JORDAN TELECOMMUNICATIONS COMPANY ... - Orange Jordan

JORDAN TELECOMMUNICATIONS COMPANY (JORDAN TELECOM) 

PUBLIC SHAREHOLDING COMPANY 

CONSOLIDATED FINANCIAL STATEMENTS 

31 DECEMBER 2005 

AUDITORS’ REPORT TO THE SHAREHOLDERS OF 



We have audited the accompanying consolidated balance sheet of Jordan Telecommunications Company (Jordan Telecom) - Public 

Shareholding Company as of 31 December 2005 and the related consolidated statements of income, cash flows and changes in equity 

for the year then ended. These consolidated financial statements are the responsibility of the Company’s Board of Directors. 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 plan and perform 

the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An 

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. 

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating 

the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as 

of 31 December 2005 and the results of its operations and its cash flows for the year then ended in accordance with International 

Financial Reporting Standards and we recommend its approval. 

The company maintains proper books of accounts and the accompanying consolidated financial statements and financial information 

in the Board of Directors report are in agreement therewith. 

Ernst & Young 

Amman – Jordan 

26 January 2006, except for note (15) dated 19 February 2006 

60



CONSOLIDATED BALANCE SHEET 

At 31 December 2005 

ASSETS 

Note 

2005 

JD 

2004 

JD 

Non-current assets 

Property, plant and equipment 

5 

244,439,331 

280,199,689 

Intangible assets 

6 

10,536,638 

11,627,418 

Available for sale investments 

7 

21,623 

3,376,002 

Deferred tax assets 

8 

13,963,117 

13,576,320 

268,960,709 

308,779,429 

Current assets 

Inventories 

9 

4,050,126 

5,570,573 

Trade and other receivables 

10 

43,967,299 

45,460,245 

Balances due from telecom administrations 

11 

3,862,431 

11,371,473 

Investments held to maturity 

1,500,000 

- 

Cash and short term deposits 

12 

217,501,479 

113,626,597 

270,881,335 

176,028,888 

TOTAL ASSETS 

539,842,044 

484,808,317 

EQUITY AND LIABILITIES 

Equity 

Capital 

13 

250,000,000 

250,000,000 

Statutory reserve 

14 

62,500,000 

62,500,000 

Cumulative changes in fair values 

(8,377) 

2,164,568 

Proposed dividends 

15 

85,000,000 

45,000,000 

Retained earnings 

2,217,630 

855,939 

Total equity 

399,709,253 

360,520,507 

Non-current liabilities 

Long term loans 

16 

8,250,375 

10,090,020 

Bonds 

17 

25,000,000 

25,000,000 

Employees’ end of service benefits 

18 

11,266,479 

11,667,514 

44,516,854 

46,757,534 

Current liabilities 

Trade and other payables 

19 

91,410,866 

70,084,549 

Balances due to telecom administrations 

11 

3,966,784 

6,996,932 

Current portion of long term loans 

16 

238,287 

448,795 

95,615,937 

77,530,276 

TOTAL EQUITY AND LIABILITIES 

539,842,044 

484,808,317 

The attached notes 1 to 27 form part of these consolidated financial statements.



CONSOLIDATED INCOME STATEMENT 

Year ended 31 December 2005 

Note 

Sale of services 

Cost of services 

GROSS PROFIT 

Administration expenses 

Selling and distribution expenses 

Government revenue share 

20 

Management fees 

20 

Depreciation, amortization and impairment of assets 

PROFIT FROM OPERATIONS 

Gain (loss) from foreign exchange differences 

Finance costs 

Finance income 

Gain from sale of available for sale investments 

7 

Other income 

Other fees 

21 

Cumulative effect of change in accounting policy 

22 

PROFIT BEFORE INCOME TAX 

Income tax expense 

8 

PROFIT FOR THE YEAR 

Earnings per share 

Weighted average number of shares during the year 

The attached notes 1 to 27 form part of these consolidated financial statements. 

