 million of its ordinary shares (equivalent to

2,400,000 GDRs). The share buyback was completed in July 2008

when the Company bought back 11,999,403 ordinary shares

(equivalent to 2,399,881 GDRs). In February 2008, the Company had

decided to cancel 61,900,000 ordinary shares (12,380,000 equivalent

GDRs), which was completed in June 2008. After the cancellation,

OTH's issued share capital was 1,028,100,000 shares (equivalent to

205.62 million GDRs). In August 2008 at an EGM of the Company,

it was resolved to reduce the issued capital of the Company by

canceling the Company's treasury shares, by the amount equal to

128,697,126 shares (equivalent to 25,739,425 GDRs), which includes

the shares bought back in the course of the May and June tender

offers. After this reduction the total number of fully paid up shares

of the Company is 899,402,874. In August 2008, the company

announced a potential on-market GDR and local share repurchase

plan of up to 44.9 million shares (equivalent of up to 8.9 million

GDRs). In total as of December 31 st , 2008 OTH holds 3,536,340 GDRs

on the LSE; the equivalent of 17,681,700 shares.

Share Ownership Program for Employees

As part of its commitment to motivate and retain its key employees,

OTH offers an ESOP plan, having an ownership of approximately 1%

of OTH shares.

Paid up Capital

As at December 31 st , 2008, OTH’s paid up capital was EGP 899,402,874,

divided into 899,402,874 shares, each with a nominal value of EGP 1.

Dividends

The Board of Directors of OTH agreed to distribute dividends to its

shareholders during 2008. In April, 2008 a dividend payment of EGP

1.0 per share (EGP 5.0 per GDR share) was distributed.

Dividend Policy

OTH’s primary goal is to maintain sufficient reserves and liquidity to

ensure its operational and financial needs and to maintain a strong

growth profile of its business. OTH intends to operate a progressive

distribution policy based on what are believed to be sustainable

levels of dividend payments supplemented by variable distribution

to shareholders of any excess cash resources. Consequently, dividends

will vary from year to year.

Share Price Performance

At the beginning of 2008, the OTH stock was quoted at EGP 92.74

on CASE. The highest quotation during the year was EGP 93.23, and

the lowest was EGP 21.66. At year end, the quotation price was EGP

30.46; this amounted to a 67.2% decrease in value. The market value

as of December 31 st , 2008 was EGP 26.9 billion.

OTH GDRs listed on the London Stock Exchange at the beginning of

2008 were quoted at US$ 83.8. The highest quotation during the year

was US$ 83.8, and the lowest was US$ 19.27. At year end, the quotation

price was US$ 27.29; this amounted to a 67.4% decrease in value. The

market value as of December 31 st , 2008 was US$ 4.8 billion.

Trade

OTH is traded on both the Egyptian Exchange and on the London

Stock Exchange under the symbols (ORTE.CA, ORAT EY) and (ORTEq.L,

OTLD LI), respectively.

Disclosure

To ensure full disclosure and transparency, OTH reports its Holding

and Consolidated financials on a quarterly basis applying both the

Egyptian Accounting Standards (”EAS”) and US$ consolidated financial

statements in accordance with the International Financial Reporting

Standards (”IFRS”).


About OTH


8

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

OTH’s Organization 2008

OTH’s Organization 2009

OTH’s Organization

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

9

Naguib Sawiris, Chairman & CEO

Naguib Sawiris, Chairman & CEO

Group Chief Financial

Officer

Aldo Mareuse

Group Chief Operating

Officer

Emad Farid

VP HR & Administration

Wafaa Lotaief

Group Chief Financial

Officer

Aldo Mareuse

Group Chief Operating

Officer

Khaled Bichara

Vice Chairman

Emad Farid

VP, HR & Administration

Wafaa Lotaief

Budgeting, Planning

& Control Officer

Ahmed Halawa

Chief Commercial

Officer

Ossama Bessada

Internal Audit

Senior Director

Walid Bedair

Budgeting, Planning

& Control Officer

Ahmed Halawa

Commercial Strategy

Senior Director

Ashraf Halim

PR & Corporate

Communications Director

Manal Abdel Hamid

Internal Audit & Revenue

Assurance Officer

Mohamed Naguib

Corporate Finance

Officer

Karim Nasr

Network Senior

Director

Mohamed Ghidan

PR & Communication

Senior Director

Sabrine El Hossamy

Corporate Finance

Officer

Karim Nasr

COPS Development

Senior Director

Yasser Maher

Business Development

Officer

Khaled Ismail

General Counsel

Ragy Soliman

Corporate Accounting

Officer

Mohamed Naguib

IT Senior Director

Moataz El Sayed

GSM Services Officer

Khaled Ismail

Corporate Accounting

Officer

Walid Bedair

Technical Senior

Director

Mohamed Ghidan

Corporate Strategy

Senior Director

Ibrahim Karam

Corporate Treasury

Officer

Amr Abaza

General Counsel

Ragy Soliman

Corporate Treasury

Officer

Amr Abaza

IT Senior Director

Moataz El Sayed

Investor Relations

Director

Investor Relations

Director

Regulatory Affairs

Director

Stefano Songini

Stefano Songini

Hisham Moafi

GSM Subsidiaries

Subsidiary

CEO

By December 31 st 2008, the total headcount of OTH Group was 17,497, of which 241were working at the Holding company.

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

Koryolink

Tamer El Mahdy

Rashid Khan

Hassan Kabbani

Yves Gauthier

Ahmed A. Doma

Kai Uebach

Ezz Heikal


10

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Financial Milestones

OTH’s Organization

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

11

January

2008

February

2008

April

2008

June

2008

July

2008

August

2008

November

2008

December

2008

OTH EGM approves the

cancellation of 61.9 million

treasury shares bringing the

total number of fully paid

shares to 1,028 million.

OTH announces US$186

million tender offer for

its own shares.

OTH EGM approves

cancellation of 128,697,126

treasury shares bringing the

total number of fully paid

shares to 899,402,874.

OTH inaugurates the first

3G Mobile Network in

the Democratic People’s

Republic of Korea (DPRK).

OTH receives first mobile

license in the Democratic

People’s Republic of Korea

(DPRK).

OTH Secures US$ 2.5bn

Committed Bank Facility.

OTH announces US$1.6 billion

tender offer for its own shares.

OTH announces dividend

payment of EGP 1.0 per share

(EGP 5.0 per GDR).

OTH announces

participation in consortium

that provisionally won AWS

spectrum in Canada.

Telecel Globe finalizes

acquisition of mobile

operations in Burundi and

Central African Republic.

OTH announces potential

on-market GDR and local

shares repurchase plan of up

to 8.9 million GDRs (44.9

million shares) over a period

of 12 months.

OTH Announces Sale of

OrasInvest, in line with

stated strategy to focus on

GSM business.


12

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

History and Evolution of the Company

OTH’s Organization

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

13

OTH entered into the GSM business in 1998 through a series of acquisitions:

Orascom Telecom

Holding S.A.E. ("OTH")

is part of the Orascom group of companies,

which was established in 1976. Orascom

entered the field of Information Technology

and Telecommunications by trading and

distributing IT and telecom equipment in

Egypt. It became the market leader

representing the most important companies

in these sectors such as Microsoft, Hewlett

Packard, Compaq, IBM, Lucent Technologies

(AT&T), Oracle and Novell.

Orascom built its solid foundations

in IT and telecommunication hardware over

a period of ten years. In 1994, it acquired an

interest in Egypt’s first ISP, InTouch, marking

its first step in offering services in the

communications marketplace. As the

communications sector in Egypt began to

be privatized, Orascom continued to add

more service companies to its portfolio, and

was a participant in a joint venture that was

awarded Egypt’s first license for VSAT

technologies, and a lead member of a

consortium formed to create Egypt’s first

private payphone network. By 1997,

Orascom was in a position to participate in

the bidding process for a GSM license in

Egypt, having proven itself in the marketplace

as an IT and telecom hardware leader,

in addition to building up the know-how

and skills in managing large scale projects

and understanding local market conditions.

On July 27 th , 1997, OTH was incorporated

to consolidate the telecommunications and

technology interests of the Orascom family

of companies and the controlling shareholders,

the Sawiris family. By 1998, OTH was

the only company in Egypt with licenses in

all three privatized sectors: wireless, fixed

line payphones and VSAT technologies.

• In early 1998

GSM operations were launched by acquiring 51% of ECMS. (” Mobinil”)

with France Telecom and Motorola.

• In September 1999

Purchase of a controlling stake in JMTS-Fastlink in Jordan.

• In March 2000

Greenfield license in Yemen was acquired.

• In April 2000

OTH purchased a 38.6% stake in PMCL- Mobilink in Pakistan and

an 80% stake in Telecel, including 11 licenses in Benin, Burkina

Faso, Burundi, CAR, the Ivory Coast, the Democratic Republic of

Congo, Gabon, Togo, Uganda, Zambia and Zimbabwe. Moreover,

in early 2000, Telecel acquired a new GSM 900 license in Niger.

• In July 2000

OTH was floated on the Cairo & Alexandria Stock Exchange and

the London Stock Exchange.

• In February 2001

BOT contract was awarded in Syria.

OTH acquired Motorola’s stake in Fastlink in Jordan, in ECMS in Egypt

and in PMCL in Pakistan, and as a result, increased its stake in Fastlink

to 91.6%, in ECMS to 31.26% and in PMCL to 68.69%.

• In July 2001

OTH acquired a Greenfield license in Algeria.

• In August 2001

OTH acquired a further 20% stake in PMCL and, as a result, increased

its ownership to 88.69%.

• In March 2002

OTH acquired a Greenfield license in Tunisia.

• In October 2002

OTH entered into a joint venture with Wataniya Telecom to operate

its GSM license in Tunisia.

• In October 2003

OTH was awarded a Greenfield license in Iraq’s central region as

a result of a competitive bidding process.

• In July 2004

OTH agreed to renew the license of its Pakistani GSM subsidiary,

Mobilink, for a further 15 years after the expiration of its previous

license in July 2007 and ending in July 2022.

• In January 2002

OTH started restructuring its 12 operations in sub-Saharan Africa

under Telecel.

• In September 2002

SabaFon in Yemen was divested.

• In December 2002

OTH sold Fastlink in Jordan for US$ 423 million.

• In May 2003

OTH finalized the sale of seven GSM assets in sub-Saharan Africa.

• In September 2004

OTH purchased 100% of a GSM operation in Bangladesh and rebranded

it as "banglalink".

• In May 2005

OTH acquired additional equity stakes in OTA in Algeria and in

Tunisiana in Tunisia to reach 87.66% and 50%, respectively, through

a series of transactions.

• In July 2005

OTH acquired all minorities in its GSM operations in Iraq.

• In December 2005

OTH acquired a strategic stake of 19.3% in Hutchison Telecommunications

International Limited.

• In November 2006

OTH acquired additional equity stakes in OTA in Algeria to reach

96.81%. In October, OTH acquired 7.91%, and in November a

further stake of 1.21% was added.

• In June 2007

OTH acquired all remaining minority stake in PMCL, as a result

OTH indirectly owns 100% of the share capital of Mobilink.

• In January 2008

OTH was granted a Greenfield license in the Democratic People’s

Republic of Korea, with a 75% ownership.

• In July 2008

OTH announced its participation in a consortium that has

provisionally won AWS spectrum in Canada to create a new

Canadian owned and controlled wireless operator together with

Globalive Communications Corporation.

• In July 2008

Telecel Globe, a majority owned subsidiary of OTH, finalized the

acquisition of telecom operators U-Com in Burundi and Telecel

in the Central African Republic.

• In January 2009

Telecel Globe, a subsidiary of OTH, announced the acquisition of

mobile telecommunications operator Cell One in Namibia.

OTH was awarded the management contract of Lebanese mobile

telecommunications operator Alfa.

After operating 21 licenses in Africa and the Middle East, OTH decided to divest smaller non-core assets

and focus on its core operations to build value:

• In September 2005

OTH closed the sale of Oasis Telecom in the Democratic Republic of Congo.

• In December 2005

OTH signed a definitive agreement to sell its GSM operation

in Congo Brazzaville, Libertis Telecom ("Liberits").

• In December 2007

OTH completes the sale of the remaining stake in HTIL.

OTH sold its Iraqi operations Iraqna for US$ 1.2 billion.

• In November 2008

OTH announced the sale of 100% of OrasInvest

• In February 2004

OTH announced the sale of 51.7% equity stake of Telecel Loteny

in the Ivory Coast.

• In January 2009

OTH announced the sale of 100% of M-link


14

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW OTH’s Organization

15

Financial Milestones

History & Evolution of OTH

Board of Directors

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

Naguib Sawiris

Executive Board Member

Chairman & CEO - Orascom Telecom

Holding S.A.E.

Since joining Orascom, the family business,

in 1979, Naguib Sawiris has continuously

contributed to the growth and

diversification of the company into what

it is today – one of Egypt’s largest and most

diversified conglomerates. The Orascom Group is the country’s largest

private sector employer and has the largest market capitalization on

the Cairo & Alexandria Stock Exchange. Mr. Sawiris established and

built the railway, information technology, and telecommunications

sectors of Orascom. The success of these ventures as well as the other

sectors of the company led to the management’s decision to split

Orascom into separate operating companies: Orascom Telecom

Holding (OTH) www.orascomtelecom.com, Orascom Construction

Industries (OCI) www.orascomci.com, Orascom Hotels & Development

(OHD) www.orascomhd.com and Orascom Technology Systems (OTS)

www.ots.com.eg. Orascom Telecom Holding S.A.E.(OTH) was

established, in late 1997, and since then, has been chaired and led

by Mr. Sawiris.

As Chairman and CEO of Orascom Telecom Holding (OTH), Mr.

Sawiris has dynamically led the growth of the company, to be the

leading regional Telecom player and among the best regarded

Emerging Markets players in the world. OTH operates GSM networks

in seven different countries in the Middle East, Africa, and South

Asia (Egypt, Bangladesh, Pakistan, Algeria, Tunisia, Zimbabwe, and

North Korea ) with 78 million subscribers as at December 2008 . In

addition, it operates a number of leading Internet Service Providers

(ISPs), as well as value added services and handset distribution

companies.

In January 2003, and as a recognition for its regional role in the

telecommunication industry, Orascom Telecom represented by Mr.

Sawiris, was appointed as Board Member of the GSM Association.

The appointment came as an acknowledgement of the group’s

position as one of the largest ten operators based on subscriber

numbers.

After founding Weather Investments in early 2005, Mr. Sawiris led

the landmark leveraged buyout of a majority stake of Wind

Telecommunications in Italy and took over management as its

Chairman in late summer 2005.Almost a year after this important

step, he led Weather Investments’ acquisition of Tim Hellas in Greece

and re-branded it under the name “Wind Hellas“. In November 2006,

Wind Telecommunications floated the largest ever PIK debt in

Europe with proceeds used to complete the buyout of Wind from

ENEL resulting in the Sawiris Family owning 98% of Weather. These

latest acquisitions mark a new milestone in Mr. Sawiris’ long and

successful career journey in leading the international growth of

both Orascom Telecom and Weather Investments.

At international and regional levels, Mr. Sawiris serves on the

following Boards, Committees and Councils:

• Member of the International Advisory Committee to the NYSE

Board of Directors (IAC) since November 2005.

• Board member of the International Advisory Board to the National

Bank of Kuwait.

• President of the German-Arab Chamber of Industry and Commerce

for 2008-2009.

• Board member of the Supreme Council of Sciences and Technology

formed by a presidential decree issued by Egyptian President

Hosni Mubarak. The council's board includes a galaxy of scientists

including Nobel laureate Dr. Ahmed Zewail, Dr. Farouq el-Baz and

Dr. Magdy Yaqoub.

• Co-chair, the Egyptian Italian Business Council .

• Board member on both the Board of Trustees and the Board of

Directors of the Arab Thought Foundation.

• Board of Trustees member of the French University in Cairo.

• Board member of the Egyptian Council for Foreign Affairs.

Mr. Sawiris is also the recipient of numerous honorary degrees,

industry awards and civic honors, including the “Legion d’honneur“

(the highest award given by the French Republic for outstanding

services rendered to France) and the recipient of prestigious

“Sitara-e-Quaid-e-Azam” award (conferred upon Mr. Sawiris in 2006

by General Pervez Musharref for services rendered to the people

of Pakistan in the field of telecommunication, investments and

social sector work) .

Mr. Sawiris holds a Diploma of Mechanical Engineering with a

Masters in Technical Administration from the Swiss Institute of

Technology, ETH Switzerland and a Diploma from the German

Evangelical School, Cairo, Egypt. Mr. Sawiris is married, with four

children and lives in Cairo, Egypt. He speaks Arabic, English, German

and fair French.

Ahmed Maher El Sayed

Non-Executive Board Member

Born September 14, 1935, graduated from

the Faculty of Law, Cairo University in 1956.

He joined the Foreign Ministry in 1957 and

served in Zurich, Kinshasa and Paris.

Moreover, he served in the departments

of Arab Affairs, Consular Affairs and

European Department. He served in the

Office of the President’s National Security Advisor from 1972-1974,

as Chief of Cabinet of Minister of Foreign Affairs from 1974-1980,

as a member of the Egyptian delegation at the Camp David

negotiations in 1978 and as a member of the Taba arbitration team.

Mr. El Sayed held the following positions:

Ambassador to Portugal (1980-1982), Ambassador to Belgium and

to the European Community (1983-1984), Head of Policy Planning

Department (1984-1986), Head of Legal Department (1987-1988),

participated in negotiations about Taba and arbitration procedures,

Ambassador to the USSR and then Russia (1988-1992), Ambassador

to the USA (1992-1999), Head of the Arab League Fund for Africa

(2000-2001), and Minister of Foreign Affairs (2001-2004). He also

publishes weekly articles in the leading newspaper “Al Sharq Al Awsat”.

Ajit Nedungadi

Non-Executive Board Member

Mr. Ajit Nedungadi is a Managing Director

at TA Associates, Inc. He serves as the Director

at the firm’s London office and focuses on

recapitalizations, management buyouts, and

minority equity investments in growth

technology companies in Europe, India, and

other emerging markets. Previously, Mr.

Nedungadi worked at Trilogy Software. He also served as an Associate

at Investcorp International, where Mr. Nedungadi specialized in

leverage buyout transactions. He was an Analyst in the Mergers and

Acquisitions Department of Credit Suisse First Boston and a Director

at Drive Assist and SmartStream Technologies. Mr. Nedungadi is

currently a Director at ION Trading Group, Alma Lasers, eDreams,

Sophos and M and M Direct. He is an active investor at Jupiter

International and Idea Cellular. He received an MBA in 1998 from

Harvard Business School, where Mr. Nedungadi was a Baker Scholar.

He has also earned a B.S., magna cum laude, Phi Beta Kappa, in

Electrical Engineering and Economics in 1992 from Yale University

François Dopffer

Non-Executive Board Member

Mr. Dopffer is a former French Ambassador

to Turkey (1991-96) and to Egypt (2000-2002).

He has extensive knowledge of United States,

North African, Middle Eastern and Asian

countries where he served in different

positions. He holds degrees in political

science (IEP Paris), public management (ENA)

and law (Paris University). In 2008, he has published a book of political

analysis, The Turkish Imbroglio.

Hassan Abdou

Non-Executive Board Member

Mr. Abdou is currently Chief Executive Officer

of Weather Investments II, which was formed

in 2005 as the majority owner of Weather

Investments, a global telecom company

owning and controlling Orascom Telecom,

Wind Telecommunications in Italy and most

recently TIM Hellas in Greece. Mr. Abdou is

an active board member in Weather, Wind and OTH and in addition,

sits on the board and executive committees of several IT, telecom

and media companies in Europe, Egypt and the Middle East.

Prior to his involvement with the Orascom Group which started in

2003, he was Chief Investment Officer of EFG-Hermes Private Equity

and the Horus Private Equity Fund where he was Fund Manager since

1997. In 1995 and until returning to Egypt, he was a consultant in

the New York office of the Boston Consulting Group where he worked

with Fortune 500 companies in such areas as Telecommunications,

Media & Entertainment, Energy and Pharmaceuticals. Mr. Abdou had

begun his career with Exxon Company where he worked for several

years as a Project Controls Engineer.

In addition to his activities in the region, Mr. Abdou is a member of the

Advisory Board of the New York Private Placement Exchange (”NYPPE”).

Mr. Abdou received his Bachelor of Science in Mechanical

Engineering from the University of Pennsylvania and a Bachelor of

Science in Economics from the Wharton Business School. In addition,

he received his MBA from the Harvard Business School.


16

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW OTH’s Organization

17

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

Iskander N. (Alex) Shalaby

Executive Board Member

Chairman, The Egyptian Company

for Mobile Services (Mobinil)

On September 1, 2008 Alex Shalaby was

appointed Chairman of the Egyptian

Company for Mobile Services (Mobinil) by

Board consensus, following his

appointment as its President and CEO in 2005. This step came as

a result of Shalaby's remarkable achievements at Mobinil over the

past three years where the company has witnessed continued

market share leadership, tripled the subscriber base from six to 19

million, doubled the revenues and increased net profits by 30%. As

former Executive Vice President of Orascom Telecom Holding (OTH)

and continuing on its board, Shalaby’s regional experience proved

invaluable as OTH continues to expand its global footprint, signaling

the need to keep him as head of Business Development.

Mr. Shalaby was Chief Officer of Regulatory Affairs for Mobinil from

1998 to 2005 and was responsible for helping with the licensing

and regulations required in setting up Mobinil as the first mobile

operator in Egypt. Mobinil is partly owned by OTH and France

Telecom/Orange, a balancing challenge for Shalaby to maintain

the trust and confidence of the two major shareholders as well as

the Company’s thousands of public shareholders.

Mr. Shalaby came to Mobinil from Washington, DC where he was

AT&T Director for Public Affairs as the company’s link to law makers

on Capitol Hill with responsibility for lobbying the executive branch

of the U.S. government. He helped in developing more liberalization

of the telecoms sector both domestically, as well as internationally

for emerging nations of the Middle East, Africa, Eastern Europe and

South Africa through the relevant multi-lateral agencies. It was during

these years that he served on the boards of the American Chamber

of Commerce becoming its president during the period 1991 – 1992

and the Fulbright Commission, as his AT&T responsibilities shifted

from local to regional, with particular focus on North Africa and the

Levant. Between 1993 and 1995, Mr. Shalaby was Regional Director

for International Public Affairs for AT&T, based in Cairo, Egypt, where

he was the principal interface with key agencies within the governments

in the region on matters impacting AT&T’s operations.

Mr. Shalaby started with data communications, moving between

posts in California and New Jersey, where he worked with Bell Labs.

Shalaby then moved to become Managing Director for AT&T in

Egypt, and General Manager for the Middle East and North Africa

region until 1993. He held a variety of technical and managerial

positions involved with AT&T start-ups in the Gulf (1977–1980). In

1977 he moved to Saudi Arabia to help launch the first AT&T

microwave project before moving on to Kuwait and the UAE. Once

again, during this period he established and secured a solid position

for AT&T in the Gulf region.

In 1966, Mr. Shalaby graduated with a Bachelors of Science in

Electrical Engineering from the University of Alexandria and started

his first job with Egypt Air as Radio and Radar Engineer for two

years. In 1969, he emigrated to the United States, where he eventually

settled in San Jose, California and started his first job at Pacific

Telephone and Telegraph Company, a subsidiary of AT&T, at the

time. During this time he earned a Masters of Science in Electrical

Engineering and Computer Science from San Jose State University.

Khaled Bichara

Executive Board Member

Group Chief Operating officer

Effective April 1, 2009 Khaled Bichara has

been appointed Group Chief Operating

Officer of Orascom Telecom Holding. In this

capacity, Mr. Bichara will be leading the

Technical, IT, Regulatory Affairs, Commercial

and Marketing Communication Departments.

Mr. Bichara brings over 15 years of diversified entrepreneurial and

management experience as the Chief Operating Officer of Wind

Telecomunicazioni S.p.A. in 2006 and heading the fixed line and portal

business unit from 2005. He played a key and instrumental role in

the successful turnaround of WIND from a loss making company to

one of the best performing mobile, fixed line and broadband

integrated operators in Europe in a record time span of three years.

Prior to joining Wind, Khaled was the cofounder, Chairman and CEO

of LINKdotNET (”LDN”), the largest private Internet Service Provider

(”ISP”) in the Middle East. Before starting LINKdotNET, he founded

Micro labs, a software development firm.

Mr. Bichara became Chief Internet Strategist of Orascom Telecom in

2000 and has been a member of the board of directors of OTH since

2003. He was also a board member of WIND Italy, WIND Hellas, MOBI

mtld ltd, the mobile domain company and multiple other boards.

In December 2003, Business Today chose Mr. Bichara among 108

executives as the first ever “Young Executive of the Year”.

Mr. Bichara earned his Bachelor of Science degree from the American

University in Cairo. He is an active member of the Software

Community in the Middle East; a founding member of the Egyptian

Software Association, Internet Society of Egypt and the Egyptian

Electronic Commerce Committee. Bichara is also member of the

Advisory Board for the Department of Computer Science and

Engineering at the American University in Cairo .

Khaled Ismail

Executive Board Member

Business Development Officer

Effective January 1 st , 2009 Dr. Khaled Ismail

has been appointed the position of Business

Development Officer at Orascom Telecom

Holding. In this capacity, Dr. Khaled Ismail

will be leading OTH business development

activities.

Prior to that, Dr. Ismail was the senior advisor of the Egyptian Minister

of CIT, responsible for technology development.

Dr. Ismail is the CEO of SySDSoft, a company focused on the design

of wireless digital communication systems. Prior to that, he was

with the IBM Research Center in NY. He is the recipient of the IBM

Invention Achievement Award and the IBM Outstanding Technical

Achievement Award in 1997 and 1995, respectively. He is also the

recipient of the IEEE Honorary Society (Eta Kapa Nu), Best Young

Electrical Engineer in the US Award in 1994, and the Shuman Award

for the Young Arab Engineer in 1995.

Dr. Ismail received his Ph.D. from the Massachusetts Institute of

Technology in 1989. He is an IEEE Fellow since 1997. He has published

over 160 papers in international journals and holds 22 US patents.

Onsi Sawiris

Non-Executive Board Member

Mr. Sawiris is an Egyptian citizen born in

Egypt in 1930 and holds a Bachelor of

Science degree in Engineering from the

Cairo University.

Mr. Sawiris serves as the Chairman of

Orascom Construction Industries (OCI) and

Orascom Trading Co., Mr. Sawiris is a Board Member in Orascom for

Hotels & Development (OHD), Orascom Technology Systems (OTS),

and Orascom Telecom Holding (OTH).

He founded Orascom in 1976 as a general contracting and trading

company. By the early 1990s, Mr. Sawiris had established Orascom

as a leading private sector contractor by working in partnership

with international companies pursuing projects in Egypt. He oversaw

the diversification of the business into new areas like tourism and

information technology and its enormous growth and success to

become Egypt’s largest conglomerate operating under three major

operating companies OTH, OCI and OHD.

Mr. Sawiris also serves as a Chairman of the Board of Directors for

Pharaonic AIG Insurance Co, the Egyptian Scandinavian Business

Association and YMCA in Cairo.

In May 2008 Mr. Sawiris was made Commander in the Order of the

Crown from his Majesty the King of Belgium ALBERT II.

In April 2007, he was awarded the Swedish Royal Order of the Polar

Star in the presence of HRH Princess Victoria of Sweden. In November

1998, Mr. Sawiris was awarded L'ORDRE DE LEOPOLD from his

Majesty the King of Belgium ALBERT II.


18

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW OTH’s Organization

19

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

Corporate Governance Report

The Company is committed to achieving and maintaining the highest

standards of corporate governance. The Company considers effective

corporate governance essential to enhancing shareholders’ value

and protecting stakeholders’ interests. Accordingly, the Board attributes

a high priority to identifying and implementing appropriate corporate

governance practices to ensure transparency, accountability and

effective internal controls. The Board continued to further its

commitment to corporate governance through reviewing existing

processes and, where appropriate, developing new ones. The

Company substantially complies with the practices enunciated in

the Egypt Code of Corporate Governance and will strive to comply

with these and other appropriate standers and governance guidelines.

The key corporate governance principles and practices are as follows:

The General Assembly

The General Assembly (”GA”) of the Company is the ultimate

governing body of the Company. In summary, the (”GA”):

• includes all the shareholders of the Company;

• takes its decision by voting among shares represented in the

meeting. The voting rule is: 1 share = 1 vote for all shares indifferently;

• holds at least one ordinary meeting per year and may have an

extra-ordinary meeting as needed;

• The responsibilities of the GA are based on the laws and Company

statues;

• It appoints the Board, approves the financial results, appoints the

external auditors, and approves dividends distribution.

Board of Directors

The Board has the responsibility to work to enhance the value of

the Company in the interest of the Company and its shareholders.

In summary, the Board:

• is engaged in active and continuous strategic planning and

approves corporate strategies, including the approval of

transactions relating to acquisitions and divestments, and capital

expenditure above delegated authority limits;

• reviews and approves the corporate plan for the forthcoming year

and following two years, including the capital expenditure and

operating budget, and reviews performance against strategic

objectives;

• assesses business opportunities and risks on an ongoing basis

and oversees the Company's control and accountability systems;

• monitors and approves the Company's financial reporting and

dividend policies;

• appoints and has the authority to remove the Chief Executive

Officer and approves the recommendations of the Human Resources;

• ratifies the appointment and has the authority to remove the

Chief Financial Officer and Group General Counsel and appoints

the Company Corporate Secretary; and

• oversees succession planning for the Chief Executive Officer and

senior management.

The Chairman and the Chief Executive Officer establish meeting

agendas to ensure adequate coverage of key issues during the year.

In addition workshops and strategy meetings take place. Executives

and other senior people regularly attend Board meetings and are

also available to be contacted by Directors between meetings.

Composition of the Board of Directors

Chairman & Managing Director

Naguib Sawiris

Board Members

Naguib Sawiris

Ahmed Maher

François Dopffer

Hassan Abdou

Iskander Shalaby

Khaled Bichara

Khaled Ezz El-Din Ismail

Ajit Nedungadi

Onsi Sawiris

(Executive-Board Member)

(Non-Executive Board Member)

(Non-Executive Board Member)

(Non-Executive Board Member)

(Executive-Board Member)

(Non-Executive Board Member)

(Executive-Board Member)

(Non-Executive-Board Member)

(Non-Executive Board Member)

In addition to three Alternate Board Members;

Hythem El-Nazer

Michael Cole

Salim Nathoo

Secretary to the Board

Ragy Soliman

The above Board Members classification is based on the Egyptian

Corporate Governance code. The latter did not specify the criteria

for independent directors that would allow the Company to

benchmark against, yet in our opinion and based on internationally

recognized best practices, a number of our directors would qualify

as independent directors bringing to the company the highest

possible standing from both a personal and professional standpoint.

Committees

• The Committee System of the Company is one of the most

important tools for the management and the operational

integration of the Company.

It has recently been revised to:

• Monitor the implementation of strategies and the development

of plans and results.

• Ensure the overall coordination of business actions and the

management of the relative cross-over business issues.

• Build up the necessary operating synergies between the various

functions involved in the technological, business and support

processes.

• Support the integrated development of the innovation processes

of the Company.

• In particular, the new Committee System of the Company includes:

Executive Committee

The objective of the Executive Committee is to review and, where

appropriate, authorize corporate action with respect to most matters

concerning the Company’s interests, strategy and management of

its business and subsidiaries during intervals between meetings of

the Board of Directors, and generally perform such duties as may

be directed by the Board of Directors from time to time.

Investment Committee

The objective of the Investment Committee is to assist the Board

in reviewing the Company's investment policies, strategies,

transactions and performance, and in overseeing the Company's

capital and financial resources. The Committee has resources and

authority appropriate to discharge its responsibilities, including the

authority to retain experts or consultants.

Audit Committee

The objective of the Audit Committee is to assist the Board in

fulfilling its oversight responsibilities by reviewing (i) proposed

financial plans; (ii) the financial information provided to shareholders

and others; (iii) systems of internal controls which management

and the Board of Directors have established; and (iv) the audit

process, including both internal and external audits. The Audit

Committee interacts directly with the independent auditor to ensure

the independent auditor’s ultimate accountability to the Board and

the Committee, as representatives of the shareholders, and is directly

responsible for the appointment, compensation and oversight of

the independent auditor.

Remuneration Committee

The objective of the Remuneration Committee is to ensure that

the Company has a formal process of considering management

and directors’ remuneration that is, executive directors should play

no part in decisions on their own remuneration, there should be

an alignment of the remuneration schemes and the performance

objectives of the Company, and the remuneration schemes should

attract and retain talented individuals.


20

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW OTH’s Organization

21

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

Corporate Responsibility Report

OTH Takes on Human Trafficking

For those of us who have heard the term “Human Trafficking” before,

but are not quite aware what it means in practical terms – it is the

transportation, coercion and exploitation of men, women and

children, typically for sex or labor. For example, when a child is

kidnapped or sold by his parents in a war-torn or impoverished

country, is taken away (often across international borders) and

exploited for cheap labor or sex, this is human trafficking. The US

state department believes that there are roughly 600,000 to 800,000

men, women and children trafficked across international borders

every year and the sexual exploitation of women and children is

estimated to generate $28 billion annually. The figures are mind

boggling and the reality is heartbreaking.

OTH has teamed up with the Suzanne Mubarak Women’s International

Peace Movement (SMWIPM) in the global fight against human

trafficking. SMWIPM is an international non-governmental organization

dedicated to the enhancement of peace in the Middle East by trying

to affect the conditions beneficial for a sustainable peace.

As a first major contribution to the fight, Orascom Telecom Holding,

along with Manpower, a global human resources giant based in

the US, sponsored a Public Service Announcement (PSA - similar

to a TV commercial but without a commercial focus) that was

created by Synergy Advertising, directed by Marwan Hamed (The

Yacoubian Building) and produced by Mayada El Hiraki (Magic Arm

Productions). OTH did this in support of the SMWIPM and worked

closely with them to make sure that the PSA supported their aims

and would be useful to them in their battle against this global

scourge. This international effort managed by OTH resulted in an

intriguing film which has received a lot of praise.

Chairman, Naguib Sawiris, also took part in a panel in Zurich,

Switzerland organized by the Geneva Center for the Democratic

Control of Armed Forces (DFCAF) and SMWIPM to discuss this form

of modern day slavery and the role of business in combating it.

According to OTH Campaign Evaluation conducted by CNN

Research, the Human trafficking Campaign is seen by an estimated

8,231,000 people (Reach 000’s) of the 45,799,000 people involved

in the survey. This equates to 18.0% (Reach %) of all the respondents

in the survey. The frequency of the campaign indicates the number

of times each person will see a spot. On average the campaign will

be seen 1.6 times by each person. The impact of the campaign

shows the total number of times an ad will be seen during the

campaign. As 8,231,000 people are estimated to see the ad, on

average 1.6 times, it will be seen a total of 13,129,000 times.

Polio Disease (Joint Project with Mobilink)

WHO called for full eradication of Polio disease from the world and

assigned the Rotary International Board of Directors and the Rotary

Foundation to implement new tailored approaches to reach all

children in 2008 in the remaining endemic pockets of Nigeria, India,

Pakistan and Afghanistan.

Orascom Telecom Holding and Mobilink (Orascom Telecom’s subsidiary

in Pakistan) donated $ 200,000 to help in the complete eradication

of polio disease in the world.

During the course of 2008 the key areas of intervention were: large

scale supplementary immunization campaigns every four weeks,

special attention to infants and very young children, including tracking

of newborn children, increased engagement of religious leaders and

Koranic schools to promote the introduction of “immunization Plus

Days” (IPD), specific polio campaigns to target mobile populations

and mapped population movements, vaccination posts at key

nomadic gathering posts and border crossings.

This joint program between OTH and Mobilink is one of a number

of examples of the Company’s CSR approach to social investment

and aims to establish linkages and opportunities of joint projects to

accelerate their impact and produce rapid results – especially in an

important area such as eradicating Polio – a disease which is still

present in a number of countries.

UNICEF has also collaborated with Mobilink in 2008 through the

organization of a series of cluster launches in the South region for

fighting Polio disease.

Hepatitis B Campaign

Egypt has one of the highest rates of Hepatitis C infections in the world,

as well as a a high rate of Hepatitis B infections. Treatment is expensive

and is putting a strain on the resources of the Ministry of Health. With

the support of USAID and the Communication for Healthy Living

Project, the National Committee for Control of Viral Hepatitis -MOHP

organized a series of campaigns in 2008 for Viral Hepatitis: at Al Azhar

Park, at Universities and at a number of summer destinations. The

campaigns focused on mobilizing youth to adopt preventive behaviors,

to get vaccinated against Hepatitis B, and to spread the word.

The National Committee for the Control of Viral Hepatitis (NCCVH)

has succeeded in attracting partners from the private, public, and

NGO sectors to unite in the campaign against viral hepatitis. Together

with its partners, the committee has coordinated several activities to

raise awareness and improve preventative behaviors among the

general public and target groups, all of which received substantial

media coverage.

A 3-year strategy and work plan for the communication activities of

the NCCVH was finalized in September 2007 in cooperation with the

MOHP and with the support of USAID through the Communication

for Healthy Living project. The campaign focuses on educating people

- with a focus on youth - to spread the word about not sharing

personal equipment that may have come into contact with blood

or bodily fluids (such as syringes, razors, and nail clippers) and reducing

stigma for those infected with viral hepatitis so they can access proper

treatment and support. Celebrities and entertainers, including actors

Amr Waked and Youssra, will continue to support the campaign to

mobilize citizens to take action against the spread of viral hepatitis.

Outreach to the private sector to support campaign activities resulted

in over EGP1,000,000 in cash and in-kind donations from the private

sector. The cooperation of Vacsera has been critical to the success of

the campaign: Vacsera offered Hepatitis B vaccines and vaccination

services at a 60% discount to the campaign. Together with the private

sector support, the campaign was able to offer Hepatitis B vaccinations

to high-risk groups - such as medical students - and the general

public at very low cost.

Campaign Highlights

University Campaign:

A series of outreach activities were held at Ain Shams and Tanta

Universities, including an information booth staffed by trained

volunteer peer educators, seminars, on-site hepatitis B vaccination,

and publicity events with celebrity participation and media coverage.

The campaign at the Universities was under the title “Stop Viral

Hepatitis” focused on educating students to spread the word about

not sharing personal equipment that may have come into contact

with blood or bodily fluid and reducing stigma for those infected

with viral hepatitis so they can get proper treatment and support.

World Hepatitis Day:

Held in Azhar Park, with family entertainment, giveaways, on-site

Hepatitis B and HIV testing and counseling, free hepatitis B vaccination,

free specialist consultation, and free liver ultrasounds by referral. The

hotline was promoted and a number of services were provided such

as free ultra sounds, free HBV vaccination, free consultations and

counseling for patients. A number of entertainment (handicraft,

painting, etc…) for kids were also organized with the purpose of

awareness raising and dissemination of information materials on

prevention, diagnosis and treatment. The event has succeeded to

increase knowledge and dialogue about Viral Hepatitis- its prevalence

and severity in Egypt. Modes of transmission and non-transmission

were discussed and people were advised on how to go about testing,

treatment and vaccination. Prevention is a key factor and therefore

awareness raising and behavioral attitudes are key predispositions

for protecting people.


22 OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

OTH’s Organization

Financial Milestones

History & Evolution of OTH

Board of Directors

Corporate Governance Report

Corporate Responsibility Report

23

Summer Awareness Program:

During the summer of 2008, under the slogan of "Sehetak Tharwetak":

The program aimed at raising the knowledge and awareness of the

general public in three different locations (Alexandria, Ras Sidr and

Masters Rest House on Cairo-Alex road) towards preventing the

spread of viral hepatitis in Egypt, safe injection practices, immunization

programs highlighting HAV, and HBV vaccination, healthy lifestyles

and proper nutrition and sports.

Cornea Transplantation for

Egyptian Children

“For children with blinding diseases of the cornea, a sophisticated

new corneal transplantation technique is necessary to restore their

vision function. This illness ruins the lives of the children and hinders

their physical development. We must all join forces to treat the

blindness of those children”. Naguib Sawiris, CEO and Chairman of OTH

Vision 2020 is the global initiative for the elimination of avoidable

blindness, launched jointly by the World Health Organization (WHO)

and the International Agency for the Prevention of Blindness (IAPB)

with an international membership of NGOs, professional associations,

eye care institutions and corporations.

In response to the UN support to the Vision 2020: the Right to Sight,

Orascom Telecom Holding partnered with the World Health

Organization, the French Embassy, the French Cultural Center, El Kasr

El Eini Hospital and other local NGOs to conduct cornea transplantation

surgical operations for needy children.

Vision 2020 member organizations are working together to eliminate

avoidable blindness, to give everyone in the world the Right to Sight.

The surgical operation takes place at El Kasr El Eini Hospital by

professional French ophthalmologists in collaboration with a team

from El Kasr El Eini Faculty of Medicine. Exchange of the latest scientific

techniques takes place in the presence of French experts from top

French universities and with Egyptian doctors contributing their

expertise. In addition to interactive lectures with French counterparts

who will conduct the operations on a voluntary basis.

HIV/AIDS Campaign on Bicycle

The project supported a team of enthusiastic and adventurous youth

from Bangladesh who has set off for a world tour on bicycle as an

advocacy campaign on HIV/AIDS. The youth in Bangladesh chose to

do this tour using a bicycle in order to connect with people on a

large scale.

Riding on a bicycle provided them access with a large number of

people on and off the road. It also allowed access to remote areas since

most of the rural areas are inaccessible to automatic/large vehicles.

Access to the remotest areas allowed for larger dissemination of

campaign messages and better communication with the locals.

The awareness campaign focused on:

• Delivering awareness messages to the regional and community

based people

• Delivering brief campaign lectures/programs and sharing

information, ideas and thoughts with youth, students at educational

institutes, social clubs or organizations

• Communicating with affected people as well as healthcare

professionals at Hospitals & Rehabilitation Centers and collecting

information on practical scenarios to enhance our campaign resources.

The campaign also included media video and photographic

coverage the purpose of which was for:

• Documenting the social and emotional impact of this epidemic.

• Illuminating the positive human responses

• Identifying & addressing the underlying drivers of the epidemic,

i.e. regional socio-economic and socio-cultural dynamics that create

gender inequality, social stigma and discrimination against AIDS

victims resulting in situations of vulnerability for them.

• Addressing Challenges, prejudices and myths surrounding this epidemic.

• Interviewing people living with HIV/AIDS to highlight and focus

on actual human faces and their lives on top of the statistics

behind the disease.

The campaign also allowed for an opportunity for networking with

peers and reaching out and exchanging ideas and sharing information

with regional people working on the campaign and others regarding

information about HIV/AIDS and its prevention.

OTH Scholarship Program

The Orascom Telecom Holding Scholarship Program, at the University

of Glasgow, offered six scholarships for Egyptian nationals in 2008/09.

The Masters program is taught over one year in the areas of Management,

Business Administration, International Trade, Economics, Banking

and Finance. The scholarship covers tuition and hospitality on the

condition that scholars return to live and work in Egypt for at least

three years upon finishing their studies.

Discussions about the possibility of establishing the program began

in London during November, 2006, when Naguib Sawiris met with

members of the Egyptian community in England and Glasgow, and

the Principal of Glasgow University, Sir Muir Russell. The aim of the

scholarship program was to provide the opportunity for talented

Egyptian students to develop their knowledge in Business and

Economics and then return to Egypt to utilize this knowledge for the

benefit of the country and its economy. The program proved to be

highly popular with 174 applicants, competing for the six available

vacancies. The chosen students were selected for their strong academic

record and the quality of their work experience.


GSM Operations

Canada

(Globalive)

North Korea

(koryolink)

Pakistan

(Mobilink)

Algeria

(OTA)

Tunisia

(Tunisiana)

Egypt

(Mobinil)

Bangladesh

(banglalink)

Central African

Republic

(Telecel Centrafrique)

Burundi

(U-COM)

Zimbabwe

(Telecel Zimbabwe)

Namibia

(Cell One)

Orascom Telecom Holding serves a population of 498 million

with an average penetration of 46 %

Country Population Mobile Penetration

Algeria (OTA) 33 million 66%

Pakistan (Mobilink) 160 million 56%

Egypt (Mobinil) 74 million 58%

Tunisia (Tunisiana) 10 million 83%

Bangladesh (banglalink) 140 million 32%

North Korea (koryolink) 23 million 0%

Canada (Globalive)* 33 million 65%

Central African Republic (Telecel Centrafrique) 4.5 million 12%

Namibia (Cell One) 2.1 million 50%

Burundi (U-Com) 9 million 11%

Population figures from the Economist Intelligence Unit for YE07

Mobile penetration is based on December 31, 2008 subscribers number and market share

* Globalive Wireless expects to launch operations in Canada at the end of 2009


26

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

OTA - ALGERIA

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

27

CEO: Tamer El Mahdy / CFO: Amr El Adawy

Subsidiary Highlights

Orascom Telecom Algeria SPA (“OTA”) operates a

GSM network in Algeria and provides a range of

prepaid and postpaid products encompassing voice, data and multimedia,

using the corporate brand “Orascom Telecom Algérie” and the dual commercial

brands of “Djezzy” and "Allo". OTA was awarded the second GSM license in

Algeria in 2001 and launched its operations in February 2002. OTA commenced

its operations under the brand “Djezzy” and introduced a second prepaid

brand “Allo” in August 2004.