2005 

JD 

352,181,852 

(115,581,265) 

236,600,587 

(16,292,964) 

(39,259,290) 

(8,061,033) 

(2,875,481) 

(70,632,092) 

99,479,727 

118,399 

(2,301,581) 

4,265,268 

3,244,240 

212,332 

(3,075,175) 

- 

101,943,210 

(15,581,519) 

86,361,691 

0.345 

250,000,000 

2004 

JD 

342,505,742 

(113,355,716) 

229,150,026 

(13,256,194) 

(37,353,973) 

(16,904,993) 

(8,216,327) 

(82,952,388) 

70,466,151 

(113,122) 

(5,397,478) 

1,872,232 

81,799 

241,698 

(1,690,641) 

(2,612,824) 

62,847,815 

(16,701,843) 

46,145,972 

0.185 

250,000,000 

62



CONSOLIDATED STATEMENT OF CASH FLOWS 


OPERATING ACTIVITIES 

Profit before tax 

Adjustments for: 

Finance costs 


Bad debts expense 

Slow moving provision 

Depreciation and impairment of assets 

Amortization and impairment of intangible assets 

Employees’ end of service benefits 

Gain from sale of property, plant & equipment 


Foreign currency exchange differences 

Deferred tax assets 


Working capital changes 

Trade and other receivables 


Inventories 

Trade and other payables 


Cash from operations 

2005 

JD 

101,943,210 

2,301,581 

(4,265,268) 

5,888,688 

990,000 

69,351,420 

1,280,672 

(401,035) 

(208,376) 

(3,244,240) 

(1,099,496) 

(386,797) 

- 

172,150,359 

(4,395,742) 

7,509,042 

530,447 

9,349,654 

(3,030,148) 

182,113,612 

2004 

JD 

62,847,815 

5,397,478 

(1,872,232) 

8,008,702 

149,690 

76,551,833 

6,400,555 

(688,888) 

(134,929) 

(81,799) 

994,518 

2,044,704 

2,612,824 

162,230,271 

988,746 

2,925,340 

1,072,359 

(3,166,178) 

(1,336,160) 

162,714,378 

Finance costs paid 

Income tax paid 

Net cash from operating activities 

(2,444,595) 

(4,620,374) 

175,048,643 

(5,121,485) 

(16,374,480) 

141,218,413 

INVESTING ACTIVITIES 

Purchase of held to maturity investments 

Purchase of property, plant and equipment 

Proceeds from sale of property, plant and equipment 

Proceeds from sale of available for sale investments 

Increase in intangible assets 


Net cash used in investing activities 

(1,500,000) 

(33,890,778) 

508,092 

4,425,674 

(189,892) 

4,265,268 

(26,381,636) 

- 

(25,941,981) 

377,796 

771,952 

(57,251) 

1,872,232 

(22,977,252) 

FINANCING ACTIVITIES 

Repayment of long term loans 

Dividends paid 

Net cash used in financing activities 

Increase (decrease) in bank balances and cash 

BANK BALANCES AND CASH AT 1 JANUARY 

BANK BALANCES AND CASH AT 31 DECEMBER 


(950,657) 

(43,841,468) 

(44,792,125) 

103,874,882 

113,626,597 

217,501,479 

(77,236,918) 

(45,000,000) 

(122,236,918) 

(3,995,757) 

117,622,354 

113,626,597



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 


Capital 

JD 

Statutory 

Reserve 

JD 

Balance at 1 January 2004 

250,000,000 56,143,652 

Profit for the year 

- 

- 

Dividends paid (Note 15) 

- 

- 

Movement in the cumulative changes in fair values - 

- 

Transfer to statutory reserve (Note 14) 

- 

6,356,348 

Transfer to retained earnings 

- 

- 

Proposed dividends (Note 15) 

- 

- 

Balance at 31 December 2004 

250,000,000 62,500,000 


- 

- 

Dividends paid (Note 15) 

- 

- 

Movement in the cumulative changes in fair values - 

- 

Proposed dividends (Note 15) 

- 

- 

Balance at 31 December 2005 

250,000,000 62,500,000 


Voluntary 

Reserve 

JD 

6,066,315 

- 

- 

- 

- 

(6,066,315) 

- 

- 

- 

- 

- 

- 

- 

Cumulative 

changes in 

fair values 

JD 

2,101,558 

- 

- 

63,010 

- 

- 

- 

2,164,568 

- 

- 

(2,172,945) 

- 

(8,377) 

Proposed 

dividends 

JD 

45,000,000 

- 

(45,000,000) 

- 

- 

- 

45,000,000 

45,000,000 

- 

(45,000,000) 

- 

85,000,000 

85,000,000 

Retained 

earnings 

JD 

- 

46,145,972 

- 

- 

(6,356,348) 

6,066,315 

(45,000,000) 

855,939 

86,361,691 

- 

- 

(85,000,000) 

2,217,630 

Total 

JD 

359,311,525 

46,145,972 

(45,000,000) 

63,010 

- 

- 

- 

360,520,507 

86,361,691 

(45,000,000) 

(2,172,945) 

- 

399,709,253 

64

JORDAN TELECOMMUNICATIONS COMPANY 

(JORDAN TELECOM) 


NOTES TO THE CONSOLIDATED 

FINANCIAL STATEMENTS 


1. GENERAL 

Jordan Telecom was registered as a public 

shareholding company on 8 October 

1996. The main operations of the 

company and its subsidiaries are disclosed 

in note number (4). 

The consolidated financial statements of 

Jordan Telecommunications Company 

(Jordan Telecom) - Public Shareholding 

Company for the year ended 31 December 

2005 were authorized for issue in 

accordance with a resolution of the Board 

of Directors on 26 January 2006. 

2.1 Basis of Preparation 

The consolidated financial statements of 

Jordan Telecommunications Company – 

Public Shareholding Company have been 

prepared in accordance with International 

Financial Reporting Standards (IFRSs). 

The consolidated financial statements have 

been prepared on a historical cost basis, 

except for available for sale investments 

that have been measured at fair value. 

The consolidated financial statements 

have been presented in Jordanian Dinars. 

Basis of Consolidation 

The consolidated financial statements 

incorporate the financial statements of 

Jordan Telecom and its wholly owned 

companies which are: Petra Jordanian 

Mobile Telecommunications Company 

(MobileCom), Jordan Data Communications 

Ltd. (Wanadoo) and Dimension 

Company For Digital Development Of 

Data (e-dimension) after eliminating all 

intercompany transactions and 

balances. 

Subsidiaries are consolidated from the 

date Jordan Telecommunications Co. 

obtains control until such time as 

control ceases. 

The financial statements of subsidiaries 

are prepared for the same reporting year 

as the parent company, using consistent 

accounting policies. 

2.2 SIGNIFICANT ACCOUNTING 

POLICIES 

Accounts Receivable 

Trade receivables are stated at original 

invoice amount less any allowance for 

any uncollectible amounts. An estimate 

for doubtful debts is made when 

collection of the full amount is no 

longer probable. Bad debts are written 

off when identified. 

Inventories 

Inventories are valued at the lower of 

cost and net realizable value. Costs are 

those expenses incurred in bringing 

each item to its present location and 

condition and is determined using the 

weighted average method. 

Available-for-sale investments 

Available for sale investment are 

recorded at cost at acquisition and 

measured subsequently at fair value. 

Gains and losses resulted from 

revaluating the investment at fair value 

are reported as a separate component of 

equity until the investment is 

derecognized or determined to be 

impaired. On derecognition or 

impairment the cumulative gain or loss 

previously reported in equity is recognized 

in the income statement for the year. 

Held-to-Maturity Investments 

Held for sale investments are initially 

recognized at cost, premium or discount 

is amortized using the effective interest 

rate method, gains and losses are 

recognized in income when the 

investments are derecognized or 

impaired. Those investments are 

classified as held to maturity when it 

has fixed or determinable maturity and 

the company has the positive intention 

and ability to hold it to maturity. 

Property, Plant and Equipment 

Property, plant and equipment are stated 

at cost less accumulated depreciation 

and any impairment in value. Land is not 

depreciated. 

Depreciation is calculated on a 

straightline basis, the depreciation rates 

are estimated according to the estimated 

useful lives of assets as follows: 

Buildings 

Telecommunications 

equipment 

Other fixed assets 

25 years 

5 to 20 years 

2 to 7 years







The carrying values of property, plant and 

equipment are reviewed periodically for 

impairment when events or changes in 

circumstances that indicates that the 

assets are recorded at values exceeding 

their recoverable amounts, consequently, 

the assets are written down to their 

recoverable amounts, and impairment is 

recognized in the income statement. 

Finance Costs 

Finance costs are recognized as an expense 

when incurred. 

Intangibles Assets 

Intangible assets acquired separately are 

measured on initial recognition at cost. 

The cost of intangible assets acquired in a 

business combination is fair value as at the 

date of acquisition. Following initial 

recognition, intangible assets are carried 

at cost less than any accumulated 

amortization and any accumulated 

impairment losses. The useful lives of these 

intangible assets are assessed to be either 

finite or indefinite. Intangible assets with 

finite lives are amortized over the useful 

economic life and assessed for impairment 

whenever there is an indication that the 

intangible asset may be impaired. 

The amortization period and the 

amortization method for an intangible 

assets with a finite useful life is reviewed 

at least at each financial year end. 