As of December 31 st , 2008, OTA served over 14 million subscribers with a

market share exceeding 64% of total mobile subscribers and its network

covered 96% of the total population of Algeria.

Despite having launched its GSM operation approximately three years after

the launch by the incumbent, Algerian Mobile Network (“AMN” conducting

business under the “Mobilis” name), OTA was able to rapidly grow into Algeria’s

leading and preferred telecommunications operator by far.

While OTA has already invested considerably in its network, it plans to make

further investments to increase its capacity, and to maintain and improve the

quality of its network to meet market demand. Finally, as demand is growing

and local content is beginning to develop, OTA has started to rollout a range

of value-added multimedia services based on GPRS and EDGE technologies,

which are designed to increase customer usage and boost loyalty.

December 2007 December 2008 %

Financial Data

Revenues (US$ 000) 1,761,859 2,040,544 15.8%

EBITDA (US$ 000) 1,115,740 1,290,062 15.6%

EBITDA Margin 63.3% 63.2% (0.1%)

Capex (US$ m ) 325 167 (48.6%)

December 2007 December 2008 %

Operational Data

Subscribers 13,382,254 14,108,859 5.4%

Prepaid 13,037,600 13,489,222 3.5%

Postpaid 344,654 619,637 79.8%

Market Share 62.4% 64.7% 2.3%

ARPU (US$) (3 months) 12.1 11.8 (2.5%)

MOU (YTD) 141 164 16.3%

Churn (3 months) 9.7% 12.5% 2.8%

Algerian Telecommunications Market

Telecommunications services in Algeria are provided principally by

Algérie Télécom, the incumbent state-owned telecommunications

operator, which provides fixed-line services, and by three GSM

mobile operators, OTA, AMN and Wataniya Telecom Algeria. Algérie

Télécom held a monopoly position with respect to basic fixed-line

services until 2005, when OTH announced the acquisition, jointly

with Telecom Egypt, of a second fixed-line license in Algeria.

License

In July 2001, OTA was granted a license to operate a nationwide

GSM telecommunications network, to provide a range of telecommunications

services in Algeria, to operate its own backbone and

to share or lease network infrastructure with or to its operators. The

license is a 15-year dual band license expiring 2016 with automatic

renewal for two subsequent five-year terms as long as OTA complies

with the terms of the license. Renewal is at no additional cost.

Network

As of December 31 st , 2008, OTA’s network covered approximately

96% of Algeria’s population, spreading its coverage over the 48

wilayas (provinces) in the country and providing on-road coverage

along major highways. The New Generation Network (“NGN”)

equipment introduced at the end of 2006 allowed OTA to further

reduce the capital expenditure and operating expense per subscriber.

Services and Marketing

OTA provides both basic voice and value-added services to its

corporate and retail subscribers. In addition to basic voice services,

OTA provides its subscribers with a wide range of value-added

services and data services such as : Voicemail, CLIP, CLIR, missed call

alert, Voice SMS, Chatting services, Web SMS, Data services, MMS,

e-voucher, Credit transfer, Ring Back Tone, EDGE, BlackBerry /

BlackBerry connect, Wap Portal, Streaming, Directory Service,

Automatic device management, Phonebook backup over GPRS,

STK menus, USSD menus and all roaming services (Prepaid roaming,

GPRS roaming...)

OTA offers prepaid, postpaid and hybrid postpaid-prepaid services

under its “Djezzy” and “Allo” brands and has become the market

leader and trendsetter with the highest brand recognition and

preference. As of December 31 st , 2008, prepaid subscribers

represented over 96% of OTA’s total subscribers’ base. OTA offers its

loyalty program “Imtiyaz” to its prepaid and postpaid subscribers

allowing them to accumulate points when using their mobile phone

and convert them into free airtime, handsets or other rewards and

advantages.

Ownership and Governance

Following the completion of an agreement to purchase an additional

1.21% stake in Oratel in November 2006, OTH directly and indirectly

owns 96.81% of OTA.


28

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Mobilink-PAKISTAN

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

29

CEO: Rashid Khan / CFO (Acting): Arshad Saeed

Subsidiary Highlights

Pakistan Mobile Communications Limited (“Mobilink” or “PMCL”) operates the

leading GSM network in Pakistan and provides a range of prepaid and postpaid

voice and data telecommunication services to both individual and corporate

subscribers. Mobilink launched its operations in August 1994 after it was

founded in 1990 as a joint venture between Motorola and the Saif Group.

Mobilink’s network is the most extensive in Pakistan, reaching over 66% of

the total population and 99% of the urban population as of December 31 st ,

2008, delivered through 7,915 cell sites and 73 switches. Mobilink enjoys the

most widespread retail channel in the country, with 467 Customer Service

and Franchise centers and over 170 thousand retailers throughout Pakistan.

Mobilink served over 28 million subscribers as of December 31 st , 2008,

representing a market share, as calculated by the company, of approximately

41.6% of the total mobile subscribers in Pakistan. According to the Pakistan

Telecommunication Authority Mobilink’s market share is 31.75% but this

market share is based on information disclosed by the operators each of

which use different subscriber recognition polices.

Notwithstanding the entry of two new operators in the Pakistani market in

2005, Mobilink’s recognition within the market, its history of cash generation

and profitability, the support of its majority shareholder, and the existing

coverage and quality of its network provided Mobilink with a strong foundation

to consolidate its market leadership.

Following the launch of China Mobile in early 2008, under the brand name

Zong, the landscape of the telecom market has become even more

competitive. However, Mobilink continues to be the market leader and has

the highest top of the mind brand awareness.

Financial Data

December 2007 December 2008 %

Revenues (US$ 000) 1,263,901 1,207,520 (4.4%)

EBITDA (US$ 000) 554,905 491,664 (11.4%)

EBITDA Margin 43.9% 40.7% (3.2%)

Capex (US$ m ) 520 537 3.3%

Operational Data

December 2007 December 2008 %

Subscribers 30,612,630 28,479,600 (7.0%)

Prepaid 30,111,756 27,971,755 (7.1%)

Postpaid 500,874 507,845 1.4%

Market Share* 39.8% 31.7% (8.1%)

ARPU (US$) (3 months) 3.8 3.0 (21.1%)

MOU (YTD) 149 172 15.4%

Churn (3 months) 5.2% 11.8% 6.6%

* Market share, as announced by the Pakistani Regulator is based on information disclosed by the other operators

which use different subscriber recognition policies.

Pakistani Telecommunications Market

Telecommunication services in Pakistan are provided by Pakistan

Telecommunication Limited (“PTCL”), the incumbent fixed-line operator,

of which 62% is state-owned, 26% is held by Etisalat and the remaining

12% is with the public. Pakistan Telecommunication Authority issued

12 new licenses to provide long distance and international services.

There are currently five mobile operators in Pakistan: Pakistan Mobile

Communication Limited (“Mobilink”), CMPak Limited (“CMPak – formerly

Paktel”), Pakistan Telecom Mobile Limited (“Ufone”), a subsidiary of PTCL,

Telenor Pakistan and Warid Telecom providing GSM services.

Mobilink was awarded a license for mobile telecommunication system

and services in July 1992 and commenced GSM operations in 1994,

becoming the first company in Pakistan to set up and operate a digital

mobile network based on GSM 900 technology.

2008 was a year of political and economic uncertainty for Pakistan. Inflation

in the country reached a record high of 23% and tax on mobile usage

was increased to 21%. Security also remained a major concern for Pakistan

throughout the year, as the country suffered from several terrorist acts.

All these factors affected the telecom business in the country.

License

Mobilink was awarded a 15-year license in July 1992 to establish and

operate a digital cellular telecommunication system using the GSM 900

standard and to offer telecommunication services in Pakistan. The

license was renewed in 2007 for a further period of 15 years. On June

26 th , 2006 Mobilink was granted another Azad Jammu & Kashmir (AJ&K)

and Northern Areas (NAs) license also for a period of 15 years.

Network

As of December 31 st , 2008, Mobilink’s GSM network covers more than

10,000 cities, towns and villages and provides on-road coverage along

all of the nation’s major highways. In addition to voice, Mobilink also

has the largest data network in the country.

Services and Marketing

Mobilink markets its prepaid services under the mother brand name

'Jazz', which offers different packages to suit the need of diverse customer

segments. Mobilink markets its postpaid services using the brand name

'Indigo', which offers different packages and value added services for

corporate and individual customers. The brand commands a premium

image in the market and is being used by several leading corporations

of the country.

In 2008, Mobilink launched its “Coverage and Connectivity” campaign,

which reinforced its leadership in nationwide cellular coverage. In a

marketplace which is primarily driven by price perception, this campaign

helped to change the customer focus from only price to the overall

communication experience. In June 2008, Mobilink introduced call set

up for the first time in the industry with the launch of its new prepaid

tariff Jazz One; thereby preserving value while giving a competitive onnet

rate. In addition to basic voice services, Mobilink offers value added

services to its customers such as Voice Portal, Mobile Banking, Caller

Ring Back Tone, Voice Mail and many more. In 2008, Mobilink introduced

several new services including Jazz Karaoke, Comedy Box and Cell

Secure. Mobilink was also the first operator in Pakistan to launch

BlackBerry services in December 2005.

In 2008, Mobilink launched its wireless broadband services under the

brand name of 'Infinity', which offers high speed internet as well as

telephony services through VoIP.

Ownership and Governance

Orascom Telecom Holding indirectly owns 100% of the share capital of

Mobilink through direct stakes held by wholly owned subsidiaries of OTH.


30

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Mobinil-EGYPT

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

31

CEO: Hassan Kabbani / CFO: Khaled El Laicy

Subsidiary Highlights

The Egyptian Company for Mobile Services (“Mobinil” or “ECMS”) operates the

leading mobile telecommunications network in Egypt and provides a range

of prepaid and postpaid voice and data telecommunications services, using

the brand name ‘‘Mobinil’’. Mobinil launched its operations in May 1998. As of

December 31 st , 2008, Mobinil’s network covered approximately 99.66% of the

total population of Egypt.

Mobinil has been serving over 20 million subscribers as of December 31 st , 2008,

becoming the first operator in the Middle East and North Africa region to reach

this figure. This figure represents a market share of approximately 47% of total

mobile subscribers in Egypt as of December 31 st , 2008.

Egyptian Telecommunications Market

Telecommunications services in Egypt are provided principally by Telecom

Egypt, the incumbent government-owned fixed-line operator, with respect to

fixed-line services, and by three GSM mobile operators, Mobinil, Vodafone Egypt

and Etisalat. Telecom Egypt’s monopoly on fixed-line services expired at the

end of 2005 and the sector is considering undertaking a progressive liberalization;

however the National Telecom Regulatory Authority (NTRA) has decided to

postpone the auction for the second fixed-line network.

License

Mobinil was granted a license in 1998 to operate a GSM mobile

telecommunications network and to provide a range of telecommunications

services in Egypt. The license, amended in January 2005 by the National

Telecommunication Regulatory Authority (”NTRA”), is a 15-year dual band license

with automatic renewal for successive five-year periods if Mobinil complies

with the license requirements. As Mobinil signed the 3G license agreement in

October 2007, the 2G license has been extended till 2022 as will the 3G license.

December 2007 December 2008 %

Financial Data

Revenues (US$ 000) 1,454,917 1,827,505 25.6%

EBITDA (US$ 000) 647,872 855,294 32.0%

EBITDA Margin 44.5% 46.8% 2.3%

Capex (US$ m ) 578 524 (9.3%)

December 2007 December 2008 %

Operational Data

Subscribers 15,117,626 20,115,377 33.1%

Prepaid 14,562,595 19,476,772 33.7%

Postpaid 1 555,031 638,605 15.1%

Market Share 49.5% 47.2% (2.3%)

ARPU (US$) * (3 months) 8.1 7.6 (6.2%)

MOU (YTD) 161 165 2.5%

Churn (3-month) 5.8% 8.8% 3.0%

On October 17 th , 2007, Mobinil has signed an agreement with NTRA for

the 3G license and its related components for a consideration of EGP 3,668

million and a charge of 2.4% of net service revenue as defined in the

agreement. An amount of EGP 318 million was paid at the date of signature

and the remaining amount is payable in installments until the end of

December 2010.

Network

In September 2008, Mobinil launched its advanced 3G services on its

state-of-the-art technology, by far the newest and the largest mobile

network in Egypt. Mobinil’s network rebirth delivers a new, reliable and

highly advanced network where customers enjoy a variety of new services

in addition to the 3G standard services like video call and Internet

everywhere with 3G Flybox and USB modems. As of December 31 st , 2008,

Mobinil’s network covered approximately 22.15% of Egypt’s territory,

enabling coverage of approximately 99.66% of the population. Mobinil

takes pride in leading the way towards green technology, as it joined the

Green Power Working Group and is committed to deploy 118,000 base

stations with renewable energy within the next four years.

Services and Marketing

Mobinil provides both voice, data and value-added services to its corporate

and retail subscribers, with an overwhelming proportion of the revenues

driven by voice services. In addition to basic voice services, Mobinil provides

its mobile subscribers with value-added services such as voicemail, caller

identification, call waiting/holding, call forwarding and data services such

as SMS, Information Services, MMS and WAP based on GPRS technologies.

2008 witnessed Mobinil’s launch of 3G services in the Egyptian market

under the initiative “Internet Everywhere” providing consumers with the

necessary tools to fully experience totally new services through a totally

new network.

As of December 31 st , 2008, prepaid subscribers represented approximately

96.83% of Mobinil’s total subscribers. Mobinil markets its prepaid services

using the ‘‘ALO’’ trade name and its postpaid services using the “Star” trade

name, in addition to “Mobinil Business” to cater to the corporate and

business market.

With the increased competition from Etisalat, and in order to address the

ongoing rapid growth of mobile services in Egypt, Mobinil developed a

strategy to address lower income customers in Egypt. Such lower spending

customers will represent an important component of increased mobile

market penetration in the future.

Among the many products and services that were launched in 2008 were

the Mobile Number Portability (MNP) initiative, enabling consumers to

move freely from one mobile operator to another while maintaining their

number, and the on-net tariff which enables Mobinil consumers to speak

to one another at a lower per minute rate as well as a wide range of

bundles (handset + line) to cater to customers seeking best value for their

communication expenditure.

On the value added services front, Mobinil launched several 3G-related

initiatives including the ASUS Eee PC, the world’s smallest net-book,

coupled with its 3G USB modem as well as the Mobinil Fly Box which

enables consumers to access the Internet anytime, anywhere. Mobinil

Life, Mobinil’s WAP portal has undergone a facelift making it more visually

appealing, more user friendly and offering a vast wealth of information to

the Egyptian user.

Ownership and Governance

Mobinil is owned by OTH, FT Group and public market equity investors.

Orascom Telecom Holding has a 34.66% economic interest and FT Group

has a 36.34% economic interest, in ECMS. The remaining shares of ECMS

(29%) are publicly traded on the Cairo and Alexandria Stock Exchange.

* ARPU, MOU & Churn expressed under OTH’s definition may differ from Mobinil’s disclosed figures.


32

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Tunisiana-TUNISIA

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

33

CEO: Yves Gauthier / CFO: Marital Caratti

Subsidiary Highlights

Orascom Telecom Tunisie (“Tunisiana” or “OTT”) operates

a GSM network in Tunisia and provides a range of prepaid

and postpaid voice and data telecommunications

services, under the brand name "Tunisiana". Tunisiana

launched its operations in December 2002 and, as of December 31 st , 2008,

Its network covered over than 99% of the total population of Tunisia.

In August 2008, Tunisiana became market share leader and ended the year

with over 4,256 million subscribers, representing a market share of

approximately 51.11% of total mobile subscribers in Tunisia.

To reach this result, Tunisiana managed to acquire over 66.5% of the total

market gross adds and almost 72% of the total market net additions.

Tunisian Telecommunications Market

Telecommunications services in Tunisia are provided principally by 2

operators: Tunisie Télécom, the incumbent telecommunications operator

which offers mobile, fixed telephony and Internet services, and Tunisiana

the only private telecom operator in Tunisia which offers only mobile

telephony services. The Tunisian government has partially privatized Tunisie

Télécom by selling a 35% stake of the company to Dubai Group TeCom-

DIG in March 2006.

Alongside the Ministry of Technologies of Communication, the NTC is also

involved in the development of telecommunications sector by providing

the necessary environment to establish a fair and healthy competition

among players and actors.

A third player in the market is expected for the beginning of 2010; this Is

expected to be a universal operator thanks to the universal license granted

concerning fixed and mobile telephony, 3G and Internet access.

December 2007 December 2008 %

Financial Data

Revenues (US$ 000) 558,616 724,091 29.6%

EBITDA (US$ 000) 278,303 378,383 36.0%

EBITDA Margin 49.8% 52.3% 2.5%

Capex (US$ m ) 76 99 30.3%

December 2007 December 2008 %

Operational Data

Subscribers 3,651,813 4,256,573 16.6%

Prepaid 3,601,102 4,177,092 16.0%

Postpaid 50,711 79,481 56.7%

Market Share 47.7% 51.1% 3.4%

ARPU (US$) (3 months) 14.3 12.7 (11.2%)

MOU (YTD) 135 158 17.0%

Churn (YTD) 7.6% 8.0% 0.4%

The new operator, to be selected by the Tunisian authority by the

end of June 2009, will be protected from any new competition for

at least one year for the 3G services and for at least 3 years for fixed

telephony.

License

OTT was granted a license in May 2002 to operate a national GSM

telecommunications network and to provide a range of

telecommunications services in Tunisia. The license was granted

for a fee of US$454 million, payable in two equal installments, which

were paid in May 2002 and September 2004. Tunisiana’s license has

a duration of 15 years and is renewable for consecutive five-year

periods, provided that OTT has met its obligations under the license

in the prior period.

Network

As of December 31 st , 2008, Tunisiana’s network provided coverage

over an area encompassing over than 99% of Tunisia’s population.

Tunisiana’s network consists of 1,940 cell sites and 13 switches.

International traffic is serviced through 4 international gateways.

Services and Marketing

Tunisiana provides both basic voice and value-added services to

its corporate and residential subscribers. In addition to basic voice

services, Tunisiana provides its subscribers with value-added services

such as voice SMS, voicemail, detailed monthly billing, SMS Billing,

call line identification presentation or restriction, call waiting/holding,

call forwarding, mobile-banking, reversed roaming, international

roaming and data services. Tunisiana’s network offers GPRS

technology, which it launched in February 2006, as well as EDGE

technology. Tunisiana is providing a range of value-added services

based on these technologies including MMS, Internet, WAP portal,

e-mail push and Data.

Tunisiana offers both pre-paid and postpaid telephony services. As

of December 31 st , 2008, prepaid subscribers represented

approximately 98.6% of Tunisiana’s total subscribers.

During 2008, Tunisiana focused on community and abundance

concepts such as Friends and Family promotions, unlimited calls,

unlimited SMS, Partners offer, Student offer, Business Group+, Awal

family, progressive bonus for revenues boosting and retention.

In order to reinforce its subscriber’s loyalty, Tunisiana launched the

LP Points transformation's phase (loyalty program) and a Roamers

IN Loyalty Program, both services being exclusive in the Tunisian

mobile market.

Also, to capture the strong potential of the visitor’s business and

further segment the market, Tunisiana launched the tourist line

offer during summer 2008.

Ownership and Governance

Orascom Telecom Holding has a 50% economic interest in OTT

through two wholly-owned subsidiaries which own 35% and 15%

of the shares in OTT, respectively. During 2005, OTH increased its

economic interest in OTT from 20.27% to 50%. The remaining 50%

interest is held by National Mobile Telecommunications Company

KSC (”Wataniya Telecom”), a Kuwaiti telecommunications company,

which was sold to Qatar Telecom during 2007.


34

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

banglalink-BANGLADESH

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

35

CEO: Ahmed A. Doma / CFO: Mohamed Osman

Subsidiary Highlights

Orascom Telecom Bangladesh Limited (“banglalink” or

“OTB”) is a GSM telecommunications operator in

Bangladesh and provides a range of prepaid and

postpaid voice and data telecommunications services,

using the brand name “banglalink TM .” Operating in highly competitive

market populated by six mobile operators, banglalink has managed to

become the second largest operator in less than 3 years of operation.

As of December 31 st , 2008, banglalink’s network covered over 90% of the

total population of Bangladesh with over 10.14 million subscribers and a

market share of over 23%. This phenomenal growth is based on the

overwhelming response to banglalink’s products and innovative services,

a strong brand image, an extensive distribution network, and continuous

improvement in service quality.

Bangladeshi Telecommunications Market

Telecommunications services in Bangladesh are provided by 5 GSM and

1 CDMA mobile operators, and 13 land line operators. The oldest mobile

operator is still the only CDMA operator, Pacific Bangladesh Telecom Ltd.

(“Citycell”), in which SingTel recently acquired a minority interest. The five

GSM operators are, in order of launch date, GrameenPhone. GP, the market

leader majority owned by Telenor, TM International Bangladesh Ltd. (“AKTEL”),

the third largest player in which NTT DoCoMo holds a 30% stake, Orascom

Telecom Bangladesh (“banglalink”), Teletalk Bangladesh Ltd. (“Teletalk”),

the state owned mobile operator, and Warid Telecom (“Warid”) that launched

operations in 2007. The Bangladesh Telecommunications Company Limited

(“BTCL”) is the incumbent state-owned fixed-line operator that has been

present from the beginning. The remaining private fixed line operators

were issued licenses a few years ago.

December 2007 December 2008 %

Financial Data

Revenues (US$ 000) 193,144 288,144 49.2%

EBITDA (US$ 000) (42,151) 13,683 132.4%

EBITDA Margin (21.8%) 4.7% 26.5%

Capex (US$ m ) 353 407 15.3%

December 2007 December 2008 %

Operational Data

Subscribers 7,082,348 10,337,128 46.0%

Prepaid 6,577,336 9,699,375 47.5%

Postpaid 505,012 637,753 26.3%

Market Share 20.6% 23.2% 2.6%

ARPU (US$) (3 months) 2.9 2.5 (13.8%)

MOU (YTD) 222 256 15.3%

Churn (3 months) 4.2% 1.9% (2.3%)

License

banglalink was issued a nationwide 15-year GSM license in November

1996 that is valid until November 2011.

Network

With the help of an aggressive network roll-out since launch, banglalink’s

network extends all across the country in all 64 districts of the country

and covers over 90% of the population. The primary focus in recent

years has been on ensuring continuous improvement in the quality

of the network.

Services and Marketing

banglalink’s marketing strategy has been focused on targeting

different consumer segments with specially designed products and

services that are tailored to the needs of these segments. banglalink’s

prepaid brand, “banglalink desh”, is perceived as the best prepaid

package in the country with innovative and value for money features

and a very strong brand image. “banglalink enterprise” caters to the

needs of the business segment including the thriving SME sector

where banglalink has been the pioneer in the country.

banglalink provides its subscribers with a wide variety of innovative

value-added services including a voice portal, song dedication,

voice chat, caller ring back tone, voice-SMS, to name a few. Banglalink

has a nationwide EDGE/GPRS network serving both postpaid and

prepaid subscribers. banglalink’s international roaming network

comprises of 374 operators across 137 countries and EDGE/GPRS

connectivity is available to roaming customers as well. banglalink

has also launched some highly appreciated call center based services

including “Healthlink”, which is a health counseling service, and

“SME Jiggasha” which provides information for SME related queries.

Such initiatives have helped in differentiating banglalink in the

market as an innovator and have also opened up new revenue

streams.

banglalink’s customer care services are regarded as the best in the

mobile industry of Bangladesh. A state-of-the art call center with

highly trained agents provides round the clock service to customers.

banglalink is also the pioneer in taking customer service closer to

its subscribers through over 1,000 customer care points across the

country – by far the largest customer care network in the industry.

A dedicated team of relationship managers provides personalized

services to enterprise customers.

Ownership and Governance

Orascom Telecom Holding owns 100% of the shares of banglalink.


36

OTH ANNUAL REPORT 2008 ABOUT OTH GSM OPERATIONS 2008 FINANCIAL REVIEW

Telecel Globe

OTA

Mobilink

Mobinil

Tunisiana

banglalink

Telecel Globe

37

CEO: Kai Uebach / CFO: Stephane Ferrie

Subsidiary Highlights

Telecel Globe, an independent wholly owned subsidiary of Orascom

Telecom Holding, launched its operations in February 2008. It is an international

telecommunications company that manages GSM operators in

small and medium sized developing countries with high growth potential.

It currently owns four GSM networks in the Central African Republic,

Burundi, Namibia and Zimbabwe and plans to continue expanding its

footprint by acquiring or developing other operators. Telecel Globe focuses

on Africa, Asia and Eastern Europe as these are the areas where the majority

of global mobile phone subscriber growth is expected in the coming years.

Telecel Globe positions its networks as market leaders and strives to improve

the quality of life of the people in the markets which it operates by increasing

network coverage, improving network quality and introducing new value

added services such as data services, prepaid roaming and air time credit

transfer. The portfolio of VAS on offer by its operators is being aggressively

expanded as the new state-of-the-art networks allow more innovative

services and promotions to be implemented, increasing customer

satisfaction and ARPUs. Telecel Globe has also established the Telecel Globe

Foundation to serve the local communities in the countries which it

operates. The Foundation regulates all the Group’s CSR activities to ensure

that all operators are responsible corporate citizens that give back to their

communities.

Financial Data

December December Inc/

2007 2008 (dec)

Revenues (US$ 000) - 25,345 n.a

EBITDA (US$ 000) - 492 n.a

EBITDA Margin - 1.92% n.a

Operational Data

December December Inc/

2007 2008 Dec. 2008

vs. Dec. 2007

Subscribers (1) - 894,822 n.a

Prepaid - 875,039 n.a

Postpaid - 19,783 n.a

(1) Total includes 100% of Telecel Zimbabwe's subscribers

U-COM (Burundi):

Telecel Globe acquired 100% of the shares of U-COM, the leading

telecommunications network in Burundi. Burundi has an emerging

telephony market with a penetration rate of 5.6%, thus availing

growth opportunities for existing operators. U-COM is currently

competing against Africell, Econet, Onamob, and Lacell is expected

to launch commercially very soon.

U-COM Burundi operates GSM 900/1800, CDMA 800, and WIMAX

(in Bujumbura) networks and is the market leader with around

308,662 subscribers and over 74% market share, as of December

2008. U-COM provides voice and data services to both its pre-paid

and postpaid customers covering around 19% of Burundi. Such

offerings range from basic services to value added services, such

as missed call alerts, 5 numbers for friends and family, roaming,

airtime credit transfer, conference call, credit balance query and call

waiting.

Telecel – RCA (Central African Republic):

Telecel Globe acquired 100% of Telecel-RCA in 2008. Central African

Republic's (CAR) telecommunications market has a penetration rate

of 8.3%, as of December 2008, providing substantial growth

opportunities for Telecel-RCA. Current competitors in CAR are

Nationlink, Orange and Moov.

Telecel-RCA operates GSM 900/1800 networks and is the market

leader with around 143,154 subscribers and over 37% market share,

as of December 2008. Telecel-RCA provides voice services to both

its pre-paid and postpaid customers covering around 17% of the

country. Such services range from basic to value added ones, such

as call waiting/holding, call forward, CLIP/CLIR, friends and family

(CUG) postpaid and prepaid, location based tariffs, SMS, SMS

international, USSD balance enquiry, voicemail, credit alert, credit

transfer and bulk SMS.

Cell One (Namibia):

Telecel Globe acquired Cell One Namibia in January 2009. The

Namibian telephony market has a penetration rate of about 50%.

Cell One is currently competing for the growth opportunities against

MTC, GSM operator partially owned by Namibia Post and

Telecommunications Holding (NPTH) and Portugal Telecom (PT),

and Telecom Namibia, which is wholly owned by the Government

and is a subsidiary of Namibia Post and Telecom Holdings Limited.

Cell One operates GSM 900/1800/3G/HSDPA networks and is

currently the market challenger with around 200,000 subscribers

and about 20% market share, as of January 2009. Cell One offers a

range of basic and value added voice and data services, such as

missed call alert, roaming, 3G, GPRS, airtime credit transfer, conference

call, credit balance query, call waiting/forwarding, voice-fax-toemail,

Internet browser, and email.


Orascom Telecom Holding S.A.E. ("Orascom Telecom") or ("OTH") was established in 1998 and has grown to

become a major player in the telecommunication market. OTH is considered among the largest and most

diversified network operators in the Middle East, Africa, and South Asia, and has acquired in early 2008 a license to operate mobile services in North Korea. Orascom Telecom is a leading mobile telecommunications

company operating in seven emerging markets having a population under license of 430 million with an average penetration of mobile telephony across all markets of approximately 2008 Financial 44%. OTH operates ReviewGSM networks

in Algeria (Djezzy), Pakistan (Mobilink), Egypt (Mobinil), Tunisia (Tunisiana), Bangladesh (Banglalink), Zimbabwe (Telecel Zimbabwe) and North Korea (Koryolink). OTH had exceeded 79 million subscribers as of September

2008. OTH's first operation was the Egyptian Company for Mobile Services commonly known as ("Mobinil"). Mobinil is a market leader serving over 18.9 million subscribers representing a market share of 47.7% (as of

September 2008). Mobinil is one of Egypt's five largest companies on Cairo & Alexandria Stock Exchange (“CASE”) in terms of market capitalization. OTH witnessed success as Orascom Telecom Algeria SPA (“Djezzy”)

was launched in February 2002. It grew to become the market leader in terms of both subscriber numbers as

well as the quality of telecommunications services provided. Djezzy serves over 14.4 million subscribers on

its network and has a 63.6% market share (as of Septmeber 2008). Orascom Telecom Tunisie (“Tunisiana”) launched its services in December 2002, and serves more than 4.1 million subscribers on its network with a growing

market share of 50.8% (as of September 2008). In Pakistan, the Pakistan Mobile communications Ltd (“Mobilink”) started its operations in 1994 and, until early 2001, had a market share of 40%. In April 2001, OTH took

over management control of the company. As the market leader, Mobilink serves more than 31 million subscribers, representing a market share of 34.8% (as of September 2008). In September 2004, OTH purchased 100%

of Sheba Telecom (Pvt.) Limited in Bangladesh. OTH re-branded and launched its services as "banglalink" in

February 2005. Immediately after the launch, OTH started its aggressive plans to develop Banglalink into a

leader in the mobile sector by rapidly expanding its GSM network to provide high quality communications services at affordable prices. Banglalink serves over 10.1 million subscribers with 22.5% market share (as of

September 2008). Vision: To become one of the world’s leading telecom operators providing the best quality services to our customers, value to our shareholders and a dynamic, challenging and fun environment for

our employees. Mission statement: Our mission is to satisfy all communication needs of the developing markets which we serve. It is our belief that there is viable economic model to serve emerging markets while availing

affordable quality. We are racing to serve the largest possible number of customers, covering the most populous countries in the world. We believe that by positioning ourselves as the primary provider of communication

services, we are shaping the future of the markets we serve.OTH has positioned itself as a leader in the region for its diverse GSM operations with various GSM support and Internet operations. One of OTH's main strategies

is to create its own non- GSM subsidiaries to act as a backbone of support for its regional GSM operations. OTH has achieved this by dedicating financial, technical and management resources for supporting its subsidiaries.

This includes network support and installation of GSM operations, equipment procurement, handset procurement and distribution companies, Value Added Services, and Internet operations. OTH is dedicated to providing

the best quality services to its customers, value to shareholders and a dynamic working environment for its nearly 20,000 employees.Orascom Telecom Holding S.A.E. ("Orascom Telecom") or ("OTH") was established

in 1998 and has grown to become a major player in the telecommunication market. OTH is considered among the largest and most diversified network operators in the Middle East, Africa, and South Asia, and has

acquired in early 2008 a license to operate mobile services in North Korea. Orascom Telecom is a leading mobile telecommunications company operating in seven emerging markets having a population under license

of 430 million with an average penetration of mobile telephony across all markets of approximately 44%.

OTH operates GSM networks in Algeria (Djezzy), Pakistan (Mobilink), Egypt (Mobinil), Tunisia (Tunisiana),

Bangladesh (Banglalink), Zimbabwe (Telecel Zimbabwe) and North Korea (Koryolink). OTH had exceeded 79 million subscribers as of September 2008. OTH's first operation was the Egyptian Company for Mobile

Services commonly known as ("Mobinil"). Mobinil is a market leader serving over 18.9 million subscribers representing a market share of 47.7% (as of September 2008). Mobinil is one of Egypt's five largest companies

on Cairo & Alexandria Stock Exchange (“CASE”) in terms of market capitalization. OTH witnessed success as Orascom Telecom Algeria SPA (“Djezzy”) was launched in February 2002. It grew to become the market

leader in terms of both subscriber numbers as well as the quality of telecommunications services provided. Djezzy serves over 14.4 million subscribers on its network and has a 63.6% market share (as of Septmeber

2008). Orascom Telecom Tunisie (“Tunisiana”) launched its services in December 2002, and serves more than 4.1 million subscribers on its network with a growing market share of 50.8% (as of September 2008). In

Pakistan, the Pakistan Mobile communications Ltd (“Mobilink”) started its operations in 1994 and, until early 2001, had a market share of 40%. In April 2001, OTH took over management control of the company. As

the market leader, Mobilink serves more than 31 million subscribers, representing a market share of 34.8% (as of September 2008). In September 2004, OTH purchased 100% of Sheba Telecom (Pvt.) Limited in

Bangladesh. OTH re-branded and launched its services as "Banglalink" in February 2005. Immediately after the launch, OTH started its aggressive plans to develop Banglalink into a leader in the mobile sector by

rapidly expanding its GSM network to provide high quality communications services at affordable prices. Banglalink serves over 10.1 million subscribers with 22.5% market share (as of September 2008). Vision: To

become one of the world’s leading telecom operators providing the best quality services to our customers, value to our shareholders and a dynamic, challenging and fun environment for our employees. Mission

statement: Our mission is to satisfy all communication needs of the developing markets which we serve. It is

our belief that there is viable economic model to serve emerging markets while availing affordable quality.

We are racing to serve the largest possible number of customers, covering the most populous countries in the world. We believe that by positioning ourselves as the primary provider of communication services, we

are shaping the future of the markets we serve.OTH has positioned itself as a leader in the region for its diverse GSM operations with various GSM support and Internet operations. One of OTH's main strategies is to

create its own non- GSM subsidiaries to act as a backbone of support for its regional GSM operations. OTH has achieved this by dedicating financial, technical and management resources for supporting its subsidiaries.

This includes network support and installation of GSM operations, equipment procurement, handset procurement and distribution companies, Value Added Services, and Internet operations. OTH is dedicated to

providing the best quality services to its customers, value to shareholders and a dynamic working environment for its nearly 20,000 employees.Orascom Telecom Holding S.A.E. ("Orascom Telecom") or ("OTH") was

established in 1998 and has grown to become a major player in the telecommunication market. OTH is considered among the largest and most diversified network operators in the Middle East, Africa, and South

Asia, and has acquired in early 2008 a license to operate mobile services in North Korea. Orascom Telecom is

a leading mobile telecommunications company operating in seven emerging markets having a population

under license of 430 million with an average penetration of mobile telephony across all markets of approximately 44%. OTH operates GSM networks in Algeria (Djezzy), Pakistan (Mobilink), Egypt (Mobinil), Tunisia

(Tunisiana), Bangladesh (Banglalink), Zimbabwe (Telecel Zimbabwe) and North Korea (Koryolink). OTH had exceeded 79 million subscribers as of September 2008. OTH's first operation was the Egyptian Company

for Mobile Services commonly known as ("Mobinil"). Mobinil is a market leader serving over 18.9 million subscribers representing a market share of 47.7% (as of September 2008). Mobinil is one of Egypt's five largest

companies on Cairo & Alexandria Stock Exchange (“CASE”) in terms of market capitalization. OTH witnessed success as Orascom Telecom Algeria SPA (“Djezzy”) was launched in February 2002. It grew to become

the market leader in terms of both subscriber numbers as well as the quality of telecommunications services provided. Djezzy serves over 14.4 million subscribers on its network and has a 63.6% market share (as of

Septmeber 2008). Orascom Telecom Tunisie (“Tunisiana”) launched its services in December 2002, and serves more than 4.1 million subscribers on its network with a growing market share of 50.8% (as of September

2008). In Pakistan, the Pakistan Mobile communications Ltd (“Mobilink”) started its operations in 1994 and, until early 2001, had a market share of 40%. In April 2001, OTH took over management control of the

company. As the market leader, Mobilink serves more than 31 million subscribers, representing a market share of 34.8% (as of September 2008). In September 2004, OTH purchased 100% of Sheba Telecom

(Pvt.) Limited in Bangladesh. OTH re-branded and launched its services as "banglalink" in February 2005. Immediately after the launch, OTH started its aggressive plans to develop banglalink into a leader in

the mobile sector by rapidly expanding its GSM network to provide high quality communications services at affordable prices. Banglalink serves over 10.1 million subscribers with 22.5% market share (as of

September 2008). Vision: To become one of the world’s leading telecom operators providing the best quality services to our customers, value to our shareholders and a dynamic, challenging and fun environment

for our employees. Mission statement: Our mission is to satisfy all communication needs of the developing markets which we serve. It is our belief that there is viable economic model to serve emerging markets

while availing affordable quality. We are racing to serve the largest possible number of customers, covering the most populous countries in the world. We believe that by positioning ourselves as the primary

provider of communication services, we are shaping the future of the markets we serve.OTH has positioned itself as a leader in the region for its diverse GSM operations with various GSM support and Internet

operations. One of OTH's main strategies is to create its own non- GSM subsidiaries to act as a backbone

of support for its regional GSM operations. OTH has achieved this by dedicating financial, technical and

management resources for supporting its subsidiaries. This includes network support and installation of GSM operations, equipment procurement, handset procurement and distribution companies, Value Added

Services, and Internet operations. OTH is dedicated to providing the best quality services to its customers,

value to shareholders and a dynamic working environment for its nearly 20,000 employees.


40 41

Orascom Telecom Holding Board Report

Highlights

• Total subscribers reached 78 million, an increase of 11% over December 2007.

1

• Revenues of US$ 5,327 million (EGP 29,153 million), growing 13% over December 2007.

1

• EBITDA reached US$ 2,384 million (EGP 13,123 million), an increase of 15% over December 2007.

• Group EBITDA margin improved to 44.7%, an increase of 90bp. over December 2007.

• GSM EBITDA margin reached 50.5%. EBITDA margins of the major subsidiaries are: Djezzy 63.2%, Mobilink 40.7%,

Mobinil 48.2%, Tunisiana 57.9%, and banglalink 4.7%.

1

• Net income for the period reached US$ 431 million (EGP 2,464 million), an increase of 7% over December 2007 2

(excluding non-recurring items).

• Earnings per GDR reached US$ 2.30 (based on a weighted average for the outstanding GDRs of 187 million over

2008) 3 .

1

• Net Debt stood at US$ 5,084 million (EGP 28,117 million) resulting in a Net Debt/EBITDA of 2.1x for the period.

1. US$ financial figures in the Income Statement & Balance Sheet are according to the International Financial Reporting Standards (IFRS).

2. After excluding the non-recurring gain of US$761 million resulting from the sale of HTIL’s share of profit from the sale of its Indian subsidiary recorded using the

equity method, and US$920 gain from Iraqna in 2007, and US$66 million gain from the sale of OrasInvest in 2008.

3.

st

As a consequence of the buy back program the outstanding GDRs as of December 31 , 2008 were reduced to 175.6 million.

Operational Performance

Financial Review 2008

• Board Report

• Financial Statements

- Egyptian Accounting Standards (in EGP)

- International Financial Reporting Standards (in US$)

During 2008 OTH continued to pursue its growth strategy further consolidating its leadership position in its markets, with the

exception of Pakistan. The total subscribers reached the 78 million mark, up 11% over 2007, driven by strong growth in Egypt,

with five million net additions in the year exceeding the 20 million subscriber mark, and Bangladesh, which added over three

million customers to reach 10.3 million subscribers. Algeria and Tunisia also performed strongly, the former further consolidating

its leadership position and the latter becoming the leading player in the country. Pakistan subscriber growth was negative as

a result of the combined effect of the adoption of the new 90 day validity regime and stringent registration policies that forced

all operators to disconnect those customers that did not register their personal details within the set deadline. The introduction

of a service tax on mobile services in Pakistan further reduced market uptake thereby reducing the number of gross additions.

Subscriber growth in Algeria in Q4 08 was also negatively impacted by the mandatory disconnection of unidentified customers;

the impact was however industry wide and allowed OTA to actually increase its market share over the previous quarter.

Table 1: Total Subscribers

Subsidiary

31 December

2007

30 September

2008

31 December

2008

Inc/(dec)

Dec. 2008 vs.

Dec. 2007

Djezzy (Algeria) 13,382,254 14,455,123 14,108,859 5%

Mobilink (Pakistan) 30,612,630 31,359,049 28,479,600 (7%)

Mobinil (Egypt) 15,117,626 18,910,861 20,115,377 33%

Tunisiana (Tunisia) 3,651,813 4,155,057 4,256,573 17%

banglalink(Bangladesh) 7,082,348 10,143,274 10,337,128 46%

Telecel Globe 1 241,874 244,088 701,647 190%

Grand Total 70,088,545 79,267,452 77,999,184 11%

1. Includes Zimbabwe subscribers in 2007 & Q3 2008 and Burundi, Central African Republic & Zimbabwe subscribers in December 2008.

ARPU in 2008 has declined over 2007 in a number of our markets mainly as a result of increased competition and regulatory

pressure on interconnection rates. The increased focus of our on-net offerings in our key markets has also caused ARPU to

decline, as these offerings have a lower average price but do not pay away interconnection. In Algeria and Tunisia Q4 ARPU in

US Dollars was negatively affected by the appreciation of the US$ against the Algerian and Tunisian Dinar. ARPU in Pakistan

increased over the previous quarter as the subscriber base clean-up took its course.


42 43

Table 2: Blended Average Revenue Per User (ARPU)

1.

2.

Subsidiary

31 December

2007

US$

(3 Months)

30 September

2008

US$

(3 Months)

31 December

2008

US$

(3 Months)

Inc/(dec)

Dec. 2008 vs.

Dec. 2007

Djezzy (Algeria) 12.1 12.4 11.8 (2.5%)

Mobilink (Pakistan) 3.8 2.9 3.0 (21.1%)

Mobinil (Egypt) 1 8.1 8.4 7.6 (6.2%)

Tunisiana (Tunisia) 14.3 14.7 12.7 (11.2%)

banglalink (Bangladesh) 2.9 2.4 2.5 (13.8%)

Global ARPU (YTD) 2 7.0 6.6 6.6 (5.7%)

Global ARPU (3 months) 6.8 6.5 6.3 (7.4%)

ARPU expressed under OTH’s definition may differ from Mobinil’s disclosed ARPU. Please see Appendix for definition.

Global ARPU is calculated on a Year to date basis, taking into account the weighted average subscribers for calculation.

Orascom Telecom Holding continued to remain market leader in all its countries of operation, with the exception of Bangladesh

where we are stably the second largest player. Our market share continued to improve in Algeria, Tunisia and Bangladesh while

it remained stable in Egypt, where we continue to remain the market leader. In Pakistan the market share as reported by the

regulator declined further as our subscriber base was negatively impacted by the implementation of our 3 month active subscriber

rule and by the mandatory disconnections; the market share calculated on our internal traffic database of active subscribers

shows a stable market share over the previous quarter.

Table 4: Capital Expenditure of OTH Subsidiaries for the twelve months to December 31 1

1.

2.

3.

4.

Country Service name Total

US$ million

2007

Total

US$ million

2008

Inc/(dec)

Algeria Djezzy 325 167 (49%)

Pakistan 2 Mobilink 520 537 3%

Egypt 2 Mobinil 578 524 (9%)

Tunisia Tunisiana 76 99 30%

Bangladesh 2 banglalink 353 407 15%

Other 3 47 160 240%

Total 1,899 1,894 0%

Total Consolidated 4 1,565 1,576 1%

Consolidated Capex/Sales 33.1% 29.6% (3.5%)

Based on 100% ownership of all subsidiaries.

Excludes intangible Capex of US$ 12 million in Pakistan for WiMax License, US$ 408 million in Egypt related to the 3G license fee and US$ 33 million in Bangladesh

for additional spectrum allocation.

“Other” companies include Linkdotnet, M-link, MedCable, OrasInvest, OT Holding, Ring and Telecel in 2007, and Linkdotnet, M-link, MedCable, Mena-Cable,

OrasInvest, OT Holding, Ring and Telecel in 2008.

Consolidated Capex based on: 48.75% in ECMS and 50% in Tunisiana.

Table 3: Market Share & Competition

Country Brand name Market Share (%) Number of additional

network

30 September 31 December

2008

2008

operations

Names of additional

network operations

Algeria Djezzy 63.6% 64.7% 2 AMN, QTel

Pakistan Mobilink 1 34.8% 31.7% 4 U-Fone, Paktel,

Telenor, Al Warid

Egypt Mobinil 47.7% 47.2% 2 Vodafone, Etisalat

Tunisia Tunisiana 50.8% 51.1% 1 Tunisie Telecom

Bangladesh banglalink 22.5% 23.2% 5 Grameen, Aktel,

Citycell, BTTB, Al Warid

1. Market share, as announced by the Pakistani Regulator is based on information disclosed by the other operators which use different subscriber recognition

policies.

Capital expenditures in 2008 were in line with the previous year. In Bangladesh we have continued to invest extensively in the

roll-out of the network, while capex in Pakistan was mainly related to capacity and coverage. In Egypt a significant portion of

investment was dedicated to the roll-out of the 3G network, which was launched in September. Capex in Algeria in 2008 was

lower than the previous year mainly as a result of the time lag between the purchase order cycle and the accounting recognition

of the capex.


44 45

Main Financial Events

Financial Review

Orascom Telecom Holding receives the first mobile

license in the Democratic People’s Republic of Korea

In January 2008, OTH was granted the first commercial

mobile license in the Democratic People’s Republic of Korea

using WCDMA (3G) technology. The license was granted to

OTH’s subsidiary koryolink Technology JV Company

(“koryolink”) which is controlled by Orascom Telecom with

an ownership of 75% while the remaining 25% is owned

by the state owned Korea Post and Telecommunications

Corporation.

In December 2008, OTH announced the inauguration of

koryolink, the first 3G mobile network in the Democratic

People’s Republic of Korea (DPRK). koryolink has deployed

its network to initially cover Pyongyang with a plan to expand

its coverage to the entire country.

Orascom Telecom Holding secures US$ 2.5 bn Committed

Bank Facility

In April 2008, OTH announced the successful closing of

the amendment and restatement of its US$ 2.5 billion five

year senior secured debt facility. General syndication was

launched on February 29th, 2008 and closed on April 14th,

2008. The Facility is used to refinance the outstanding

amounts under the company’s existing US$ 2.5bn jumbo

facilities and for general corporate purposes and extends

the tenor back to five years.

Orascom Telecom Holding completes Two Tender Offers

for Its Own Shares, Cancels Treasury Shares, and Announces

a New Share Buy Back Program

In April 2008, OTH announced the commencement of a

cash tender offer pursuant to which it offered to purchase

up to 106 million of its ordinary shares (including ordinary

shares represented by GDRs) at a purchase price of EGP

83 per ordinary share for a total of EGP 8,798 million (approximately

US$1.6 billion).

In May 2008, OTH announced that a total of 363,337,618

ordinary shares (including ordinary shares represented by

GDRs) were validly tendered. OTH purchased shares on a

pro-rata basis from all tendering shareholders and, accordingly,

accepted for payment from each tendering shareholder

approximately 29.174% of the shares validly tendered by

such shareholder.

In May 2008, OTH announced a further cash tender offer

where it offered to purchase up to 12 million of its ordinary

shares (including ordinary shares represented by GDRs) at

a purchase price of EGP83 per ordinary share for a total of

EGP 996 million (approximately US$186 million).

In July 2008, OTH announced that a total of 356,688,019

ordinary shares (including ordinary shares represented by

GDRs) were validly tendered. Accordingly, OTH accepted

for payment from each tendering shareholder approximately

3.3643% of the shares validly tendered by such shareholder.

In August 2008, the EGM decided, in consensus of the votes

of shareholders present and represented in the meeting, to

approve the reduction of the Company’s issued capital by

writing off the Company’s treasury shares, for an amount

equal to 128,697,126 shares (25.7 million GDRs). After

this reduction the total number of fully paid up shares is

899,402,874 equivalent to 179.9 million GDRs.

Orascom Telecom Holding announces participation in

consortium that has provisionally won AWS spectrum in

Canada

In July 2008, OTH announced its participation in a consortium

to create a new Canadian owned and controlled wireless

operator. OTH joined forces with Canada’s Globalive

Communications Corporation, the parent company of Yak

Communications which offers dialaround, home phone,

internet and long distance services to more than one million

customers across Canada. The new Canadian wireless

operator has provisionally won AWS spectrum in

Canada.

Telecel Globe finalises acquisition of mobile operations

in Burundi and Central African Republic

In July 2008, Telecel Globe, a majority owned subsidiary of

OTH, finalized the acquisition of telecom operators U-Com

in Burundi and Telecel in the Central African Republic.

Burundi has a population of approximately 8.7 million, of

which 51% is between the age of 15 and 64 years, and

a mobile penetration of 4% at the end of 2007, while the

Central African Republic has a population of 4.4 million, of

which 55% is between the age of 15 and 64 years, and a

mobile penetration of 6.2% at the end of 2007. U-Com Burundi

operates GSM 900/1800, CDMA 800, and WIMAX (in

Bujumbura) networks and is the market leader with

246,000 subscribers and over 70% market share. Telecel

Centrafrique utilizes a GSM 900/1800 network and is the

largest operator in the Central African Republic with over

113,000 subscribers and 37% market share. The ARPU in

U-Com and Telecel RCA are US$9.2 and US$15.6 respectively.

Both operations are generating positive EBITDA.

The total consideration paid was around US$106 million in

cash. The acquisition implies an aggregate EV per subscriber

of US$350 as of June 30th 2008. Both businesses

will require, on aggregate, a further equity injection of up to

US$25 million over the next 2 years to fund network expansion

and for general corporate purposes. The debt assumed

as part of these two transactions is non-recourse on Telecel

Globe.

These acquisitions are part of Telecel Globe’s strategy to

target licenses and mobile operators in small and medium

sized developing countries that have high growth potential.

Telecel Globe is already assuming operational management

of Telecel Zimbabwe.

Orascom Telecom Holding secures commitments to

subscribe for US$230 mln senior bond

In November 2008, Orascom Telecom announced that it had

secured commitments for a US$230 million financing with a

maturity of approximately 3 to 4 years, to be implemented in

a fully subscribed private placement.

Orascom Telecom Holding announces sale of OrasInvest

In November 2008, OTH announced the sale of its non-

GSM subsidiary OrasInvest to The Abu Dhabi Investment

Company for a total consideration of US$ 180 million; US$

90 million was paid in cash in November 2008 while the

remaining US$ 90 million is in the form of interest bearing

promissory notes due 12 months after the closing of the

transaction.

Revenues

Revenue growth in 2008 was strong, notwithstanding the adverse developments in Pakistan which caused the revenues from

this country to decrease significantly as a result of the depreciation of the local currency versus the US Dollar. Revenues

reached $5.33 billion growing 13% over the prior year mainly driven by the growth of the GSM business which was up 14% over

the prior year. Performance was especially strong in Algeria, Egypt, Tunisia and Bangladesh but was offset by a decline in the

US Dollar revenues from Mobilink in Pakistan. It is worth noting that in local currency terms underlying growth in Pakistan was

double digit over the previous year; this is clearly demonstrated by the revenue performance in Q4 which improved over Q3 with

of the stabilisation of the Pakistani Rupee against the US Dollar. Organic growth in 2008, net of foreign exchange impacts, was

in line with the 18-20% growth guidance provided.

Table 5: Consolidated Revenues

Subsidiary

GSM

31 December

2007

US$ (000)

31 December

2008

US$ (000)

Inc/

(dec)

Q3 – 2008

(3 months)

US$ (000)

Q4 – 2008

(3 months)

US$ (000)

Inc/

(dec)

Djezzy (Algeria) 1,761,859 2,040,544 16% 543,648 508,922 (6%)

Mobilink (Pakistan) 1,263,901 1,207,520 (4%) 261,166 272,929 5%

Mobinil (Egypt) 705,233 890,949 26% 239,959 231,772 (3%)

Tunisiana (Tunisia) 265,372 326,110 23% 92,064 74,138 (19%)

banglalink (Bangladesh) 193,144 288,144 49% 75,875 80,027 6%

Telecel Globe (Africa) - 25,345 na 13,328 12,017 (10%)

Total GSM 4,189,509 4,778,612 14% 1,226,040 1,179,805 (4%)

Telecom Services

Ring 285,089 228,252 (20%) 55,365 48,043 (13%)

M-Link & MedCable 148,854 194,868 31% 55,817 42,584 (24%)

Other 1 51,040 48,741 (5%) 12,549 13,287 6%

Total Telecom Services 484,983 471,861 (3%) 123,731 103,914 (16%)

Internet Services 52,118 76,076 46% 20,318 21,093 4%

Total Consolidated 4,726,610 5,326,549 13% 1,370,089 1,304,812 (5%)

1. Other Telecom Services Companies include C.A.T., koryolink, OrasInvest (for 11 months), and TWA in Q4 2008, C.A.T. OrasInvest, and TWA in Q3 2008 and

C.A.T. OrasInvest and ARPU+ in 2007.


46 47

EBITDA

Consolidated EBITDA in the twelve months ended December 31, 2008 grew 15% over the previous year reaching $2,384 million,

as a combined result of top-line growth and further efficiency on the costs side. The performance was strong across all

main subsidiaries, with the exception of Pakistan, with Mobinil and Tunisiana delivering an impressive growth and banglalink

now in positive EBITDA territory. EBITDA growth was solid also in Algeria although impacted by the devaluation of the local

currency against the US Dollar in the fourth quarter of 2008. In local currency terms Mobilink’s EBITDA grew single digit in 2008

and improved significantly during Q4.

Table 6: Consolidated EBITDA 1

1.

2.

3.

Subsidiary

GSM

31 December

2007

US$ (000)

31 December

2008

US$ (000)

Inc/

(dec)

Q3 – 2008

(3 months)

US$ (000)

Q4 – 2008

(3 months)

US$ (000)

Inc/

(dec)

Djezzy (Algeria) 1,115,740 1,290,062 16% 345,630 340,329 (2%)

Mobilink (Pakistan) 554,905 491,664 (11%) 88,603 112,804 27%

Mobinil (Egypt) 317,198 429,683 35% 113,721 119,310 5%

Tunisiana (Tunisia) 135,580 188,912 39% 55,255 41,068 (26%)

banglalink (Bangladesh) (42,151) 13,683 132% 2,835 22,400 690%

Telecel Globe (Africa) - 492 na 3,473 (1,597) na

Total GSM 2,081,272 2,414,496 16% 609,517 634,314 4%

Telecom Services

Ring 5,397 (1,593) (130%) (739) (6,141) (731%)

M-Link & MedCable 23,292 24,985 7% 7,408 4,982 (33%)

Other 2 6,008 9,144 52% 4,990 (2,031) na

Total Telecom Services 34,697 32,536 (6%) 11,659 (3,190) (127%)

Internet Services 3,583 (62) (102%) 1,937 (205) (111%)

OT Holding & Other 3 (47,010) (63,411) na (11,376) (19,210) na

Total Consolidated 2,072,542 2,383,559 15% 611,737 611,709 0%

EBITDA excludes management fees which were previously treated as a cost in each subsidiary and as a revenue for the Koryolink Holding.

Other Telecom Services Companies include ARPU+, C.A.T., OrasInvest, OT WIMAX, and TWA in 2007, and C.A.T., koryolink, Mena Cable, OrasInvest (11

months), OT WIMAX, and TWA in 2008.

Other non operating companies include: Cortex, Eurasia, FPPL, Moga Holding, MinMax, OIIH, Oratel, OTCS, OT ESOP, OTFSCA, OTI Malta, OT Services

Europe, OT Wireless Europe, Pioneers, SAWLTD and Telecel.

Consolidated EBITDA margin was up 90 basis point over the previous year reaching 44.7%, mainly driven by the impressive

performance of the GSM business which displayed a margin above 50%. Margins were up or stable in all major subsidiaries

with OTA maintaining a solid 63.2% margin, Mobinil improving its margin by 3 p.p. to 48.2%, Tunisiana up almost 7 p.p. to

57.9% and banglalink achieving a mid-single digit margin. Mobilink’s margin in 2008 suffered from the sharp increase in cost of

oil in Q2 and Q3 which significantly impacted its operating expenditures as it had to rely increasingly on fuel powered generators

to run its network during blackouts on the national electricity grid; with the utilities cost stabilising in Q4 the margin in Pakistan

has improved over Q3. The margin in Tunisiana declined in Q4 over Q3 mainly as a result of the decline in incoming visitor

roaming revenues, and as a result of the depreciation of the Tunisian Dinar against the US Dollar.

Table 7: Consolidated EBITDA Margin

Subsidiary

GSM

31 December

2007

31 December

2008

Change Q3 2008

(3 months)

Q4 2008

(3 months)

Change

Djezzy (Algeria) 63.3% 63.2% (0.1%) 63.6% 66.9% 3.3%

Mobilink (Pakistan) 43.9% 40.7% (3.2%) 33.9% 41.3% 7.4%

Mobinil (Egypt) 45.0% 48.2% 3.2% 47.4% 51.5% 4.1%

Tunisiana (Tunisia) 51.1% 57.9% 6.8% 60.0% 55.4% (4.6%)

banglalink (Bangladesh) (21.8%) 4.7% 26.5% 3.7% 28.0% 24.3%

Telecel Globe (Africa) - 1.9% na 26.1% (13.3%) (39.4%)

Total GSM 49.7% 50.5% 0.8% 49.7% 53.8% 4.1%

Total Telecom Services 7.2% 6.9% (0.3%) 11.0% (3.1%) (14.1%)

Internet Services 6.9% (0.1%) (7.0%) 9.5% (0.1%) (9.6%)

EBITDA Margin 43.8% 44.7% 0.9% 44.6% 46.9% 2.3%

Table 8: Foreign Exchange Rates used in the Income Statement & Balance Sheet

Currency Income Statement 1 Balance Sheet 2

Dec.

2007

Sept.

2008

Dec.

2008

Change

Dec.

2008

vs. Dec.

2007

Change

Dec.

2008

vs.

Sept.

2008

Dec.

2007

Sept.

2008

Dec.

2008

Change

Dec.

2008

vs. Dec.

2007

Change

Dec.

2008

vs.

Sept.

2008

Egyptian Pound / US Dollar 0.1764 0.1838 0.1827 3.6% (0.6%) 0.1797 0.1818 0.1807 0.56% (0.61%)

Algerian Dinar / US Dollar 0.0144 0.0158 0.0155 7.6% (1.9%) 0.0149 0.0166 0.0141 (5.4%) (15.1%)

Tunisian Dinar / US Dollar 0.7828 0.8396 0.8129 3.8% (3.2%) 0.8062 0.8141 0.7612 (5.6%) (6.5%)

Pakistan Rupee / US Dollar 0.0165 0.0147 0.0141 (14.5%) (4.1%) 0.0163 0.0128 0.0127 (22.1%) (0.78%)

Bangladeshi Taka / US Dollar 0.0144 0.0145 0.0144 0.0% (0.69%) 0.0145 0.0145 0.0144 (0.69%) (0.69%)

Canadian Dollar / US Dollar Na 0.9603 0.8876 na (7.6%) na 0.9652 0.8304 na (14.0%)

Source: Banks

1. Represents the average monthly exchange rate from the start of the year until the end of the period.

2. Represents the spot exchange rate at the end of the period.


48 49

Net Income

Net Income in 2008 reached US$431 million (EGP 2,464 million), a 79% decrease over the previous year which was positively

impacted by the non-recurring gain of US$761 million recorded in 2007 resulting from HTIL’s share of profit from the sale of its

Indian subsidiary recorded using the equity method, and by the US$ 920 million gain from Iraqna in 2007. Operating Income

in 2008 increased 15% over the previous year to US$1,498 million. On a quarterly basis Profit Before Tax grew 33% over the

previous quarter to US$240 million notwithstanding the increase in Net Financing Costs resulting from foreign exchange losses.

Unrealized foreign exchange losses resulted from liabilities to suppliers and remaining license payments in Pakistan that cannot

be hedged, from the shareholder loan provided to Globalive Wireless to comply with Canadian legal requirements (loan will be

marked to market every quarter in function of the exchange rate), and from the financial liabilities in Algeria. Net Income in the

fourth quarter increased by 23% over the previous quarter resulting in a QoQ increase of EPS of 28% to US$ 0.46 per GDR.

Table 9: Income Statement in IFRS/US$

31 December

2007

US$ (000)

31 December

2008

US$ (000)

Inc/

(dec)

Q3 – 2008

(3 months)

US$ (000)

Q4 – 2008

(3 months)

US$ (000)

Inc/

(dec)

Revenues 4,726,610 5,326,549 13% 1,370,089 1,304,812 (5%)

Other Income 48,934 41,257 11,279 9,518

Total Expense (2,703,002) (2,984,247) (769,631) (702,621)

EBITDA 1 2,072,542 2,383,559 15% 611,737 611,709 0%

Depreciation & Amortization (752,136) (912,173) (234,894) (224,870)

Impairment of Non Current Assets (18,718) (39,464) 2 (2,195) (1,480)

Gain (Loss) on Disposal of Non Current Assets (2,605) 66,315 59 65,862

Operating Income 1,299,083 1,498,237 15% 374,707 451,222 20%

Financial Expense (520,320) (468,453) (121,170) (96,642)

Financial Income 38,074 53,110 (3,787) 10,364

Foreign Exchange Gain (Loss) 41,949 (201,083) 3 (69,459) 3 (121,735) 3

Net Financing Cost (440,297) (616,426) (194,416) (208,013)

Share of Profit (Loss) of Associates 761,295 (2,955) - (2,955)

Gain (Loss) on Disposal of Associates (2,592) 27,262 - -

Profit Before Tax 1,617,489 906,118 (44%) 180,291 240,255 33%

Income Tax (453,621) (403,494) (89,836) (135,121)

Profit from Continuing Operations 1,163,868 502,624 (57%) 90,455 105,134 16%

Gain (Loss) from Discontinued Operations 4 919,628 - - -

Profit for the Period 2,083,496 502,624 (76%) 90,455 105,134 16%

Attributable to:

Equity Holders of the Parent 5 2,021,353 430,822 (79%) 69,414 85,448 23%

Earnings Per Share (US$/GDR) 9.69 2.30 6 (76%) 0.36 0.46 28%

Minority Interest 62,143 71,802 21,041 19,686

Net Income 2,083,496 502,624 (76%) 90,455 105,134 16%

Balance Sheet

Aldo Mareuse, Group CFO commented: “OTH has no significant debt maturities until 2013 mainly as a result of the successful

refinancing of the US$2.5 billion senior secured facility completed in April 2008 which has a five year maturity. We expect the

operating subsidiaries of Orascom Telecom Holding to continue to generate substantial cash flow, in particular in Algeria, Egypt

and Tunisia thereby allowing for steady cash upstreams to consolidate OTH’s cash position in 2009 and beyond. In Pakistan

and Bangladesh we will focus on cash flow optimization through a highly flexible approach to capex spend which will be reduced

in line with the slower market demand for mobile services while preserving a highly effective service proposition and quality

of service. Orascom Telecom Holding remains committed to these markets and will ensure that both entities, and in particular

Pakistan, have sufficient liquidity to respect their financial covenants for 2009 and beyond.

OTH will continue to support the development of its new ventures in North Korea and in Canada. In North Korea we expect the

business to become EBITDA positive in the first year of operation thereby significantly reducing our needs to inject equity going

forward. In Canada OTH has already invested in Q3 2008 a substantial part of its committed expenditure of US$500 – US$700

million and further liquidity requirements are therefore expected to remain relatively limited.

The overall liquidity profile of Orascom Telecom Holding for 2009 and beyond will be further improved through our US$1 billion

free cash flow optimization program. We will also continue to opportunistically monitor attractive financing opportunities, as demonstrated

by our recent $230 million secured bond issue, to further strengthen our balance sheet.”

Debt Repayment Profile

530

OTH Debt Maturity Profile (US$ millions)

563

790

405

1,025

412

387

599

737

385

118

176

2009 2010 2011 2012 2013 After 2013

OTH

426

Subsidiaries

1,880

510

1,370

947

210

1.

2.

3.

4.

5.

6.

Management Presentation developed from IFRS financials.

Includes a full impairment of the license of C.A.T. for US$ 30 million recorded in Q2 2008.

Mainly due to the FX loss reported in Pakistan, Canada and Algeria as a result of the depreciation of the Pakistani Rupee, the Canadian Dollar and the Algerian

Dinar against the US Dollar.

Represents Iraqna net profit net of Tax and inter-company transactions.

Equates to Net Income after Minority Interest

Based on a weighted average for the outstanding number of shares of 187,335,132 GDRs in 2008


50 51

Table 10: Balance Sheet in IFRS/US$

1.

2.

3.

4.

Assets

IFRS/US$

31 December

2007

US$ (000)

IFRS/US$

31 December

2008

US$ (000)

Property and Equipment (net) 4,803,014 5,056,570

Intangible Assets 2,225,304 2,371,053

Other Non-Current Assets 714,270 727,436

Total Non-Current Assets 7,742,588 8,155,059

Cash and Cash Equivalents 1,238,568 651,783

Trade Receivables 370,345 327,638

Assets Held for Sale 924,351 1 80,471 2

Other Current Assets 1,067,800 705,409

Total Current Assets 3,601,064 1,765,301

Total Assets 11,343,652 9,920,360

Equity Attributable to Equity Holders of the Company 3,149,069 1,080,230 3

Minority Share 93,063 120,994

Total Equity 3,242,132 1,201,224

Liabilities

Long Term Debt 3,378,582 5,205,030

Other Non-Current Liabilities 516,907 515,279

Total Non-Current Liabilities 3,895,489 5,720,309

Short Term Debt 1,839,618 530,315

Trade Payables 1,083,378 1,186,464

Other Current Liabilities 1,283,035 1,282,048

Total Current Liabilities 4,206,031 2,998,827

Total Liabilities 8,101,520 8,719,136

Total Liabilities & Shareholder’s Equity 11,343,652 9,920,360

Net Debt 4 3,979,632 5,083,562

Includes HTIL.

Includes M-Link.

Reflects the purchase of approximately 29.3 million GDRs of treasury shares in 2008.

Net Debt is calculated as a sum of Short Term Debt, Long Term Debt, less Cash and Cash Equivalents.

Cash Flow Statement

Table 11: Cash Flow Statement in US$

Cash Flows from Operating Activities

IFRS/US$

31 December

2007

US$ (000)

IFRS/US$

31 December

2008

US$ (000)

Profit for the Period 1,163,869 502,624

Depreciation, Amortization & Impairment of Non-Current Assets 770,996 951,637

Income Tax Expense 453,621 403,498

Net Financial Charges (Income) 482,317 415,074

Share of Loss (Profit) of Associates Accounted for Using the Equity Method (761,295) 2,956

Other 6,174 96,152

Changes in Assets Carried as Working Capital (276,909) (151,775)

Changes in Other Liabilities Carried as Working Capital 110,394 111,808

Income Tax Paid (164,420) (480,807)

Interest Expense Paid (494,927) (428,436)

Net Cash Generated by Operating Activities 1,289,820 1,422,731

Cash Flows from Investing Activities

Cash Outflow for Investments in Property & Equipment, Intangible Assets,

and Financial Assets & Consolidated Subsidiaries

Proceeds from Disposal of Property & Equipment, Associates,

Subsidiaries and Financial Assets

(2,009,924) (1,743,441)

267,203 2,085,120

Dividends & Interest Received 816,406 34,392

Net Cash Used in Investing Activities (926,315) 376,071

Cash Flows from Financing Activities

Proceeds from Non-Current Borrowings 2,334,307 2,522,216

Repayment of Non-Current Borrowings (987,809) (1,975,760)

Net Proceeds (Payments) from Current Financial Liabilities (480,841) (56,633)

Advances & Loans made to Associates & Other Parties - (441,910)

Net Change in Cash Collateral 36,286 (76,872)

Dividend Payments (131,303) (165,977)

Net Payments for Treasury Shares (855,772) (2,086,224)

Change in Minority Interest (63,677) (62,562)

Net Cash generated by (Used in) Financing Activities (148,809) (2,343,722)

Net Change Generated by Discontinued Operations 234,677 -

Net Increase (Decrease) in Cash & Cash Equivalents 449,373 (544,920)

Cash Included in Assets Held for Sale - (7,805)

Effect of Exchange Rate Changes on Cash & Cash Equivalents 32,997 (34,060)

Cash & Cash Equivalents at the Beginning of the Period 756,198 1,238,568

Cash & Cash Equivalents at the End of the Period 1,238,568 651,783


52 53

Table 12: Income Statement in EAS/Egyptian Pounds

1.

31 December

2007

EGP (000)

31 December

2008

EGP (000)

Inc/

(dec)

Q3 – 2008

(3 months)

EGP (000)

Q4 – 2008

(3 months)

EGP (000)

Net Revenues 26,793,594 29,153,310 9% 7,410,508 7,266,348 (2%)

Other Income 281,754 225,805 61,026 53,082

Total Expense (15,209,824) (16,255,932) (4,133,544) (3,901,172)

EBITDA 1 11,865,524 13,123,183 11% 3,337,990 3,418,258 2%

Depreciation & Amortization (4,257,471) (4,980,805) (1,267,457) (1,248,779)

Other (120,879) 146,959 (11,017) 351,219

Operating Income 7,487,174 8,289,337 11% 2,059,516 2,520,698 22%

Financial Expense (2,947,994) (2,562,098) (654,621) (539,956)

Financial Income 215,833 290,682 (21,404) 58,050

Foreign Exchange Gain (Loss) 237,599 (1,100,569) (377,840) (668,742)

Net Financing Cost (2,494,562) (3,371,985) (1,053,865) (1,150,648)

Share of Profit (Loss) of Associates 4,315,530 (16,171) - (16,171)

Gain (Loss) on Disposal of Associates (14,695) 149,210 (470) 845

Profit Before Tax 9,293,447 5,050,392 (46%) 1,005,181 1,354,725 35%

Income Tax (2,571,426) (2,208,409) (485,822) (747,881)

Profit from Continuing Operations 6,722,021 2,841,983 (58%) 519,359 606,844 17%

Gain (Loss) from Discontinued Operations 5,213,066 - - -

Profit for the Period 11,935,087 2,841,983 (76%) 519,359 606,844 17%

Attributable to:

Equity Holders of the Parent 11,563,307 2,463,594 (79%) 414,425 502,944 21%

Earnings Per Share (LE/Share) 11.08 2.63 (76%) 0.43 0.54 26%

Minority Interest 371,780 378,389 104,934 103,900

Net Income 11,935,087 2,841,983 (76%) 519,359 606,844 17%

Management Presentation developed from EAS financials

Inc/

(dec)

Table 13: Balance Sheet in EAS/Egyptian Pounds 1

Assets

EAS/LE

31 December

2007

EGP (000)

EAS/LE

31 December

2008

EGP (000)

Property & Equipment 26,688,621 27,929,538

Intangible Assets 12,187,406 12,927,369

Other Non-Current Assets 3,974,910 4,026,358

Total Non-Current Assets 42,850,937 44,883,265

Cash & Cash Equivalents 6,892,630 3,607,620

Trade Receivables 2,060,972 1,813,478

Assets Held for Sale 5,144,015 445,408

Other Current Assets 5,945,949 3,912,554

Total Current Assets 20,043,566 9,779,060

Total Assets 62,894,503 54,662,325

Equity Attributable to Equity Holders of the Company 17,300,808 5,791,788

Minority Share 521,460 632,979

Total Equity 17,822,268 6,424,767

Liabilities

Long Term Debt 18,792,359 28,794,164

Other Non-Current Liabilities 2,876,590 2,852,074

Total Non-Current Liabilities 21,668,949 31,646,238

Short Term Debt 10,234,451 2,929,972

Trade Payables 6,028,997 6,567,076

Other Current Liabilities 7,139,838 7,094,272

Total Current Liabilities 23,403,286 16,591,320

Total Liabilities 45,072,235 48,237,558

Total Liabilities & Shareholder’s Equity 62,894,503 54,662,325

Net Debt 2 22,134,180 28,116,516

1.

2.

Management presentation developed from EAS financials.

Net Debt is calculated as a sum of Short Term Debt, Long Term Debt, less Cash and Cash Equivalents.


54 55

Appendix I

Table 14: Ownership Structure & Consolidation Methods

Subsidiaries Ownership December 31 Consolidation Method December 31

2007 2008 2007 2008

GSM Operations

Mobinil (Egypt) 1 28.75% 28.75% Proportionate Consolidation Proportionate Consolidation

Egyptian Co. for Mobile Services 20.00% 20.00% Proportionate Consolidation Proportionate Consolidation

IWCPL (Pakistan) 100.00% 100.00% Full Consolidation Full Consolidation

Orascom Telecom Algeria 2 96.81% 96.81% Full Consolidation Full Consolidation

Telecel (Africa) 100.00% 100.00% Full Consolidation Full Consolidation

Orascom Telecom Tunisia 3 50.00% 50.00% Proportionate Consolidation Proportionate Consolidation

Telecel Globe - 100.00% - Full Consolidation

OT Ventures 4 100.00% 100.00% Full Consolidation Full Consolidation

Koryolink - 75.00% - Full Consolidation

Internet Service

Intouch 98.15% 100.00% Full Consolidation Full Consolidation

Non GSM Operations

Ring 99.00% 99.00% Full Consolidation Full Consolidation

Orasinvest 100.00% - Full Consolidation -

OTCS 100.00% 100.00% Full Consolidation Full Consolidation

OT ESOP 100.00% 100.00% Full Consolidation Full Consolidation

Arpu + 5 99.07% - Full Consolidation -

M-Link 100.00% 100.00% Full Consolidation Full Consolidation

OT Services Europe 100.00% 100.00% Full Consolidation Full Consolidation

MedCable 100.00% 100.00% Full Consolidation Full Consolidation

Mena Cable - 100.00% - Full Consolidation

Moga Holding 100.00% 100.00% Full Consolidation Full Consolidation

Oratel 100.00% 100.00% Full Consolidation Full Consolidation

C.A.T. 6 50.00% 50.00% Proportionate Consolidation Proportionate Consolidation

OT Wireless Europe 100.00% 100.00% - Full Consolidation

OT WIMAX 100.00% 100.00% Full Consolidation Full Consolidation

TWA 51.00% 51.00% Full Consolidation Full Consolidation

OIIH - 100.00% - Full Consolidation

OT Holding 100.00% 100.00% Full Consolidation Full Consolidation

FPPL - 100.00% - Full Consolidation

MinMax Ventures 100.00% 100.00% Full Consolidation Full Consolidation

OIH 7 100.00% 100.00% Full Consolidation Full Consolidation

OTFCSA 100.00% 100.00% Full Consolidation Full Consolidation

OT Holding Canada 8 - 100.00% - Full Consolidation

ITCL 50.00% 50.00% Proportionate Consolidation Proportionate Consolidation

SAWLTD - 100.00% - Full Consolidation

Glossary

ARPU (Average Revenue per User): Average monthly

recurrent revenue per customer (excluding visitors roaming

revenue & connection fee). This includes airtime revenue

(national & international), as well as, monthly subscription

fee, SMS, GPRS & data revenue. Quarterly ARPU is calculated

as an average of the last three months.

Capex: Tangible & Intangible fixed assets additions during

the reporting period, includes work in progress, network, IT,

and other tangible and intangible fixed assets additions but

excludes license fees.

Churn: Disconnection rate. This is calculated as the number

of disconnections during a month divided by the average

customer base for that month.

Churn Rule: A subscriber is considered churned (removed

from the subscriber base) if he exceeds the 90 days from

the end of the grace period without recharging. It is worth

noting that the grace period is a function of the scratch card

being recharged by the subscriber in case this card has a

certain validity and grace period. In cases where scratch

cards have open validity, the subscriber is considered

churned in case he has not made a single billable event in

the last 90 days ( i.e outgoing or incoming call or sms, wap

session…). Open cards validity is applied for OTA, Mobilink

and banglalink so far.

MOU (Minutes of Usage): Average airtime minutes per

customer per month. This includes billable national & international

outgoing traffic originated by subscribers (on-net, to

land line & to other operators). Also, this includes incoming

traffic to subscribers from land line or other operators.

OTH’s Market Share Calculation Method: The market

share is calculated through the data warehouse of OTH’s

subsidiaries. The number of SIM cards of competitors that

appeared in the call detail record of each of OTH’s subsidiaries

is collected. This reflects the number of subscribers of

the competition. However, OTH deducts the number of SIM

cards that did not appear in the call detail records for the last

90 days to account for churn. The same is applied to OTH

subsidiaries. This method is used to calculate the market

shares of Djezzy, Mobinil, and Tunisiana only. In Pakistan &

Bangladesh, Market share as announced by the Regulators

is based on disclosed information by the other operators

which may use different subscriber recognition policies.

Disclaimer

This presentation contains statements that could be construed

as forward looking. These statements appear in a

number of places in this presentation and include statements

regarding the intent, belief or current expectations of

the subscriber base, estimates regarding future growth in

the different business lines and the global business, market

share, financial results and other aspects of the activity and

situation relating to the company.

Such forward looking statements are no guarantees of

future performance and involve risks and uncertainties, and

actual results may differ materially from those in the forward

looking statements as a result of various factors.

You are cautioned not to place undue reliance on those forward

looking statements, which speak only as of the date of

this presentation, which is not intended to reflect Orascom

Telecom’s business or acquisition strategy or the occurrence

of unanticipated events.

1.

2.

3.

4.

5.

6.

7.

8.

Mobinil is a holding company which controls 51% of ECMS, the mobile operator. Mobinil is also the brand name used by ECMS.

Direct and Indirect stake through Moga Holding Ltd. and Oratel.

Orascom Telecom Tunisia is proportionately consolidated through Orascom Tunisia Holding and Carthage Consortium.

OT Ventures owns 100% of Sheba Telecom which operates under the trade name banglalink.

In September 2007, ARPU+ became fully consolidated in Intouch.

Direct and Indirect stake through International Telecommunications Consortium Limited (ITCL).

OIH owns 100% of Orascom Telecom Iraq which sold Iraqna in December 2007.

Holding company for OTH’s Share in Globalive which has been accounted for under the equity method.


56 57

Auditor’s report

To the Shareholders of Orascom Telecom Holding S.A.E

We have audited the accompanying consolidated financial statements of Orascom Telecom Holding S.A.E. which comprise the consolidated balance

sheet as at 31 December 2008, and the consolidated income statement, consolidated statement of recognized income and expense and statement

of consolidated cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

These consolidated financial statements are the responsibility of Company’s management. Management is responsible for the preparation and

fair presentation of these consolidated financial statements in accordance with the Egyptian Accounting Standards and in the light of the prevailing

Egyptian laws, management responsibility includes, designing, implementing and maintaining internal control relevant to the preparation

and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; management responsibility

also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and we conducted our audit in accordance

with the Egyptian Standards on Auditing and in the light of the prevailing Egyptian laws. Those standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

Consolidated financial

statements and auditor’s report

(in EGP)









Consolidated Balance Sheet

Consolidated Income Statement

Consolidated Statement of Recognized

Income and Expense

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Appendix A - Liabilities to Banks

Appendix B - Bonds

Appendix C - Scope of Consolidation

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures

selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due

to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation

of the 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 financial statements.

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

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position

of Orascom Telecom Holding S.A.E as of 31 December 2008, and of its consolidated financial performance and its consolidated cash flows for

the year then ended in accordance with the Egyptian Accounting Standards and the Egyptian laws and regulations relating to the preparation

of these consolidated financial statements.

Emphasis of a matter

Without qualifying our opinion, we draw attention to note (35) “Contingent Assets and Liabilities” for the following:

1- Egyptian Company for Mobile Services (ECMS) “Jointly controlled entity” filed a lawsuit against the National Telecommunication Regulatory

Authority (NTRA) to cancel NTRA’s decision relating to the amendments of the interconnect prices between the fixed and mobile

networks. The Company and its external legal counselor believe that the possibility of winning the lawsuit is probable as NTRA’s decision

does not have legal or contractual ground, therefore the Company continued to recognize interconnect revenue and cost from and to Telecom

Egypt based on the existing agreement.

2- Some subsidiaries received tax assessment from the tax authorities in the territories in which they operate. Management believes that these

assessments are excessive, and intends to challenge the assessments through the proper legal channels. Currently, the management of these

subsidiaries can not make reliable estimate of tax exposures.

KPMG Hazem Hassan

Cairo, 13 April 2009


58 59

Consolidated Balance Sheet

Consolidated Income Statement

As at December

(in million of EGP) Note 2008 2007

(reclassified)

Assets

Property and equipment 17 27,930 26,689

Intangible assets 18 12,927 12,187

Other non-current financial assets 19 3,541 3,571

Deferred tax assets 20 486 404

Total non-current assets 44,884 42,851

Inventories 584 617

Trade receivables 21 1,813 2,061

Other current financial assets 19 1,535 3,501

Current income tax receivables 16 416 622

Other current assets 22 1,377 1,205

Cash and cash equivalents 23 3,608 6,893

Assets held for sale 6 445 5,144

Total current assets 9,778 20,043

Total Assets 54,662 62,894

Equity and Liabilities

Share capital 899 1,090

Reserves (1,405) (3,861)

Retained earnings 6,298 20,071

Equity attributable to equity holders of the Company 5,792 17,300

Minority interest 633 522

Total equity 24 6,425 17,822

Liabilities

Non-current borrowings 25 28,794 18,792

Other non-current liabilities 26 1,217 1,080

Provisions 21 -

Non-current income tax liabilities 16 237 -

Deferred tax liabilities 20 1,377 1,797

Total non-current liabilities 31,646 21,669

Current borrowings 25 2,930 10,235

Trade payables 27 6,567 6,029

Other current liabilities 26 4,737 4,300

Current income tax liabilities 16 1,887 2,461

Provisions 334 378

Liabilities held for sale 6 136 -

Total current liabilities 16,591 23,403

Total Liabilities 48,237 45,072

Total Equity and Liabilities 54,662 62,894

For the year ended 31 December

(in million of EGP) Note 2008 2007

(reclassified)

Continuing operations

Revenues 7 29,153 26,794

Other income 226 282

Purchases and services 8 (13,747) (12,971)

Other expenses 9 (955) (898)

Personnel costs 10 (1,554) (1,341)

Depreciation and amortization 11 (4,981) (4,257)

Impairment charges 12 (216) (106)

Disposal of non-current assets 13 363 (15)

Operating income 8,289 7,488

Financial income 291 216

Financial expense (2,562) (2,948)

Net foreign exchange (loss) /gain (1,101) 238

Net financing costs 14 (3,372) (2,494)

Share of (loss) /profit of associates 15 (16) 4,315

Gain/ (loss) on disposal of associates 15 149 (16)

Profit before income tax 5,050 9,293

Income tax expense 16 (2,208) (2,571)

Profit from continuing operations 2,842 6,722

Discontinuing operations

Profit from discontinued operations, net of tax 6 - 5,213

Profit for the year 2,842 11,935

Attributable to:

- Equity holders of the Company 2,464 11,563

- Minority interest 378 372

Basic and diluted earnings per share in EGP 28

- from continuing operations 2.63 6.09

- from discontinued operations - 5.00

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

Group CFO

Aldo Mareuse

Chairman & Managing Director

Naguib Onsi Sawiris

Auditor’s report ‘attached’


60 61

Consolidated Statement of Recognized Income and Expense

Consolidated Statement of Cash Flows

For the year ended 31 December 2008 2007

(in million of EGP)

Changes in fair value of available-for-sale financial assets, net of

(19) 3

tax

Cash flow hedges, net of tax (484) (21)

Currency translation differences (1,161) (166)

Share of profit recognized directly in equity of associates 27 14

Net expense recognized directly in equity (1,637) (170)

Profit for the year 2,842 11,935

Total recognized income for the year 1,205 11,765

Attributable to:

- Equity holders of the Company 848 11,375

- Minority interest 357 390

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

For the year ended 31 December 2008 2007

(in million of EGP) (reclassified)

Continued operations

Profit for the year 2,842 6,722

Adjustments for :

Depreciation, amortization and impairment 5,197 4,363

Income tax expense 2,208 2,571

Equity settled share based payment 71 49

Net financial expenses 2,271 2,732

Unrealized foreign exchange difference 786 (278)

Loss on disposal of non-current assets 8 2

(Gain) / loss from sale of subsidiaries and financial assets (371) 13

Share of loss / (profit) of associates 16 (4,315)

(Gain) / loss on disposal of associates (149) 16

Change in provisions and allowances 192 235

Change in assets carried as working capital (847) (1,573)

Change in other liabilities carried as working capital 521 540

Income tax paid (2,632) (932)

Interest expense paid (2,345) (2,806)

Net cash generated by operating activities 7,768 7,339

Cash outflow for investments in:

- Property and equipment (8,063) (8,711)

- Intangible assets (802) (547)

- Subsidiaries (564) (2,121)

- Other non-current financial assets (112) -

Proceeds from disposals of:

- Property and equipment 62 32

- Subsidiaries 386 (343)

- Associates 5,234 1,827

-Other financial assets 5,739 -

Dividends and interest received 188 4,628

Net cash generated/ (used in) by investing activities 2,068 (5,235)

Proceeds from non-current borrowings 13,805 13,232

Repayment of non-current borrowings (10,801) (5,600)

Net (payments) from current borrowings (310) (2,726)

Advances and loans made to associate and other parties (2,419) -

Net change in cash collateral (421) 206

Dividend payments ( 909) (787)

Net payments for treasury shares (11,418) (4,851)

Change in Minority Interest (357) (364)

Net cash (used in) financing activities (12,830) (890)

Discontinued operations

Net cash generated by operating activities - 1,465

Net cash used in investing activities - (134)

Net cash generated by discontinued operations - 1,331

Net (decrease)/ increase in cash and cash equivalents (2,994) 2,545

Cash included in assets held for sale (44) -

Effect of exchange rate changes on cash and cash equivalents (247) 13

Cash and cash equivalents at the beginning of the year 6,893 4,335

Cash and cash equivalents at the end of the year 3,608 6,893

(The notes from (1) to (37) are an integral part of these consolidated financial statements)


62 63

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

1- General

A- Legal status

Orascom Telecom Holding S.A.E “the Company” is an

Egyptian Joint Stock Company subject to the provisions

of the Capital Market Law No. 95 of 1992 and

its executive regulations. The Company is a majority

owned subsidiary of Weather Investments S.P.A

registered in Italy. The Company’s registered office is

located in Nile City Towers, Ramlet Beaulac, Cairo,

Egypt.

B- Purpose of the company

The Company’s purpose is to participate in companies

issuing securities or to increase its share capital of

these companies. The Company may have interest or

participate in, by any mean, in companies and other

enterprises that have activities similar to those of the

Company or those that may assist the Company to

achieve its objective in Egypt or abroad. It may also

merge into those companies and enterprises purchase

them or affiliate them, pursuant to the provisions of the

law and its executive regulations.

The company and its subsidiaries from the biggest

companies in providing the mobile services in Middle

East companies, Africa and South Asia, it covers a

geographic area containing for 450 million citizens.

C- Financial statement authorization

The financial statements were approved by the board

of directors on March 16, 2008.

2- Basis of preparation

2-1 Statement of compliance

These Consolidated financial statements have been

prepared in accordance with the Egyptian Accounting

Standards (EASs) and relevant Egyptian laws and

regulations.

2-2 Basis of measurement

The financial statements are prepared on the historical

cost convention, except for the following assets and

liabilities which are measured as fair value

• Derivative financial instruments.

• Financial instruments at fair value through profit and

loss.

• Available-for-sale financial assets.

2-3 Functional and presentation currency

These financial statements are presented in Egyptian

pounds (L.E), which is the Company’s functional currency.

All financial information presented in Egyptian

pounds has been rounded to the nearest million.

2-4 Use of estimates and judgments

The preparation of financial statements requires management

to make judgments, estimates and assumptions

that affect the application of accounting policies

and the reported amounts of assets, liabilities, income

and expenses. Actual results may differ from these

estimates.

Estimates and underlying assumptions are reviewed

on an ongoing basis. Revisions to accounting estimates

are recognized in the period in which the estimate

is revised and in any future periods affected.

In particular, information about significant areas of

estimation uncertainty and critical judgments in applying

accounting policies that have the most significant

effect on the amount recognized in the financial statements

are described in the following notes:

• Measurement of the recoverable amount of intan

gible assets and goodwill.

• Valuation of financial instruments

• Recognition of deferred tax assets.

• Provisions and contingencies.

3- Significant accounting policies applied

The accounting policies adopted for the preparation of

the Consolidated Financial Statements are consistent

with those used in the preparation of the Consolidated

Financial Statements of the Company as of and for the

year ended December 31, 2007, except as disclosed

below. The accounting policies have been consistently

applied to all the years presented.

Historically the Company has elected the presentation of

costs in the income statement by function. In order to be

consistent with the method of presentation adopted by

the Parent Company and facilitate the Parent Company

financial reporting procedure, the Group has elected the

presentation of costs by nature for the preparation of the

income statement for the year ending on or after December

31, 2008. The Company has reclassified comparative

amounts disclosed for the prior years reported as

if the new disclosure policy had always been applied.

In addition, the Group has performed certain reclassifications

to the balance sheet in order to homogenize

classification criteria with that of the Parent Company.

Note (37) “Reconciliation of previous disclosure” provide

further details regarding the income statement prepared

using the “function of expense” method and the reclassifications

performed on the balance sheet.