Intangible assets with indefinite useful 

lives are tested for impairment annually, 

such intangibles are not amortized. 

Trade and Other Payables 

Liabilities are recognized for amounts to 

be paid in the future for goods received 

or services rendered, whether billed by 

the supplier or not. 

Employees' End Of Service Benefits 

The company provides end of service 

benefits to its employees. The 

entitlement to these benefits is based 

upon the employees’ final salary and 

length of service, subject to the 

completion of a minimum service period 

in accordance with the Company’s 

international policies. The expected costs 

of theses benefits are accrued over the 

period of employment. Actuarial gains 

and losses are recognized as income or 

expense and where material is amortized 

over the expected average remaining 

working lives of the employees. 

Taxation 

Taxation is provided for in accordance 

with Jordanian fiscal regulations. 

Deferred income tax is provided, using 

the liability method, on all temporary 

differences at the balance sheet date 

between the tax bases of assets and 

liabilities and their carrying amounts for 

financial reporting purposes. 

Deferred income tax assets are 

recognized for all deductible temporary 

differences, carry-forward of unused tax 

assets and unused tax losses, to the 

extent that it is probable that taxable 

profit will be available against which the 

deductible temporary differences, 

carry-forward of unused tax assets and 

unused tax losses can be utilized. 

The carrying amount of deferred 

income tax assets is reviewed at each 

balance sheet date and reduced to the 

extent that it is no longer probable that 

sufficient taxable profit will be 

available to allow all or part of the 

deferred income tax asset to be utilized. 

Deferred income tax assets and 

liabilities are measured at the tax rates 

that are expected to apply to the period 

when the asset is realised or the liability 

is settled, based on tax rates (and tax 

laws) that have been enacted or 

substantively enacted at the balance 

sheet date. 

Impairment And Unrecoverability Of 

Financial Assets 

The Company at each balance sheet 

date assesses whether there is an 

indication that a financial asset or 

group of financial asset may be 

impaired. If such indications exists, the 

estimated recoverable amount of that 

asset is determined and any losses 

resulted from the impairment is 

calculated as the difference between 

the recoverable amount and the 

carrying amount. Impairment losses are 

recognized in the statement of income. 

Provisions 

Provisions are recognized when the 

company has an obligation (legal or 

66







constructive) arising from a past event, 

and the costs to settle the obligation are 

both probable and able to be reliably 

measured. 

Revenue Recognition 

Operating revenues from 

communication services are recognized 

when communication services are 

rendered. Revenues from telephone 

subscriptions, connection charges as well 

as leased line services are recognized 

proportionately over contract periods or 

as services are performed. Revenues 

from sale of telecommunications 

equipment are recognized upon delivery 

to the customer. 

Leases 

Leases where the lessor retains 

substantially all the risks and benefits of 

ownership of the asset are classified as 

operating leases. Operating lease 

payments are recognized as an expense 

in the consolidated income statement 

on a straight-line basis over the lease 

term. 

Foreign Currencies 

Transactions in foreign currencies are 

recorded at the rate ruling at the date of 

the transactions. Monetary assets and 

liabilities denominated in foreign 

currencies are retranslated at the rate of 

exchange ruling at the balance sheet 

date. All differences resulted from the 

retranslation are taken to the income 

statement. 

3. Judgements And Estimates 

The preparation of the consolidated 

financial statements and applying the 

accounting polices requires the 

Company’s management making 

judgments at estimates that may affect 

the amounts of financial assets and 

liabilities and disclosing contingent 

liabilities. Those judgments and estimates 

also affect the revenues, expenses and 

provisions and also the changes on 

cumulative fair value that appears as 

part of equity. It’s required also from the 

Company to do significant judgments to 

estimate the amounts and timing of 

future cash inflows to determine the 

level of the allowance for doubtful 

accounts and the impairment of financial 

assets. Those judgments and 

estimates are based on different assumptions 

and factors that have different 

degrees of uncertainty, and the actual 

results could materially differ 

form estimates due to changes in future. 

The Company’s management uses 

significant assumptions relating to future 

and other sources to assess the degree of 

uncertainty at the end of each year 

which could have significant effect on 

the amounts recognized in the current 

and subsequent financial statements. 

4. Segment Information 

The company’s operating businesses are 

organized and managed separately 

according to the nature of the services 

provided, with each segment representing 

a strategic business unit that offers 

different services. 

The fixed-line voice segment constructs, 

develops and maintains fixed telecommunication 

network services. The 

segment exclusivity period as the only 

fixed line provider ended on 31 December 

2004. 