The functional currency of each subsidiary is the local

currency where that entity operates. In order to present

financial information to international investors, the information

presented in this document has been presented

in million of Egyptian Pounds (“EGP.”), except earnings

per share information and unless otherwise stated.

3-1 Basis of consolidation

The consolidated financial statements include the

following companies:

3-1-1 Subsidiary companies

- The consolidated financial statements include

all subsidiaries that are controlled by the parent

company and which the management intends to

continue to control. Control exists when the Group

has the power to govern the financial and operating

policies of an entity so as to obtain benefits from

its activities. In assessing control, potential voting

rights that presently are exercisable are taken into

account. The financial statements of subsidiaries

are included in the consolidated financial statements

from the date that control commences until

the date that control ceases.

- Intragroup balances and transactions, including

income, expenses and dividends, are eliminated

in full. Profits and losses resulting from intragroup

transactions that are recognized in assets, such as

inventory and fixed assets, are eliminated in full.

Intragroup losses may indicate an impairment that

requires recognition in the consolidated financial

statements. EAS 24 Income Taxes applies to

temporary differences that arise from the elimination

of profits and losses resulting from intragroup

transactions.

- Minority interests shall be presented in the consolidated

balance sheet within equity, separately from

the parent shareholder’s equity. Minority interests

in the profit or loss of the group shall also be separately

disclosed.

- A parent loses control when it loses the power to

govern the financial and operating policies of an

investee so as to obtain benefit from its activities.

3-1-2 Joint venture companies

Joint control is the contractually agreed sharing of

control over an economic activity, and exists only

when the strategic financial and operating decisions

relating to the activity require the unanimous consent

of the parties sharing control (the ventures).

Proportion consolidation is a method of accounting

whereby a venture’s share of each of the assets,

liabilities, income and expenses of a jointly controlled

entity is combined line by line with similar items in

the venture’s financial statements or reported as

separate line items in the venture’s financial statements.

3-1-3 Investments in associates

Investments in associates are stated at equity

method. Under the equity method the investment in

associates is initially recognize at cost and the carrying

amount is increased or decreased to recognize

the investor’s share of the profit or loss of the

associates after the date of acquisition. Distributions

received from associates reduce the carrying amount

of the investment.

Losses of an associate in excess of the Company’s

interest in that associate (which includes any longterm

interests that, in substance, form part of the

Company’s net investment in the associate) are not

recognized, unless the Company has incurred legal

or constructive obligations or made payments on

behalf of the associate.

Any excess of the cost of the acquisition over the

Company’s share of the net faire value of the identifiable

assets, liabilities and contingent liabilities of

the associate recognized at the date of acquisition

is recognized as goodwill. The goodwill is included

within the carrying amount of the investment and is

assessed for impairment as part of the investment.

3-2 Translation of the foreign currencies transactions

Orascom Telecom Holding and some of its subsidiaries

maintain their accounting books in Egyptian

Pound. Transactions denominated in foreign currencies

are recorded at the prevailing exchange rate at

the date of transactions. Monetary assets and liabilities

denominated in foreign currencies at the balance

sheet date are translated at the prevailing exchange

rates at that date. The foreign currencies exchange differences

arising on the settlement of transactions and

the translation at the balance sheet date are recognized

in the income statement.

3-3 Translation of the foreign subsidiaries’ financials

As at the balance sheet date the assets and liabilities

of these consolidated subsidiaries are translated to

Egyptian Pound at the prevailing rate as at the period

end, and the shareholders’ equity accounts are translated

at historical rates, where as the income statement

items are translated at the average exchange

rate prevailing during the period of the consolidated

financial statements. Currency translation differences

are recorded in the shareholders’ equity section of the

balance sheet as translation reserves adjustments.

3-4 Derivative financial instruments

The Group uses derivative financial instruments to

hedge its exposure to foreign exchange and interest

rate risks arising from operational, financial and investment

activities. In accordance with its treasury policy,

the Group does not hold or issue derivative financial

instruments for trading purposes. However, derivatives

that do not qualify for hedge accounting are accounted

for as trading instruments. Derivatives are recognized

initially at fair value; attributable transaction costs are

recognized in profit or loss when incurred. Subsequent

to initial recognition, derivatives are measured at

fair value, and changes therein are accounted for as

described below.

Cash flow hedges

Changes in the fair value of the derivative hedging

instrument designated as a cash flow hedge are recognized

directly in equity to the extent that the hedge

is effective. To the extent that the hedge is ineffective,

changes in fair value are recognized in profit or loss.

If the hedging instrument no longer meets the criteria

for hedge accounting, expires or is sold, terminated

or exercised, then hedge accounting is discontinued

prospectively. The cumulative gain or loss previously

recognized in equity remains in place until the forecast

transaction occurs. When the hedged item is a

non-financial asset, the amount recognized in equity is

transferred to the carrying amount of the asset when it

is recognized. In other cases the amount recognized in

equity is transferred to profit or loss in the same period

that the hedged item affects profit or loss.

Fair value hedges

Changes in the fair value of a derivative hedging

instrument designated as a fair value hedge are recognized

in profit or loss. The hedged item also is stated

at faire value in respect of the risk being hedged, with

any gain or loss being recognized in profit or loss.

3-5 Property & equipment and depreciation

Property & equipment are stated at historical cost and

presented in the balance sheet net of accumulated depreciation

and impairment (Note 3-9-b). Depreciation

is charged to the income statement over the estimated

useful-life of each asset using the straight-line method.

The following are the estimated useful lives, for each

class of assets, for depreciation calculation purposes:


64 65

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Assets

Buildings

Cell sites

Tools

Computers equipment

Furniture and Fixtures

Vehicles

Leasehold improvements and

renovations

Depreciation period

50 years

8-15 years

5-10 years

3-5 years

5-10 years

3-6 years

3-8 years

Expenditure incurred to replace a component of an

item of property and equipment that is accounted for

separately, including major inspection and overhaul

expenditure, is capitalized. Other subsequent expenditure

is capitalized only when it increases the future

economic benefits embodied in the property and

equipment. All other expenditure is recognized in the

income statement as an expense as incurred.

3-6 Property and equipment under construction

Property and equipment under construction are recognized

initially at cost. Cost includes all expenditures

directly attributable to bringing the asset to a working

condition for its intended use. Property and equipment

under construction are transferred to property and

equipment caption when they are completed and are

ready for their intended use.

3-7 Intangible assets

A- Goodwill

Goodwill (positive and negative) represents amounts

arising on acquisition of subsidiaries, associates

and joint ventures. Goodwill (positive and negative)

represents the difference between the cost of the

acquisition and the fair value of the net identifiable

assets acquired at acquisition date.

- Positive goodwill is stated at cost less impairment losses.

- While negative goodwill arose will be recognized

directly in the income statement.

- Goodwill resulting from further acquisitions after

control is obtained is determined on the basis of

the cost of the additional investment and the carrying

amount of net assets at the date of acquisition,

accordingly.

Assets

B- Other intangible assets

Other intangible assets that are acquired by the

Group are stated at cost less accumulated amortization

and impairment losses. Amortization is recognized

in the income statement on a straight – line

basis over the estimated useful lives of intangible

assets. License fees are amortized over the period

of the licenses, concessions and computers software

are amortized from the date they are available for

use. The estimated useful lives are as follows:

Licenses Fees

Concessions and Computers

software

Amortization period

Over the remaining

period of the licenses

3-15 years

C- Subsequent expenditure

Subsequent expenditure on capitalized intangible

assets is capitalized only when it increases the future

economic benefits embodied in the specific asset to

which it relates. All other expenditure is expensed as

incurred.

3-8 Investments at fair value

a- Available-for-sale financial assets

Available-for-sale financial assets are valued at fair

value, with any resultant gain or loss being recognized

in equity, except for impairment losses which

is recognized in the income statement. When these

investments are derecognized, the cumulative gain

or loss previously recognized directly in equity is

recognized in the income statement. The fair value

of investments available for sale, identifies based

on quoted price of the exchange market at the balance

sheet date, investments that are not quoted,

and whose fair value can not be measured reliably,

are stated at cost less impairment loss.

b- Investments at fair value through profit and loss

An instrument is classified as at fair value through

income statement if it is held for trading or is designated

as such upon initial recognition. Financial

instruments are designated at fair value through

income statement if the Company manages such

investments and makes purchase and sale decisions

based on their fair value.

3-9 Impairment

a- Financial assets

A financial asset is considered to be impaired if objective

evidence indicates that one or more events

have had a negative effect on the estimated future

cash flows of that asset.

An impairment loss in respect of a financial asset

measured at amortized cost is calculated as the

difference between its carrying amount, and the

present value of the estimated future cash flows

discounted at the original effective interest rate. An

impairment loss in respect of an available-for-sale

financial asset is calculated by reference to its current

fair value.

Individually significant financial assets are tested

for impairment on an individual basis. The remaining

financial assets are assessed collectively in

groups that share similar credit risk characteristics.

All impairment losses are recognized in profit or

loss. Any cumulative loss in respect of an availablefor-sale

financial asset recognized previously in

equity is transferred profit or loss.

An impairment loss is reversed if the reversal can

be related objectively to an event occurring after

the impairment loss was recognized. For financial

assets measured at amortized cost and availablefor-sale

financial assets that are debt securities,

the reversal is recognized in profit or loss. For

available-for-sale financial assets that are equity

securities, the reversal is recognized directly in

equity.

b- Non-financial assets

The carrying amounts of the Group’s non-financial

assets, other than biological assets, investment

property, inventories and deferred tax assets,

are reviewed at each reporting date to determine

whether there is any indication of impairment.

An impairment loss is recognized if the carrying

amount of an asset or its cash-generating unit

exceeds its recoverable amount. A cash-generating

unit is the smallest identifiable asset group that

generates cash flows that largely are independent

from other assets and groups. Impairment losses

are recognized in profit or loss.

The recoverable amount of an asset or cash-generating

unit is the greater of its value in use and its

fair value less costs to sell.

Impairment losses recognized in prior periods are

assessed at each reporting date for any indications

that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been a

change in the estimates used to determine the recoverable

amount. An impairment loss is reversed

only to the extent that the asset’s carrying amount

does not exceed the carrying amount that would

have been determined, net of depreciation or amortization,

if no impairment loss had been recognized.

3-10 Cash and cash equivalents

For the purpose of preparing the Statement of

Cash Flows, the Company considers all cash on

hands and bank on demand deposits with banks

and short-term highly liquid investments that are

readily convertible to known amounts of cash and

that are subject to an insignificant risk of changes

in value with original maturities of three months or

less are considered as cash and cash equivalents.

The Statement of Cash Flows is prepared according

to the indirect method.

3-11 Trade and other receivables

Trade and other receivables are stated at their cost

less impairment losses.

3-12 Inventories

Inventories are stated at the lower of cost and

net realizable value. Cost is determined using the

weighted average method and net realizable value

is the estimated selling price in the ordinary course

of business, less the estimated costs of completion

and other addition expenses.

3-13 Non-current assets held for sale

Non-current assets (or disposal groups comprising

assets and liabilities) that are expected to be

recovered primarily through sale rather than through

continuing use is classified as held for sale. Immediately

before classification as held for sale, the assets

(or components of a disposal group) are remeasured

in accordance with the Group’s accounting policies.

Thereafter generally the assets (or disposal group)

are measured at the lower of their carrying amount

and fair value less cost to sell. Any impairment loss

on a disposal group first is allocated to goodwill, and

then to remaining assets and liabilities on pro rata

basis, except that no loss is allocated to inventories,

financial assets, deferred tax assets, employee

benefit assets, investment property and biological assets,

which continue to be measured in accordance

with the Group’s accounting policies. Impairment

losses on initial classification as held for sale and

subsequent gains or losses on remeasurement are

recognised in profit or loss. Gains are not recognised

in excess of any cumulative impairment loss.

3-14 Taxation

Income tax on the profit or loss for the year comprises

current and deferred tax. Income tax is recognized

in the income statement except to the extent

that it relates to items recognized directly in equity, in

which case it is recognized in equity.

Current tax is the expected tax payable on the taxable

income for the year, using tax rates enacted or

substantially enacted at the balance sheet date, and

any adjustment to tax payable in respect of previous

years.

Deferred tax is provided using the balance sheet

liability method, providing for temporary differences

between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts

used for taxation purposes. The amount of deferred

tax provided is based on the expected manner of

realization or settlement of the carrying amount of

assets and liabilities, using tax rates enacted or substantively

enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent

that it is probable that future taxable profits will be

available against which the asset can be utilized.

Deferred tax assets are reduced to the extent that it

is no longer probable that the related tax benefit will

be realized.

3-15 Provisions

Provisions are recognized when the Company has

a legal or constructive obligation as a result of a

past event and it’s probable that a flow of economic

benefits will be required to settle the obligation. If

the effect is material, provisions are determined by

discounting the expected future cash flows at a pretax

rate that reflects current market assessment of

the time value of money and, where appropriate, the

risks specific to the liability. Provisions are reviewed

at the balance sheet date and amended (when necessary)

to represent the best current estimate.

3-16 Earning per share

The Company presents basic earnings per share

(EPS) data for its ordinary shares. Basic EPS is

calculated by dividing the profit or loss attributable to

ordinary shareholders of the Company by the weighted

average number of ordinary shares outstanding

during the period.

3-17 Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at

fair value less attributable transaction costs. Subsequent

to initial recognition, Interest-bearing borrowings

are stated at amortized cost with any difference

between cost and redemption value being recog-


66 67

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

nized in the income statement over the period of the

borrowings on an effective interest basis.

3-18 Issued capital

a- Repurchase of share capital

When share capital recognized as equity is repurchased,

the amount of the consideration paid,

including directly attributable costs, is recognized

as a change in equity.

Repurchased shares are classified as treasury

stock and presented as a deduction from total

equity.

b- Dividends

Dividends are recognized as a liability in the year in

which they are declared.

3-19 Legal reserve

As per the Company’s statutes 5% of net profit for

the year is set aside to form a legal reserve, the

transfer to such reserve ceases once it reaches 50%

of the Company’s paid in share capital. The reserve

can be utilized in covering losses or increasing the

Company’s share capital.

3-20 Revenue recognition

(i) Cellular operations revenue

GSM revenue is recognized when services rendered

to the customers based on the actual usage airtime

from the following activities:

- Prepaid cards is recognized based on the actual

used calls minutes while the unused call minutes at

the end of the period are deferred.

- Monthly and connection fees are recognized in the

income statement on a straight-line basis over the

period or the terms of the contract.

- Other GSM telecommunications services and facilities

when provided.

(ii) Telecommunications services revenue

Revenue from the provision of telecommunications

services includes the following:

- Goods sold

Revenue is recognized when the significant risks

and rewards of ownership have been transferred to

the buyer.

- Construction contracts

Revenue is recognized in proportion to the stage of

completion of the contract.

- Satellite services

Revenue is recognized once the services delivered

to the client.

- VAS revenue

Value added services (VAS) revenue is recognized

once the services are delivered, or used by the

customers.

- Space segment revenue

Space segment rental fees are recognized in the

income statement on a straight-line basis over the

terms of the lease.

(iii) Internet and fixed lines revenue

Revenue is recognized once the service delivered

to the client.

3-21 Expenses

a- Borrowing costs

Borrowing costs are recognized as expenses in the

income statement when incurred, with the exception

of borrowing cost directly attributable to the

construction and acquisition of new assets which is

capitalized as part of the relevant assets cost and

depreciated over assets’ estimated useful lives. This

capitalization ceases once the assets become in

operational condition and ready for use.

b- Employees’ pension

The Company contributes to the government social

insurance system for the benefit of its personnel in

accordance with the social insurance law. Under this

law, the employees and the employers contribute into

the system on a fixed percentage-of-salaries basis.

The Company’s liability is confined to the amount of

its contribution. Contributions are charged to income

statement using the accrual basis of accounting.

3-22 Segment reporting

A segment is a distinguishable component of the

group that is engaged either in providing products or

services (business segment) or in providing products

or services within a particular economic environment

(geographical segment), which is subjected to risks

and rewards that are different from those of other

segments. The group’s primary format for segment

reporting is based on business segment.

3-23 Discontinued operations

A discontinued operation is a component of the

Group’s business that represents a separate major

line of business or geographical area of operations

that has been disposed of or is held for sale, or is

a subsidiary acquired exclusively with a view to

resale. Classification as a discontinued operation

occurs upon disposal or when the operation meets

the criteria to be classified as held for sale, if earlier.

When an operation is classified as a discontinued

operation, the comparative income statement is represented

as if the operation had been discontinued

from the start of the comparative period.

4- Financial Risk Management

Financial Risk Factors

The Group’s activities expose it to a variety of financial risks:

market risk (including currency risk, fair value interest risk

and cash flow interest risk), credit risk and liquidity risk. In

particular the Group is exposed to risks from movements

in exchange rates, interest rates and market prices. The

Group’s overall risk management program focuses on the

unpredictability of financial markets and seeks to minimize

potential adverse effects on the Group’s performance

through ongoing operational and finance activities. Depending

on the risk assessment, the Group uses selected derivative

hedging instruments. The management has overall

responsibility for the establishment and oversight of the

group’s risk management framework.

Market Risk

Foreign exchange risk

The Group operates internationally and is exposed to for-

eign exchange risk arising from various currency exposures

in its investing, financing and operating activities. The main

currencies to which the Group is exposed are the US dollar

and the Euro.

In general the Group’s subsidiaries are encouraged to

obtain financing in their functional currency in order to have

a natural hedge of the exchange rate of such financing.

However, as some transactions are executed in foreign currencies,

and in particular in USD and Euro, the Group may

be subject to the risk of exchange rate fluctuations. As of

December 31, 2008 the Group’s borrowings included USD

borrowings amounting to 4,022 million)equivalent to EGP

22,267 million) and Euro borrowings amounting to 298 million

equivalent to ( EGP 2,300 million.) In certain instances

the Group has entered into economic hedging agreements

to manage the risk of fluctuations relating to these financing

operations. In particular, Pakistan Mobile Communication

Limited (PMCL) had borrowings for US$ 315 million (equivalent

to EGP 1,750 million) and Euro 216 million (equivalent

to EGP 1,680 million) as of December 31, 2008. Such borrowings

were fully hedged by PMCL using cross currency

swaps pursuant to which interest payments and principal

payments are paid in Pakistani Rupee.

The Group subsidiaries generally execute their operating

activities in their respective functional currencies. Some

Group subsidiaries are, however, exposed to foreign currency

risks in connection with scheduled payments in currencies

that are not their functional currencies. In general

this relates to foreign currency denominated supplier payables

and receivables. The Group monitors the exposure

to foreign currency risk arising from operating activities and,

where relevant, enters into hedging transactions in order to

manage the exposure.

As at December 31, 2008, if the functional currencies had

weakened / strengthened by 3% against the US$, the Euro

and CAD, with all other variables held constant, profit for the

year would have decreased / increased by EGP 370 million,

respectively.

Additionally, the Group has investments in foreign operations,

whose net assets are exposed to foreign currency

translation risk. Currency exposure to such risk is not

hedged

Cash flow and fair value interest rate risk

The Group is exposed to market risks as a result of changes

in interest rates particularly in relation to borrowings. Borrowings

issued at floating rates expose the Group to cash

flow interest rate risk. Borrowings issued at fixed rates

expose the Group to fair value interest rate risk.

The basic strategy of interest rate risk management is to

balance the debt structure with an appropriate mix of fixed

and floating interest rate borrowings based on the Group’s

perception of future interest rate movements. In particular,

the risk monitored relates to the impact of movements in

floating rate indices on the Group’s finance charges.

When considered appropriate, the Group manages its cash

flow interest rate risk by using floating-to fixed interest rate

swaps. In particular , as of December 31, 2008 the Group

had outstanding floating-to-fixed interest rate swaps with a

notional value of 1.500 million (equivalent to EGP 8,300 million).

After considering such derivative transactions approximately

[53%] of the Group’s total borrowings had a floating

rate of interest.

The Group considers the sensitivity of its finance costs to

movements in interest rates. In particular an increase /

decrease of 0.5% in interest rates as of December 31, 2008

would have resulted in an increase / decrease in finance

costs of USD 15 million and a decrease / increase in the

cash flow hedge reserve of USD 25 million.

Price risk

The Group has limited exposure to equity securities price

risk on investments held by the Group.

Credit Risk

The Group considers that it is not exposed to major concentrations

of credit risk in relation to trade receivables. However,

credit risk can arise in the event of non-performance of

counterparty, particularly in relation to credit exposures for

trade and other receivables, financial instruments and cash

and cash equivalents.

The Group considers that the concentration of credit risk

with respect to trade receivables is limited given that the

Group’s customer base is largely pre-paid subscribers. Post

paid subscribers generally represent a small portion of the

subscriber base and therefore the credit exposure is limited.

In addition, the Group tries to mitigate credit risk by adopting

specific control procedures, including assessing the credit

worthiness of the counterparty and limiting the exposure to

any one counterparty.

Credit risk relating to cash and cash equivalents, derivative

financial instruments and financial deposits arises from the

risk that the counterparty becomes insolvent and accordingly

is unable to return the deposited funds or execute the

obligations under the derivative transactions as a result of

the insolvency. To mitigate this risk, wherever possible the

Group conducts transactions and deposits funds with financial

institutions with a [minimum of investment grade rating.]

The Group is exposed to credit risk relating to other receivables

as follows:

• In December 2007, the Group sold its investment

in Iraqna Company for Mobile Phone Services

Limited (“Iraqna”) (see note 6 “Assets and liabilities

classified as held for sale and discontinuing operations”

for further information). The total receivable

for the sale amounted to US$ 1.2billion (equivalent

to EGP 6.64 billion), which was due to be paid in

equal installments in December 2008 and 2009.

However, during 2008 the Group entered into a receivable

purchase agreement for the sale of these

receivables. As of December 31, 2008 an amount

of US$ 75 million (equivalent to EGP 415 million)

was outstanding which relates to an amount that

was withheld for potential claims. On February 26,

2009 Orascom Telecom Iraq Corp. Limited filed a

claim in the High Court of Justice, Queen’s Bench

Division, Commercial Court, in London, against

each of 1) Atheer Telecom Iraq Limited (“Atheer”)

and 2) Mobile Telecommunications Company KSC

(“MTC”) to recover the remaining unpaid US$

75 million plus interest from the sale of Iraqna to

Atheer, which was guaranteed by MTC. The claim

was served on the defendants and on March 13,

2009 each of the defendants filed acknowledgments

of service and notices of intent to defend.

Proceedings are ongoing in this matter. Management

is expecting to receive full settlement of the

outstanding balance with in the next month.


68 69

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

• In November 2008 the Group sold its investment

in Orasinvest. The total receivable from the sale

amounted to US$ 180 million (equivalent to EGP

985 million), prior to price adjustments. As of December

31, 2008 the amount outstanding was US$

90 million ( equivalent to EGP 498 million,) prior to

price adjustments. The remaining receivable is

respected to be settled in December 2009.

• During 2008 the Group entered into two loans

agreements to provide a total amount of EGP

2,341 million to Globalive Wireless Management

Corp (“GWMC”), a subsidiary of the associate

Globalive Investment Holdings Corp (see Note 34

“Related party transactions” for further details).

As of December 31, 2008 a total amount of EGP

2,286 million was outstanding under these agreements.

The loans were primarily provided to

GWMC to fund the acquisition of spectrum licences

in Canada. The licences were awarded to GWMC

during March 2009 by Industry Canada and it is

expected that GWMC will become fully operational

during the fourth quarter of 2009. Based on business

plan projections it is expected that GWMC,

As of December 31, 2008 Carrying

amount

Liabilities

will be able to repay the loan received when it is

fully operational.

• In general the remaining other receivables and

financial receivables included in financial assets

generally relate to a variety of smaller amounts due

from a wide range of counterparties, therefore, the

Group does not consider that it has a significant

concentration of credit risk.

Liquidity Risk

The Group monitors liquidity risk in order to ensure that it

maintains sufficient cash and cash equivalents and availability

of funding through an appropriate level of committed

credit facilities. In general, liquidity risk is monitored at entity

level whereby each subsidiary is responsible for managing

and monitoring its cashflows and rolling liquidity reserve

forecast in order to ensure that it has sufficient committed

facilities to meet its liquidity needs.

The table below analyses the group’s financial liabilities into

relevant maturity groupings based on the remaining period

at the balance sheet to the contractual maturity date. The

amounts disclosed in the table are the contractual undiscounted

cashflows.

Expected

cash flows (*)

Less than

1 year

Between

1 and 5 years

More than

5 years

Liabilities to banks 24,467 30,526 4,060 25,257 1,209

Bonds 6,377 9,003 630 4,058 4,315

Other borrowings 250 300 105 195 -

Telecommunication licence payable 2,190 2,640 1,127 1,021 492

Trade payables 6,567 6,567 6,567 - -

As of December 31, 2007 Carrying

amount

Liabilities

39,851 49,036 12,489 30,531 6,016

Expected cash

flows (*)

Less than

1 year

Between

1 and 5 years

More than

5 years

Liabilities to banks 22,017 25,455 10,783 13,294 1,378

Bonds 6,854 10,525 1,009 3,221 6,295

Other borrowings 125 156 138 18 -

Telecommunication licence payable 1,387 1,880 403 899 578

Trade payables 6,029 6,029 6,029 - -

36,412 44,045 18,362 17,432 8,251

* Expected cashflows are the gross contractual undiscounted cash flows including interest, changes and other fees.

As of December 31, 2008

Cash outflow / (cash inflow)

Expected cash

flows (*)

The table below analyses the group’s derivative financial

instruments into relevant maturity groupings based on the

remaining period at the balance sheet date to the contractual

maturity date. The amounts disclosed in the table are

the contractual undiscounted cash flows.

Less than

1 year

Between 1 and 5

years

More than 5

years

Interest rate derivatives 641 236 405 -

Foreign exchange derivatives (5) 57 (59) (3)

Other derivative instruments - cash outflow 31 31 - -

Other derivative instruments - cash inflow (31) (31) - -

Total 636 293 346 (3)

As of December 31, 2007 Expected cash

flows (*)

Cash outflow / (cash inflow)

Less than 1 year Between 1 and 5

years

More than 5

years

Interest rate derivatives 34 21 13 -

Foreign exchange derivatives (320) (68) (229) (23)

Total (286) (47) (216) (23)

* Derivative cashflows for interest rate derivatives and foreign

exchange derivatives represent the net cashflow from

the relevant swap transaction as such derivatives are net

settled. Cash inflow and cash outflow for other derivative

instruments are shown separately as such derivatives are

gross settled.

Derivative cash outflows do not include the potential cash

outflows should the share warrants of My Screen and Lingo

be exercised. The exercise of such warrants is at the option

of the Group. Details of such warrants are provided in note

19 “Other financial assets”. Additionally the put and call

option for the purchase of the investment in Namibia has not

been included in the contractual cashflows.

Contractual cashflows are divided based on the relevant

index as of the balance sheet date.

Capital risk management

The Group’s objectives when managing capital are to

safeguard the Group’s ability to continue as a going concern

in order to provide returns for shareholders and to maintain

an optimal capital structure to reduce the cost of capital. In

order to maintain or adjust the capital structure, the Group

may adjust the amount of dividends paid to shareholders,

return capital to shareholders through share buyback transactions,

issue new shares or sell assets to reduce debt.

Other risks

Political and economic risk in emerging countries

A significant amount of the Group’s operations are conducted

in Algeria, Pakistan, Egypt and Tunisia. The operations

of the Group depend on the market economies of the

countries in which the subsidiaries operate. In particular,

these markets are characterized by economies that are in

various stages of development or are undergoing restructuring.

Therefore the operating results of the Group are

affected by the current and future economic and political

developments in these countries. In particular, the results of

operations could be unfavorably affected by changes in the

political or governmental structures or weaknesses in the

local economies in the countries where it operates. These

changes could also have an unfavorable impact on financial

condition, performance and business prospects.

Regulatory risk in emerging countries

Due to the nature of the legal and tax jurisdictions in the

emerging countries where the Group operates, it is possible

that laws and regulations could be amended. This could

include factors such as the current tendency to withhold

tax on the dividends of these subsidiaries, the granting of

relief to certain operations and practices relating to foreign

currency exchange. These factors could have an unfavorable

effect on the financial activities of the Group and on the

ability to receive funds from the subsidiaries.

Revenue generated by the majority of the Group subsidiaries

is expressed in local currency. The Group expects

to receive most of this revenue from its subsidiaries and

therefore it relies on their ability to be able to transfer

funds. The regulations in the various countries where the

subsidiaries operate could reduce the ability to pay interest

and dividends and to repay loans, credit instruments and

securities expressed in foreign currency through the transfer

of currency. In addition, in some countries it could be difficult

to convert large amounts of foreign currency due to central

bank regulations. The central banks may amend regulations

in the future and therefore the ability of the Group to receive

funds from its subsidiaries may be restricted.

5- Segment reporting

The Company considers primary segment information by

business activity. The method used to identify the business

segments include the factors used by management

to direct the Group and assign managerial responsibilities.

The methodology adopted to identify the components of

revenues and cost attributable to each business segment

is based on the identification of each component of cost

and revenues directly attributable to each segment. The

operating activities of the Group are organized and managed

separately based on the nature of the products and

services provided. Each segment offers different products

and services to different markets and is controlled by different

legal entities.

The following primary business segments have been identified:

• GSM covering the mobile telecommunications

services activities of the Group, including the sale

of pre-paid telephone cards, post-paid and monthly

subscriptions packages, telephone packages and

roaming included in this segment are ;

Telecom services relating to the sale of handsets,

including ring tones and other cell phone products

and activities relating to the rental of portals to allow

satellite roaming calls and value added service

activities; and

• Internet & fixed line covering the internet and fixed

telecommunications services of the Group.

The Group also reports geographical segments based on

the geographical location of the legal entity controlling the

operation, which is the same as the location of the major

customers.

The following geographical segments have been identified:

• North Africa – comprising Algeria and Tunisia

• Middle East – comprising Egypt

• South Asia – comprising Pakistan and Bangladesh

• Others – comprising, North Korea, Central Africa,

Burundi, Malta, Belgium, the United Kingdom and

other countries


70 71

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Primary segment information

2008

2007

GSM

Telecom

services

Internet &

fixed line

Unallocated *

Gross revenues 26,738 3,822 521 - 31,081

Total

24,141 4,534 357 - 29,032

Intersegment revenues (581) (1,248) (99) - (1,928)

(391) (1,800) (47) - (2,238)

Revenues 26,157 2,574 422 - 29,153

23,750 2,734 310 - 26,794

Impairment charges (41) - (175) - (216)

(35) - (71) - (106)

Depreciation and amortization (4,809) (63) (88) (21) (4,981)

(4,090) (61) (82) (24) (4,257)

Operating income 8,127 (36) (393) 591 8,289

8,140 (192) (238) (222) 7,488

Profit before income tax 6,153 (103) (435) (565) 5,050

6,888 (209) (222) 2,836 9,293

Profit/(loss) from continuing operations 4,525 (348) (446) (889) 2,842

5,500 (239) (222) 1,683 6,722

Profit from discontinued operations - - - - -

5,213 - - - 5,213

Profit/(loss) for the year 4,525 (348) (446) (889) 2,842

10,713 (239) (222) 1,683 11,935

Total segment assets 46,204 2,275 1,091 5,092 54,662

49,343 2,199 922 10,430 62,894

Total capital expenditure** 9,271 597 349 30 10,247

9,610 250 244 27 10,131

Total segment liabilities 26,270 985 590 20,392 48,237

*Unallocated represents revenues and costs relating to

activities provided centrally from headquarters to subsidiaries

across the group. These activities include staff functions

with group wide responsibilities such as internal audit, financial

advisory, legal services, communications and investor

relations. Unallocated assets and liabilities mainly include

borrowings of the Company and deferred tax assets and

liabilities.

25,190 1,143 512 18,227 45,072

** Segment capital expenditure is the total cost incurred

during the period to acquire property and equipment and

intangible assets other than goodwill.

Secondary segment information

2008

2007

North

Africa

South Asia

Middle

East

Other Unallcated Total

Gross revenues 13,413 8,375 7,670 1,623 - 31,081

11,871 8,287 7,448 1,426 - 29,032

Intersegment revenues (454) (133) (923) (418) - (1,928)

(365) (27) (1,264) (582) - (2,238)

Revenues 12,959 8,242 6,747 1,205 - 29,153

11,506 8,260 6,184 844 - 26,794

Operating income 5,855 1,018 1,145 710 (439) 8,289

5,115 1,562 922 114 (225) 7,488

Profit before income tax 5,618 (361) 820 570 (1,597) 5,050

4,808 670 867 116 2,832 9,293

Profit/(loss) from continuing operations 4,062 (196) 398 499 (1,921) 2,842

3,979 364 670 30 1,679 6,722

Profit from discontinued operations - - - - - -

- - 5,213 - - 5,213

Profit /(loss) for the year 4,062 (196) 398 499 (1,921) 2,842

3,979 364 5,883 30 1,679 11,935

Total segment assets 17,024 20,999 10,004 1,509 5,126 54,662

18,466 19,130 8,057 6,810 10,431 62,894

Capital expenditure 1,203 5,504 3,406 104 30 10,247

2,005 5,914 1,967 218 27 10,131

6- Assets and liabilities classified as held for sale and discontinuing operations

The following table discloses the results of discontinuing operations for the years indicated

2008 2007

Revenues - 6,097

Expenses - (849)

Profit before tax from discontinued operations - 5,248

Income tax expense - (35)

Profit from discontinued operations - 5,213

The following provides a breakdown of assets and liabilities held for sale as of December 31, 2008:

2008 2007

Property, plant and equipment 61 -

Intangible assets 111 -

Investments accounted for using the equity method - 5,144

Trade receivables 221 -

Other current assets 8 -

Cash and cash equivalents 44 -

Assets held for sale 445 5,144

Trade payables 119 -

Other current liabilities 11 -

Current income tax liabilities 6 -

Liabilities held for sale 136 -


72 73

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Hutchison Telecommunications

In October 2007, management initiated proceedings to

dispose of the investment in Hutchison Telecommunications

International Limited (“Hutchison Telecommunications”).

During October and November 2007, the Company sold

5.0% of the investment in Hutchison Telecommunications,

incurring a loss of EGP 16 million which was recorded in the

income statement for the year ended December 31, 2007.

In January 2008, the Company sold the remaining investment

of 14.2% for consideration of EGP 5 billion, generating

a gain of EGP 149 million. This gain has been recorded in

gain on disposal of associates.

As of December 31, 2007 assets held for sale includes the

Company’s equity investment in Hutchison Telecommunications

which was disposed of in January 2008. In accordance

with Egyptian accounting standard 32 assets held for sale

in disposal groups have been separately shown in a specific

caption on the consolidated balance sheet. As Hutchison

Telecommunications is an associate there is no income

statement disclosure relating to Hutchison Telecommunications

within discontinuing operations.

Operations in Iraq

In December 2007, the Company sold its subsidiary Iraqna

Company for Mobile Service Ltd (“Iraqna”) for consideration

of US$ 1.2 billion equivalent to (EGP 6.64 billion). The

purchase consideration is split into two non-interest bearing

receivables of US$ 600 million each which are due on

7- Revenues

Revenues from services

December 31, 2008 and 2009, respectively. In June 2008,

the Company entered into a receivable purchase agreement

with the National Bank of Kuwait and various financial

institutions for the sale of these receivables.

As of December 31, 2008 an amount of US$ 75 million was

outstanding relating to the amount withheld as guarantee.

In accordance with EAS 32, the results of operations relating

to 2007 have been shown separately on the consolidated income

statement within the caption discontinued operations.

M-Link

The assets and liabilities related to M-Link, a company part

of the Telecom services segment, have been presented

as held for sale, following OTH managements’ decision to

focus on GSM business and dispose of non-core assets.

M-Link has been sold to TLC Servizi S.p.A., a wholly owned

subsidiary of Wind Telecomunicazioni S.p.A., in January

2009.

Oracap Far East Ltd.

Another company included in assets held for sale is Oracap

far East Ltd. The assets and liabilities of this company

(mainly relating to EGP 6 million licence to operate a bank

and EGP 6 million cash) have been presented as held for

sale, following OTH managements’ decision to dispose of

the assets. Oracap far East Ltd had a capital commitment

amounting to approximately EGP 742 million.

2008 2007

Telephony services 25,999 23,522

Interconnection traffic 1,046 835

International and national roaming 544 431

Other services 74 67

Total revenues from services 27,663 24,855

Total revenues from sale of goods 1,490 1,939

Total 29,153 26,794

Total revenues from services increased in 2008 mainly due

to the increase in revenues from telephony services as a

result of an increase in the subscriber numbers, mainly in

Algeria, Egypt, Tunisia and Bangladesh. Revenues from

interconnection traffic and international and national roaming

increased in 2008 compared to 2007 due to the increase

in subscriber numbers.

Total revenues from sale of goods decreased in 2008 mainly

as a result of the disposal of the subsidiary Ring Jordan in

May 2007, in addition to a decrease in sales of goods in

Ring Egypt.

8- Purchases and services

Purchases and services costs increased during 2008

primarily due to the increase in operating activities. As a

percentage of revenues, purchase and service costs were

substantially consistent, amounting to 48% in 2007 and to

47% in 2008.

In particular, interconnection traffic and roaming costs

increased in 2008 compared to 2007 mainly due to the

increase in the subscriber numbers in North Africa.

9- Other expenses

2008 2007

License costs 304 232

Travel costs 113 76

Accruals for provisions 78 60

Allowance for doubtful receivables 102 158

Taxes (other than income tax) 93 114

Training expenses 58 56

Other operating expenses 207 202

Total 955 898

The increase in other expenses was primarily attributable to

the increase in licence costs as a result of the increased ac-

10- Personnel costs

2008 2007

Interconnection traffic and roaming 3,894 3,318

Cost of handsets, scratch cards, sim cards, bundle cost 1,538 1,986

Advertising and promotional services 1,382 1,504

Internet and fixed line costs 1,342 1,161

Customer acquisition costs 1,381 1,494

Maintenance costs 1,038 615

Utilities 721 429

Rental of network 466 642

Other leases and rentals 417 371

Rental of civil and technical sites 388 335

Consulting and professional services 318 286

Consumable materials, equipment and goods 264 236

Cost for security service 205 148

Cost for printing & collection services 64 124

Other service expenses 329 322

Total 13,747 12,971

Cost of handsets, scratch cards, sim cards and bundle costs

decreased substantially in 2008 compared to 2007 as a result

of the disposal of the Ring Jordan subsidiary in May 2007.

Maintenance costs, security services and utilities increased

in 2008 due to significant investments in the Groups

telecommunication network as well as increased fuel and

energy prices,

tivity. The annual contribution for licence costs is calculated

as a percentage of revenues.

2008 2007

Wages and salaries 1,078 884

Bonuses given to management and employees 146 169

Social security 86 71

Share based compensation 61 48

Pension costs 41 51

Board of Directors remuneration 15 16

Other personnel costs 127 102

Total 1,554 1,341


74 75

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Personnel costs increased in 2008 compared to 2007 due to

the increase in the average number of employees during the

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

Average for the year ended December 31,

(in number of employees) 2008 2007

Senior management 205 188

Middle management 1,355 1,177

Staff 15,012 13,973

Total 16,572 15,338

Depreciation of property and equipment:

2008 2007

-Cell sites 3,747 3,135

-Computers, fixtures and other equipment 338 257

-Buildings 127 92

Amortization of intangible assets

As of December 31,

(in number of employees) 2008 2007

Senior management 216 193

Middle management 1,447 1,262

Staff 14,859 15,164

Total 16,522 16,619

The table below provides a breakdown of the average number of employees for the years ended December 31, 2008 and 2007:

11- Depreciation and amortization

-Licences 613 604

-Other intangible assets 156 169

Total 4,981 4,257

13- Disposal of non-current assets

Gain on disposal of non-current assets amounting to EGP

363 million in 2008 mainly relates to the gain on the disposal

of the subsidiary Orasinvest EGP 371 million (USD 68

million). In November 2008, the Company disposed of its investment

in Orasinvest for consideration of US$ 180 million

equivalent to EGP 996 million (USD 180 million). Consideration

of US$ 90 million equivalent to EGP 498 million was

paid in cash on closing of the transaction and a promissory

note was issued by the purchasers for the remaining US$

90 million equivalent to EGP 498 million. The promissory

note is due on December 19, 2009 and interest of 12.5%

year. In particular, the increase in senior and middle management

personnel related to the increase in operations.

Depreciation and amortization increased due to the increase in cell sites depreciation primarily as a result of an increase in

investments.

annually accrues on the outstanding principal. Additionally

12- Impairment charges

the sale and purchase agreement includes a potential price

Impairment charges amounting to EGP 216 million in 2008 adjustment based on Orasinvest’s revenue for the twelve

mainly relate to the impairment of EGP 170 million of the month period following the closing date.

CAT telecommunication license in Algeria. Following the

decision to liquidate this entity, the license has been fully

impaired. Impairment charges also include impairments of

EGP 38 million for obsolete property and equipment in Pakistan

and an impairment of EGP 8 million for other intangible

assets.

14- Net financing costs

2008 2007

Interest on deposits and bank accounts 162 200

Interest on non-current financial receivables 84 -

Other financial income 36 9

Dividends from investments 9 7

Financial income 291 216

Impairment of financial assets (3) (1)

Interest on bonds (500) (543)

Interest on other borrowings (1,834) (2,301)

Interest on other liabilities and other financial expense (225) (103)

Financial expense (2,562) (2,948)

Foreign exchange (loss) / gain (1,936) 238

Fair value changes of FX derivative instruments 835 -

Net foreign exchange (loss) / gain (1,101) 238

Total (3,372) (2,494)

Financial expense decreased mainly due to a decrease in

interest paid on other borrowings mainly due the restructuring

and amendment of the Company’s syndicated loan

facility, and particularly to the decrease of its spread from

2.5% to 2.0%. Additionally, interest on other liabilities and

financial expense increased mainly due to the increase in

telecommunication licence payable and the interest effect of

non-current income tax liabilities.

The increase in foreign exchange loss is mainly due to unrealized

losses on translation of supplier facilities, telecommunication

licence payables and borrowings due to the devaluation

of the PKR and DZD against the US$. Furthermore,

foreign exchange loss in 2008 also included the unrealized

loss on the translation of the loans provided to Globalive

Management Corp (“GWMC”) which are denominated in

CAD (Note 30).

Fair value changes on FX derivative instruments relates to

the changes in the fair value of the cross currency swaps

held by PMCL in connection with the economic hedge of

borrowings.

16- Income tax expense

15- Share of profit / (loss) of associates and gain/(loss)

on disposal of associates

Hutchison Telecommunications

As explained in Note 6 “Assets and liabilities held for sale

and discontinuing operations”, during October and November

2007, the Group sold 5% of its investment in Hutchison

Telecommunications. The remaining investment was sold in

January 2008. The Group’s share of profit from the associate,

which was recorded in share of profit of associates,

amounted to EGP 4,315 million in 2007. The sale of the first

portion of the investment in 2007, recorded in gain/(loss) on

disposal of associates, generated a loss of EGP 16 million,

whilst the gain on disposal of the remaining investment in

2008 amounted to EGP 149 million.

Globalive

Share of loss of associates amounting to EGP 16 million in

2008 relates to the Group’s investment in Globalive. Further

details of this associate are included in Note 30 “Acquisition

of Associates”.

2008 2007

Current income tax expense (2,339) (2,028)

Deferred taxes 131 (543)

Income tax expense (2,208) (2,571)

Current income tax receivables and liabilities in the consolidated balance sheet are as follows:

2008 2007

Current income tax receivable 416 622

Current and non current income tax liabilities (2,124) (2,461)


76 77

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate

applicable to profits of the consolidated entities as follows:

Profit / (loss) from continuing operations 5,050

Tax calculated at Company's income tax rate 1,010

Different income tax rates in subsidiaries 456

Theoretical income tax for the year 1,466

Permanent differences 87

Unrecognized deferred tax for tax losses 493

Reversal of expired deferred tax assets for tax losses 47

Utilization of previously unrecognized deferred tax assets (89)

Unrecognized deferred tax liabilities on unremitted earnings 101

Other differences 103

Income tax for the year 2,208

The Group’s income tax expense decreased from EGP 2,571 million in 2007 to EGP 2,208 million in 2008. While the effective

tax rate increased from 28% to 44%, respectively. Income tax expense in 2007 was benefited by a tax exemption for Orascom

Telecom Algeria S.P.A. (“OTA”). This tax exemption expired in August 2007.