The mobile communications segment 

installs, operates and manages a cellular 

network in Jordan. The segment duopoly 

period to install, operate and manage a 

cellular network in Jordan ended on 1 

January 2004. 

The data services segment provides, 

furnish, installs, maintains, engineers and 

operates communication facilities for the 

provision of data network and internet 

access services to its customers and 

helping companies to be more efficient 

in the way they do their business on 

Internet.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 


The following tables present revenue and profit and certain asset and liability information regarding the company’s business segments 

for the years ended 31 December 2005 and 2004. 

Fixed-line 

voice 

JD 

Mobile 

Communications 

JD 

Data 

JD 

Total 

JD 


Revenue 

Sales of services to external customers 

234,681,470 

110,242,109 

7,258,273 

352,181,852 

Inter-segment sales 

18,404,234 

5,427,297 

485,655 

24,317,186 

Total revenue 

253,085,704 

115,669,406 

7,743,928 

376,499,038 

Segment results 

Profit from operations before depreciation, 

amortization and impairment of assets 

114,328,292 

51,844,725 

3,938,802 

170,111,819 


(70,632,092) 

Gain on exchange 

118,399 

Finance costs 

(2,301,581) 


4,265,268 


3,244,240 

Other income 

212,332 

Income tax 

(15,581,519) 

Other deductions 

(3,075,175) 


86,361,691 

Assets and liabilities 

Segment assets 

415,554,067 

115,559,266 

8,728,711 

539,842,044 

Segment liabilities 

104,258,533 

32,463,467 

3,410,791 

140,132,791 

Other segment information 


173,117,242 

70,290,949 

1,031,140 

244,439,331 


4,755,947 

5,780,691 

- 

10,536,638 

68





4. Segment Information (Continued) 

Fixed-line 

voice 

JD 

Mobile 

Communications 

JD 

Data 

JD 

Total 

JD 


Revenue 

Sales of services to external customers 

243,413,236 

94,265,515 

4,826,991 

342,505,742 

Inter-segment sales 

15,096,549 

5,447,861 

281,376 

20,825,786 

Total revenue 

258,509,785 

99,713,376 

5,108,367 

363,331,528 

Segment results 

Profit from operations before depreciation, 

amortization and impairment of assets 

111,238,207 

39,735,205 

2,445,127 

153,418,539 


(82,952,388) 

Loss on exchange 

(113,122) 

Finance costs 

(5,397,478) 


1,872,232 


81,799 

Other income 

241,698 

Income tax 

(16,701,843) 

Other deductions 

(1,690,641) 


(2,612,824) 


46,145,972 

Assets and liabilities 

Segment assets 

381,748,054 

97,357,870 

5,702,393 

484,808,317 

Segment liabilities 

96,604,213 

25,307,025 

2,376,572 

124,287,810 

Other segment information 


209,849,654 

69,714,709 

635,326 

280,199,689 


4,966,650 

6,660,768 

- 

11,627,418





5. Property, Plant And Equipment 

Land and 

buildings 

JD 

Telecommunications 

equipment 

JD 

Other 

fixed assets 

JD 

Projects-in- 

Progress 

JD 

Total 

JD 

Cost: 

At 1 January 2005 

79,879,246 

453,521,949 

65,456,224 

11,645,779 

610,503,198 

Additions 

197,598 

22,476,265 

1,721,664 

9,495,251 

33,890,778 

Completed projects transferred to 

property, plant and equipment 

150,598 

7,480,589 

941,387 

(8,572,574) 

- 

Disposals 

(196,634) 

(14,317,050) 

(960,702) 

- 

(15,474,386) 


80,030,808 

469,161,753 

67,158,573 

12,568,456 

628,919,590 

Depreciation: 

At 1 January 2005 

22,637,741 

258,278,424 

49,387,344 

- 

330,303,509 

Depreciation and impairments of assets 

2,265,209 

59,646,797 

7,439,414 

- 

69,351,420 

Relating to disposals 

(117,338) 

(14,111,292) 

(946,040) 

- 

(15,174,670) 


24,785,612 

303,813,929 

55,880,718 

- 

384,480,259 

Net carrying amount 


55,245,196 

165,347,824 

11,277,855 

12,568,456 

244,439,331 


57,241,505 

195,243,525 

16,068,880 

11,645,779 

280,199,689 

Land and buildings include land 

amounting to JD 481,138 (2004: JD 

481,138) owned by the Government of 

Jordan, which is used by the company for 

the public benefit. 

During 2005, the Company has reviewed 

the useful lives of certain assets which 

resulted in adjusting of the useful lives in 

accordance with the nature of those assets 

and with what is used in the telecom 

industry. This resulted in a reduction of the 

useful lives for certain assets and a 

difference in depreciation expense for the 

year 2005 approximately by JD 5 million. 

During 2005, the Company recognized an 

amount of JD 819,143 as impairment of 

assets related to group of assets that the 

Company decided to replace with more 

efficient technology. 

70





6. Intangible Assets 

FLAG access rights 

FLAG access rights impairment 

Mobile operating license and frequency rights 

Goodwill 

Other intangibles 

Accumulated amortization 

Net book value 

Movements 

Net book value at 1 January 

Additions 

FLAG access rights impairment 

Amortization 

Net book value at 31 December 

2005 

JD 

8,794,415 

- 

8,997,657 

- 

526,622 

18,318,694 

(7,782,056) 

10,536,638 

11,627,418 

189,892 

- 

(1,280,672) 

10,536,638 

2004 

JD 

10,558,065 

(1,902,542) 

8,997,657 

8,306,421 

475,623 

26,435,224 

(14,807,806) 

11,627,418 

17,970,722 

57,251 

(1,902,542) 

(4,498,013) 

11,627,418 

FLAG access rights, mobile operating license and frequency rights and other intangibles are being amortized over their useful 

economic lives of 20 years and15 years respectively, goodwill was fully amortised in 2004 over 5 years. 

7. Available For Sale Investments 

Intelsat- Limited 

University House for Consulting 

2005 

JD 

- 

21,623 

21,623 

2004 

JD 

3,346,002 

30,000 

3,376,002 

During 2005 the Company sold its investment in Intelsat Limited for JD 4,425,674 with resulted in a gain of JD 3,244,240.





8. Income Tax 

Major components of income tax expense for the year ended 31 December 2005 are as follows: 

2005 

JD 

2004 

JD 

Consolidated income statement 

Income tax charge – current year 

Income tax charge – prior years 

Deferred income tax (income) expense 

Relating to doubtful debts provision 

Relating to impairment of property, plant & equipment 

Relating to end of service benefits 

Income tax expense reported in the consolidated income statement 

15,958,802 

9,514 

(2,543,008) 

1,490,624 

665,587 

15,581,519 

11,457,139 

3,200,000 

1,044,888 

827,593 

172,223 

16,701,843 

A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to 

income tax expense at the company’s effective income tax rate for the years ended 31 December 2005 and 2004 is as follows: 

Accounting profit before income tax 

At statutory income tax rate of 25% 

Subsidiary profit 

Goodwill amortization 

Debts written off 

Allowance for doubtful accounts 

Impairment of assets 

Previous years’ tax returns differences 

Expenses and provisions not allowable for income tax purposes 

Discount 

Deferred tax 

Income tax expense reported in the consolidated income 

statement at effective income tax rate of 15% (2004: 26%) 

2005 

JD 

101,943,210 

25,485,802 

(4,372,389) 

- 

(5,312,078) 

1,689,317 

(1,235,984) 

(618,295) 

991,943 

(660,000) 

(386,797) 

15,581,519 

2004 

JD 

62,847,815 

15,711,953 

(2,337,993) 

830,642 

(3,193,032) 

2,018,836 

(827,593) 

3,200,000 

(37,173) 

(708,501) 

2,044,704 

16,701,843 

72





Deferred income tax asset at 31 December 2005 relates to the following: 

2005 

JD 

2004 

JD 

Consolidated balance sheet 


Impairment of property, plant and equipment 

End of service benefits 

7,895,536 

3,003,894 

3,063,687 

13,963,117 

6,628,649 

4,030,793 

2,916,878 

13,576,320 

Income tax assessments have been agreed with the Income Tax Department for all the years up to 31 December 2003. 

9. Inventories 

Materials and supplies 

Handsets and others 

Provision for damaged and slow moving materials and supplies 

Materials and supplies in transit 

The materials and supplies are held for own use and are not for resale. 