17- Property and equipment

Cost

Land and

Buildings

Cell Sites

Computers,

fixtures and

other

equipment

Assets Under

Construction

As of January 1, 2008 910 29,915 1,591 4,432 36,848

Additions 214 1,752 454 6,479 8,899

Change in the scope of consolidation (17) 324 (61) (22) 224

Assets held for sale (15) (85) (17) (8) (125)

Disposals (30) (224) (32) (45) (331)

Currency translation differences (90) (3,861) (149) (487) (4,587)

Reclassifications 22 5,013 25 (5,060) -

As of December 31, 2008 994 32,834 1,811 5,289 40,928

Accumulated Depreciation and Impairment

As of January 1, 2008 247 9,044 819 49 10,159

Charge for the year 127 3,747 338 - 4,212

Change in the scope of consolidation 3 140 (40) - 103

Assets held for sale (4) (52) (10) - (66)

Disposals (3) (158) (16) - (177)

Impairment loss 2 1 1 37 41

Currency translation differences (47) (1,155) (72) - (1,274)

As of December 31, 2008 325 11,567 1,020 86 12,998

Net book value as of December 31, 2007 663 20,871 772 4,383 26,689

Net book value as of December 31, 2008 669 21,267 791 5,203 27,930

2008

Total

Cost

Land and

Buildings

Cell Sites

Computers,

fixtures and

other

equipment

Assets Under

Construction

As of January 1, 2007 681 23,945 1,363 4,121 30,110

Additions 241 1,498 313 6,806 8,858

Change in the scope of consolidation (17) (1,494) (90) (86) (1,687)

Disposals (2) (87) (21) (1) (111)

Currency translation differences (2) (289) (8) (23) (322)

Reclassifications 9 6,342 34 (6,385) -

As of December 31, 2007 910 29,915 1,591 4,432 36,848

Accumulated Depreciation and Impairment

As of January 1, 2007 156 6,151 669 - 6,976

Charge for the year 97 3,280 271 - 3,648

Change in the scope of consolidation (17) (371) (58) - (446)

Disposals (1) (13) (16) - (30)

Impairment loss 4 57 - 49 110

Currency translation differences 8 (60) (47) - (99)

As of December 31, 2007 247 9,044 819 49 10,159

Net book value as of December 31, 2006 525 17,794 694 4,121 23,134

Net book value as of December 31, 2007 663 20,871 772 4,383 26,689

Additions to property and equipment in 2008 mainly relate to

cell site investments and assets under construction relating

to new base stations, predominantly in GSM companies

in Pakistan, Bangladesh and Algeria. Those investments

are mainly due to the expansion of the business, increased

capacity and the change in GSM technology.

Property and equipment transferred to assets held for sale

in 2008 relates to the property and equipment of M Link.

See Note 6 “Assets and liabilities classified as held for

sale and discontinuing operations” for further information.

Additionally, depreciation charged during 2007 includes

Total

an amount of EGP 164 million relating to the discontinued

operations of Iraqna.

Property and equipment pledged as security for bank borrowings

amount to EGP 7 billion as of December 31, 2008

and primarily relate to securities for borrowings of PMCL,

TWA and OTT.

In the year ended December 31, 2008 and 2007 the Group

capitalized borrowing costs of EGP 344 million and EGP

314 million, respectively, relating to the acquisition of property

and equipment.


78 79

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

18- Intangible assets

Cost

Licences Goodwill Others Total

As of January 1, 2008 9,465 6,475 1,115 17,055

Additions 1,105 - 241 1,346

Change in the scope of consolidation 101 510 24 635

Assets held for sale (4) (93) (17) (114)

Disposals - - (38) (38)

Currency translation differences (365) (34) 7 (392)

As of December 31, 2008 10,302 6,858 1,332 18,492

Accumulated Amortization

As of January 1, 2008 3,415 810 643 4,868

Charge for the year 613 - 156 769

Change in the scope of consolidation 17 - 5 22

Impairment loss 169 5 2 176

Assets held for sale - - (4) (4)

Disposals - - (2) (2)

Currency translation differences (208) ( 2) (54) (264)

As of December 31, 2008 4,006 813 746 5,565

Net book value as of December 31, 2007 6,050 5,665 472 12,187

Net book value as of December 31, 2008 6,296 6,045 586 12,927

Cost

Licences Goodwill Others Total

As of January 1, 2007 8,018 4,734 750 13,502

Additions 1,324 - 227 1,551

Change in the scope of consolidation 39 1,819 - 1,858

Currency translation differences 137 (78) 85 144

Reclassifications (53) - 53 -

As of December 31, 2007 9,465 6,475 1,115 17,055

Accumulated Amortization

As of January 1, 2007 2,751 810 425 3,986

Charge for the year 604 - 169 773

Change in the scope of consolidation 19 - - 19

Currency translation differences 41 - 49 90

As of December 31, 2007 3,415 810 643 4,868

Net book value as of December 31, 2006 5,267 3,924 325 9,516

Net book value as of December 31, 2007 6,050 5,665 472 12,187

Additions to intangible assets in 2008 primarily relate to

the acquisition of a 3G license in Egypt, by ECMS with a

duration of 14 years validity, the group’s proportionate share

is EGP 941 million and acquisition of a WiMax License by

PMCL.

Intangible assets pledged as security for bank borrowings

amount to EGP 7.6 billion and primarily relate to securities

for borrowings of PMCL and OTT.

Impairment tests for goodwill

Goodwill is allocated to the individual CGU which reflects

the minimum level at which the units are monitored for management

control purposes.

The carrying amount as of December 31, 2008 was subject

to an impairment test involving comparing the carrying

The following table provides an analysis of goodwill by segment

GSM

19- Other financial assets

Telecom

Services

amount with value in use and the recoverable amount. No

evidence of impairment arose. Value in use was determined

by discounting the expected cash flows, resulting from business

plans approved by the respective Board of Directors,

using the post-tax weighted average cost of capital (WACC)

as the discount rate.

2008 2007

Internet &

Fixed Line

Total GSM Telecom

Services

Internet &

Fixed Line

North Africa 3,099 - - 3,099 3,099 - - 3,099

South Asia 1,531 5 - 1,536 1,540 5 - 1,545

Middle East 814 32 123 969 814 4 110 928

Other 441 - - 441 - 93 - 93

Total

5,885 37 123 6,045 5,453 102 110 5,665

2008 2007

Non-curent Current Total Non-curent Current Total

Financial receivables 2,302 940 3,242 3,167 3,154 6,321

Derivative financial instruments 885 136 1,021 251 82 333

Deposits 240 459 699 78 247 325

Financial assets available for sale 114 - 114 75 18 93

3,541 1,535 5,076 3,571 3,501 7,072

Deposits are partially pledged as security against related bank borrowings

19-1 Financial receivables

amounting to US$ 90 million equitant to EGP 498 million

As of December 31, 2008 financial receivables mainly

include an amount of CAD 483 million equivalent to EGP 2.2

billion relating to a financial receivable due from Globalive

Wireless Management Corp, a subsidiary of the associate

Globalive Investment Holdings. The Company provided financing

to Globalive Wireless Management Corp in connection

with the funding of the acquisition of spectrum licences

(further information is provided in Note 30 “Acquisition of

associates”).

Financial receivables as of December 31, 2008 also include

an amount of US$ 165 million equivalent to EGP 913 million

relating to receivables from the sale of subsidiaries. This primarily

relates to the receivable from the sale of Orasinvest

which is to be settled in December 2009 and the residual

receivable of US$ 75 million equivalent to EGP 415 million

from the sale of Iraqna.

As of December 31, 2007 financial receivables includes

an amount of US$ 1.1 billion equivalent to EGP 7,1 billion

of which US$ 566 million equivalent to EGP 3 billion is

included in current financial receivables and US$ 534 million

equivalent to EGP 3 billion is included in non-current

financial receivables) relating to the receivable from the sale

of the subsidiary in Iraq. As explained in Note 6 “Assets

and liabilities classified as held for sale and discontinuing

operations”, the Company entered into receivable purchase

agreements, during 2008, for the sale of this receivable.

19-2 Derivative financial instruments

2008 2007

Assets Liabilities Assets Liabilities

Interest rate derivatives - 624 - 31

Foreign exchange derivatives 981 - 320 -

Other derivative instruments 40 6 13 -

Total 1,021 630 333 31

Less non-current portion

Interest rate derivatives - 399 - -

Foreign exchange derivatives 851 - 251 -

Other derivative instruments 34 - - -

Current portion 136 231 82 31


80 81

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Interest rate derivatives

The notional principal amounts of the outstanding interest

rate swaps that qualify for hedge accounting amounts to

US$ 1.5 billion equivalent to EGP 8.3 billion, relating to the

A1 and A2 term loan supplements of the Company. Under

the derivative contract the Company pays fixed interest rate

of 4.24% and receives 6 month Libor. Gains and losses are

recognized in the cash flow hedge reserve in equity. As of

December 31, 2008 the fair value of the derivative liability

was EGP 634 million. The loss recognized in the cash

flow hedge reserve, net of deferred tax as of December 31,

2008, amounts to EGP 484 million.

Foreign exchange derivatives

Foreign exchange derivatives primarily relate to the economic

hedge of PMCL. The cross currency swap relates to

certain borrowings of PMCL, under which borrowings are

swapped from US$ to PKR and from Euro to PKR, whilst the

associated interest is swapped from LIBOR to KIBOR and

from Euribor to KIBOR. The changes in the fair value of the

derivative are recognized in foreign exchange loss / gain in

the income statement.

The following table shows the ageing analysis of financial receivables and long term deposits as of December 31, 2008 and

2007:

Financial assets available for sale

Deposits

* This entity is inactive and has therefore been recorded at cost.

My Screen Mobile Inc

In May 2008, the Company concluded a “Restricted Stock

Purchase Agreement” with My Screen Mobile Inc, an

entity specializing in the delivery of advertising to mobile

phones, to acquire 12.5 million shares which represents

approximately 9% of the total share capital and existing

voting rights. Additionally the Company purchased share

warrants to acquire up to 20 million shares at an exercise

price of US$ 2 per share. The warrants can be exercised

from the date of the agreement until May 23, 2012. The

total purchase price of the shares and warrants was US$ 10

million. Upon exercise of the warrants, the Company would

hold approximately 20% of the existing and potential voting

Other derivative instruments

Other derivative instruments mainly include the warrants to

purchase shares of My Screen Mobile Inc and Lingo Media

Corporation amounting to US$ 6 million equivalent to EGP

32 million and EGP 360,000, respectively as of December

31, 2008. The details of these warrants are provided below

in the section “Financial assets available for sale”. (Note No.

19-4 financial assets held for sale.)

CDC Fennec Ltd, a lender to OTA has the option to convert

all amounts payable under the loan agreement into shares

of the Company until the debt is extinguished. As of December

31, 2008 and 2007 the fair value of this option was zero.

Deposits

Deposits primarily relate to letters of guarantee and other restricted

cash held as security for the performance of Group

obligations. The increase in deposits in 2008 mainly relates

to an increase in cash deposits in Algeria.

2008 2007

Financial receivables

Deposits

Financial receivables

Not past due 699 2,827 325 6,321

Past due 0-30 days - - - -

Past due 31-120 days - 415 - -

Past due 121 - 150 days - - - -

Past due more than 150 days - - - -

699 3,242 325 6,321

Company name ownership % December 31, 2008 December 31, 2007

Smart Village (ECDMIV) 10% 44 45

My Screen Mobile Inc 9% 22 -

Lingo Media Corporation 23% 17 -

Top Level Domain Co. 5% 6 6

Other investments 25 42

114 93

rights. Based on an assessment of the potential ownership

percentage and other contractual rights, management does

not consider that it has significant influence over the company.

Therefore, the investment has been recorded as a

financial asset available for sale and measured at fair value.

As of December 31, 2008 the fair value of the investment

amounted to EGP 22 million equivalents to US$ 4 million.

Lingo Media Corporation

In August 2008, the Company entered into a subscription

agreement to acquire 2,857,143 common shares of Lingo

Media Corporation, a media entity focusing on online advertising.

The investment represents approximately 23% of the

total share capital and existing voting rights. The Company

also purchased share warrants to acquire up to 2,142,857

shares of this entity. The warrants can be exercised from

the date of the agreement for a period of two years, at an

increasing price from US$4 up to US$8 per share. The

total purchase price of the shares and warrants was US$

5 million. Assuming exercise of the warrants, the Company

would have an interest of approximately 34% in this entity.

Based on an assessment of the contractual rights, management

does not consider that it has significant influence over

the company. Therefore, the investment has been recorded

as a financial asset available for sale and measured at fair

value. As of December 31, 2008, the fair value of the in-

The gross movement in the deferred income tax account is as follows:

vestment amounted to EGP16 million equivalents to US$ 3

million and the fair value of the warrants, which is recorded

in derivative financial assets, amounted to EGP 360,000

equivalents to US$ 65,000 .

20- Deferred taxes

Deferred income tax assets and liabilities are offset when

there is a legally enforceable right to offset current tax assets

and liabilities and when the deferred income tax assets

and liabilities relate to income taxes due to the same tax

authority. The following table provides a reconciliation of deferred

tax assets and liabilities of the Group to the amounts

included in the face of the balance sheet.

2008 2007

Deferred tax liabilities, gross 2,290 2,535

Deferred tax assets offset (913) (738)

Deferred tax liabilities 1,377 1,797

Deferred tax assets, gross 1,402 1,143

Deferred tax liabilities offset (916) (739)

Deferred tax assets 486 404

of which recognized directly in equity (121) (5)

2008 2007

As of January 1, 1,393 899

Exchange differences (250) (44)

Income statement charge (131) 543

Tax charged directly to equity (121) (5)

As of December 31, 891 1,393

The movement of deferred tax assets and liabilities during the year, without taking into consideration any offsetting is provided in

the tables below:

Deferred tax liabilities

Depreciation

and amortization

Unremitted

earnings

As of December 31, 2007 2,054 479 2 2,535

Charged / (credited) to the income statement 198 (16) 47 229

Exchange differences (449) (20) (5) (474)

As of December 31, 2008 1,803 443 44 2,290

Deferred tax assets

Tax

losses

Accrued

revenue

Depreciation

and amortization

Impairment

of

assets

Provisions

Other

Fair

value

As of December 31, 2007 633 181 111 67 53 6 92 1,143

Charged / (credited) to the

income statement

Other

Total

Total

382 26 15 (14) (5) (6) (38) 360

Charged directly to equity - - - - - 121 - 121

Change in scope - - - - - - 3 3

Exchange differences (175) (12) (4) (7) (6) - (21) (225)

As of December 31, 2008 840 195 122 46 42 121 36 1,402


82 83

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Deferred tax assets on tax losses carry forwards mainly

refer to income tax loss carryforwards of the Group’s subsidiaries

in Pakistan with no expiry date.

No deferred tax assets were recognized on income tax loss

carry forwards for some foreign subsidiaries, mainly Banglalink

and CAT, as it is currently not probable that taxable

profit will be available in the near future against which such

tax loss carry forwards might be utilized.

Generally the Group does not recognize deferred tax assets

for temporary differences related to accruals for provisions,

The following table provides a breakdown by estimated recoverability of recognized deferred tax assets and liabilities:

Deferred tax liabilities

The following table shows the movement in the allowance for doubtful receivables

due to uncertainties in connection with the tax treatment of

such expenses, as they might be challenged by local tax

authorities.

No liability has been recognized in respect of temporary

differences associated with investments in subsidiaries,

branches and associates and interests in joint ventures,

where the Group is in a position to control the timing of the

reversal of the temporary differences and it is probable that

such differences will not reverse in the foreseeable future.

Deferred tax assets

2008 2007 2008 2007

within 1 year 276 461 4 40

within 1 - 5 years 1,826 697 1,391 1,091

after 5 years 188 1,377 7 12

21- Trade receivables

2,290 2,535 1,402 1,143

2008 2007

Receivables due from customers 916 948

Receivables due from telephone operators 506 423

Accrued revenue (unbilled) 422 694

Receivables due from authorized dealers 92 93

Other trade receivables 250 387

Allowance for doubtful receivables (373) (484)

Total 1,813 2,061

2008 2007

At January 1 484 452

Exchange differences (30) -

Additions (allowances recognized as an expense) 102 175

Change in scope (1) (83)

Use (73) (35)

Reversal (11) (15)

Reclassifications (98) (10)

At December 31, 373 484

22- Other current assets

The increase in other receivables is mainly related to down

payments as a guarantee to issue indexed notes with a

nominal amount of US$ 230 (private placement) through a

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

23- Cash and cash equivalents

2008 2007

Prepaid expenses 428 422

Advances to suppliers 89 95

Receivables due from tax authority 84 253

Deferred cost 78 106

Other receivables 953 477

Allowance for doubtful current assets (255) (148)

Total 1,377 1,205

fully owned subsidiary Orascom Telecom Oscar (see note

36 Subsequent events).

2008 2007

At January 1 148 144

Exchange differences (1) (2)

Additions (allowances recognized as an expense) 11 8

Reversal - (1)

Reclassifications 97 (1)

At December 31, 255 148

2008 2007

Bank accounts 2,929 2,387

Deposits 387 386

Money market fund - 4,110

Treasury bills 277 -

Cash on hand 15 10

Total 3,608 6,893

Cash and cash equivalents as of December 31, 2007 were unusually high mainly due to the receipt of the proceeds from the

sale of 5% of the investment in Hutchison Telecommunication.

The following table shows the ageing analysis of trade receivables as of December 31, 2008 and 2007, net of the relevant provision

for doubtful receivables:

2008 2007

Not past due 852 1,158

Past due 0-30 days 393 339

Past due 31-120 days 353 310

Past due 121 - 150 days 50 79

Past due more than 150 days 165 175

Trade receivables 1,813 2,061

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

collateral as security.


84 85

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

24-Changes in equity

Share

capital

Treasury

shares

Other

reserves

Retained

earnings

Total

Minority

interest

Total

equity

As of January 1, 2007 1,100 (754) 1,226 10,041 11,613 713 12,326

- available-for-sale financial assets - - 3 - 3 - 3

- cash flow hedges - - (21) - (21) - (21)

Currency translation differences - - (184) - (184) 18 (166)

Share of profit recognized directly in

equity of associates - - 14 - 14 - 14

Net income recognized directly in

equity

- - (188) - (188) 18 (170)

Profit for the year - - - 11,563 11,563 372 11,935

Total recognized income as of

December 31, 2007 - - (188) 11,563 11,375 390 11,765

Dividends paid - - - (787) (787) (364) (1,151)

Dividends paid to employees - - - (103) (103) - (103)

Share based compensation - - 49 - 49 - 49

Cancellation of shares (10) 636 (17) (609) - - -

Purchase of treasury shares - (4,847) - - (4,847) - (4,847)

Acquisition of minority interest - - - - - (217) (217)

Reclassifications - - 34 (34) - - -

As of December 31, 2007 1,090 (4,965) 1,104 20,071 17,300 522 17,822

Share

capital

Treasury

shares

Other

reserves

Retained

earnings

Total

Minority

interest

Total

equity

As of January 1, 2008 1,090 (4,965) 1,104 20,071 17,300 522 17,822

- available-for-sale financial assets - - (19) - (19) - (19)

- cash flow hedges - - (484) - (484) - (484)

Currency translation differences - - (1,140) - (1,140) (21) (1,161)

Share of profit recognized directly in

equity of associates - - 27 - 27 - 27

Net income recognized directly in

equity

- - (1,616) - (1,616) (21) (1,637)

Profit for the year - - - 2,464 2,464 378 2,842

Total recognized income as of

December 31, 2008 - - (1,616) 2,464 848 357 1,205

Dividends paid - - - (909) (909) (331) (1,240)

Dividends paid to employees - - - (88) (88) - (88)

Share based compensation - - 71 - 71 - 71

Cancellation of shares (191) 15,526 (95) (15,240) - - -

Purchase of treasury shares - (12,058) - - (12,058) - (12,058)

Sale of treasury shares - 632 (4) - 628 - 628

Capital increase in subsidiaries - - - - - 85 85

As of December 31, 2008 899 (865) (540) 6,298 5,792 633 6,425

24-1 Authorized and Issued Share Capital

As of December 31, 2007 the issued and paid up share capital

amounted to LE 1,090 million comprising 1,090,000,000

shares of a nominal value of LE 1 per share. The Company

is listed on both the Cairo and Alexandria Stock Exchange

and also has GDR’S (where one GDR is equivalent to 5 local

shares) listed on the London Stock Exchange.

On February 24, 2008, the Extraordinary General Meeting

approved a share capital reduction through the cancellation

of 61,900,000 treasury shares (11,612,970 GDR and

3,835,150 local shares) amounted to L.E 4,831 million (867

USD million). The cancellation of the shares took place on

June 16, 2008. Accordingly, the issued and paid up share

capital became L.E. 1,028 million as of June 30, 2008

comprising 1,028,100,000 shares of nominal value L.E. 1

per share.

Furthermore, on August 8, 2008, the Extraordinary General

Meeting approved a share capital reduction through the cancellation

of 128,697,126 treasury shares (22,891,514 GDR’s

and 14,239,556 local shares) amounted to L.E. 10,694

million. The cancellation took place on September 11, 2008.

Accordingly, as a result of the above transactions, as of

December 31, 2008 the issued and paid up share capital

amounted to LE 899 million comprising 899,402,874 shares

of a nominal value of LE 1 per share.

The legal reserve connected with the cancelled shares

including currency translation differences, amounting to LE

95 million, was reclassified from other reserves to retained

earnings

24-2 Treasury Shares

As previously explained as of December 31, 2008, the

Company cancelled a total of 190,597,126 treasury shares

(34,504,484 GDR and 18,074,706 local shares) at total cost

of L.E. 15,526 million.

On May 14, 2008, the Company purchased 105,999,773

shares (11,177,963 local shares and 18,964,362 GDR’s),

through a tender offer at a purchase price of LE 83 per local

share and US$ 77.41 per GDR.

On July 2, 2008, the Company purchased 11,999,403

25- Borrowings

As of December 31, 2008

As of December 31, 2007

within

one year

1-2

years

2-3

years

3-4

years

4-5

years

after 5

years

Liabilities to banks 2,390 2,588 4,130 5,231 8,966 1,162 24,467

Total

9,607 3,178 3,985 2,722 1,194 1,331 22,017

Bonds 196 282 75 346 1,398 4,080 6,377

531 36 364 97 331 5,495 6,854

Derivative instruments 231 200 127 64 8 - 630

31 - - - - - 31

Other borrowings 113 30 39 32 36 - 250

66 18 22 14 5 - 125

Total as of December 31, 2008 2,930 3,100 4,371 5,673 10,408 5,242 31,724

Total as of December 31, 2007 10,235 3,232 4,371 2,833 1,530 6,826 29,027

Liabilities to banks

Appendix A includes a detailed analysis of liabilities to banks

as of December 31, 2008.

In addition to the normal scheduled repayments of borrowing

facilities, in accordance with the relevant agreements,

the main changes in liabilities to banks during 2008 relates

to financing transactions by the Company and PMCL, primarily

for the purpose of refinancing existing borrowings.

As of December 31, 2007 the Company had an amount of

EGP 11,600 million outstanding relating to a syndicated loan

facility. Following the disposal of Hutchison Telecommunications

in January 2008, the Group was required to make a

mandatory prepayment of EGP 5,331 million equivalents to

US$ 958 million of this facility from the proceeds of the disposal.

During the year, in accordance with the contractual

conditions, the Company also made additional repayments

of EGP 770 million of this facility. Following these repayshares

(3,035,563 local shares and 1,792,768 GDR’s),

through a tender offer launched on May 27, 2008 at a purchase

price of LE 83 per share and US$ 77.77 per GDR.

In addition to the two fixed price tender offers, during the

year ended December 31, 2008 the Company purchased

from the market 46,560,120 shares to be held as treasury

shares and sold 18,206,500 shares to the market.

24-3 Share based compensation plan

During the year ended December 31, 2008 the Group acquired

1,383,855 of its own shares Share grants exercised

during 2008 resulted in 1,223,148 shares.

As a result of the above transactions, as of December 31,

2008 the Company had 21,343,485 shares held as treasury

shares and for the purposes of the share based compensation

plan, the market value of these shares at 31 December

2008 is L.E 642 million.

24-4 Dividends

The Shareholders’ Meeting of the Company held on April 21,

2008 approved a dividend distribution of LE 1 per share (LE

5 per GDR) which was paid on June 5, 2008. The dividend

distribution in 2007 amounted to LE 0.75 per share (LE 3.75

per GDR).

ments the amount outstanding was EGP 5,427 million.

During the second quarter of 2008, the Company entered

into an agreement to refinance the amount outstanding

under this facility using the proceeds from a new five year

senior secured syndicated debt facility. The proceeds from

the new facility, of EGP 13.8 billion equivalent to US$ 2.5

billion, were partially used to repay previous facilities and to

finance the tender offer for the acquisition of treasury shares

(see “Treasury shares” for further details on these transactions

24-2). The new facility has duration of five years and is

due in 2013 with a grace period of two years.

Additionally, during 2008 PMCL entered into a syndicated

loan for an amount of PKR 22,060 million (equivalent to

EGP 1,544 million). The loan, which was fully drawn down

in 2008, is repayable in six semi annual installments between

July 2011 and January 2014. The proceeds from the

loan were used to refinance existing borrowings amounting


86 87

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

to EGP 1,368 million and to finance ongoing capital expenditure

programs.

Bonds

Appendix B includes a detailed analysis of Bonds as of December

31, 2008. During 2008 PMCL received proceeds of

PKR 1,899 million (equivalent to EGP 146 million) from the

issuance of new unsecured term finance certificates. The

bond bears interest of 6 months KIBOR plus a spread of

1.65% and is repayable on 28 October 2013.

Currency and Interest Rate Information of Borrowings

As of December 31, 2008

USD Euro Egyptian

Pound

Pakistan

Rupee

Derivatives

Details of the derivative liabilities are provided in Note 19

“Other financial assets”.

Financial liabilities include secured liabilities of EGP 21,566 million as of December 31, 2008 and EGP 20,195 million as of December

31, 2007. In general, the financial liabilities are secured on property and equipment of the relevant subsidiary, pledged

shares and receivables.

The increase in telecommunication license payable relates to the 3G license acquired by ECMS.

Other Borrowings

Other borrowings mainly include notes payable to suppliers

and loans from minority shareholders in subsidiaries.

Bangladeshi

Taka

Algerian

Dinar

Tunisian

Dinar

Others

Total borrowings by currency

of issue 22,266 2,332 2,963 3,187 336 287 304 49 31,724

Notional amount of currency

derivatives (1,746) (1,687) - 3,433 - - - - -

Borrowings after

derivative effect 20,520 645 2,963 6,620 336 287 304 49 31,724

of which (after derivative

effect):

floating rate borrowings 6,141 601 2,537 6,616 335 287 295 - 16,812

fixed rate borrowings 14,379 44 426 4 1 - 9 49 14,912

As of December 31, 2007

Total borrowings by currency

of issue 18,562 2,662 2,852 3,485 317 725 424 - 29,027

Notional amount of currency

derivatives (1,722) (1,803) - 3,525 - - - - -

Borrowings after

derivative effect 16,840 859 2,852 7,010 317 725 424 - 29,027

of which (after derivative

effect):

floating rate borrowings 3,983 781 1,839 7,010 317 725 419 - 15,074

fixed rate borrowings 12,857 78 1,013 - - - 5 - 13,953

26- Other liabilities

Current

2008 2007

Non-current

Total Current Non-current

Telecommunication license payable 1,120 1,070 2,190 399 988 1,387

Taxes (Other than income taxes) 1,051 - 1,051 1,177 - 1,177

Prepaid Traffic and deferred income 1,065 - 1,065 933 - 933

Due to local authorities 346 - 346 676 - 676

Personnel payables 293 - 293 410 - 410

Other 862 147 1,009 705 92 797

Total 4,737 1,217 5,954 4,300 1,080 5,380

Total

Total

27- Trade payables

Trade payables are all due within one year.

28- Earnings per share

2008 2007

Capex payables 3,622 3,602

Trade payables due to suppliers 1,438 1,214

Trade payables to telephone operators 409 251

Other trade payables 1,098 962

Total 6,567 6,029

(a) Basic

Basic earnings per share is calculated by dividing the

profit attributable to equity holders of the Company by the

weighted average number of ordinary shares outstanding

Attributable to the equity holders of the Company:

2008 2007

- Profit from continuing operations (in million of EGP) 2464 6350

- Profit from discontinuing operations (in million of EGP) - 5213

2,464 11,563

Weighted average number of shares (in number of shares) 936,675,662 1,043,162,950

Earnings per share – basic (in EGP)

- from continuing operations 2.63 6.09

- from discontinuing operations - 5,00

(b) Diluted

Diluted earnings per share is calculated by adjusting the

weighted average number of ordinary shares outstanding to

Attributable to the equity holders of the Company:

2.63 11.09

2008 2007

Profit from continuing operations (in million of EGP) 2,464 6,350

Profit from discontinued operations (in million of EGP) - 5,213

2,464 11,563

Weighted average number of shares in issue (in number of shares) 936,675,662 1,043,162,950

Adjustments for:

- Shares granted (in number of shares) 2,245,362 912,162

Weighted average number of shares for diluted earnings per share (in number of shares) 938,921,024 1,044,075,112

Earnings per share – diluted (in EGP)

during the year, excluding ordinary shares purchased by the

Company and held as treasury shares or for the purposes of

the share based compensation.

assume conversion of all dilutive potential ordinary shares.

During 2007 and 2008 the dilutive potential ordinary shares

relate to the share based compensation plan.

- from continuing operations 2.63 6.09

- from discontinuing operations - 5,00

29- Business combinations

During 2008 the Group acquired 100% of share capital of

two GSM telecommunications operators in Central African

Republic and Burundi through its subsidiary Telecel Globe

2.63 11.09

and a telecommunication company operating in the software

development, internet and related services through its

subsidiary Intouch.


88 89

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

The following table provides details of main acquisitions during 2008:

(*) The provisional fair value is approximated with the acquirees’ carrying amounts.

U-COM

The Group acquired U-COM, a mobile telecommunications

operator in Burundi for a cash consideration of US$ 77 million

equivalent to EGP 421 million. U-COM is consolidated

from the third quarter 2008 and contributed revenues of

EGP 77.5 million and net profits of EGP 16.6 million to the

Group during the period.

U-Com Burundi operates GSM 900/1800, CDMA 800, and

WIMAX (in Bujumbura) networks and is the market leader

with 246,000 subscribers and over 70% market share in

Burundi. The goodwill is attributable to the strong market

position of U-COM in Burundi.

Telecel Centrafrique

The Group acquired the Central African GSM telecommunications

operator Telecel Centrafirque (“Telecel”)for a

cash consideration of US$ 34 million equivalent to EGP 186

million. Telecel Centrafrique is consolidated from the third

quarter 2008 and contributed revenues of EGP 60.8 million

and net loss of EGP 27 million to the Group during the

period.

The goodwill is attributable to Telecel Centrafrique market

position. The company utilizes a GSM 900/1800 network

and is the largest operator in the Central African Republic

with over 113,000 subscribers and 37% market share.

WOL Telecom Limited

The Group acquired 100% of the share capital of WOL

Telecom Limited (“WOL”), a telecommunication company,

operating in software development, internet and related services,

for a cash consideration of EGP 93 million equivalents

to USD 17 million. WOL is consolidated from January 1,

Provisional fair value (*)

U-COM Telecel WOL

Cash and cash equivalents 16 16 49

Property and equipment 93 104 38

Intangible assets 5 - 11

Deferred tax assets 5 - -

Inventories 5 5 -

Trade receivables 16 49 5

Other current assets (16) 16 5

Non-current borrowings - (38) -

Other non-current liabilities - (22) -

Current borrowings - (16) -

Other current liabilities (27) (22) (16)

Trade payables (4) (4) (15)

Current income tax liabilities (11) - -

Net identifiable assets acquired 82 88 77

Provisional goodwill 339 99 16

Cash consideration 421 187 93

Cash and cash equivalents in subsidiary

acquired

(16) (16) (49)

Cash outflow on acquisition 405 171 44

2008. The goodwill is attributable to WOL’s market positioning

and the synergies expected to arise after its acquisition

by the Group. The goodwill is attributable to the internet and

fixed line segment.

See note 36 “Subsequent events” for the business combination

that took place after the balance sheet date but before

the approval of these financial statements.

30- Acquisition of Associates

Globalive

During 2008 Orascom Telecom Holding Canada (Malta)

Limited (“OTHCML”) acquired an interest in Globalive

Canada Holdings Corp (“Globalive”). This investment

comprises a combination of voting and non-voting rights.

Including direct and indirect interests, OTHCML holds 65.4%

of the outstanding shares and directly holds 33.2% of the

voting rights. The investment is equity accounted as the

Group only has significant influence and not control over the

financial and operating policies of this company.

In March 2009, Globalive was awarded CAD 442 million

equivalent to EGP 2 billion of spectrum licences from

Industry Canada’s Advances Wireless Services Spectrum

Auction. Globalive will offer a wireless service across

Canada in a market that is not fully penetrated and which

offers relatively high ARPU. Globalive expects to launch its

network to consumers in the fourth quarter of 2009.

During 2008, Globalive Management Corp (“GWMC”, a

subsidiary of Globalive) entered into two loan agreements

with the Company to borrow up to a total of CDA 508 million

equivalent to EGP 2.3 billion . As of December 31, 2008

the outstanding loan amount, including accrued interest

amounts to EGP 2.2 billion (equivalent to US$ 483 million).

Both loans are secured non-revolving term loans, bearing interest of Libor plus 18%. The loans are secured by an assignment

of the spectrum licenses and are guaranteed, on a limited recourse basis, by some of the investment held by GWMC.

The following table provides selected financial information of Globalive as of December 31, 2008 and for the year ended December

31, 2008.

Total assets 2,074

Total liabilities 2,243

Revenue -

Net loss (154)

% shareholding 65.4%

proportional share of net loss (101)

Elimination of proportional share of intragroup interest expense 85

Share of loss in associate (16)

31- Interest in joint ventures

The Group has the following interest in its joint ventures:

Joint venture Shareholding Country of domiciliation

Egyptian Company for Mobile Services S.A.E. 34.67% Egypt

Orascom Telecom Tunisie S.A. 50.00% Tunisia

Consortium Algerian Telecommunication S.P.A. 50.00% Algeria

The following amounts represent the assets, liabilities, revenues

and profit for the year of the joint ventures. They are

included in the balance sheet and income statement of the

Group’s consolidated financial statements according to its

shareholding in each joint venture.

2008 2007

Revenues 13,979 11,394

Profit for the year 1,352 1,151

Current assets 2,635 2,682

Non-current assets 15,869 13,117

Current liabilities 7,328 6,333

Non-current liabilities 7,400 5,776

32- Commitments

The commitments as of December 31, 2008 and 2007 are provided in the table below:

As of December31,

2008

As of December 31,

2007

Intangible assets 766 1,925

Property and equipment 1,870 2,029

Others 604 237

Total 3,240 4,191

Commitments for the purchase of intangible assets mainly

relate to commitments of ECMS amounting to EGP 597 million

primarily relating to the acquisition of the 3G licence

Commitments for purchase of property and equipment

mainly relate to commitments of Mena Cable amounting to

EGP 842 million relating to the purchase of marine cables

and related equipment.

Other purchase commitments mainly relate to the commitment

of Telecel Globe to purchase Powercom Limited for

an amount of EGP 327 million. The first installment of this

commitment, amounting to EGP 166 million, is due in January

2009 and the remaining installment, of EGP 161 million,

is due one year later.


90 91

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

The following table provides the future aggregate minimum lease payments under non-cancellable operating leases:

2008 2007

Within one year 152 138

Between 1-5 years 650 607

After 5 years 227 238

1029 983

33- Share based compensation

The following table provides a summary of the Company’s existing Executive Share Option Plans (ESOP), not expired as of

December 31, 2008:

Grant date Tranche GDRs

granted (thousands)

The ESOP was introduced in 2003 and the Company since

then uses treasury shares bought from the market to cover

the plan. The Board of Directors of the Company has appointed

a Committee that can grant GDR options or GDRs

to employees of the Company and its subsidiaries through

Orascom Telecom ESOP Limited., Malta, a wholly owned

subsidiary. Such GDRs of the Company are listed on the

London Stock Exchange and denominated in US$. Awards

under the ESOP are generally reserved for employees at

a senior management level and above that have spent

at least one full year of services in the Company and that

have a satisfactory performance according to their appraisal

reports. The Company has made annual grants on July 1

each year since 2003; from 2007 onwards additional GDRs

Vesting period

(months)

Weighted

exercise price

in EGP

GDR price at

grant date in

EGP

Fair value of

GDRs at grant

date in EGP

July 1, 2004 3 4 42 50.92 51.42 26.51

July 1, 2005 2 20 30 - 280.62 272.32

July 1, 2005 3 40 42 - 280.62 269.61

July 1, 2006 2 29 30 - 225.83 219.13

July 1, 2006 3 31 42 - 225.83 216.97

January 1, 2007 2 53 24 - 365.31 348.59

January 1, 2007 3 53 36 - 365.31 395.16

July 1, 2007 1 46 18 - 359.22 352.08

July 1, 2007 2 46 30 - 359.22 348.59

July 1, 2007 3 46 42 - 359.22 345.16

January 1, 2008 1 11 12 - 459.41 442.80

January 1, 2008 2 25 24 - 459.41 437.65

January 1, 2008 3 29 36 - 459.41 432.78

July 1, 2008 1 25 18 - 348.15 336.58

July 1, 2008 2 25 30 - 348.15 331.21

July 1, 2008 3 25 42 - 348.15 326.01

were granted on January 1 to existing employees. The

GDRs granted vest in three installments over the vesting

periods that vary from 12 to 42 months. Starting from 2005

GDRs are granted for free and must be exercised within two

years after the end of the vesting period. Exercise of an

award is subject to employment in the Group at the exercise

date. The Group has no legal obligation to repurchase or

settle the awards in cash.

GDRs were valued using the Black-Scholes option-pricing

model. The assumptions for calculations of the fair value

per GDR at the grant date include the GDR price at each

grant date, nil exercise price, a GDR price volatility between

29% and 69%, a dividend yield of 1% and an annual risk

free rate between 3.74% and 6.43%.

The following table provides a breakdown of the movements of outstanding GDR options and GDRs granted and their weighted

average exercise price:

Average

exercise price

in EGP per

GDR option

granted

2008 2007

GDR options

(thousands)

GDRs granted

for free

(thousands)

Average

exercise price

in EGP per

GDR option

granted

The weighted average GDR price during 2008 amounted to US$ 48.65 (2007; US$ 70.33).

The following table details the range of exercise prices and the weighted average remaining contractual life of outstanding

awards as of December 31, 2008 and 2007:

The table below sets forth the awards outstanding as of December 31, 2008 and their expiry dates:

GDR options

(thousands)

GDRs granted

for free

(thousands)

At January 1 50.92 80 478 26.35 483 227

Granted - - 140 - - 297

Forfeited - - (6) - - -

Exercised 50.92 (76) (108) 21.48 (403) (46)

Expired - - - - - -

At December 31 9.20 4 504 9.20 80 478

thereof exercisable 4 20 - - -

Range of exercise

price in EGP

Weighted

average exercise

price in

EGP

December 31, 2008 December 31, 2007

Number of

GDRs (thousands)

Weighted

average

remaining life

in months

Weighted

average exercise

price in

EGP

Number of

GDRs (thousands)

Weighted

average

remaining life

in months

50.92 50.92 4 12 50.92 80 24

nil nil 504 36 nil 478 40

Expiry date - December 31

Exercise price in EGP per

GDR

GDRs (thousands)

2008 2007

2009 0 - 50.92 24 208

2010 - 179 174

2011 - 180 130

2012 - 100 46

2013 - 25 -

Total 508 558

34- Related party transactions

Transactions with subsidiaries, associates, with the Parent

Company and its subsidiaries and other related parties are

not considered atypical or unusual, as they fall within the

Group’s normal course of business and are conducted under

market conditions that would be performed by independent

third parties.


92 93

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

The main related party transactions are summarized as follows:

Weather Investments Group

Sale of services and

goods

Transactions with Weather Investments Group

The Group is directly controlled by Weather Investments.

Transactions with Weather Investments and its subsidiaries

mainly relate to management fees charged by the Company

and interconnection traffic between the Group and the

subsidiaries of Weather Investments, and particularly Wind

Telecomunicazioni SpA.

Transactions with Joint Ventures of the Group

Transactions with joint ventures of the Group mainly refer to

transactions with OTT and ECMS relating to interconnection

traffic and the sale of handsets.

Transactions with Associates of the Group

OTH provided financing to Globalive Investment Holdings

Corp’s subsidiary, Globalive Wireless Management Corp

Purchase of services and

goods

Interest income

2008 2007 2008 2007 2008 2007

Weather Investments 66 32 1 - - -

Wind Telecomunicazioni SpA 197 137 33 45 - -

Joint ventures

ECMS 16 115 - - - -

OTT 93 72 203 96 - -

Associate

GWMC - - - - 49 -

Other related parties

Orascom Construction Industries - - 16 74 - -

Orascom Technology Solution - - 27 40 - -

Orascom Trading - - 55 68 - -

Orascom Training & Technology - - 66 6 -

Total 372 356 401 329 49 -

Weather Investments Group

Receivables

Payables

2008 2007 2008 2007

Weather Investments 77 33 6 -

Wind Telecomunicazioni SpA 33 17 22 11

Joint ventures

ECMS 28 39 6 6

OTT 11 82 28 39

Associate

GWMC 2,220 - - -

Other related parties

Orascom Construction Industries - - 6 -

Orascom Technology Solution 5 6 6 -

Orascom Trading - - 11 11

Total 2,374 177 85 67

(“GWMC”), an associate of the Group, in connection with

the funding of the acquisition of the spectrum licenses. For

further details see Note 30 “Acquisition of associates”.

Transactions with other related parties

The Group is indirectly controlled by the Sawiris family.

Transactions with entities under the control of the Sawiris

family mainly refer to transactions with Orascom Constructions

Industries, Orascom Technology Solutions, Orascom

Trading and Orascom Training & Technology.

Transactions with Orascom Technology Solutions mainly refer

to maintenance activities of electronic hard- and software

carried out for the Group. Orascom Constructions Industries

and Orascom Trading mainly provide maintenance and

construction services for the buildings the Group is working

in, whereas transactions with Orascom Training & Technol-

ogy mainly include management training programs.

Furthermore, during 2008 the Group acquired 98.9% of

MMS from companies controlled by the Sawiris family for

a total purchase consideration of US$ 7 million through its

subsidiary Ring For Distributions.

35-Contingent assets and liabilities

The Group is subject to various legal proceedings and

claims which arise in the ordinary course of business due to

the nature of the operations of the Group and the nature of

the markets where the Group operates.

The Group recognizes a provision for losses and liabilities

when the existence is certain or probable. As of December

31, 2008 the Company is a party in a number of legal cases

which resulted from carrying out its activities. Based on the

legal advice obtained, the Company’s management believe

that the outcome of these lawsuits, individually or in aggregate,

would not be material to the Group’s results.

PMCL is involved in proceedings regarding tax claims up

to the year 2005 whereby the tax authorities conducted

assessments by curtailing expenditure claimed by PMCL.

The appeals have been decided by the second level tax

appellate forum and the assessments have been set aside

for fresh consideration. With the exception of the 2005 tax

year, the re-assessment has been completed. However,

Pac has appealed against the re-assessment. The amount

under dispute is equal to approximately PKR 1 709 million

equivalent to EGP 110 million.

The Jordanian Tax Authority has initiated proceedings

against Pioneer Investment Ltd., a wholly owned subsidiary

of the Group, in connection with the sale of Fastlink (Jordan

Mobile Telecommunication Services). The amount under

dispute is approximately Diners 49.2 million equivalent to

EGP 343 million. At present the Group is not in a position

to assess the status of the case.

The Group resorted to the International Chamber of

Commerce Arbitration regarding a material breach of the

Shareholders’ Agreement entered into between Orascom

Telecom and France Telecom in relation to the management

of Mobinil for Telecommunications and Egyptian Company

for Mobile Services (ECMS). Although no official timeline

has been communicated to the management, the management

expects a decision on the matter sometime before end

of June 2009. The management is not in a position to opine

on the outcome of the arbitration process

Orascom Telecom Iraq upon the disposal of its investment

in (Iraqna for Mobile Services-subsidiary) provided warranty

to the purchaser of the investment. This warranty, for a

maximum amount of US$ 120 million,( equivalent EGP 664

million) is in respect of claims and tax covenant claim and

includes all legal and other professional fees and expenses

payable by the company in respect of all such claims and

tax covenant claims, of which no more than US$ 60 million

(equivalent to 332 million ) shall be payable in relation to tax

covenant claim.

Telecom Egypt filed a complaint with the dispute resolution

committee of the National Telecommunication Regulatory

Key management compensation

Key management includes executive and non executive

directors of the Board of Directors of the Company, the

Company’s chief financial officer, other managing directors

considered key personnel and the chief executive officers

of significant subsidiaries and joint ventures. The compensation

paid or payable to key management for employee

services is shown below:

Key management compensation 2008 2007

Salaries and other short-term employee benefits 60 57

Equity settled share based payments 11 17

(NTRA), with the purpose of changing its interconnection

prices with the mobile operators, despite the fact that there

are existing contracts with the operators. In response ECMS

requested the committee to respect the prices of contracts

in effect. The NTRA issued a ruling on the dispute on

September 3, 2008 in favor of Telecom Egypt by changing

the interconnection prices between the fixed and mobile networks

to be effective from that date. On November 1, 2008

a law suit against the NTRA was filed in the Administrative

Court at the State Counsel asking for staying and nullifying

the NTRA decision.