10. Trade And Other Receivables 

2005 

JD 

3,884,987 

1,273,779 

(1,845,416) 

3,313,350 

736,776 

4,050,126 

2004 

JD 

5,031,878 

904,582 

(856,906) 

5,079,554 

491,019 

5,570,573 

Trade receivables 

Unbilled revenue 


Amounts due from related parties 

Other receivables 

2005 

JD 

78,107,567 

13,796,248 

91,903,815 

(61,574,970) 

30,328,845 

1,412,785 

12,225,669 

43,967,299 

2004 

JD 

106,134,239 

12,958,188 

119,092,427 

(87,067,686) 

32,024,741 

1,439,888 

11,995,616 

45,460,245





11. Amounts Due From And To Telecom Administrations 

The company has agreements with the local and foreign network operators, whereby amounts due to and from the same 

operator are subject to the right of set off. The net balances as of 31 December 2005 and 2004 as follows: 


Allowance for doubtful debts 



2005 

JD 

7,465,535 

(3,603,104) 

3,862,431 

3,966,784 

2004 

JD 

15,761,888 

(4,390,415) 

11,371,473 

6,996,932 

12. Cash And Short Term Depsoits 

Bank balances and cash 

Short term deposits 

2005 

JD 

7,794,838 

209,706,641 

217,501,479 

2004 

JD 

4,991,795 

108,634,802 

113,626,597 

Short term deposits represents deposits 

with commercial banks in Jordan for 

period from 1 to 3 months in Jordanian 

Dinars, Euro and US Dollars with an 

effective interest rate of 3.57%, 1.99% 

and 3.68% respectively (2004: JD 

1.93%, Euro 1.99% and USD 1.83%). 

13. Capital 

Jordan Telecommunications Company 

(Jordan Telecom) capital consists of 

250,000,000 shares with par value of 

one Jordanian Dinar each. 

14. Statutory Reserve 

As required by the Jordanian Companies’ 

Law, 10% of the net income before tax 

is transferred to statutory reserve. The 

company may resolve to discontinue 

such annual transfers when the reserve 

totals 25% of the issued share capital. 

Accordingly, for 2005, the company 

decided not to transfer any amount to 

the statutory reserve. 

The statutory reserve is not available for 

distribution. 

15. Proposed Dividends 

During the year, dividends of JD 0.18 

per share totalling JD 45,000,000 

relating to 2004 were declared and 

paid. 

The Board of Directors in its meetings 

held on 19 February 2006 proposed a 

cash dividends of JD 0.34 per share 

totalling JD 85,000,000 which is 

subject to approval of the General 

Assembly. 

16. Term Loans 

Current portion of long term loans 

2005 

JD 

2004 

JD 

Islamic Development Bank Loan - Jeddah 

French Government Protocol / Third Loan 

French Government Protocol / Second Loan 

- 

106,626 

131,661 

238,287 

341,436 

107,359 

- 

448,795 

74





Long term loans 

Islamic Development Bank Loan – Jeddah 

French Government Protocol / Third Loan 

French Government Protocol / Second Loan 

2005 

JD 

- 

1,720,173 

6,530,202 

8,250,375 

2004 

JD 

512,154 

2,061,202 

7,516,664 

10,090,020 

Following is a summary of the Company’s 

direct loans and loans to the Government of 

Jordan that were lent back to the Company 

in accordance with re-lending agreements: 

- French Government Protocol / Second Loan 

On 23 February 1995 the Government of 

Jordan, represented by the Ministry of 

Planning, signed a financial protocol with 

the Government of the French Republic. 

According to the protocol the French 

Government will finance several development 

projects including a FRF 52,000,000 

loan to finance importing and building the 

Tla’ Al Ali Communication Switch Unit. The 

loan is subject to an annual interest rate of 

1% payable on the total amount 

outstanding; it is applicable as of the date 

of each drawing and shall be paid 

semi-annually. Principal payments of each 

withdrawal shall be paid in 40 equal 

consecutive 6 monthly instalments, the 

first installment falling due 126 months 

after the end of the calendar quarter 

during which each drawing is made. 

Drawings commenced on 1 July 1995. 

The repayment of this loan will start on 31 

March 2006. 

- Islamic Development Bank Loan - Jeddah 

On 5 October 1996 the company obtained a 

loan from Islamic Development Bank - 

Jeddah to finance the improvement of the 

efficiency of telecommunications services in 

Aqaba City. The loan for USD 8,840,000 was 

subject to an annual interest rate of 8% 

payable on the total amount outstanding. 

Principal and mark up were to be paid in 

Islamic Dinars in 13 semi-annual and 

consecutive payments, and the first 

installment become payable after 54 months 

from the first withdrawal. The first 

withdrawal was made on 23 May 1997. 

The loan was fully repaid during June 2005. 

- French Government Protocol /Third Loan 

On 24 October 1996 the Government of 

Jordan represented by the Ministry of 

Planning signed a financial protocol with the 

Government of the French Republic. 