Based on the legal advice obtained, ECMS’s management

believes that ECMS has a strong legal and contractual position;

therefore ECMS recorded interconnection traffic with

Telecom Egypt based on the existing agreement. If ECMS

had applied Telecom Egypt’s interpretations, it would have

negatively impacted the Group’s interconnection revenue by

EGP 49 million equivalents to US$ 9 million, and decreased

interconnection cost by EGP 34 million equivalents to US$ 3

million for the current financial year.

On December 23, 2008 OTA received a provisional corporate

tax assessment amounting to EGP 310 million equivalents

to US$ 56 million relating to year 2004. Management

illustrated its position to the tax administration at January 31,

2009. As management considers most of the tax assessment

challengeable, it did not accrue any provision.

InTouch group received a tax claim amounting to EGP 22

million equivalents to US$ 4 million. Management believes

that the process is still in its early stages and that at present

the Group is not in a position to assess the potential liability

in this regard.

OTT received a notification on tax investigation during

2006 regarding electronic recharge sales. The total amount

claimed by the tax authority is estimated to be EGP 293 million

(the Group’s proportionate share of such claim amounts

to approximately EGP 147 million). In 2007 OTT received

the first judgment according to which the amount was

reduced to EGP 66 million equivalents to US$ 12 million.

Management believes to be fully compliant with Tunisian

legislation. However, due to uncertainties of the legal environment,

managements provided for the amount fully. The

Group’s proportionate share of this provision amounts to

EGP 33 million equivalents to US$ 6 million.

The tax exposure of U-Com Burundi, a subsidiary of Telecel

Globe, amounts approximately to EGP 66 million including

penalties, as of December 31, 2008. As at present the

Group is not in a position to assess the status of the case,

no provision has been accounted for.

The Group has provided guarantees and letters of credit

in the ordinary course of business of the Group’s activities.

Guarantees include the following:


94 95

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

• Letter of guarantee in an amount of EGP 161

equivalent to 29 USD million which represent the

unpaid portion in investment in Power Com Company

located in Nambia;

• Letter of guarantee in an amount of US$ 2 million

equivalent to 11 million provided by OTH to BBG

Telecommunication;

• Letter of Guarantee amounting to US$ 1 million

equivalent to EGP 5.5 million in favour of NTRA

to guarantee MENA Cable execution of its entire

obligations related to constructing, operating and

renting sea cables networks and its infrastructure

for international communication;

• Letters of guarantee provided by Ring Egypt, of

which the uncovered portion amounts to EGP 102

million equivalent to 18.5 USD million, provided to

mobile handset suppliers;

• Letters of guarantee provided by ECMS to National

Telecom Regulatory Authority. The Company’s

share in such letters of guarantee is equal to EGP

89 million.

• Guarantee provided by mobilink on behalf of

Dancom online with an amount of PKR 148 million

equivalents to EGP 11 million.

36- Subsequent events

Acquisitions and participations

On January 2009 the Group acquired 100% of the Namibian

telecommunications operator, Cell One, through its subsidiary

Telecel Globe. This acquisition together with the acquisition of

TUCOM and TCAR are part of Telecel Globe’s strategy to target

licenses and mobile operators in small and medium sized

developing countries that have high growth potential.

The total purchase consideration amounted to EGP 327 million

equivalents to US$ 59 million.

In March 2009 the company announced that Globalive

Wireless Management Corp. (“Globalive Wireless”), in which

OTH has a 65.4% indirect equity ownership, has officially

been granted its spectrum license from Industry Canada and

has received the corresponding spectrum. Globalive Wireless

participated in Industry Canada’s Advanced Wireless

Services Spectrum Auction in May 2008, purchasing CAD

442 million in provisional spectrum. Following a standard review

period, Globalive has been granted its license, having

met the eligibility requirements specified by Industry Canada

to become a spectrum license.

Disposals

On January 13, 2009 OTH disposed of 100% of its investment

in M-Link to TLC Servizi S.p.A. which is a wholly owned

subsidiary of Wind Telecomunicazioni S.p.A. for a total consideration

of US$ 77 million equivalent to EGP 426 million..

On February, 2009 OTH received an indicative non-binding

offer from ECMS for the acquisition of 100% of the shares

of LINKdotNET and Link Egypt. The offer was approved by

the Board of Directors of ECMS on February 20, 2009. The

transaction will be subject to standard due diligence procedures

and the valuation will be based on arm’s length legal

requirements which are in line with best practice. The valuation

will be finalized at the end of the due diligence process

and will be subject to approval by the OTH Board of Directors.

Oscar bond

On February 12, 2009 Orascom Telecom issued US$ 230

million secured equity-indexed notes through a private

placement. Such secured equity indexed notes mature in

2013 and bear floating rate interest of Libor plus 5%.The

minimum/maximum redemption amount is based on the

performance of the Company’s GDR’s.

Share transactions

In February 2009, the Company plans a potential GDR and

local shares repurchase from the market of up to 27 million

shares (5.4 million GDRs) over the following three months.

The potential buy back consist with what was declared in

August 2008, to buy 44, 5 million shares (8.9 million GDRs)

over twelve month from that date.

Other events

On January 13, 2009 the Company was awarded the

management contract for one of two Lebanese mobile

telecommunications operators. The management contract

has duration of one year which can be further extended for

another year.

International Chamber of Commerce decision Concerning

Mobinil Telecom

- Mobinil for Telecommunications S.A.E. (“Mobinil”)

(unlisted Company) is a jointly controlled entity

between Orascom Telecom Holding S.A.E. (“OTH”)

and France Telecom (“FT”). FT owns 71.25% of the

shares of Mobinil, and OTH owns the remaining

28.75%. The purpose of Mobinil is to acquire the

license of the first Mobile network (GSM) in Egypt

through the Egyptian Company for Mobile Services

(“ECMS”) “the operator” which is owned by Mobinil

at 51%. The shares of ECMS are traded in Egypt

Stock Exchange. In addition.

- On August 8th 2007, OTH initiated arbitration

against FT at the Arbitration Court of the International

Chamber of Commerce (ICC) regarding

the dispute related to determining the identity of

the shareholders who are entitled to acquire the

interest of another partner in Mobinil based on the

provisions of the shareholders agreement.

On March 10th, 2009, the ICC has issued its award which is

summarized as follows:-

1-OTH has to sell and transfer the ownership of all its

shares in Mobinil amounting to 9 079 shares to FT

at the price of L.E. 441.658 per share with a total

amount of L.E. 4 009 812 982 which has to be paid

on its equivalent in U.S. Dollars at the exchange

rate of the payment date.

2-OTH has to execute the sale not later than a 30

days period from arbitration award date, and in

case OTH fails to execute the sale within the said

period, a delay penalty of U.S.$. 50 000 per day

shall be levied against OTH..

3-Rejecting the other claims and the claims of compensation

presented by the parties in dispute.

On April 7th, 2009, the Capital Market Authority (CMA)

issued its decision in regard to the legal effect based on

the execution of the arbitration award and its impact on the

minority interest of ECMS (a listed company in Egypt Stock

Exchange) which stipulated the following:-

- The provision of Article No. (327) of the executive

regulations of the Capital Market Law that is

relevant to the purchase offers for the purposes of

acquisition stipulates that equality and equal opportunities

among the holders of financial securities

subject to the purchase offer must be in place.

- The provision of Article No. (353) of the said

executive regulations also included the obligatory

cases in which a mandatory purchase offer to buy

the entire shares and the convertible bonds of the

company targeted by the offer, in addition to the

stipulation of paragraph No. (3) of the same article.

- Whereas, the execution of the arbitration award

results in an indirect acquisition by FT of more than

50% of the capital or voting rights.

- Whereas there is a close relationship between the

transfer of the ownership of the shares of Mobinil

to FT which results in the acquisition of 51% of the

shares of ECMS.

- And whereas the only activity of Mobinil is the

ownership of a stake that is more than 50% of the

shares of ECMS and exercising its voting rights

related thereto, therefore, the execution of the ownership

transfer process relevant to the execution of

the arbitration award cannot be separated from the

liabilities arising from the said award. Especially,

the processes of transferring the ownership of the

shares of ECMS in the light of the obligation of

presenting a mandatory purchase offer.

(in million of EGP)

Year end

31, December

2007

as reported

In addition to the necessity of execution on the

shares of ECMS in a direct and indirect way,

through the acquisition of the partner’s stake in

the shares of Mobinil, simultaneously. Hence the

transfer of ownership of the same share cannot be

accepted whether in a direct or an indirect way at

two different prices in the same time.

- The Capital Market Authority (CMA) refused the

mandatory purchase offer presented by FT to acquire

all the shares of ECMS as it is to the contrary

of the principle of equality and equal opportunities

among the securities’ owners.

Due to the fact of not reaching a clear agreement in

regard to the minority interest of the shareholders

of ECMS, the management of OTH, currently, cannot

estimate the financial impact of this event on

the financial statements of the company.

37- Reconciliation of previous disclosure

The following table provides a reconciliation between the

income statement classified by function as reported in the

consolidated financial statements for 2007 and the income

statement classified by nature, disclosed for comparative

purposes in these annual consolidated financial statements

as of and for the year ended December 31, 2008.

Reclassification due to changing

of presentation from functional to nature

Year end

31, December

2007

as reclassified

A B C

Net revenues 26,909 - - (115) 26,794

Other income 167 - - 115 282

Operating cost (14,460) - 14,466 (6) -

Distribution expenses (1,406) 1,406 - - -

Administrative expenses (3,349) 3,349 - - -

Remunerations and allowances for Board

(4) 4 - - -

members

Purchases and services - (2,603) (10,351) (17) (12,971)

Other expenses (385) (299) (374) 160 (898)

Personnel costs - (1,341) - - (1,341)

Depreciation and amortization - (516) (3,741) - (4,257)

Impairment of non-current assets - - - (106) (106)

Gains/(losses) on disposal of non-current

- - - (15) (15)

assets

Operating income 7,472 - - 16 7,488

Net financing costs (2,494) - 2,494 - -

Financial expense - - (2,948) - (2,948)

Financial income - - 216 - 216

Foreign exchange gain/(losses) - - 238 - 238

Share of profit/(losses) of associates 4,315 - - - 4,315

Gain / (loss) on disposal of associates - - - (16) (16)

Profit before tax 9,293 - - - 9,293

Income tax (2,571) - - - (2,571)

Profit from continuing operations 6,722 - - - 6,722

Profit from discontinuing operations (after 5,213 - - - 5,213

tax)

Profit for the year 11,935 - - - 11,935

Attributable to:

Equity holders of the company 11,563 11,563

Minority interest 372 372


96 97

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

A

Administrative expenses and distribution expenses have

been reclassified according to their nature. In particular an

amount of EGP 1,341 million was reclassified to personnel

costs, an amount of EGP 2,603 million and to purchase and

services, an amount of EGP 516 million to other expenses

and an amount of EGP 299 million to depreciation and

amortization.

The reclassifications to purchase and services mainly relate

to consulting and professional services and expenses for

maintenance and utilities. The reclassification to other expenses

mainly relate to taxes other than income taxes and

expenses for traveling and staff training.

The reclassification of EGP 1,406 million from distribution

expenses to purchase and services mainly relates to the

reclassification of marketing and promotion expenses.

B

Net finance costs have been reallocated to financial expenses

for EGP 2,948 million, to financial income for EGP 215

million and to foreign exchange gains for EGP 238 million.

Operating costs have been reclassified according to their

nature. In particular an amount of EGP 10,351 million

was reclassified to purchase and services, an amount of

EGP 3,741 million to depreciation and amortization and an

amount of EGP 374 million to other expenses.

The reclassification to purchase and services mainly

includes interconnection traffic, roaming, expenses for handsets,

scratch and sim cards, customer acquisition costs,

internet and land line costs. The reclassification to other

expenses mainly relates to license fee expenses.

C

The reclassification of EGP 225 million to other expenses

mainly relates to accruals for provisions and doubtful receivables.

The following table provides reconciliation between the balance

sheet classification as of December 31, 2007 included

in the annual consolidated financial statements as of and

for the year ended December 31, 2007 and the information

included for comparative purposes in these annual consolidated

financial statements as of and for the year ended

December 31, 2008.

31-Dec-07 Reclassifications 31-Dec-07

(in million of EGP) as reported A B C reclassified

Assets

Property and equipment 26,689 - - - 26,689

Intangible assets 6,521 5,666 - - 12,187

Goodwill 5,666 (5,666) - - -

Investments 94 (94) - - -

Advance payments for investments 174 (174) - - -

Other non-current financial assets 3,303 268 - - 3,571

Deferred tax assets 404 - - - 404

Total non-current assets 42,851 - - - 42,851

Inventories 617 - - - 617

Trade receivables 1,184 (406) 443 840 2,061

Other current financial assets 5,829 - - (2,328) 3,501

Due from related parties 447 - (447) - -

Prepaid expenses 415 - (415) - -

Current income tax receivables - - - 622 622

Other receivables - (80) 419 866 1,205

Cash and cash equivalents 6,893 - - - 6,893

Assets held for sale 5,144 - - - 5,144

Total current assets 20,529 (486) - - 20,043

Total Assets 63,380 (486) - - 62,894

Equity and Liabilities

Equity attributable to equity holders of

the Company

17,300 - - - 17,300

Minority interest 522 - - - 522

Total shareholders equity 17,822 - - - 17,822

Liabilities

Non-current borrowings 18,724 - 68 - 18,792

Other non-current liabilities 1,148 - (68) - 1,080

Deferred tax liabilities 1,797 - - - 1,797

Total non-current liabilities 21,669 - - - 21,669

Current borrowings 9,770 365 31 69 10,235

Trade payables 5,427 1,172 - (570) 6,029

Other payables 5,492 463 (2,581) 926 4,300

Due to related parties 110 - - (110) -

Debt due on purchase of investments 315 - - (315) -

Accrued expenses 2775 (2,406) (369) - -

Current income tax liabilities - (80) 2,541 - 2,461

Provisions - - 378 - 378

Total current liabilities 23,889 (486) - - 23,403

Total Liabilities 44,558 (486) - - 45,072

Total Equity and Liabilities 63,380 (486) - - 62,894


98 99

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

A

An amount of EGP 5,666 million has been reclassified from

goodwill to intangible assets.

Investments amounting to EGP 94 million have been reclassified

to other non-current financial assets.

Advance payments for investments amounting to EGP 174

million have been reclassified to other non-current financial

assets.

Accrued expenses have mainly been reclassified to trade

payables for an amount of EGP 1,172 million, to other payables

for an amount of EGP 463 million and to current borrowings

for an amount of EGP 365 million. The reclassification

to other payables mainly relates to accrued expenses.

The reclassification to trade payables includes payables for

property and equipment and the reclassification to current

borrowings relates to accrued interest expense.

B

Trade receivables due from related parties amounting to

EGP 443 million have been reclassified to trade receivables.

Prepaid expenses amounting to EGP 415 million have been

reclassified to other receivables

Accrued expenses amounting to EGP 369 million relating

to provisions have been reclassified to provisions for other

liabilities and charges. Current income tax liabilities amounting

to EGP 2,541 million have been reclassified from other

payables to a new line of the balance sheet.

C

Liabilities due to related parties amounting to EGP 110 million

and debt due on purchase of investments amounting to

EGP 315 million thousand have been reclassified to trade

payables. The reclassification from trade payables to other

payables is mainly due to payables due to local authorities.

Appendix A - Liabilities to Banks

Orascom Telecom Holding S.A.E.

Current

Millions of EGP

Total

Noncurrent

Currency

Nominal

Millions of contract currency

Line of

credit Maturity Interest rate Securities

Revolving Credit Supplement 18 5 535 5,553 US$ 1,000 1,000 17/4/2013 Libor + 2% Secured

A1 Term Loan Supplement 73 5 286 5,359 US$ 987 987 17/4/2013 Libor + 2% Secured

A2 Term Loan Supplement 38 2 761 2,799 US$ 513 513 17/4/2013 Libor + 2% Secured

National Societe Generale Bank 55 - 55 US$ 9 10 30/4/2009 Libor +2.5% Unsecured

National Bank Of Abu Dhabi 55 - 55 US$ 9 10 31/12/2009 0.5 plus NBAD base rate for USD Unsecured

Fortis Banque 29 14 43 Euro 6 20 14/6/2010 6.30% Unsecured

Piraeus Bank 19 - 19 US$ 3 5 31/5/2009 Libor + 2% Unsecured

NSGB-Car Loan 2 11 13 EGP 13 15 2/2/2013 11% Unsecured

Credit Agricole Indo Suez Ban 4 - 4 US$ 1 10 31/5/2009 1 mnth Libor + 2.25% p.a. Unsecured

NSGB-Car Loan - 6 6 EGP 6 15 8/3/2014 11% Unsecured

293 13,613 13,906

Pakistan Mobile Communications

Limited

MCB Bank Limited - Pakistan 117 1 541 1,658 PKR 22,060 22,060 04/01/2014 6 mnth Kibor + 1.30% Secured

ABN AMRO - COFACE Loan - ECA 161 292 453 Euro 60 125 30/12/2011 6 mnth Euribor + 0.80% Secured

ABN AMRO - Hermes - ECA Round II 149 271 420 Euro 56 110 16/09/2011 6 mnth Euribor + 0.25% Secured

ABN AMRO - Coface - ECA Round II 86 199 285 Euro 40 85 29/06/2013 6 mnth Euribor + 0.25% Secured

Royal Bank of Scotland - Pakistan 2 246 248 PKR 3,548 3,548 18/12/2012 6 mnth Euribor+ 1.30% Secured

ABN AMRO - ECGD - ECA Round II 53 188 241 US$ 50 94 28/02/2014 6 mnth Libor + 0.175% Secured

Habib Bank Limited - Pakistan 1 210 211 PKR 3,000 3,000 18/12/2013 6 mnth Kibor + 1.30% Secured

DEG - Germany 6 155 161 Euro 20 20 15/08/2013 6 mnth Euribor + 3% Secured

FMO - Netherlands 6 155 161 Euro 20 20 15/08/2013 6 mnth Euribor + 3% Secured

ABN AMRO - Hermes - ECA 61 83 144 Euro 19 46 29/03/2011 6 mnth Euribor + 0.78% Secured

ABN AMRO - ECGD - ECA 39 89 128 US$ 24 48 28/02/2012 6 mnth Libor + 0.40% Secured

Citibank N.A - Islamabad - Pakistan 28 44 72 PKR 949 1,740 02/07/2011 6 mnth Kibor + 2.25% Secured

ABN AMRO - ECA 20 37 57 Euro 8 10 15/12/2011 6 mnth Euribor + 2.50% Secured

Standard Chartered Bank-Pakistan 64 - 64 PKR 902 1,000 1 year 3 mnth Kibor + 2% Secured

Habib Bank Limited - Pakistan 52 - 52 PKR 732 750 1 year 1 mnth Kibor + 2% Secured

HSBC Bank Middle East Limited- Pakistan 17 - 17 PKR 244 600 1 year 1 mnth Kibor + 1.25% Secured

Habib Bank Limited - Pakistan 14 - 14 PKR 188 1,500 01/04/2009 6 mnth Kibor + 1% p.a or 3.5% Secured

Faysal Bank Limited - Pakistan 7 - 7 PKR 102 715 01/06/2009 6 mnth Kibor + 1.35% p.a with a floor

3.5%

883 3,510 4,393

Secured

Egyptian Company for Mobile Services

S.A.E.

Misr/CIB/NSGB/HSBC (Syndicated loans) - 1,112 1,112 L.E. 1,121 1,121 14/08/2014 The interest rate shall be calculated

based on following elements: CBE

discount rate (CDR) - the company’s

time deposit.

Misr/CIB/NBE (Syndicated loans) 160 554 714 L.E. 718 878 30/04/2013 Return rate - CBE mid corridor rate

- 3.75% including highest over down

balance.

Unsecured

Unsecured

Misr/CIB/NSGB/HSBC (Syndicated loans) - 697 697 L.E. 707 1,072 26/02/2015 commission Unsecured

Credit Agricole Bank 60 - 60 L.E. 59 73 1 year 11.75% Unsecured

Banque Misr 39 - 39 L.E. 40 43 1 year 0.125 Unsecured

Scotiabank Cairo 16 - 16 L.E. 14 43 1 year 12.25% Unsecured

National Societe General Bank 17 - 17 L.E. 17 29 1 year 11.25% Unsecured

HSBC 17 - 17 L.E. 14 41 1 year 13.50% Unsecured

BNP Paribas 17 - 17 L.E. 18 50 1 year 11.75% Unsecured

Barclays 17 - 17 L.E. 17 38 1 year 11.75% Unsecured

343 2,363 2,706 * including highest over

drawn balance commission


100 101

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Appendix A - Liabilities to Banks (Continued)

Appendix A - Liabilities to Banks (Continued)

Current

Total

Noncurrent

Currency

Nominal

Line of

credit Maturity Interest rate Securities

Current

Total

Noncurrent

Currency

Nominal

Line of

credit Maturity Interest rate Securities

Millions of EGP Millions of contract currency

Orascom Telecom Bangladesh Limited

USD Commercial Facility 53 646 699 US$ 130 130 1/8/2013 3 mnth Libor +3.45% Secured

Hermes Facility 69 409 478 US$ 91 120 1/7/2014 3 mnth Libor+0.55% Secured

DFI Facility - 160 160 US$ 30 30 15/6/2014 3 mnth Libor +3.60% Secured

BDT A Facility 50 117 167 BDT 2,205 2,520 30/6/2012 14.75% ( Floating) Secured

BDT B Facility 8 69 77 BDT 1,020 1,020 30/6/2014 91days TB rate+ 7.5% Secured

Standard Chartered Bank 28 - 28 BDT 348 348 22/1/2009 14.50% (Floating) Unsecured

Pubali Bank Limited 28 - 28 BDT 350 350 22/1/2009 14.50% (Floating) Unsecured

National Bank Ltd. 8 - 8 BDT 100 100 22/1/2009 14.50% (Floating) Unsecured

National Credit and Commercial Bank 8 - 8 BDT 100 100 22/1/2009 14.50% (Floating) Unsecured

Standard Bank Limited 1 - 1 BDT 12 12 22/1/2009 14.50% (Floating) Unsecured

United Commercial Bank Ltd. 8 - 8 BDT 100 100 22/1/2009 14.50% (Floating) Unsecured

Standard Chartered Bank 1 - 1 BDT 11 25 22/1/2009

Standard Chartered Bank 8 - 8 BDT 100 100 22/1/2009 13.25% (floating) and 14.5% (floating) Unsecured

270 1,401 1,671

Orascom Telecom Algeria S.P.A.

Hermes loan 2006 116 331 447 US$ 83 86 15/11/2012 Libor + 0.6 % Secured

Coface Loan 2006 DZD 149 138 287 DZD 3,808 9,724 15/11/2010 Rediscount rate + 0.60% Secured

265 469 734

Trans World Associates (Private) Limited

Millions of EGP

Millions of contract currency

United Bank Limited - 9 9 PKR 138 345 27/11/13 Kibor + 3% Secured

Habib Bank Limited - 7 7 PKR 101 252 27/11/13 Kibor + 3% Secured

Allied Bank Limited - 6 6 PKR 80 200 27/11/13 Kibor + 3% Secured

Askari Bank Limited - 5 5 PKR 69 172 27/11/13 Kibor + 3% Secured

Standard Chartered Bank Pakistan Limited - 5 5 PKR 69 173 27/11/13 Kibor + 3% Secured

Pak Oman Investment Company Limited - 4 4 PKR 60 150 27/11/13 Kibor + 3% Secured

Ponjub bank - 3 3 PKR 46 115 27/11/13 Kibor + 3% Secured

El Falah Bank - 3 3 PKR 40 100 27/11/13 Kibor + 3% Secured

SAPICO - 3 3 PKR 40 100 27/11/13 Kibor + 3% Secured

Ring for Distributions

- 45 45

Over Draft facility from Arab Bank - Algeria 2 2 4 L.E 3 3 01/12/2011 7.62% Unsecured

Over Draft facility from Abu Dabi Bank -

Egypt

7 - 7 US$ 1 2 01/12/2009 7.50% Unsecured

NSGB OverDrafts 1 - 1 L.E 1 1 01/12/2009 7.75% Unsecured

NBAD OverDrafts 3 - 3 US$ 1 1 01/12/2009 7.75% Unsecured

13 2 15

Total - liabilities to banks 2,390 22,077 24,467

Orascom Telecom Tunisie S.A.

International refinancing 129 253 382 Euro 100 100 March-2011 Euribor+1% Secured

Local refinancing 99 195 294 TND 105 105 March-2011 TMM+2% Secured

228 448 676

Appendix B– Bonds

Current Non-current Total Nominal Maturity Interest Securities

Moga Holding Limited

CDC loan 28 138 166 Euro 18 18 15/8/2010 Euribor plus 10 % Secured

Med Cable Limited

28 138 166

Export Credit Calyon 17 31 48 Euro 6 12 13/9/2011 Euribor + 0.95 % Guaranteed

Commercial Loan Calyon 7 - 7 Euro 1 4 17/12/2009 Euribor + 3.5 % Guaranteed

Intouch for Telecommunication Services

24 31 55

Barclays 10 10 20 L.E 35 35 1/10/2010 14.25% Secured

NBAD 9 12 21 L.E 35 35 1/4/2011 14.50% Secured

Other - various lenders 9 - 9 L.E 11 12 1/4/2011 14% Unsecured

Telecel Globe Limited

28 22 50

Banque de development 4 26 30 XAF 2,500 2,500 30/06/2014 9.25% Unsecured

Commercial Bank Centrafrique 3 5 8 XAF 635 635 30/06/2011 11% Unsecured

Commercial Bank Centrafrique 1 4 5 XAF 423 423 31/07/2012 12% Unsecured

Pakistan Mobile Communications Limited

Millions of GEP Currency Millions of

contract

currency

ABN Amro Bank and Deutcs bank 16 1,360 1,376 USD 250 13/11/2013 8.625% Unsecured

Pak Oman Investment Company Limited 4 226 230 PKR 3,258 31/05/2013 6 mnth Kibor + 2.85% Secured

United Bank Limited (Trustee) 29 - 29 PKR 400 11/03/2009 "6 mnth' Kibor + 1.6%

floor of 4.95%

and cap of 12%”

Allied Bank Limited 10 244 254 PKR 3,500 01/10/2010 6 mnth Kibor + 1.30% Unsecured

Allied Bank Limited 8 271 279 PKR 3,907 28/10/2013 6 mnth Kibor + 1.65%

Orascom Telecom Finance SCA

67 2 101 2 168

Senior Notes OTFSCA 129 4,080 4,209 USD 750 08/02/2014 7.88% Unsecured

129 4 080 4 209

Total Bonds 196 6 181 6 377

Secured

Commercial Bank Centrafrique 6 - 6 XAF 379 379 one year 12% Unsecured

popluer Moroco Centrafrique 1 - 1 XAF 109 109 one year 15% Unsecured

15 35 50


102 103

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Notes to the Consolidated Financial Statements

As of and for the year ended December 31, 2008

Appendix C - Scope Of Consolidation

Selected subsidiaries, joint ventures and associates

Country of domiciliation Shareholding (directly/indirectly) held by Orascom Telecom Holding

North Africa Algeria Orascom Telecom Algeria S.P.A. 96.81%

Algeria Orascom Telecom Service Algeria 96.81%

Algeria Data Base Management services Algeria 100.00%

Algeria Ring Algeria LLC 98.01%

Algeria Caring Algeria 97.03%

Algeria MobiZone Algeria 100.00%

Algeria Algeria Win Call 100.00%

Algeria Consortium Algerian Telecommunication S.P.A. 49.83%

Morocco Kenza Telecom Morocco 100.00%

Tunisia Ring Tunisia 78.21%

Tunisia Ring Distribution Tunisia 77.43%

Tunisia Ring Retail Tunisia 76.65%

Tunisia R&D Tunisia 96.53%

Tunisia Orascom Telecom Tunisie S.A. 50.00%

Asia Bangladesh Orascom Telecom Bangladesh Limited 100.00%

Bangladesh Ring Bangladesh 98.98%

Bangladesh MobiZone Bangladesh 100.00%

North Korea CHEO Technology JV (DPKR) 75.00%

Pakistan Pakistan Mobile Communications Limited 100.00%

Pakistan Business & Communications 100.00%

Pakistan Link Direct International Limited 100.00%

Pakistan Mobitalk Limited 100.00%

Pakistan MobiZone Pakistan (Pvt.) Limited 100.00%

Pakistan PMDL Limited 16.70%

Pakistan Trans World Assoicates (Private) Limited 51.00%

Pakistan Ring Pakistan 94.59%

Pakistan Ring Pakistan Service 94.59%

Pakistan WOL Telecom Limited 100.00%

Pakistan Call Pack Pakistan 100.00%

Middle East Dubai Gloabl Entity for Telecom Trade 100.00%

Dubai Global Entity for Telecom Trade -FZE 100.00%

Dubai Ring Dubai 96.53%

Dubai LinkDotNet Dubai 100.00%

Dubai MobiZone Dubai 100.00%

Egypt Cortex Egypt 94.00%

Egypt Ring for Distributions 99.00%

Egypt Advanced Electronic Industries 96.53%

Egypt Caring Egypt 97.02%

Egypt Connect 50.49%

Egypt MMMS 98.80%

Egypt Intouch for Telecommunication Services 100.00%

Egypt Link Egypt 99.96%

Egypt Into Net 55.78%

Egypt LINKdotNET 100.00%

Egypt Arab Finance Securities 100.00%

Egypt Link Development 99.80%

Egypt Link Online Egypt 100.00%

Egypt Arpu for Telecommunication Services 100.00%

Egypt Global Telecom 95.80%

Egypt Egypt Call 99.98%

Egypt Mobinil Services Egypt 35.86%

Egypt Mobinil for Telecommunication S.A.E. 28.75%

Egypt Egyptian Company for Mobile Services S.A.E. 34.67%

Egypt

Egypt

Egypt

Iraq

Egyptian French Company for Finance Lease

Orascom for International Investment Holding

Middle East and North Africa Cable Submarine

Ring Iraq

4.91%

99.9%

100%

96.53%

Palestine Pal Call Palestine 99.90%

Appendix C - Scope Of Consolidation (Continued)

Selected subsidiaries, joint ventures and associates

Country of domiciliation Shareholding (directly/indirectly) held by Orascom Telecom Holding

Qatar LDN Qatar 49.00%

Saudi Arabia LinkDotNet Saudi Arabia 100.00%

Saudi Arabia MobiZone Saudi Arabia 100.00%

Central Africa Burundi U-Com Burundi S.A. 100.00%

Central Africa Telecel Centrafrique S.A. 100.00%

Sudan Sudan Call 70.00%

North America Canada Globablive Investment Holdings 47.60%

Canada Globalive Canada Holdings 65.05%

Canada Globalive Wireless Management 65.05%

Canada Gloablive Wireless LP (GELP) 65.05%

Canada Globalive Telecom Holdings 65.05%

Canada Orascom Telecom Holding (Canada) Limited 100.00%

Europe France Orascom Telecom Services Europe 100.00%

France Orascom Telecom Wireless Europe 100.00%

Italy MobiZone Italy 99.00%

Luxembourg M Link Sarl 100.00%

Luxembourg Orascom Luxrembourg Sarl 100.00%

Luxembourg Orascom Luxembourg Finance SCA 100.00%

Luxembourg Orascom Telecom Sarl 100.00%

Luxembourg Orascom Telecom Finance SCA 100.00%

Luxembourg M Link Teleport 100.00%

Malta Sawyer Limited 100.00%

Malta Orascom Telecom Eurasia Limited 100.00%

Malta Oratel International Inc plc 100.00%

Malta Moga Holding Limited 100.00%

Malta International Wireless Communications Pakistan Limited 100.00%

Malta TMGL 100.00%

Malta Telecel International Limited 100.00%

Malta Orascom Tunisia Holding 100.00%

Malta Carthage Consortium Limited 100.00%

Malta Orascom Iraq Holding 100.00%

Malta Orascom Telecom Iraq Corporation 100.00%

Malta Orascom Telecom Ventures Limited 100.00%

Malta Telecel Globe Limited 100.00%

Malta Orascom Telecom Holding (Malta) Canada Limited 100.00%

Malta M Link Limited 100.00%

Malta Minimax Ventures 100.00%

Malta Financial Powers Plan Limited 100.00%

Malta Orascom Telecom ESOP Limited 100.00%

Malta Data Base Management services Limited 100.00%

Malta Orascom Telecom CS 100.00%

Malta Mcube 51.00%

Netherland Orascom Telecom Netherland 100.00%

Switzerland Telecel International S.A. Switzerland 100.00%

United Kingdom Med Cable Limited 100.00%

United Kingdom Orascom Telecom WiMax 100.00%

United Kingdom International Telecommunication Consortium Limited 50.00%


104 105

Independent Auditor’s Report

To The Board of Directors of Orascom Telecom Holding (S.A.E)

We have audited the accompanying consolidated financial statements of Orascom Telecom Holding (S.A.E), which comprise the consolidated

balance sheet as at 31 December 2008, and the consolidated income statement, consolidated statement of recognized income and expense and

consolidated cash flows statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the 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 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.

Auditor’s 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 financial statements are free from material misstatement.

Consolidated Financial

Statements and Auditor’s Report

(in US$)

• Auditor’s Report

• Consolidated Balance Sheet

• Consolidated Income Statement

• Consolidated Statement of Recognized

Income and Expense

• Consolidated Statement of Cash Flows

• Notes to the Consolidated Financial

Statements

• Appendix A - Liabilities to banks

• Appendix B - Bonds

• Appendix C - Scope of consolidation

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 auditor’s 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 auditor considers 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 consolidated financial statements present fairly, in all material respects, the financial position of Orascom Telecom Holding

(S.A.E) as at 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with International

Financial Reporting Standards.

Emphasis of a matter

Without qualifying our opinion, we draw attention to note (35) “Contingent Assets and Liabilities” for the following:

1-

1- Egyptian Company for Mobile Services (ECMS) “Jointly controlled entity” filed a lawsuit against the National

Telecommunication Regulatory Authority (NTRA) to cancel NTRA’s decision relating to the amendments of the

interconnect prices between the fixed and mobile networks. The Company and its external legal counselor believe

that the possibility of winning the lawsuit is probable as NTRA’s decision does not have legal or contractual

ground, therefore the Company continued to recognize interconnect revenue and cost from and to Telecom Egypt

based on the existing agreement.

2- 2- Some subsidiaries received tax assessment from the tax authorities in the territories in which they

operate. Management believes that these assessments are excessive, and intends to challenge the assessments

through the proper legal channels. Currently, the management of these subsidiaries can not make reliable estimate of

tax exposures.

KPMG Hazem Hassan

Cairo, 13 April 2009


106 107

Consolidated Balance Sheet

Consolidated Income Statment

As at December Note 2008 2007

(in million of US$)

(reclassified)

Assets

Property and equipment 17 5,057 4,803

Intangible assets 18 2,371 2,225

Other non-current financial assets 19 639 642

Deferred tax assets 20 88 73

Total non-current assets 8,155 7,743

Inventories 106 111

Trade receivables 21 328 370

Other current financial assets 19 277 629

Current income tax receivables 16 75 112

Other current assets 22 247 216

Cash and cash equivalents 23 652 1,239

Assets held for sale 6 80 924

Total current assets 1,765 3,601

Total Assets 9,920 11,344

Equity and Liabilities

Share capital 261 316

Reserves (329) (680)

Retained earnings 1,148 3,513

Equity attributable to equity holders of the Company 1,080 3,149

Minority interest 121 93

Total equity 24 1,201 3,242

Liabilities

Non-current borrowings 25 5,205 3,379

Other non-current liabilities 26 220 194

Provisions 3 -

Non-current income tax liabilities 16 43 -

Deferred tax liabilities 20 249 323

Total non-current liabilities 5,720 3,896

Current borrowings 25 530 1,840

Trade payables 27 1,186 1,083

Other current liabilities 26 856 773

Current income tax liabilities 16 341 442

Provisions 61 68

Liabilities held for sale 6 25 -

Total current liabilities 2,999 4,206

Total Liabilities 8,719 8,102

Total Equity and Liabilities 9,920 11,344

For the year ended 31 December Note 2008 2007

(in million of US$)

(reclassified)

Continuing operations

Revenues 7 5,327 4,727

Other income 41 49

Purchases and services 8 (2,511) (2,288)

Other expenses 9 (174) (158)

Personnel costs 10 (299) (257)

Depreciation and amortization 11 (912) (752)

Impairment charges 12 (39) (19)

Disposal of non-current assets 13 66 (3)

Operating income 1,499 1,299

Financial expense (468) (520)

Financial income 52 38

Net foreign exchange gain /(loss) (201) 42

Net financing costs 14 (617) (440)

Share of profit / (loss) of associates 15 (3) 761

Gain/ (loss) on disposal of associates 15 27 (3)

Profit before income tax 906 1,617

Income tax expense 16 (403) (454)

Profit from continuing operations 503 1,163

Profit from discontinued operations 6 - 920

Profit for the year 503 2,083

Attributable to:

- Equity holders of the Company 431 2,021

- Minority interest 72 62

Basic and diluted earnings per share in US$ 28

- from continuing operations 0.46 1.06

- from discontinued operations n.a. 0.88

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

Group CFO

Aldo Mareuse

Chairman & Managing Director

Naguib Onsi Sawiris

Auditor’s report ‘attached’


108 109

Consolidated Statement of Recognized Income and Expense

Consolidated Statement of Cash Flows

For the year ended 31 December 2008 2007

(in million of US$)

Changes in fair value of available-for-sale financial assets (2) 1

Cash flow hedges, net of tax (88) (4)

Currency translation differences (176) 71

Share of profit recognized directly in equity of associates 5 3

Net expense recognized directly in equity (261) 71

Profit for the year 503 2,083

Total recognized income for the year 242 2,154

Attributable to:

- Equity holders of the Company 173 2,086

- Minority interest 69 68

(The notes from (1) to (37) are an integral part of these consolidated financial statements)

For the year ended 31 December 2008 2007

(in million of US$) (reclassified)

Profit for the year from continuing operations 503 1,163

Depreciation, amortization and impairment 951 771

Income tax expense 403 454

Equity settled share-based payment transactions 11 9

Net financial expenses 416 482

Unrealized foreign exchange difference 143 (49)

Loss on disposal of non-current assets 2 1

(Gain) / loss from sale of subsidiaries and financial assets (68) 2

Share of (profit) / loss of associates 3 (761)

(Gain) / loss on disposal of associates (27) 3

Change in provisions and allowances 35 42

Change in assets carried as working capital (152) (278)

Change in other liabilities carried as working capital 112 110

Income tax paid (481) (164)

Interest expense paid (428) (495)

Net cash generated by operating activities 1,423 1,290

Cash outflow for investments in:

- Property and equipment (1,474) (1,540)

- Intangible assets (146) (96)

- Subsidiaries (103) (374)

- Other non-current financial assets (20) -

Proceeds from disposals of:

- Property and equipment 11 6

- Subsidiaries 69 (60)

- Associates 956 322

-Other financial assets 1,049 -

Dividends and interest received 34 816

Net cash generated/(used in) by investing activities 376 (926)

Proceeds from non-current borrowings 2,522 2,334

Repayment of non-current borrowings (1,976) (988)

Net proceeds /(payments) from current borrowings (57) (481)

Advances and loans made to associate and other parties (442) -

Net change in cash collateral (77) 37

Dividend payments (166) (131)

Net payments for treasury shares (2,086) (856)

Change in Minority Interest (61) (64)

Net cash used in financing activities (2,343) (149)

Discontinued operations

Net cash generated by operating activities - 258

Net cash used in investing activities - (23)

Net cash generated by discontinued operations - 235

Cash included in assets held for sale (8) -

Effect of exchange rate changes on cash and cash equivalents (35) 33

Net (decrease) / increase in cash and cash equivalents (587) 483

Cash and cash equivalents at the beginning of the year 1,239 756

Cash and cash equivalents at the end of the year 652 1,239

(The notes from (1) to (37) are an integral part of these consolidated financial statements)


110 111

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

1- General information

Orascom Telecom Holding S.A.E. (the “Company”)

is a joint stock company with its head office in Cairo,

Egypt. The Company, through its subsidiaries (together

the “Group”) is a leading mobile telecommunications

company operating in high growth emerging markets in

the Middle East, Africa and Asia, having a total population

under license of approximately 450 million. The

Company is a subsidiary of Weather Investments S.p.A.

(“Weather Investments” or the “Parent Company”). The

Company is listed on the Egyptian Stock Exchange and

has Global Depository Receipts (“GDR”) listed on the

London Stock Exchange.

These consolidated financial statements as of and for

the year ended December 31, 2008 (the “Consolidated

Financial Statements”) were approved for issue by the

Board of Directors on March 16, 2009.

2- Significant accounting policies

2-1 Basis of presentation

The Consolidated Financial Statements of the Group,

as of and for the year ended December 31, 2008,

have been prepared in accordance with International

Financial Reporting Standards (IFRS) and its interpretations

as adopted by the International Accounting

Standards Board (IASB) and all interpretations of the

International Financial Reporting Interpretations Committee

(IFRIC) and all interpretations of the Standing

Interpretations Committee (SIC).

The consolidated financial statements have been

prepared under the historical cost basis except for the

following:

• derivative financial instruments are measured at

fair value;

• financial instruments at fair value through profit or

loss are measured at fair value; and

• available-for-sale financial assets are measured at

fair value.

For presentational purposes, the current/non-current

distinction has been used for the balance sheet, while

expenses are analyzed in the income statement using

a classification based on their nature. (See “Change

in Accounting Policies” for changes to the classification

of the income statement in 2007). The indirect

method has been selected to present the cash flow

statement.

The information presented in this document has been

presented in millions of United States Dollar (US$”),

except earnings per share and unless otherwise

stated.

2-3 Summary of main accounting principles and policies

The main accounting principles and policies adopted

in preparing these Consolidated Financial Statements

are set below. These policies have been consistently

applied to all period in those consolidated financial

statements, and have been applied consistently by

the group entities.

Basis of consolidation

The Consolidated Financial Statements include

the financial statements of the Company and those

entities over which the Company exercises control,

both directly or indirectly, from the date of acquisition

to the date when such control ceases. Control may

be exercised through direct or indirect ownership of

shares with majority voting rights, or by exercising a

dominant influence expressed as the direct or indirect

power, based on contractual agreements or statutory

provisions, to determine the financial and operational

policies of the entity and obtain the related benefits,

regardless of any equity relationships. The existence

of potential voting rights that are exercisable or convertible

at the balance sheet date is also considered

when determining whether there is control or not.

The financial statements used in the consolidation

process are those prepared by the individual Group

entities as of and for the year ended December 31,

2008 (the reporting date for these Consolidated

Financial Statements) in accordance with IFRS used

by the Company in preparing these statements and

approved by the respective Boards of Directors.

The consolidation procedures used are as follows:

• the assets and liabilities and income and expenses

of consolidated subsidiaries are included on a lineby-line

basis, allocating to minority interests, where

applicable, the share of equity and profit or loss for

the year that is attributable to them. The resulting

balances are presented separately in consolidated

equity and the consolidated income statement;

• the purchase method of accounting is used to

account for business combinations in which the

control of an entity is acquired. The cost of an acquisition

is measured as the fair value of the assets

acquired, liabilities incurred or assumed and equity

instruments issued at the acquisition date, plus all

other costs directly attributable to the acquisition.

The excess of the cost of acquisition over the fair

value of the assets, liabilities and contingent liabilities

acquired is recorded as goodwill. If the cost

of acquisition is less than the fair value of the net

assets of the subsidiary acquired, the difference

is recognized immediately in the income statement;

• business combinations in which all of the combining

entities or businesses are ultimately controlled

by the same party or parties both before and after

the business combination are considered business

combinations involving entities under common

control. In the absence of an accounting standard

guiding the accounting treatment of these operations

the Group applies IAS 8, consolidating the

book values of the entity transferred and reporting

any gains arising from the transfer in goodwill;

• the purchase of equity holdings from minority holders

in entities where control is already exercised

is considered a purchase. Therefore the difference

between the cost incurred for the acquisition

and the respective share of the accounting equity

acquired is recognized in goodwill;

• any options to purchase minority interests outstanding

at the end of the year are treated as

exercised and are reported as a financial liability

or in equity depending on whether the transaction

is to be settled in cash or through the exchange of

equity instruments;

• unrealized gains and losses on transactions carried

out between companies consolidated on a

line-by-line basis and the respective tax effects are

eliminated if material, as are corresponding balances

for receivables and payables, income and

expense, and finance income and expense;

• gains and losses arising from the sale of holdings

in consolidated entities are recognized in

the income statement as the difference between

the selling price and the corresponding portion of

consolidated equity sold.

Associates

Investments in companies where the Group exercises

a significant influence (hereafter “associates”), which

is presumed to exist when the Group holds between

20% and 50%, are accounted for using the equity

method.

The equity method is as follows:

• the Group’s share of the profit or loss of an investee

is recognized in the income statement from

the date when significant influence or control begins

up to the date when that significant influence

or control ceases. Investments in associates with

negative shareholders’ equity are impaired and a

provision for its losses is accrued only if the Group

has a legal or constructive obligation to cover such

losses. Equity changes in investees accounted

for using the equity method that do not result from

profit or loss are recognized directly in consolidated

equity reserves;

• unrealized gains and losses generated from transactions

between the Company or its subsidiaries

and its investees accounted for using the equity

method are eliminated on consolidation for the portion

pertaining to the Group; unrealized losses are

eliminated unless they represent an impairment.

Joint ventures

Joint ventures are those entities over whose activities

the Group has joint control, established by contractual

agreement and requiring unanimous consent for

strategic financial and operating decisions.

Interests in joint ventures are consolidated using the

proportionate method under which the assets and liabilities

and income and expenses of the joint venture

are consolidated on a line-by-line basis in proportion

to the share held by the Group in the venture. The

carrying amount of the consolidated investment is

then eliminated against the respective portion of equity.

Transactions, balances and any unrealized gains

and losses on intercompany transactions are proportionately

eliminated.

Unrealised gains arising from transactions with associates

(and jointly controlled entities) are eliminated

to the extent of the Group’s interest in the enterprise.

Unrealised gains resulting from transactions with associates

and joint ventures are eliminated against the

investment in the associates or joint venture.

Appendix 3 includes a list of the entities included in

the scope of consolidation.

Foreign currency translation

Functional and presentation currency

The functional currency of each subsidiary is the local

currency where that entity operates. In order to present

financial information to international investors the

Group’s presentation currency is US$.

Transactions and balances

Transactions in foreign currencies are translated into

the functional currency of the relevant entity at the

exchange rate prevailing at the date of the transaction.

Monetary assets and liabilities denominated in

foreign currencies are translated, at the balance sheet

date, into the prevailing exchange rates at that date.

Foreign currency exchange differences arising on the

settlement of transactions and the translation of the

balance sheet are recognized in the income statement.

Group companies

The financial statements of the Group entities are

translated into the presentation currency as follows:

• assets and liabilities are translated at the closing

exchange rate;

• income and expenses are translated at the average

exchange rate for the year;

• all resulting exchange differences are recognized

as a separate component of equity in the “translation

reserve”;

• goodwill and fair value adjustments arising on the

acquisition of a foreign entity are treated as assets

and liabilities of the foreign entity and are translated

at the closing exchange rate; and

• in the preparation of the consolidated cash flow

statement, the cash flows of foreign subsidiaries

are translated at the average exchange rate for the

year.

The exchange rates applied in relation to the US$ are

as follows:

Average for year ended December 31, Closing rate as of December 31,

2008 2007 2008 2007

Egyptian Pound (LE) 0.1827 0.1764 0.1807 0.1797

Algerian Dinar (DZD) 0.0155 0.0144 0.0141 0.0149

Tunisian (TND) 0.8129 0.7828 0.7612 0.8062

Pakistan Rupee (PKR) 0.0141 0.0165 0.0127 0.0163

Bangladeshi Taka (BDT) 0.0144 0.0144 0.0144 0.0145

Canadian Dollar (CAD) 0.8876 n.a. 0.8304 n.a.

Euro 1.4935 1.4112 1.4113 1.4656


112 113

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Property and equipment

Property and equipment are stated at purchase cost

or production cost, net of accumulated depreciation

and any impairment losses. Cost includes expenditure

directly attributable to bringing the asset to the

location and condition necessary for use and any

dismantling and removal costs which may be incurred

as a result of contractual obligations which require the

asset to be returned to its original state and condition.

Borrowing costs directly associated with the purchase

or construction of property and equipment are capitalized

as incurred together with the asset to which they

relate.

Costs incurred for ordinary and cyclical repairs and

maintenance are charged directly to the income

statement in the year in which they are incurred.

Costs incurred for the expansion, modernization or

improvement of the structural elements of owned or

leased assets are capitalized to the extent that they

have the requisites to be separately identified as

an asset or part of an asset, in accordance with the

“component approach”. Under this approach each

asset is treated separately if it has an autonomously

determinable useful life and value. Depreciation is

charged at rates calculated to write off the costs over

their estimated useful lives on a straight-line basis

from the date the asset is available and ready for

use.

The useful lives of property and equipment and their

residual values are reviewed and updated, where

necessary, at least at each year end. Land is not depreciated.

When a depreciable asset is composed of

identifiable separate components whose useful lives

vary significantly from those of other components of

the asset, depreciation is calculated for each component

separately, applying the “component approach”.

The useful lives estimated by the Group for the various

categories of property and equipment are as

follows.

Number of years

Buildings 50

Cell Sites 8-15

Tools 5-10

Computer equipment 3-5

Furniture and Fixtures 5-10

Vehicles 3-6

Leasehold improvements and renovations 3-8

Gains or losses arising from the sale or retirement of

assets are determined as the difference between the

net disposal proceeds and the net carrying amount

of the asset sold or retired and are recognized in the

income statement in the period incurred under “Disposal

of non-current assets”.

Finance leases are leases that substantially transfer

all the risks and rewards incidental to the ownership

of assets to the Group. Property and equipment acquired

under finance lease are recognized as assets

at their fair value or, if lower, at the present value of

the minimum lease payments, including any amounts

to be paid for exercising a purchase option. The corresponding

liability due to the lessor is recognized as

part of financial liabilities.

An asset acquired under a finance lease is depreciated

over the shorter of the lease term and its useful

life.

Lease arrangements in which the lessor substantially

retains the risks and rewards incidental to ownership

of the assets are classified as operating leases.

Lease payments under operating leases are recognized

as an expense in the income statement on a

straight-line basis over the lease term.

Intangible assets

Intangible assets are identifiable non-monetary assets

without physical substance which can be controlled

and which are capable of generating future economic

benefits. Intangible assets are stated at purchase

and/or production cost including any expenses that

are directly attributable to preparing the asset for its

intended use, net of accumulated amortization and

impairment losses, if applicable. Borrowing costs

accruing during and for the development of the asset

are capitalized as incurred. Amortization begins when

an asset becomes available for use and is charged

systematically on the basis of the residual possibility

of utilization of the asset, meaning on the basis of its

estimated useful life.

• Licenses

Costs for the purchase of telecommunication

licences are capitalized. Amortization is charged on

a straight-line basis such as to write off the cost incurred

for the acquisition of a right over the shorter

of the period of its expected use and the term of

the underlying agreement, starting from the date

on which the acquired licence may be exercised.

• Goodwill

Goodwill represents the excess of the cost of an

acquisition over the interest acquired in the net fair

value at the acquisition date of the assets and liabilities

of the entity or business acquired. Goodwill

relating to investments accounted for using the

equity method is included in the carrying amount

of the investment. Goodwill is not systematically

amortized but is rather subject to periodic tests

to ensure that the carrying amount in the balance

sheet is adequate (“impairment testing”). Impairment

testing is carried out annually or more frequently

when events or changes in circumstances

occur that could lead to an impairment of the cash

generating units (“CGUs”) to which the goodwill

has been allocated. An impairment loss is recognized

whenever the recoverable amount of goodwill

is lower than its carrying amount. The recoverable

amount is the higher of the fair value of the

CGU less costs to sell and its value in use, which

is represented by the present value of the cash

flows expected to be derived from the CGU during

operations and from its retirement at the end of its

useful life. The method for calculating value in use

is described in the paragraph below “Impairment of

assets”. Once an impairment loss has been recognized

for goodwill it cannot be reversed.

Whenever an impairment loss resulting from the

above testing exceeds the carrying amount of the

goodwill allocated to a specific CGU the residual

loss is allocated to the assets of that particular

CGU in proportion to their carrying amounts. The

carrying amount of an asset under this allocation

is not reduced below the higher of its fair value

less costs to sell and its value in use as described

above.

• Software

Acquired software licences are capitalised on the

basis of the costs incurred to acquire and bring to

use the specific software. Software licenses are

amortized on a straight-line basis over their useful

life (between 3 to 5 years), while software maintenance

costs are expensed in the income statement

in the period in which they are incurred.

Costs incurred on development of software products

are recognized as intangible assets when

the Group has intentions to complete and use or

sell the assets arising from the project, considering

the existence of a market for the asset, its

commercial and technological feasibility, its costs

can be measured reliably and there are adequate

financial resources to complete the development

of the asset. Other development expenditures are

recognized in the income statement in the period in

which they are incurred.

Directly attributable costs that are capitalised as

part of the software product include the software

development employee costs and an appropriate

portion of relevant overheads. Other development

expenditures that do not meet these criteria are

recognised as an expense as incurred. Development

costs previously recognised as an expense

are not recognised as an asset in a subsequent

period.

• Customer List

The customer list as an intangible asset consists

of the list of customers identified on allocating

the purchase price arising on acquisitions carried

out by the Group. Amortization is charged on the

basis of the respective estimated useful lives which

range from 5 to 10 years.

Impairment of non-financial assets

At each balance sheet date, property and equipment

and intangible assets with finite lives are assessed

to determine whether there is any indication that an

asset may be impaired. If any such indication exists,

the recoverable amount of the asset concerned is estimated

and any impairment loss is recognized in the

income statement. Intangible assets with an indefinite

useful life are tested for impairment annually or more

frequently when events or changes in circumstances

occur that could lead to an impairment loss. The

recoverable amount of an asset is the higher of its

fair value less costs to sell and its value in use, which

is represented by the present value of its estimated

future cash flows. In determining an asset’s value in

use the estimated future cash flows are discounted

using a pre-tax rate that reflects the market’s current

assessment of the cost of money for the investment

period and the specific risk profile of the asset. If an

asset does not generate independent cash flows its

recoverable amount is determined in relation to the

cash-generating unit (CGU) to which it belongs. An

impairment loss is recognized in the income statement

when the carrying amount of an asset or the

CGU to which it is allocated exceeds its recoverable

amount. If the reasons for previously recognizing an

impairment loss cease to exist, the carrying amount

of an asset other than goodwill is increased to the net

carrying amount of the asset that would have been

determined (net of amortization or depreciation) had

no impairment loss been recognized for the asset,

with the reversal being recognized in the income

statement.

Investments

Investments in companies other than those classified

as available for sale are measured at fair value

with any changes in fair value being recognized in

the income statement. (The accounting treatment

of financial assets available for sale is discussed in

“Financial assets available for sale”). If fair value cannot

be reliably determined an investment is measured

at cost. Cost is adjusted for impairment losses if

necessary, as described in the paragraph “Impairment

of Assets”. If the reasons for an impairment loss no

longer exist, the carrying amount of the investment is

increased up to the extent of the loss with the related

effect recognized in the income statement. Any risk

arising from losses exceeding the carrying amount of

the investment is accrued in a specific provision to the

extent of the Group’s legal or constructive obligations

on behalf of the associate. Investments held for sale

or to be wound up in the short term are classified as

current assets and stated at the lower of their carrying

amount and fair value less costs to sell.

Financial instruments

Financial instruments consist of financial assets and

liabilities whose classification is determined on their

initial recognition and on the basis of the purpose for

which they were purchased. Purchases and sales of

financial instruments are recognized at their settlement

date. Financial assets are derecognized when

the right to receive cash flows from them ceases and

the Group has effectively transferred all risks and

rewards related to the instrument and its control.

The fair values of quoted investments are based on

current bid prices. If the market for a financial asset

is not active (and for unlisted securities), the Group

establishes fair value by reference to prices supplied

by third-party operators and by using valuation models

based primarily on objective financial variables

and, where possible, prices in recent transactions and

market prices for similar financial instruments.

Financial Assets

Financial assets are initially recognized at fair value

and classified in one of the following three categories

and subsequently measured as described:


114 115

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

• Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss

includes financial assets purchased primarily for

sale in the short term, and derivative financial instruments,

except for the effective portion of those

designated as cash flow hedges. These assets

are measured at fair value; any change in the year

is recognized in the income statement. Financial

instruments included in this category are classified

as current assets if they are held for trading or expected

to be disposed of within twelve months from

the balance sheet date. Derivatives are treated as

assets or liabilities depending on whether their fair

value is positive or negative; positive and negative

fair values arising from transactions with the same

counterparty are offset if this is contractually provided

for. Fair value gains and losses from foreign

currency swaps are recognized in foreign currency

gains and losses in the income statement.

• Financial receivables

Financial receivables are non-derivative financial

instruments which are not traded on an active

market and which are expected to generate fixed

or determinable repayments. They are included

as current assets unless they are contractually

due more than twelve months after the balance

sheet date in which case they are classified as

non-current assets. These assets are measured at

amortized cost using the effective interest method.

If there is objective evidence of factors which

indicate impairment, the asset is reduced to the

present value of future cash flows. The impairment

loss is recognized in the income statement. If in future

years the factors which caused the impairment

cease to exist, the carrying amount of the asset is

reinstated up to the amount that would have been

obtained had amortized cost been applied.

• Financial assets available-for-sale

Financial assets available for sale are nonderivative

financial instruments which are either

designated in this category or not classified in any

of the other categories. Available for sale financial

assets are measured at fair value. Changes in the

fair value of monetary securities denominated in

a foreign currency and classified as available for

sale are analyzed between translation differences

resulting from changes in amortized cost of the

security and other changes in the carrying amount

of the security. The translation differences on

monetary securities are recognized in profit or loss;

translation differences on non-monetary securities

are recognized in equity. Changes in the fair value

of monetary and non-monetary securities classified

as available for sale are recognized in equity.

When securities classified as available for sale

are sold or impaired, the accumulated fair value

adjustments recognized in equity are included in

the income statement.

The classification of an asset as current or noncurrent

is the consequence of strategic decisions

regarding the estimated period of ownership of

the asset and its effective marketability, with those

which are expected to be realized within twelve

months from the balance sheet date being classified

as current assets.

The Group does not have any held to maturity

financial assets.

Impairment of financial assets

Individually significant financial assets are tested for

impairment on an individual basis. The remaining

financial assets are assessed collectively in groups

that share similar credit risk characteristics. In the

case of equity securities classified as available for

sale, 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. If any

such evidence exists for available for sale financial

assets, the cumulative loss – measured as the difference

between the acquisition cost and the current fair

value, less any impairment loss on that financial asset

previously recognized in profit or loss – is removed

from equity and recognized in the income statement.

Impairment losses recognized in the income statement

on equity instruments are not reversed through

the income statement.

Financial liabilities

Financial liabilities consisting of borrowings, trade

payables and other obligations are measured at amortized

cost using the effective interest method. When

there is a change in cash flows which can be reliably

estimated, the value of the financial liability is recalculated

to reflect such change based on the present

value of expected cash flows and the originally determined

internal rate of return. Financial liabilities are

classified as current liabilities except where the Group

has an unconditional right to defer payment until at

least twelve months after the balance sheet date.

Financial liabilities are derecognized when settled and

the Group has transferred all the related costs and

risks relating to an instrument.

Derivative financial instruments

Derivatives are initially recognized at fair value on

the date a derivative contract is entered into and

subsequently remeasured at fair value. The method

of recognizing the resulting gain or loss depends on

whether the derivative is designated as a hedging

instrument, and if so, the nature of the item being

hedged.

The Group documents at the inception of the transaction

the relationship between hedging instruments

and hedged items, as well as its risk management objectives

and strategy for undertaking various hedging

transactions. The Group also documents its assessment,

both at hedge inception and on an ongoing

basis, of whether the derivatives that are used in

hedging transactions are highly effective in offsetting

changes in fair values or cash flows of hedged items.

The full fair value of a hedging derivative is classified

as a current asset or liability when the remaining

maturity of the hedged item is less than 12 months.

Derivatives which do not qualify for hedge accounting

are classified as a financial asset at fair value through

profit or loss.

• Fair value hedge

Changes in the fair value of derivatives that are

designated and qualify as fair value hedges are

recorded in the income statement, together with

any changes in the fair value of the hedged asset

or liability that are attributable to the hedged risk. If

the hedge is not fully effective, meaning that these

changes are different, the non-effective portion is

treated as part of the net financing cost for the year

in the income statement.

• Cash flow hedge

The effective portion of changes in the fair value of

derivatives that are designated and qualify as cash

flow hedges is recognized in equity in a specific

reserve (the “cash flow hedge reserve”) . The gain

or loss relating to the ineffective portion is recognized

immediately in the income statement.

A hedge is normally considered highly effective

if from the beginning and throughout its life the

changes in the expected cash flows for the hedged

item are substantially offset by the changes in the

fair value of the hedging instrument. When the economic

effects deriving from the hedged item are

realized, the related gains or losses in the reserve

are reclassified to the income statement together

with the economic effects of the hedged item.

Whenever the hedge is not highly effective, the

non-effective portion of the change in fair value of

the hedging instrument is immediately recognized

as part of the net financing cost for the year in the

income statement.

When a hedging instrument expires or is sold,

or when a hedge no longer meets the criteria for

hedge accounting, any cumulative gain or loss

existing in equity at that time remains in equity and

is recognized when the forecast transaction is ultimately

recognized in the income statement. When

a forecast transaction is no longer expected to occur,

the cumulative gain or loss that was reported

in equity is immediately transferred to the income

statement.

Inventories

Inventories are stated at the lower of purchase cost

or production cost and net realizable value. Cost is

based on the weighted average method. Net realizable

value is the estimated selling price in the ordinary

course of business, less the estimated costs of

completion and selling expenses. When necessary,

obsolescence allowances are made for slow-moving

and obsolete inventories. Inventories mainly comprise

handsets and SIM cards.

Cash and cash equivalents

Cash and cash equivalents include cash in hand,

deposits held at call with banks and other short-term

highly liquid investments with original maturities of

three months or less.

Non-current assets and liabilities held for sale

Non-current assets (or disposal groups comprising

assets and liabilities) that are expected to be

recovered primarily through sale rather than through

continuing use is classified as held for sale. Immediately

before classification as held for sale, the assets

(or components of a disposal group) are remeasured

in accordance with the Group’s accounting policies.

Thereafter the assets and liabilities held for sale (or

disposal group) are measured at the lower of their

carrying amount and fair value less cost to sell. Any

impairment loss on a disposal group first is allocated

to goodwill, and then to remaining assets and liabilities

on pro rata basis, except that no loss is allocated

to inventories, financial assets, and deferred tax

assets, which continue to be measured in accordance

with the Group’s accounting policies. Impairment

losses on initial classification as held for sale and

subsequent losses on remeasurement are recognised

in the income statement. Subsequent increase in

fair value less costs to sell may be recognised in the

income statement only to the extent of the cumulative

impairment loss that has been recognised previously.

Current and deferred income tax

The tax expense for the period comprises current

and deferred tax. Tax is recognised in the income

statement, except to the extent that it relates to items

recognised directly in equity. In this case, the tax is

also recognised in equity.

The current income tax charge is calculated on the

basis of the tax laws enacted or substantively enacted

at the balance sheet date in the countries where the

Group’s subsidiaries, associates and joint venture

operate and generate taxable income. Management

periodically evaluates positions taken in tax returns

with respect to situations in which applicable tax

regulation is subject to interpretation. It establishes

provisions where appropriate on the basis of amounts

expected to be paid to the tax authorities.

Deferred income tax is recognized, using the balance

sheet liability method, on temporary differences arising

between the tax bases of assets and liabilities and

their carrying amounts in the consolidated financial

statements. However, deferred income tax is not accounted

for if it arises from initial recognition of goodwill

or the initial recognition of an asset or liability in

a transaction other than a business combination that

at the time of the transaction affects neither accounting

nor taxable profit or loss. Deferred income tax is

determined using tax rates (and laws) that have been

enacted or substantially enacted at the balance sheet

date and are expected to apply when the related

deferred income tax asset is realised or the deferred

income tax liability is settled.

Deferred income tax assets are recognized only to the

extent that it is probable that future taxable profit will

be available against which the temporary differences

can be utilized.

Deferred income tax is provided on temporary differences

arising on investments in subsidiaries, associates

and joint ventures, except where the timing of

the reversal of the temporary difference is controlled

by the Group and it is probable that the temporary difference

will not reverse in the foreseeable future.

Additional income taxes that arise from the distribution

of dividends are recognised at the same time that

the liability to pay the related dividend is recognised.


116 117

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Deferred tax assets and liabilities are offset if there

is a legally enforceable right to offset current tax liabilities

and assets, and they relate to income taxes

levied by the same tax authority on the same taxable

entity, or on different tax entities, but they intend to

settle current tax liabilities and assets on a net basis

or their tax assets and liabilities will be realised simultaneously.

Provisions

Provisions are only recognized when the Group has

a present legal or constructive obligation arising

from past events that will result in a future outflow of

resources, and when it is probable that this outflow

of resources will be required to settle the obligation.

The amount provided represents the best estimate of

the present value of the outlay required to meet the

obligation. The interest rate used in determining the

present value of the liability reflects current market

rates and takes into account the specific risk of each

liability. Provisions are not recognised for future operating

losses.

Employee benefits

• Short-term benefits

Short-term benefits are recognized in the income

statement in the year when an employee renders

service.

• Share-based employee benefits

The Group recognizes additional benefits to

certain managers and other members of personnel

through share based payment plans. IFRS 2

- Share-based Payment considers these plans to

represent a component of employee remuneration.

The fair value of the employee services received at

the grant date in exchange for the grant of options

or shares is recognized as an expense with a correspondent

increase in equity. The total amount

to be expensed is determined by reference to the

fair value of the options granted, excluding the

impact of any non-market service and performance

vesting conditions. The total amount expensed is

recognized over the vesting period, which is the

period over which all of the specified vesting conditions

are to be satisfied.

Share capital

Ordinary shares are classified as equity. Incremental

costs directly attributable to the issue of new shares

are shown in equity as a deduction, net of tax, from

proceeds.

Treasury shares

Where any Group company purchases the Company’s

equity share capital (treasury shares), the

consideration paid, including any directly attributable

incremental costs (net of income taxes) is deducted

from equity attributable to equity holders of the

Company until the shares are cancelled or re-issued.

Where such shares are subsequently re-issued, any

consideration received, net of any directly attributable

incremental transaction costs and the related income

tax effects, is included in equity attributable to equity

holders of the Company.

Legal reserve

As per the Company’s statutes 5% of net profit for the

year is set aside to form a legal reserve, the transfer

to such reserve ceases once it reaches 50% of the

Company’s paid in share capital. The reserve can be

utilized for covering losses or for increasing the Company’s

share capital. If the reserve falls below the said

50%, the Company should resume setting aside 5%

of its annual net profit until the reserve reaches 50%

of the Company’s paid in share capital.

Dividend distribution

Dividend distribution to the Company’s shareholders

is recognized as a liability in the Consolidated Financial

Statements in the period in which the dividends

are approved by the Company’s shareholders.

Revenue recognition

Revenue comprises the fair value of the consideration

received or receivable for the sale of goods and services

in the ordinary course of the Group’s activities.

Revenue is shown net of value added tax, rebates

and discounts and after eliminating sales within the

Group.

Revenue from the sale of goods is recognized when

the Group transfers the risks and rewards of ownership

of the goods. Revenue from services is recognized

in the income statement by reference to the

stage of completion and only when the outcome can

be reliably estimated.

More specifically, the criteria followed by the Group in

recognizing ordinary revenue are as follows:

• revenue arising from post-paid traffic, interconnection

and roaming is recognized on the basis of the

actual usage made by each subscriber and telephone

operator. Such revenue includes amounts

paid for access to and usage of the Group network

by customers and other domestic and international

telephone operators;

• revenue from the sale of prepaid cards and recharging

is recognized on the basis of the prepaid

traffic actually used by subscribers during the year.

The unused portion of traffic at period end is recognized

as “Liabilities – Deferred Income”;

• revenue from the sale of mobile phones and fixedline

phones and related accessories is recognized

at the time of sale;

• one-off revenue from landline and mobile (prepaid

or subscription) activation and/or substitution,

prepaid recharge fees and the activation of new

services and tariff plans is recognized for the full

amount at the moment of activation independent of

the period in which the actual services are rendered

by the Group. In the case of promotions with

a cumulative plan still open at the end of the year,

the activation fee is recognized on an accruals

basis so as to match the revenue with the year in

which the service may be used;

Dividend income from investments recorded at fair

value through profit and loss or as available for sale

is recognized when the right to receive payment is

established.

Interest income

Interest income is recognized on a time-proportion

basis using the effective interest rate method.

Earnings per share

Basic

Basic earnings per share are calculated by dividing

the profit for the year attributable to equity holders

of the Company, both from continuing and discontinued

operations, by the weighted average number

of ordinary shares in issue during the year excluding

ordinary shares purchased by the Company and held

as treasury shares.

Diluted

Diluted earnings per share are calculated by dividing

the profit for the year attributable to equity holders of

the Company by the weighted average of the number

of ordinary shares of the Company outstanding

during the year where, compared to basic earnings

per share, the weighted average number of shares

outstanding is modified to include the conversion of all

dilutive potential shares, while the profit for the year

is modified to include the effects of such conversion

net of taxation. Diluted earnings per share are not

calculated when there are losses as any dilutive effect

would improve earnings per share.

Discontinued operations

A discontinued operation is a component of the

Group’s business that represents a separate major

line of business or geographical area of operations

that has been disposed of or is held for sale, or is a

subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs

upon disposal or when the operation meets the criteria

to be classified as held for sale, if earlier. When

an operation is classified as a discontinued operation,

the comparative income statement is re-presented as

if the operation had been discontinued from the start

of the comparative period.

Segment reporting

A segment is a distinguishable component of the

group that is engaged either in providing products or

services (business segment) or in providing products

or services within a particular economic environment

(geographical segment), which is subjected to risks

and rewards that are different from those of other

segments. The group’s primary format for segment

reporting is based on business segment

Change in accounting policy

Historically the Company has elected the presentation

of costs in the income statement by function. In order

to be consistent with the method of presentation adopted

by the Parent Company and facilitate the Parent

Company financial reporting procedure, the Group

has elected the presentation of costs by nature for

the preparation of the income statement for periods

ending on or after June 30, 2008. The Company has

reclassified comparative amounts disclosed for the

prior periods reported as if the new disclosure policy

had always been applied. In addition, the Group has

performed certain reclassifications to the balance

sheet in order to homogenize classification criteria

with that of the Parent Company. Note 37 “Reconciliation

of previous disclosure” provides further details

regarding the income statement prepared using the

“function of expense” method and the reclassifications

performed on the balance sheet.

Recent accounting pronouncements

The following new standards, amendments to standards

and interpretations have been issued but are

not effective for the financial year 2008 and have not

been early adopted:

IAS 23 (revised), “Borrowing costs” will be effective

for the Group from January 1, 2009. This amendment

requires that borrowing costs directly attributable

to the acquisition, construction or production of a

qualifying asset are capitalized as part of the cost of

that asset. The Group currently capitalizes all such

borrowing costs. It therefore does not impact the

Group’s consolidated financial statements.

IAS 23 (amendment), “Borrowing costs” will be effective

for the Group from January 1, 2009. This

amendment has changed the definition of borrowing

costs so that interest expense is calculated using

the effective interest rate method defined in IAS 39

“Financial Instruments: Recognition and Measurement”.

The Group will apply the IAS 23 (Amendment)

prospectively to the capitalization of borrowing costs

on qualifying assets from January 1, 2009.

IAS 1 (revised), “Presentation of financial statements”,

will be effective for the Group from January 1, 2009.

The revised standard will prohibit the presentation

of items of income and expenses relating to nonowner

changes in equity in the statement of changes

in equity. Such non-owner changes in equity will

be required to be presented separately from owner

changes in equity. All non-owner changes in equity

will be required to be shown in a performance statement

(the statement of comprehensive income) or

two statements (the income statement and statement

of comprehensive income). Where entities restate

or reclassify comparative information, they will be

required to present a restated balance sheet as at the

beginning of the comparative period, in addition to

the current requirement to present balance sheets at

the end of the current period and comparative period.

The impacts of this standard’s future application are

being analyzed.

IAS 1 (amendment), “Presentation of financial statements”,

will be effective for the Group from January 1,

2009. The amendment clarifies that some rather than

all financial assets and liabilities classified as held for

trading in accordance with IAS 39, “Financial Instruments:

Recognition and Measurement” are examples

of current assets and current liabilities respectively.

The impacts of this standard’s future application are

being analyzed.

IFRS 2 (amendment) “Share-based payment”, will be

effective for the Group from January 1, 2009. The

amended standard deals with vesting conditions and

cancellations. It clarifies that vesting conditions are

service conditions and performance conditions only.

Other features of a share based payment are not


118 119

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

vesting conditions. These features would need to be

included in the grant date fair value for transactions

with employees and others providing similar services;

they would not impact the number of awards expected

to vest or valuation thereof subsequent to grant date.

All cancellations, whether they result from a decision

taken by the entity or by another party, will be

accounted for on the same basis. The impacts of this

standard’s future application are being analyzed.

IAS 27 (revised), “Consolidated and separate financial

statements” will be effective for the Group from January

1, 2010. The revised standard requires the effects

of all transactions with non-controlling interests to be

recorded in equity if there is no change in control and

these transactions will no longer result in goodwill or

gains and losses. The standard also specifies the accounting

when control is lost. Any remaining interest

in the equity is re-measured to fair value, and a gain

or loss is recognized in profit or loss. The Group will

apply IAS 27 (revised) prospectively to transactions

with non-controlling interests from January 1, 2010.

IFRS 3 (revised), “Business combinations,” will be

effective for the Group from January 1, 2010. The

revised standard continues to apply the acquisition

method to business combinations, with some

significant changes. For example, all payments to

purchase a business are to be recorded at fair value

at the acquisition date, with contingent payments

classified as debt subsequently re-measured through

the income statement. There is a choice on an

acquisition-by-acquisition basis to measure the noncontrolling

interest in the acquiree either at fair value

or at the non-controlling interest’s proportionate share

of the acquiree’s net assets. All acquisition-related

costs should be expensed. The Group will apply

IFRS 3 (revised) prospectively from January 1, 2010.

IFRS 5 (amendment) “Non-current assets held for

sale and discontinued operations” and consequential

amendments to IFRS 1 “First-time adoption” will be

effective for the Group from January 1, 2010. The

amendment clarifies that all of a subsidiary’s assets

and liabilities are classified as held for sale if a partial

disposal sale plan results in loss of control. Relevant

disclosure should be made for this subsidiary

if the definition of a discontinued operation is met. A

consequential amendment to IFRS 1 states that these

amendments are applied prospectively from the date

of transition to IFRS. The Group will apply IFRS 5

(amendment) prospectively to all partial disposals of

subsidiaries from January 1,

2010.

IAS 28 (amendment), “Investments in associates,”

and consequential amendments to IAS 32, “Financial

Instruments: Presentation” and IFRS 7, “Financial instruments:

Disclosures” will be effective for the Group

from January 1, 2009. The amendment requires an

investment in an associate to be treated as a single

asset for the purposes of impairment testing. Any

impairment loss is not allocated to specific assets

included within the investment, for example, goodwill.

Reversals of impairment are recorded as an adjustment

to the investment balance to the extent that the

recoverable amount of the associate increases. The

Group will apply the IAS 28 (Amendment) and provide

the required disclosure, where applicable, for impairment

tests from January 1, 2009.

IAS 36 (amendment), “Impairment of assets” will be

effective for the Group from January 1, 2009. This

amendment requires that, where fair value less costs

to sell is calculated on the basis of discounted cash

flows, disclosures equivalent to those for value-in-use

calculation should be made. The Group will apply

the IAS 36 (amendment) and provide the required

disclosure where applicable for impairment tests from

January 1, 2009.

IAS 39 (amendment), “Financial instruments: Recognition

and measurement” will be effective for

the Group from January 1, 2009. The amendment

clarifies that it is possible for there to be movements

into and out of the fair value through profit and loss

category where a derivative commences or ceases to

qualify as a hedging instrument in cash flow or net investment

hedge. The definition of financial asset and

liability at fair value through profit or loss as it relates

to items that are held for trading is also amended. It

clarifies that a financial asset or liability that is part of

a portfolio of financial instruments managed together

with evidence of an actual recent pattern of short-term

profit-taking is included in such a portfolio on initial

recognition. Guidance on designating and documenting

hedges was amended to make the guidance

consistent with IFRS 8, “Operating segments,” which

requires disclosure for segments to be based on

information reported on a “management approach.”

When measuring the carrying amount of a debt instrument

on cessation of fair value hedge accounting, the

amendment clarifies that a revised effective interest

rate (calculated at the date fair value hedge accounting

ceases) are used. The impacts of this standard’s

future application are being analyzed.

IFRS 8,“Operating segments” will be effective for the

Group from January 1, 2009. IFRS 8 replaces IAS

14, “Segment reporting” and requires a “management

approach” under which segment information is

presented on the same basis as that used for internal

reporting purposes. The adoption of this standard

is not expected to have a material impact on the

Group’s financial reporting.

IFRIC 13, “Customer loyalty programmes”, will be

effective for the Group from January 1, 2009. According

to IFRIC 13, loyalty programs should be valued at

their fair value which is defined as the excess price

over the sales incentive that would be granted to any

new customer. The impacts of this standard’s future

application are being analyzed.

There are a number of minor amendments to IFRS 7

“Financial Instruments: Disclosures”, IAS 8 “Accounting

Policies, Changes In Accounting Estimates and

Errors”, IAS 10 “Events After The Reporting Period”.,

IAS 18 “Revenue” and IAS 34 “Interim Financial Reporting”

which are part of the IASB’s annual improvement

project published in May 2008 (not addressed

above). These amendments are unlikely to have a

material impact on the consolidated financial statements

of the Group and have therefore not been

analyzed in detail.

3- Use of Estimates

The preparation of these Consolidated Financial

Statements required management to apply accounting

policies and methodologies that are based on complex,

subjective judgments, estimates based on past experience

and assumptions determined from time to time to

be reasonable and realistic based on the related circumstances.

The use of these estimates and assumptions

affects the amounts reported in the balance sheet, the

income statement and the cash flow statement as well

as the notes. The final amounts for items for which estimates

and assumptions were made in the Consolidated

Financial Statements may differ from those reported in

these statements due to the uncertainties that characterize

the assumptions and conditions on which the

estimates are based.

The accounting principles requiring a higher degree of

subjective judgment in making estimates and for which

changes in the underlying conditions could significantly

affect the Consolidated Financial Statements are briefly

described below.

Goodwill

Goodwill is tested for impairment on an annual basis to

determine whether any impairment losses have arisen

that should be recognized in the income statement.

More specifically, the test is performed by allocating the

goodwill to a cash generating unit and subsequently

estimating the unit’s fair value. Should the fair value

of the net capital employed be lower than the carrying

amount of the CGU an impairment loss is recognized for

the allocated goodwill. The allocation of goodwill to cash

generating units and the determination of the fair value

of a CGU requires estimates to be made that are based

on factors that may vary over time and that could as a

result have an impact on the measurements made by

management which might be significant.

Impairment of non-current assets

Non-current assets are reviewed to determine whether

there are any indications that the net carrying amount of

these assets may not be recoverable and that they have

suffered an impairment loss that needs to be recognized.

In order to determine whether any such elements exist it

is necessary to make subjective measurements, based

on information obtained within the Group and in the

market and also on past experience. When a potential

impairment loss emerges it is estimated by the Group

using appropriate valuation techniques. The identification

of the elements that may determine a potential impairment

loss and the estimates used to measure such loss

depend on factors which may vary over time, thereby

affecting the estimates and measurements.

Depreciation of non-current assets

The cost of property and equipment is depreciated on

a straight-line basis over the useful lives of the assets.

The useful life of property and equipment is determined

when the assets are purchased and is based on the

past experience of similar assets, market conditions and

forecasts concerning future events which may affect

them, amongst which are changes in technology. The

actual useful lives may therefore differ from the estimates

of these. The Group regularly reviews technologi-

cal and business sector changes, dismantling costs and

recoverable amounts in order to update residual useful

lives. Such regular updating may entail a change of the

depreciation period and consequently a change in the

depreciation charged in future years.

Deferred tax assets

The recognition of deferred tax assets is based on forecasts

of future taxable profit. The measurement of future

taxable profit for the purposes of determining whether or

not to recognize deferred tax assets depends on factors

which may vary over time and which may lead to significant

effects on the measurement of this item.

Income tax

The companies of the Group are subject to different

tax legislation. A significant amount of estimates are

necessary in order to account for the total tax effects

on the financial statements. The Group has a number

of operations for which the relevant taxes are difficult

to estimate and thus has to accrue some tax liabilities

based on estimates. Whenever the actual tax expense is

different from the estimated, the difference is recorded in

the income statement.

Fair value of derivatives and other financial instruments

The fair value of financial instruments is determined

based on quoted market prices, where available, or

on estimates using present values or other valuation

techniques. Those techniques are significantly affected

by the assumptions used, including discount rates and

estimates of future cash flows. Where market prices

are not readily available, fair value is based on either

estimates obtained from independent experts or quoted

market prices of comparable instruments.

Provisions and contingencies

In recognizing provisions the Group analyses the extent

to which it is probable that a liability will arise from disputes

with employees, suppliers and third parties and in

general the losses it will be required to incur as a result

of past obligations. The definition of such provisions entails

making estimates based on currently known factors

which may vary over time and which could actually turn

out to be significantly different from those referred to in

preparing the financial statements.

4. Financial Risk Management

Financial Risk Factors

The Group’s activities expose it to a variety of financial

risks: market risk (including currency risk, fair value interest

risk and cash flow interest risk), credit risk and liquidity

risk. In particular the Group is exposed to risks from movements

in exchange rates, interest rates and market prices.

The Group’s overall risk management program focuses on

the unpredictability of financial markets and seeks to minimize

potential adverse effects on the Group’s performance

through ongoing operational and finance activities. Depending

on the risk assessment, the Group uses selected

derivative hedging instruments. The management has

overall responsibility for the establishment and oversight of

the group’s risk management framework..


120 121

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Market Risk

Foreign exchange risk

The Group operates internationally and is exposed to

foreign exchange risk arising from various currency

exposures in its investing, financing and operating

activities. The main currencies to which the Group is

exposed are the US dollar and the Euro.

In general the Group’s subsidiaries are encouraged

to obtain financing in their functional currency in order

to have a natural hedge of the exchange rate of such

financing. However, as some transactions are executed

in foreign currencies, and in particular in US$

and Euro, the Group may be subject to the risk of

exchange rate fluctuations. As of December 31, 2008

the Group’s borrowings included US$ borrowings

amounting to US$ 4,022 million and Euro borrowings

amounting to Euro 298 million (equivalent to US$ 421

million). In certain instances the Group has entered

into economic hedging agreements to manage the

risk of fluctuations relating to these financing operations.

In particular, Pakistan Mobile Communication

Limited (PMCL) had borrowings for US$ 315 million

and Euro 216 million (equivalent to US$ 305 million)

as of December 31, 2008. Such borrowings were

fully hedged by PMCL using cross currency swaps

pursuant to which interest payments and principal

payments are paid in Pakistani Rupee.

The Group subsidiaries generally execute their

operating activities in their respective functional

currencies. Some Group subsidiaries are, however,

exposed to foreign currency risks in connection

with scheduled payments in currencies that are not

their functional currencies. In general this relates to

foreign currency denominated supplier payables and

receivables. The Group monitors the exposure to

foreign currency risk arising from operating activities

and, where relevant, enters into hedging transactions

in order to manage the exposure.

As at December 31, 2008, if the functional currencies

had weakened / strengthened by 3% against the

US$, the Euro and CAD, with all other variables held

constant, profit for the year would have decreased /

increased by US$ 67 million, mainly relating to US$

denominated borrowings.

Additionally, the Group has investments in foreign

operations, whose net assets are exposed to foreign

currency translation risk. Currency exposure to such

risk is not hedged.

Cash flow and fair value interest rate risk

The Group is exposed to market risks as a result of

changes in interest rates particularly in relation to borrowings.

Borrowings issued at floating rates expose

the Group to cash flow interest rate risk. Borrowings

issued at fixed rates expose the Group to fair value

interest rate risk.

The basic strategy of interest rate risk management is

to balance the debt structure with an appropriate mix

of fixed and floating interest rate borrowings based on

the Group’s perception of future interest rate movements.

In particular, the risk monitored relates to the

impact of movements in floating rate indices on the

Group’s finance costs.

When considered appropriate, the Group manages its

cash flow interest rate risk by using floating-to fixed

interest rate swaps. In particular , as of December

31, 2008 the Group had outstanding floating-to-fixed

interest rate swaps with a notional value of US$ 1.5

billion. After considering such derivative transactions

approximately 53% of the Group’s total borrowings

had a floating rate of interest.

The Group considers the sensitivity of its finance

costs to movements in interest rates. In particular an

increase / decrease of 0.5% in interest rates as of December

31, 2008 would have resulted in an increase/

decrease in finance costs of US$ 15 million and a

decrease / increase in the cash flow hedge reserve of

US$ 25 million.

Price risk

The Group has limited exposure to equity securities

price risk on investments held by the Group.

Credit Risk

The Group considers that it is not exposed to major concentrations

of credit risk in relation to trade receivables.

However, credit risk can arise in the event of non-performance

of a counterparty, particularly in relation to credit

exposures for trade and other receivables, financial

instruments and cash and cash equivalents.

The Group considers that the concentration of credit risk

with respect to trade receivables is limited given that the

Group’s customer base is largely pre-paid subscribers.

Post paid subscribers generally represent a small portion

of the subscriber base and therefore the credit exposure

is limited. In addition, the Group tries to mitigate credit

risk by adopting specific control procedures, including

assessing the credit worthiness of the counterparty and

limiting the exposure to any one counterparty.

Credit risk relating to cash and cash equivalents, derivative

financial instruments and financial deposits arises

from the risk that the counterparty becomes insolvent

and accordingly is unable to return the deposited funds

or execute the obligations under the derivative transactions

as a result of the insolvency. To mitigate this risk,

wherever possible the Group conducts transactions and

deposits funds with financial institutions with a minimum

of investment grade rating.

The Group is exposed to credit risk relating to other

receivables as follows:

• In December 2007, the Company sold its investment

in Iraqna Company for Mobile Phone Services Limited

(“Iraqna”) (see Note 6 “Assets and liabilities classified

as held for sale and discontinuing operations”

for further information). The total receivable for the

sale amounted to US$ 1.2 billion, which was due to

be paid in equal installments in December 2008 and

2009. However, during 2008 the Group entered into

a receivable purchase agreement for the sale of these

receivables. As of December 31, 2008 an amount of

US$ 75 million was outstanding which relates to an

amount that was withheld for potential claims. On

February 26, 2009 Orascom Telecom Iraq Corp. Limited

filed a claim in the High Court of Justice, Queen’s

Bench Division, Commercial Court, in London, against

each of 1) Atheer Telecom Iraq Limited (“Atheer”) and

2) Mobile Telecommunications Company KSC (“MTC”)

to recover the remaining unpaid US$ 75 million plus

interest from the sale of Iraqna to Atheer, which was

guaranteed by MTC. The claim was served on the

defendants and on March 13, 2009 each of the defendants

filed acknowledgments of service and notices of

intent to defend. Proceedings are ongoing in this matter.

Management is expecting to receive full settlement

of the outstanding balance within the next month.

• In November 2008 the Company sold its investment

in Orasinvest Holding Inc. (“OrasInvest”). The total

receivable from the sale amounted to US$ 180 million,

prior to price adjustments. As of December 31,

2008 the amount outstanding was US$ 90 million,

prior to price adjustments. The remaining receivable

is respected to be settled in December 2009.

• During 2008 the Company entered into two loans

agreements to provide a total amount of US$ 423

million to Globalive Wireless Management Corp

(“GWMC”), a subsidiary of the associate Globalive

Investment Holdings Corp (“Globalive”) (see Note 30

“Acquisition of associates” for further details). As of

December 31, 2008 a total amount of US$ 401 million

was outstanding under these agreements. The loans

were primarily provided to GWMC to fund the acquisition

of spectrum licences in Canada. The licences

were awarded to GWMC during March 2009 by Industry

Canada and it is expected that GWMC will become

As of December 31, 2008 Carrying

amount

Liabilities

Expected

cash flows (*)

fully operational during the fourth quarter of 2009.

Based on business plan projections it is expected that

GWMC, will be able to repay the loan received when

it is fully operational.

• In general the remaining other receivables and financial

receivables included in financial assets generally

relate to a variety of smaller amounts due from a wide

range of counterparties, therefore, the Group does

not consider that it has a significant concentration of

credit risk.

Liquidity Risk

The Group monitors liquidity risk in order to ensure that it

maintains sufficient cash and cash equivalents and availability

of funding through an appropriate level of committed

credit facilities. In general, liquidity risk is monitored

at entity level whereby each subsidiary is responsible

for managing and monitoring its cashflows and rolling

liquidity reserve forecast in order to ensure that it has

sufficient committed facilities to meet its liquidity needs.

The table below analyses the group’s financial liabilities

into relevant maturity groupings based on the remaining

period at the balance sheet to the contractual maturity

date. The amounts disclosed in the table are the contractual

undiscounted cashflows.

Less than

1 year

Between

1 and 5 years

More than

5 years

Liabilities to banks 4,421 5,515 734 4,563 218

Bonds 1,153 1,627 114 733 780

Finance lease liability 33 45 12 33 -

Other borrowings 15 15 12 3 -

Telecommunication licence payable 395 477 204 184 89

Trade payables 1,186 1,186 1,186 - -

As of December 31, 2007 Carrying

amount

Liabilities

7,203 8,865 2,262 5,516 1,087

Expected

cash flows (*)

Less than

1 year

Between

1 and 5 years

More than

5 years

Liabilities to banks 3,957 4,575 1,938 2,389 248

Bonds 1,230 1,891 181 579 1,131

Finance lease liability 16 19 16 3 -

Other borrowings 10 10 10 - -

Telecommunication licence payable 250 338 72 162 104

Trade payables 1,083 1,083 1,083 - -

6,546 7,916 3,300 3,133 1,483

* Expected cashflows are the gross contractual undiscounted cash flows including interest, charges and other fees.


122 123

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

The table below analyses the group’s derivative financial instruments into relevant maturity groupings based on the remaining

period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual

undiscounted cash flows.

As of December 31, 2008

Cash outflow / (cash inflow)

Expected cash

flows (*)

Less than

1 year

Between

1 and 5 years

More than

5 years

Interest rate derivatives 116 43 73 -

Foreign exchange derivatives (2) 10 (11) (1)

Other derivative instruments - cash outflow 31 31 - -

Other derivative instruments - cash inflow (31) (31) - -

Total 114 53 62 (1)

and is controlled by different legal entities.

The following primary business segments have been

identified:

• GSM covering the mobile telecommunications

services activities of the Group, including the sale

of pre-paid telephone cards, post-paid and monthly

subscriptions packages, telephone packages and

roaming included in this segment are ;

Telecom services relating to the sale of handsets,

including ring tones and other cell phone products

and activities relating to the rental of portals to allow

satellite roaming calls and value added service activities;

and

• Internet & fixed line covering the internet and fixed

telecommunications services of the Group.

The Group also reports geographical segments based

on the geographical location of the legal entity controlling

the operation, which is the same as the location of the

major customers.

The following geographical segments have been identified:

• North Africa – comprising Algeria and Tunisia

• Middle East – comprising Egypt

• South Asia – comprising Pakistan and Bangladesh

• Others – comprising, North Korea, Central Africa,

Burundi, Malta, Belgium, the United Kingdom and

other countries

As of December 31, 2007

Cash outflow / (cash inflow)

* Derivative cashflows for interest rate derivatives and foreign ex

change derivatives represent the net cashflow from the relevant

swap

transaction as such derivatives are net settled. Cash

inflow and cash

outflow for other derivative instruments are

shown separately as such

derivatives are gross settled.

Derivative cash outflows do not include the potential cash outflows

should the share warrants of My Screen and Lingo be exercised.

The exercise of such warrants is at the option of the Company.

Details of such warrants are provided in Note 19 “Other financial assets”.

Additionally a put and call option for the purchase of the investment

in Namibia has not been included in the contractual cashflows.

Contractual cashflows are derived based on the relevant index as of

the balance sheet date.

Capital risk management

The Group’s objectives when managing capital are to

safeguard the Group’s ability to continue as a going

concern in order to provide returns for shareholders and

to maintain an optimal capital structure to reduce the

cost of capital. In order to maintain or adjust the capital

structure, the Group may, among other things, adjust the

amount of dividends paid to shareholders, return capital

to shareholders through share buyback transactions,

issue new shares or sell assets to reduce debt.

Other risks

Political and economic risk in emerging countries

A significant amount of the Group’s operations are

conducted in Algeria, Pakistan, Egypt and Tunisia. The

operations of the Group depend on the market economies

of the countries in which the subsidiaries operate.

In particular, these markets are characterized by economies

that are in various stages of development or are

undergoing restructuring. Therefore the operating results

of the Group are affected by the current and future

economic and political developments in these countries.

In particular, the results of operations could be unfavorably

affected by changes in the political or governmental

structures or weaknesses in the local economies in the

countries where it operates. These changes could also

have an unfavorable impact on financial condition, performance

and business prospects.

Expected cash

flows (*)

Less than 1

year

Between 1 and

5 years

More than 5

years

Interest rate derivatives 6 4 2 -

Foreign exchange derivatives (57) (12) (41) (4)

Total (51) (8) (39) (4)

Regulatory risk in emerging countries

Due to the nature of the legal and tax jurisdictions in

the emerging countries where the Group operates, it is

possible that laws and regulations could be amended.

This could include factors such as the current tendency

to withhold tax on the dividends of these subsidiaries,

the granting of relief to certain operations and practices

relating to foreign currency exchange. These factors

could have an unfavorable effect on the financial activities

of the Group and on the ability to receive funds from

the subsidiaries.

Revenue generated by the majority of the Group

subsidiaries is expressed in local currency. The Group

expects to receive most of this revenue from its subsidiaries

and therefore it relies on their ability to be able to

transfer funds. The regulations in the various countries

where the subsidiaries operate could reduce the ability

to pay interest and dividends and to repay loans, credit

instruments and securities expressed in foreign currency

through the transfer of currency. In addition, in some

countries it could be difficult to convert large amounts of

foreign currency due to central bank regulations. The

central banks may amend regulations in the future and

therefore the ability of the Company to receive funds

from its subsidiaries may be restricted.

5- Segment reporting

The Company considers primary segment information

by business activity. The method used to identify the

business segments include the factors used by management

to direct the Group and assign managerial responsibilities.

The methodology adopted to identify the

components of revenues and cost attributable to each

business segment is based on the identification of each

component of cost and revenues directly attributable to

each segment. The operating activities of the Group are

organized and managed separately based on the nature

of the products and services provided. Each segment

offers different products and services to different markets

Primary segment information

2008

2007

GSM

Telecom

services

Internet &

fixed line

Unallocated *

Gross revenues 4,886 698 95 - 5,679

Total

4,259 800 63 - 5,122

Intersegment revenues (106) (228) (18) - (352)

(69) (318) (8) - (395)

Revenues 4,780 470 77 - 5,327

4,190 482 55 - 4,727

Impairment charges (8) - (31) - (39)

(6) - (13) - (19)

Depreciation and amortization (880) (12) (16) (4) (912)

(722) (11) (15) (4) (752)

Operating income 1,574 85 (72) (88) 1,499

1,424 (38) (42) (45) 1,299

Profit before income tax 1,211 72 (79) (298) 906

1,203 (41) (39) 494 1,617

Profit/(loss) from continuing operations 914 27 (81) (357) 503

958 (46) (39) 290 1,163

Profit from discontinued operations - - - - -

920 - - - 920

Profit/(loss) for the year 914 27 (81) (357) 503

1,878 (46) (39) 290 2,083

Total segment assets 8,195 413 197 1,115 9,920

8,667 397 203 2,077 11,344

Total capital expenditure ** 1,689 118 65 6 1,878

1,707 109 42 5 1,863

Total segment liabilities 4,681 167 107 3,764 8,719

4,415 207 129 3,350 8,101

* Unallocated represents revenues and costs relating to activities provided centrally from headquarters to subsidiaries across the group. These activities

include staff functions with group wide responsibilities such as internal audit, financial advisory, legal services, communications and investor relations. Unal

located assets and liabilities mainly include borrowings of the Company and deferred tax assets and liabilities.

** Segment capital expenditure is the total cost incurred during the period to acquire property and equipment and intangible assets other than goodwill.


124 125

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Secondary segment information

2008

2007

North

Africa

South Asia

Middle

East

Other Unallocated * Total

Gross revenues 2,451 1,530 1,401 297 - 5,679

2,094 1,462 1,314 252 - 5,122

Intersegment revenues (83) (24) (169) (76) - (352)

(64) (5) (223) (103) - (395)

Revenues 2,368 1,506 1,232 221 - 5,327

2,030 1,457 1,091 149 - 4,727

Operating income 1,071 186 200 130 (88) 1,499

902 276 146 20 (45) 1,299

Profit before income tax 1,026 (66) 140 104 (298) 906

848 118 137 20 494 1,617

Profit/(loss) from continuing operations 742 (36) 63 91 (357) 503

702 64 102 5 290 1,163

Profit from discontinued operations - - - - - -

- - 920 - - 920

Profit /(loss) for the year 742 (36) 63 91 (357) 503

702 64 1,022 5 290 2,083

Total segment assets 2,890 3,739 1,863 313 1,115 9,920

3,118 3,449 1,476 1,224 2,077 11,344

Capital expenditure 219 960 547 146 6 1,878

354 1,049 417 38 5 1,863

Total segment assets 8,195 8,195 413 197 1,115 9,920

8,667 8,667 397 203 2,077 11,344

Total capital expenditure ** 1,689 1,689 118 65 6 1,878

1,707 1,707 109 42 5 1,863

Total segment liabilities 4,681 4,681 167 107 3,764 8,719

4,415 4,415 207 129 3,350 8,101

6- Assets and liabilities classified as held for sale and discontinuing operations

The following table discloses the results of discontinuing operations for the years indicated

2008 2007

Revenues - 646

Expenses - (368)

Profit before tax from discontinued operations - 278

Income tax expense of discontinued operations - (36)

Gain on disposal of discontinued operations - 844

Income tax expense on gain on disposal - (166)

Profit from discontinued operations - 920

The following provides a breakdown of assets and liabilities held for sale as of December 31, 2008:

2008 2007

Property and equipment 11 -

Intangible assets 20 -

Investments accounted for using the equity method - 924

Trade receivables 40 -

Other current assets 1 -

Cash and cash equivalents 8 -

Assets held for sale 80 924

Trade payables 22 -

Other current liabilities 2 -

Current income tax liabilities 1 -

Liabilities held for sale 25 -

Hutchison Telecommunications

In October 2007, management initiated proceedings

to dispose of the investment in Hutchison Telecommunications

International Limited (“Hutchison Telecommunications”).

During October and November 2007,

the Company sold 5.0% of the investment in Hutchison

Telecommunications, incurring a loss of US$ 3 million

which was recorded in the income statement for the

year ended December 31, 2007. In January 2008, the

Company sold the remaining investment of 14.2% for

consideration of US$ 956 million, generating a gain of

US$ 27 million. This gain has been recorded in gain on

disposal of associates.

As of December 31, 2007 assets held for sale includes

the Company’s equity investment in Hutchison Telecommunications

which was disposed of in January 2008. In

accordance with IFRS 5, assets held for sale in disposal

groups have been separately shown in a specific caption

on the consolidated balance sheet. As Hutchison

Telecommunications is an associate there is no income

statement disclosure relating to Hutchison Telecommunications

within discontinuing operations.

Operations in Iraq

In December 2007, the Company sold its subsidiary

Iraqna for consideration of US$ 1.2 billion. The pur-

7- Revenues

Revenues from services

chase consideration is split into two non-interest bearing

receivables of US$ 600 million each which are due on

December 31, 2008 and 2009, respectively. In June

2008, the Company entered into a receivable purchase

agreement with the National Bank of Kuwait and various

financial institutions for the sale of these receivables.

As of December 31, 2008 an amount of US$ 75 million

was outstanding relating to the amount withheld as

guarantee.

In accordance with IFRS 5, the results of operations

relating to 2007 have been shown separately on the consolidated

income statement within the caption discontinued

operations.

M-Link

The assets and liabilities related to M-Link Company

(“M-Link”), a company part of the Telecom services segment,

have been presented as held for sale, following

OTH managements’ decision to focus on GSM business

and dispose of non-core assets. M-Link has been sold

to TLC Servizi S.p.A., a wholly owned subsidiary of Wind

Telecomunicazioni S.p.A., in January 2009.

Another company included in assets held for sale is

Oracap for East Ltd. The assets and liabilities of this

company (mainly relating to US$ 1 million licence to

operate a bank and US$ 1 million cash) have been

presented as held for sale, following OTH managements’

decision to dispose of the assets. Oracap for East Ltd

had a capital commitment amounting to approximately

US$ 134 million.

2008 2007

Telephony services 4,751 4,150

Interconnection traffic 191 147

International and national roaming 99 76

Other services 14 12

Total revenues from services 5,055 4,385

Total revenues from sale of goods 272 342

Total 5,327 4,727

Total revenues from services increased in 2008 mainly due to the increase in revenues from telephony services as a result

of an increase in the subscriber numbers, mainly in Algeria, Egypt, Tunisia and Bangladesh. Revenues from interconnection

traffic and international and national roaming increased in 2008 compared to 2007 due to the increase in subscriber numbers.


126 127

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Total revenues from sale of goods decreased in 2008 mainly as a result of the disposal of the subsidiary Ring Jordan in May

2007, in addition to a decrease in sales of goods in Ring Egypt.

8- Purchases and services

2008 2007

Interconnection traffic and roaming 711 585

Cost of handsets, scratch cards, sim cards, bundle cost 281 350

Advertising and promotional services 253 265

Internet and fixed line costs 245 205

Customer acquisition costs 252 264

Maintenance costs 190 109

Utilities 132 76

Rental of network 85 113

Other leases and rentals 76 65

Rental of civil and technical sites 71 59

Consulting and professional services 58 50

Consumable materials, equipment and goods 48 42

Cost for security service 37 26

Cost for printing & collection services 12 22

Other service expenses 60 57

Total 2,511 2,288

10- Personnel costs

2008 2007

Wages and salaries 195 154

Bonuses given to management and employees 45 52

Social security 16 13

Share based compensation 11 9

Pension costs 7 9

Board of Directors remuneration 3 3

Other personnel costs 22 17

Total 299 257

Personnel costs increased in 2008 compared to 2007 due to the increase in the average number of employees during the

year. In particular, the increase in senior and middle management personnel related to the increase in operations.

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

As of December 31,

(in number of employees) 2008 2007

Senior management 216 193

Middle management 1,447 1,262

Staff 14,859 15,164

Total 16,522 16,619

Purchases and services costs increased during 2008 primarily due to the increase in operating activities. As a percentage of

revenues, purchase and service costs were substantially consistent, amounting to 48% in 2007 and to 47% in 2008.

In particular, interconnection traffic and roaming costs increased in 2008 compared to 2007 mainly due to the increase in the

subscriber numbers in North Africa.

Cost of handsets, scratch cards, sim cards and bundle costs decreased substantially in 2008 compared to 2007 as a result

of the disposal of the Ring Jordan subsidiary in May 2007.

Maintenance costs, security services and utilities increased in 2008 due to significant investments in the Groups telecommunication

network as well as increased fuel and energy prices,

9- Other expenses

2008 2007

Licence costs 55 41

Travel costs 21 13

Accruals for provisions 14 11

Allowance for doubtful receivables 19 28

Taxes (other than income tax) 17 20

Training expenses 11 10

Other operating expenses 37 35

Total 174 158

The increase in other expenses was primarily attributable to the higher licence costs driven by increased activity. The annual

contribution for licence costs are calculated as a percentage of revenues.

The table below provides a breakdown of the average number of employees for the years ended December 31, 2008 and 2007:

Average for the year ended December 31,

(in number of employees) 2008 2007

Senior management 205 188

Middle management 1,355 1,177

Staff 15,012 13,973

Total 16,572 15,338

11- Depreciation and amortization

2008 2007

Depreciation of property and equipment:

-Cell sites 686 552

-Computers, fixtures and other equipment 63 46

-Buildings 23 17

Amortization of intangible assets

-Licences 112 107

-Other intangible assets 28 30

Total 912 752

Depreciation and amortization increased due to the increase in cell sites depreciation primarily as a result of an increase in

investments.


128 129

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

12- Impairment charges

Impairment charges amounting to US$ 39 million in 2008

mainly relate to the impairment of US$ 31 million of the

CAT telecommunication license in Algeria. Following the

decision to liquidate this entity, the licence has been fully

impaired. Impairment charges also include impairments

of US$ 7 million for obsolete property and equipment in

Pakistan and an impairment of US$1 million for other

intangible assets.

13- Disposal of non-current assets

Gain on disposal of non-current assets amounting to

14- Net financing costs

US$ 68 million in 2008 mainly relates to the gain on

the disposal of the subsidiary OrasInvest. In November

2008, the Company disposed of its investment in

OrasInvest for consideration of US$ 180 million. Consideration

of US$ 90 million was paid in cash on closing of

the transaction and a promissory note was issued by the

purchasers for the remaining US$ 90 million. The promissory

note is due on December 19, 2009 and interest of

12.5% accrues on the outstanding principal. Additionally

the sale and purchase agreement includes a potential

price adjustment based on OrasInvest’s revenue for the

twelve month period following the closing date.

2008 2007

Interest on deposits and bank accounts 29 35

Interest on non-current financial receivables 15 -

Other financial income 6 2

Dividends from investments 2 1

Financial income 52 38

Impairment of financial assets: (1) -

Interest on bonds (91) (96)

Interest on other borrowings (335) (403)

Interest on other liabilities and other financial expense (41) (21)

Financial expense (468) (520)

Foreign exchange gain /(loss) (354) 42

Fair value changes of FX derivative instruments 153 -

Net foreign exchange gain /(loss) (201) 42

Net financing cost (617) (440)

Financial expense decreased mainly due to a decrease

in interest paid on other borrowings mainly due the

restructuring and amendment of the Company’s syndicated

loan facility, and particularly to the decrease of its

spread from 2.5% to 2.0%. Additionally, interest on other

liabilities and financial expense increased mainly due to

the increase in telecommunication licence payable and

the interest effect of non-current income tax liabilities.

The increase in foreign exchange loss is mainly due to

unrealized losses on translation of supplier facilities,

telecommunication licence payables and borrowings

due to the devaluation of the PKR and DZD against

the US$. Furthermore, foreign exchange loss in 2008

also included the unrealized loss on the translation of

the loans provided to GWMC which are denominated in

CAD. See Note 30 “Acquisition of associates” for further

information.

Fair value changes on FX derivative instruments relates

to the changes in the fair value of the cross currency

swaps held by Pakistan Mobile Communications Limited

(“PMCL”) in connection with the economic hedge of borrowings.

16- Income tax expense

15- Share of profit / (loss) of associates and gain/(loss)

on disposal of associates

Hutchison Telecommunications

As explained in Note 6 “Assets and liabilities held for

sale and discontinuing operations”, during October and

November 2007, the Group sold 5% of its investment in

Hutchison Telecommunications. The remaining investment

was sold in January 2008. The Group’s share of

profit from the associate, which was recorded in share

of profit of associates, amounted to US$ 761 million in

2007. The sale of the first portion of the investment in

2007, recorded in gain/(loss) on disposal of associates,

generated a loss of US$ 3 million, whilst the gain on

disposal of the remaining investment in 2008 amounted

to US$ 27 million.

Globalive

Share of loss of associates amounting to US$ 3 million

in 2008 relates to the Group’s investment in Globalive.

Further details of this associate are included in Note 30

“Acquisition of Associates”.

2008 2007

Current income tax expense 427 358

Deferred taxes (24) 96

Income tax expense 403 454

Current income tax receivables and liabilities in the consolidated balance sheet are as follows:

2008 2007

Current income tax receivable 75 112

Current and non current income tax liabilities (384) (442)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax

rate applicable to profits of the consolidated entities as follows:

Profit from continuing operations 906

Tax calculated at Company's income tax rate 181

Different income tax rates in subsidiaries 87

Theoretical income tax for the year 268

Permanent differences 16

Unrecognized deferred tax for tax losses 90

Reversal of expired deferred tax assets for tax losses 8

Utilization of previously unrecognized deferred tax assets (16)

Unrecognized deferred tax liabilities on unremitted earnings 19

Other differences 18

Income tax for the year 403

The Group’s income tax expense decreased from US$ 454 million in 2007 to US$ 403 million in 2008 while the effective tax

rate increased from 28% to 44%, respectively. Income tax expense in 2007 was benefited by a tax exemption for Orascom

Telecom Algeria S.P.A. (“OTA”). This tax exemption expired in August 2007.

17- Property and equipment

Cost

Land and

Buildings

Cell Sites

Computers,

fixtures

and other

equipment

Assets Under

Construction

As of January 1, 2008 165 5,382 289 796 6,632

Additions 39 322 87 1,184 1,632

Change in the scope of consolidation (3) 59 (11) (4) 41

Assets held for sale (3) (16) (3) (1) (23)

Disposals (6) (41) (6) (8) (61)

Currency translation differences (16) (682) (25) (87) (810)

Reclassifications 4 916 5 (925) -

As of December 31, 2008 180 5,940 336 955 7,411

Accumulated Depreciation and Impairment

As of January 1, 2008 44 1,628 148 9 1,829

Charge for the year 23 686 63 - 772

Change in the scope of consolidation 1 26 (7) - 20

Assets held for sale (1) (9) (2) - (12)

Disposals (1) (29) (3) - (33)

Impairment loss - - - 7 7

Currency translation differences (8) (208) (13) - (229)

As of December 31, 2008 58 2,094 186 16 2,354

Net book value as of December 31, 2007 121 3,754 141 787 4,803

Net book value as of December 31, 2008 122 3,846 150 939 5,057

2008

Total


130 131

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Cost

Land and

Buildings

Cell Sites

Computers,

fixtures

and other

equipment

Assets Under

Construction

As of January 1, 2007 122 4,181 208 724 5,235

Additions 40 266 89 1,195 1,590

Change in the scope of consolidation (3) (263) (16) 3 (279)

Disposals - (16) (4) (18) (38)

Currency translation differences 4 95 7 18 124

Reclassifications 2 1,119 5 (1,126) -

As of December 31, 2007 165 5,382 289 796 6,632

Accumulated Depreciation and Impairment

As of January 1, 2007 28 1,071 109 - 1,208

Charge for the year 17 580 48 - 645

Change in the scope of consolidation (3) (66) (10) - (79)

Disposals - (2) (3) - (5)

Impairment loss 1 9 - 9 19

Currency translation differences 1 36 4 - 41

As of December 31, 2007 44 1,628 148 9 1,829

Net book value as of December 31, 2006 94 3,110 99 724 4,027

Net book value as of December 31, 2007 121 3,754 141 787 4,803

Additions to property and equipment in 2008 mainly

relate to cell site investments and assets under construction

relating to new base stations, predominantly in GSM

companies in Pakistan, Bangladesh and Algeria. Those

investments are mainly due to the expansion of the

business, increased capacity and the change in GSM

technology.

Property and equipment transferred to assets held for

sale in 2008 relates to the property and equipment of

M Link. See Note 6 “Assets and liabilities classified as

held for sale and discontinuing operations” for further

information. Additionally, depreciation charged during

2007 includes an amount of US$ 30 million relating to

the discontinued operations of Iraqna.

Total

Property and equipment pledged as security for bank

borrowings amount to US$ 1.3 billion as of December

31, 2008 and primarily relate to securities for borrowings

of PMCL, Trans World Asscociated Private Limited

(“TWA”) and Orascom Telecom Tunisie S.A.(“OTT”).

In the year ended December 31, 2008 and 2007 the

Group capitalized borrowing costs of US$ 63 million and

US$ 39 million, respectively, relating to the acquisition of

property and equipment.

The Group leases various assets under non-cancellable

finance lease agreements. As of December 31, 2008 the

Group had assets under finance lease with cost of US$

53 million and net book value of US$ 44 million mainly

relating to vehicles and equipment.

18- Intangible assets

Licences Goodwill Others Total

Cost

As of January 1, 2008 1,701 1,173 200 3,074

Additions 252 - 44 296

Change in the scope of consolidation 20 93 4 117

Assets held for sale (2) (17) (3) (22)

Disposals - - (7) (7)

Currency translation differences (110) - 2 (108)

As of December 31, 2008 1,861 1,249 240 3,350

Accumulated Amortization

As of January 1, 2008 614 120 115 849

Charge for the year 112 - 28 140

Change in the scope of consolidation 3 - - 3

Disposals - - (1) (1)

Impairment loss 31 - 1 32

Currency translation differences (36) 1 (9) (44)

As of December 31, 2008 724 121 134 979

Net book value as of December 31, 2007 1,087 1,053 85 2,225

Net book value as of December 31, 2008 1,137 1,128 106 2,371

Licences Goodwill Others Total

Cost

As of January 1, 2007 1,406 835 146 2,387

Additions 224 - 49 273

Change in the scope of consolidation 7 312 - 319

Currency translation differences 64 26 5 95

As of December 31, 2007 1,701 1,173 200 3,074

Accumulated Amortization

As of January 1, 2007 480 116 82 678

Charge for the year 107 - 30 137

Change in the scope of consolidation 3 - - 3

Currency translation differences 24 4 3 31

As of December 31, 2007 614 120 115 849

Net book value as of December 31, 2006 926 719 64 1,709

Net book value as of December 31, 2007 1,087 1,053 85 2,225

Additions to intangible assets in 2008 primarily relate

to the acquisition of a 3G license in Egypt, by Egyptian

Company for Mobile Services S.A.E. (“ECMS”) with a

duration of 14 years validity, the group’s proportionate

share is US$ 172 million and the acquisition of a WiMax

License by PMCL.

Intangible assets pledged as security for bank borrowings

amount to US$ 1.4 billion and primarily relate to

securities for borrowings of PMCL and OTT.

Impairment tests for goodwill

Goodwill is allocated to the individual CGU which reflects

the minimum level at which the units are monitored for

management control purposes.

The carrying amount as of December 31, 2008 was

subject to an impairment test involving comparing the

carrying amount with value in use and the recoverable

amount. No evidence of impairment arose. Value in

use was determined by discounting the expected cash

flows, resulting from business plans approved by the respective

Board of Directors, using the post-tax weighted

average cost of capital (WACC) as the discount rate.

The following table provides an analysis of goodwill by

segment


132 133

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

GSM

Telecom

Services

2008 2007

Internet &

Fixed Line

Total GSM Telecom

Services

Internet &

Fixed Line

North Africa 564 - - 564 560 - - 560

South Asia 288 1 - 289 288 1 - 289

Middle East 167 6 22 195 166 1 20 187

Other 80 - - 80 - 17 - 17

19. Other financial assets

Total

1,099 7 22 1,128 1,014 19 20 1,053

Noncurrent

2008 2007

Current Total Noncurrent

Current

Financial receivables 416 170 586 569 567 1,136

Derivative financial instruments 160 25 185 45 15 60

Deposits 43 82 125 14 44 58

Financial assets available for sale 20 - 20 14 3 17

Deposits are partially pledged as security against related

bank borrowings.

Financial Receivables

As of December 31, 2008 financial receivables mainly

include an amount of US$ 401 million relating to a financial

receivable due GWMC. The Company provided

financing to GWMC in connection with the funding of the

acquisition of spectrum licences (further information is

provided in Note 30 “Acquisition of associates”).

Financial receivables as of December 31, 2008 also

include an amount of US$ 165 million relating to receivables

from the sale of subsidiaries. This primarily

Derivative financial instruments

Total

639 277 916 642 629 1,271

relates to the receivable from the sale of OrasInvest

amounting to US$ 90 million which is due to be settled in

December 2009 and the residual receivable of US$ 75

million from the sale of Iraqna.

As of December 31, 2007 financial receivables includes

an amount of US$ 1,100 million (of which US$ 566 million

is included in current financial receivables and US$

534 million is included in non-current financial receivables)

relating to the receivable from the sale of Iraqna.

As explained in Note 6 “Assets and liabilities classified

as held for sale and discontinuing operations”, the

Company entered into receivable purchase agreements,

during 2008, for the sale of this receivable.

As of December 31, 2008 2008 2007

Assets Liabilites Assets Liabilites

Interest rate derivatives - 112 - 6

Foreign exchange derivatives 178 - 58 -

Other derivative instruments 7 1 2 -

Total 185 113 60 6

Less non-current portion

Interest rate derivatives - 71 - -

Foreign exchange derivatives 154 - 45 -

Other derivative instruments 6 - - -

Current portion 25 42 15 6

Interest rate derivatives

The notional principal amounts of the outstanding

interest rate swaps that qualify for hedge accounting

amounts to US$ 1.5 billion, relating to the A1 and A2

term loan supplements of the Company. Under the

derivative contract the Company pays fixed interest rate

and receives 6 month Libor. Gains and losses are recognized

in the cash flow hedge reserve in equity. As of

December 31, 2008 the fair value of the derivative liability

was US$ 113 million. The loss recognized in the cash

flow hedge reserve, net of deferred tax as of December

31, 2008, amounts to US$ 88 million.

Foreign exchange derivatives

Foreign exchange derivatives primarily relate to the economic

hedge of PMCL. The cross currency swap relates

to certain borrowings of PMCL, under which borrowings

are swapped from US$ to PKR and from Euro to PKR,

whilst the associated interest is swapped from LIBOR

to KIBOR and from Euribor to KIBOR. The changes in

the fair value of the derivative are recognized in foreign

exchange loss / gain in the income statement.

Deposits

2008 2007

Financial

receivables

Deposits

Financial

receivables

Not past due 125 511 58 1,136

Past due 0-30 days - - - -

Past due 31-120 days - 75 - -

Past due 121 - 150 days - - - -

Past due more than 150 days - - - -

Financial assets available for sale

125 586 58 1,136

Company name % ownership December 31, 2008 December 31, 2007

Smart Village (ECDMIV) 10% 8 8

My Screen Mobile Inc 9% 4 -

Lingo Media Corporation 23% 3 -

Top Level Domain Co. 5% 1 1

Other investments 4 8

My Screen Mobile Inc

In May 2008, the Company concluded a “Restricted

Stock Purchase Agreement” with My Screen Mobile

Inc, an entity specializing in the delivery of advertising

to mobile phones, to acquire 12.5 million shares which

represents approximately 9% of the total share capital

and existing voting rights. Additionally, the Company

purchased share warrants to acquire up to 20 million

shares at an exercise price of US$ 2 per share. The

warrants can be exercised from the date of the agreement

until May 23, 2012. The total purchase price of the

shares and warrants was US$ 10 million. Upon exercise

of the warrants, the Company would hold approximately

20% of the existing and potential voting rights. Based

on an assessment of the potential ownership percentage

and other contractual rights, management does

not consider that it has significant influence over the

company. Therefore, the investment has been recorded

as a financial asset available for sale and measured at

fair value. As of December 31, 2008 the fair value of the

investment amounted to US$ 4 million and the fair value

of the warrant amounted to US$ 6 million.

Other derivative instruments

Other derivative instruments mainly include the warrants

to purchase shares of My Screen Mobile Inc and Lingo

Media Corporation amounting to US$ 6 million and US$

0.1 million, respectively as of December 31, 2008. The

details of these warrants are provided below in the section

“Financial assets available for sale”.

CDC Fennec Ltd, a lender to OTA has the option to convert

all amounts payable under the loan agreement into

shares of the Company until the debt is extinguished.

As of December 31, 2008 the amount due, recorded as

liabilities to banks, amounted to US$ 30 million. As of

December 31, 2008 and 2007 the fair value of this option

was zero.

Deposits

Deposits primarily relate to letters of guarantee and other

restricted cash held as security for the performance

of Group obligations. The increase in deposits in 2008

mainly relates to an increase in cash deposits in Algeria.

The following table shows the ageing analysis of financial

receivables and long term deposits as of December

31, 2008 and 2007:

20 17

Lingo Media Corporation

In August 2008, the Company entered into a subscription

agreement to acquire 2,857,143 common shares

of Lingo Media Corporation, a media entity focusing on

online advertising. The investment represents approximately

23% of the total share capital and existing voting

rights. The Company also purchased share warrants

to acquire up to 2,142,857 shares of this entity. The

warrants can be exercised from the date of the agreement

for a period of two years, at an increasing price

from US$4 up to US$8. The total purchase price of

the shares and warrants was US$ 5 million. Assuming

exercise of the warrants, the Company would have an

interest of approximately 34% in this entity. Based on an

assessment of the contractual rights, management does

not consider that it has significant influence over the

company. Therefore, the investment has been recorded

as a financial asset available for sale and measured at

fair value. As of December 31, 2008, the fair value of

the investment amounted to US$ 3 million and the fair

value of the warrants, which is recorded in derivative

financial assets, amounted to US$ 0.1 million.


134 135

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

20. Deferred taxes

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and

liabilities and when the deferred income tax assets and liabilities relate to income taxes due to the same tax authority. The

following table provides a reconciliation of deferred tax assets and liabilities of the Group to the amounts included in the face

of the balance sheet.

2008 2007

Deferred tax liabilities, gross 415 456

Deferred tax assets offset (166) (133)

Deferred tax liabilities 249 323

Deferred tax assets, gross 254 206

Deferred tax liabilities offset (166) (133)

Deferred tax assets 88 73

of which recognized directly in equity (22) (1)

The gross movement in the deferred income tax account is as follows:

2008 2007

As of January 1, 250 157

Exchange differences (42) (2)

Change in scope (1) -

Income statement charge (24) 96

Tax charged directly to equity (22) (1)

As of December 31, 161 250

The movement of deferred tax assets and liabilities during the year, without taking into consideration any offsetting is provided in

the tables below:

Deferred tax liabilities

Depreciation

and

amortization

Unremitted

earnings

As of December 31, 2007 370 86 - 456

Charged / (credited) to the income statement 36 (3) 9 42

Exchange differences (79) (3) (1) (83)

As of December 31, 2008 327 80 8 415

Deferred tax assets

Tax

losses

Accrued

revenue

Depreciation

and

amortization

Impairment

of assets

Provisions

Other

Fair

value

As of December 31, 2007 114 33 20 12 9 1 17 206

Charged / (credited) to the income

statement 70 5 3 (3) (1) (1) (7) 66

Charged directly to equity - - - - - 22 - 22

Change in scope - - - - - - 1 1

Exchange differences (32) (2) (1) (1) (1) - (4) (41)

As of December 31, 2008 152 36 22 8 7 22 7 254

Other

Total

Total

where the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such

differences will not reverse in the foreseeable future.

The following table provides a breakdown by estimated recoverability of recognized deferred tax assets and liabilities:

Deferred tax liabilities

Deferred tax assets

2008 2007 2008 2007

within 1 year 50 83 1 7

within 1 - 5 years 331 125 252 197

after 5 years 34 248 1 2

21. Trade receivables

415 456 254 206

2008 2007

Receivables due from customers 165 170

Receivables due from telephone operators 91 76

Accrued revenue (unbilled) 76 125

Receivables due from authorized dealers 17 17

Other trade receivables 46 69

Allowance for doubtful receivables (67) (87)

Total 328 370

The following table shows the movement in the allowance for doubtful receivables

2008 2007

At January 1 87 79

Exchange differences (6) 2

Additions (allowances recognized as an expense) 19 28

Change in scope - (15)

Use (13) (6)

Reversal (2) (3)

Reclassifications (18) 2

At December 31, 67 87

The following table shows the ageing analysis of trade receivables as of December 31, 2008 and 2007, net of the relevant

provision for doubtful receivables:

2008 2007

Not past due 154 207

Past due 0-30 days 71 61

Past due 31-120 days 64 56

Past due 121 - 150 days 9 14

Past due more than 150 days 30 32

Trade receivables 328 370

Deferred tax assets on tax losses carry forwards mainly

refer to income tax loss carry forwards of the Group’s

subsidiaries in Pakistan with no expiry date.

No deferred tax assets were recognized on income tax

loss carryforwards for some foreign subsidiaries, mainly

Orascom Telecom Bangladesh Limited (“OTB”) and CAT,

as it is currently not probable that taxable profit will be

available in the near future against which such tax loss

carryforwards might be utilized.

Generally the Group does not recognize deferred tax assets for

temporary differences related to accruals for provisions, due to uncertainties

in connection with the tax treatment of such expenses,

as they might be challenged by local tax authorities.

No liability has been recognized in respect of temporary

differences associated with investments in subsidiaries,

branches and associates and interests in joint ventures,

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

any collateral as security.


136 137

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

22- Other current assets

2008 2007

Prepaid expenses 76 75

Advances to suppliers 16 17

Receivables due from tax authority 15 45

Deferred cost 14 19

Other receivables 172 87

Allowance for doubtful current assets (46) (27)

Total 247 216

The increase in other receivables is mainly related to down payments as a guarantee to issue indexed notes with a nominal

amount of US$ 230 milion (private placement) through a fully owned subsidiary Orascom Telecom Oscar. See note 36 “Subsequent

Events” for further information.

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

2008 2007

At January 1 27 25

Exchange differences (1) 1

Additions (allowances recognized as an expense) 2 1

Reclassifications 18 -

At December 31, 46 27

23- Cash and cash equivalents

2008 2007

Bank accounts 580 1,168

Deposits 70 69

Cash on hand 2 2

Total 652 1,239

Cash and cash equivalents as of December 31, 2007 were unusually high mainly due to the receipt of the proceeds from the

sale of 5% of the investment in Hutchison Telecommunication.

24- Changes in equity

Share

capital

Attributable to equity holders of the Company

Treasury

shares

Other

reserves

Retained

earnings

Total

Minority

interest

Total

equity

As of January 1, 2007 319 (131) 136 1,740 2,064 125 2,189

Fair value gains/(loss), net of tax:

- available-for-sale financial assets - - 1 - 1 - 1

- cash flow hedges - - (4) - (4) - (4)

Currency translation differences - - 65 - 65 6 71

Share of profit recognized directly

in equity of associates

Net income recognized directly

in equity

- - 3 - 3 - 3

- - 65 - 65 6 71

Profit for the year - - - 2,021 2,021 62 2,083

Total recognized income as of

December 31, 2007

- - 65 2,021 2,086 68 2,154

Dividends paid - - - (137) (137) (64) (201)

Share based compensation - - 9 - 9 - 9

Cancellation of shares (3) 112 (4) (105) - - -

Purchase of treasury shares - (873) - - (873) - (873)

Acquisition of minority interest - - - - - (36) (36)

Reclassifications - - 6 (6) - - -

As of December 31, 2007 316 (892) 212 3,513 3,149 93 3,242

Share

capital

Attributable to equity holders of the Company

Treasury

shares

Other

reserves

Retained

earnings

Total

Minority

interest

Total

equity

As of January 1, 2008 316 (892) 212 3,513 3,149 93 3,242

Fair value gains/(loss), net of tax:

- available-for-sale financial assets - - (2) - (2) - (2)

- cash flow hedges - - (88) - (88) - (88)

Currency translation differences - - (173) - (173) (3) (176)

Share of profit recognized directly

in equity of associates

Net income recognized directly

in equity

- - 5 - 5 - 5

- - (258) - (258) (3) (261)

Profit for the year - - - 431 431 72 503

Total recognized income as of

December 31, 2008

- - (258) 431 173 69 242

Dividends paid - - (9) (157) (166) (61) (227)

Share based compensation - - 11 - 11 - 11

Cancellation of shares (55) 2,789 (79) (2,655) - - -

Purchase of treasury shares - (2,202) - - (2,202) - (2,202)

Sale of treasury shares - 115 - - 115 - 115

Capital increase minority interest - - - - - 20 20

Reclassifications - - (16) 16 - - -

As of December 31, 2008 261 (190) (139) 1,148 1,080 121 1,201


138 139

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Authorized and Issued Share Capital

As of December 31, 2007 the issued and paid up share

capital amounted to LE 1,090 million (equivalent to US$

316 million) comprising 1,090,000,000 shares of a nominal

value of LE 1 per share. The Company is listed on

both the Egyptian Stock Exchange and also has GDR’S

(where one GDR is equivalent to 5 local shares) listed

on the London Stock Exchange.

On February 24, 2008, the Extraordinary General

Meeting approved a share capital reduction through the

cancellation of 61,900,000 treasury shares (11,612,970

GDR and 3,835,150 local shares). The cancellation of

the shares took place on June 16, 2008.

Furthermore, on August 8, 2008, the Extraordinary

General Meeting approved a share capital reduction

through the cancellation of 128,697,126 treasury shares

(22,891,514 GDR’s and 14,239,556 local shares). The

cancellation took place on September 11, 2008.

Accordingly, as a result of the above transactions, as of

December 31, 2008 the issued and paid up share capital

amounted to LE 899 million (equivalent to US$ 261 million)

comprising 899,402,874 shares of a nominal value

of LE 1 per share.

The legal reserve connected with the cancelled shares

including currency translation differences, amounting to

LE 95 million (equivalent to US$ 16 million), was reclassified

from other reserves to retained earnings.

25- Borrowings

As of December 31, 2008

As of December 31, 2007

within one

year

Treasury Shares

Treasury Shares

On May 14, 2008, the Company purchased

105,999,773 shares (11,177,963 local shares and

18,964,362 GDR’s), through a tender offer at a purchase

price of LE 83 per local share and US$ 77.41

per GDR.

On July 2, 2008, the Company purchased 11,999,403

shares (3,035,563 local shares and 1,792,768

GDR’s), through a tender offer launched on May

27, 2008 at a purchase price of LE 83 per share and

US$ 77.82 per GDR.

As previously explained, the Company cancelled

190,597,126 treasury shares (equivalent to 38.12 million

GDR’s).

In addition to the two fixed price tender offers, during

the year ended December 31, 2008 the Company

purchased from the market 46,560,120 shares to be

held as treasury shares and sold 18,206,500 shares

to the market.

Share based compensation plan

During the year ended December 31, 2008 the Group

acquired 1,383,855 of its own shares. Share grants

exercised during 2008 resulted in 1,223,148 shares.

As a result of the above transactions, as of December

31, 2008 the Company had 21,343,485 shares held

as treasury shares and for the purposes of the share

based compensation plan with a fair market value of

US$ 116 million.

Dividends

The Shareholders’ Meeting of the Company held on

April 21, 2008 approved a dividend distribution of LE

1 per share (LE 5 per GDR) which was paid on June

5, 2008. The dividend distribution in 2007 amounted

to LE 0.75 per share (LE 3.75 per GDR).

1-2 years 2-3 years 3-4 years 4-5 years after 5

years

Liabilities to banks 432 468 746 945 1,620 210 4,421

Total

1,726 572 716 489 215 239 3,957

Bonds 35 51 14 63 253 737 1,153

95 6 65 17 59 988 1,230

Derivative instruments 42 36 23 11 1 - 113

6 - - - - - 6

Finance lease liability 8 8 7 6 4 - 33

3 5 5 2 1 - 16

Other borrowings 13 - - - 2 - 15

10 - - - - - 10

Total as of December 31, 2008 530 563 790 1,025 1,880 947 5,735

Total as of December 31, 2007 1,840 583 786 508 275 1,227 5,219

Finance Lease Liabilities

Gross finance lease liabilities - minimum lease payments

Telecommunications in January 2008, the Group was

required to make a mandatory prepayment of US$ 958

million of this facility from the proceeds of the disposal.

During the year, in accordance with the contractual conditions,

the Company also made additional repayments

of US$ 140 million of this facility. Following these repayments

the amount outstanding was US$ 988 million.

During the second quarter of 2008, the Company entered

into an amendment agreement which restated the

amount outstanding under this facility using the proceeds

from a new five year senior secured syndicated

debt facility. The proceeds from the new facility, of US$

2.5 billion, were partially used to repay previous facilities

and to finance the tender offer for the acquisition of

treasury shares (see “Share Capital” for further details

on these transactions). The new facility has a duration of

five years and is due in 2013 with a grace period of two

years.

Additionally, during 2008 PMCL entered into a syndicated

loan for an amount of PKR 22,060 million (equivalent

to US$ 352 million). The loan, which was fully

drawn down in 2008, is repayable in six semi-annual

installments between July 2011 and January 2014. The

proceeds from the loan were used to refinance existing

borrowings amounting to US$ 250 million and to finance

ongoing capital expenditure programs.

Bonds

Appendix B includes a detailed analysis of Bonds as

of December 31, 2008. During 2008 PMCL received

proceeds of PKR 1,899 million (equivalent to US$

30 million) from the issuance of new unsecured term

finance certificates. The bond bears interest of 6 months

KIBOR plus a spread of 1.65% and is repayable on 28

October 2013.

Derivatives

Details of the derivative liabilities are provided in Note 19

“Other financial assets”.

2008 2007

Within one year 12 5

Between 1-5 years 31 16

After 5 years - -

43 21

Future finance charges on finance leases (10) (5)

Present value of finance lease liabilities 33 16

The present value of finance lease liabilities is as follows:

Within one year 8 3

Between 1-5 years 25 13

After 5 years - -

33 16

Other Borrowings

Other borrowings mainly include notes payable to suppliers and loans from minority shareholders in subsidiaries.

Liabilities to banks

Appendix A includes a detailed analysis of liabilities to

banks as of December 31, 2008.

In addition to the normal scheduled repayments of borrowing

facilities, in accordance with the relevant agreements,

the main changes in liabilities to banks during

2008 relates to financing transactions by the Company

and PMCL, primarily for the purpose of refinancing existing

borrowings.

As of December 31, 2007 the Company had an amount

of US$ 2,084 million outstanding relating to a syndicated

loan facility. Following the disposal of Hutchison


140 141

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Notes to the consolidated financial statements

As of end for the year ended December 31, 2008

Currency Information of Borrowings

As of December 31, 2008

Total borrowings by currency

of issue

Notional amount of currency

derivatives

Borrowings after derivative

effect

of which (after derivative effect):

US$ Euro Egyptian

Pound

Pakistan

Rupee

Bangladeshi

Taka

Algerian

Dinar

Tunisian

Dinar

Others

4,022 421 539 576 61 52 55 9 5,735

Total

(315) (305) - 620 - - - - -

3,707 116 539 1,196 61 52 55 9 5,735

floating rate borrowings 1,110 108 458 1,195 61 52 53 - 3,037

fixed rate borrowings 2,597 8 81 1 - - 2 9 2,698

As of December 31, 2007

Total borrowings by currency

of issue