According to the protocol the French 

Government will finance several development 

projects including a FRF 15,000,000 

loan to finance importing and building the 

Al-Ashrafia Communication Switch Unit. The 

loan will be subject to an annual interest 

rate of 1%, and will be drawn based on the 

progress of the project. Interest shall be 

payable on the total amount outstanding; 

it shall be applicable as of the date of each 

drawing and shall be paid semi-annually. 

Principal payments of each withdrawal shall 

be paid in 30 equal consecutive 6 monthly 

installments, the first installment falling 

due 90 months after the end of the 

calendar quarter during which each 

drawing is made. Drawings commenced on 

1 July 1997. 

The repayment of this loan started on 31 

March 2005. 

17. Bonds 

On 9 July 2002, the Company issued bonds 

for a total of JD 25 million. The purpose of 

the issue is to finance MobileCom’s (fully 

owned subsidiary) operations. The bonds 

were listed on Amman Stock Exchange and 

bear a fixed interest rate of 7.25% for the 

first five years after which the average of 

Prime Lending Rates of reference banks 

minus 0.25% will apply for the remaining 

period. The interest is payable on each 9 

January and 9 July. These bonds are due on 

9 July 2010.





18. Employees' End Of Service Benefits 

In accordance with the Companies’ by-laws, the company provides end of service benefits for its employees. The amounts recognized 

in the balance sheet in respect of end of service benefits are as follows: 

Provision at 1 January 

Expenses recognized in the income statement 

End of service benefits paid 

Provision at 31 December 

The principal actuarial assumptions used: 

Discount rate at 31 December 

Expected rate of increase of employee remuneration 

Average length of employee service 

Present value of end of service provision 

There are no material unrecognized actuarial gains (losses). 

19. Trade And Other Payables 

Accrued expenses 

Subscribers’ deposits 

Deferred revenues 

Amounts due to related parties 

Government revenue sharing 

Trade creditors 

Scientific research and vocational training 

Contracts retentions 

2005 

JD 

11,667,514 

2,162,875 

(2,563,910) 

11,266,479 

2005 

JD 

5% 

3.5% 

17.6 years 

11,266,479 

42,365,618 

17,538,026 

11,979,805 

7,498,924 

5,658,369 

4,286,070 

1,406,604 

677,450 

91,410,866 

2004 

JD 

12,356,402 

2,715,440 

(3,404,328) 

11,667,514 

2004 

JD 

5% 

3.5% 

17.2 years 

11,667,514 

28,489,007 

16,437,713 

9,276,578 

8,597,985 

4,834,297 

794,139 

712,233 

942,597 

70,084,549 

20. Government Revenue Share And Management Fees 

In accordance with the agreement signed with the Telecommunications Regulatory Commission (TRC), a percentage of the 

telecommunications services revenue is payable to TRC. 

The Company calculates and pays management fees to France Telecom, in accordance with the agreement signed between the 

Company and France Telecom. 

76





21. Other Fees 

Jordanian universities fees 

Scientific research and vocational training reserve 

Vocational and technical training fund fees 

2005 

JD 

1,093,524 

1,093,524 

888,127 

3,075,175 

2004 

JD 

641,745 

641,745 

407,151 

1,690,641 

22. Cumulative Effect Of Change In 

Accounting Policy 

During 2004, the group elected to 

change its accounting policy with 

respect to borrowing costs capitalized 

on property, plant and equipment. 

In order to conform with the benchmark 

treatment in the International Accounting 

Standard 23 Borrowing Costs, the group 

now expenses rather than capitalizes 

such costs. This change in accounting 

policy has been accounted for in the 

income statement as the cumulative 

effect of change in accounting policy. 

The effect of the change is decreasing 

the property plant and equipment by 

JD 2,612,824 representing interest 

capitalized in prior years of JD 

4,912,206 net of its related depreciation 

of JD 2,299,382. 

23. Related Parties Transactions 

The consolidated financial statements include the financial statements of Jordan Telecommunications Company and the 

subsidiaries listed in the following table: 

Name 

Petra Jordanian Mobile Telecommunications Company (MobileCom) 

Country of 

incorporation 

Jordan 

Percentage of equity interest 

2005 2004 

100% 100% 

Jordan Data Communications Ltd. (Wanadoo) 


100% 

100% 

Dimension Company for Digital Development of Data (e-dimension) 


100% 

100% 

These represent transactions with related parties, i.e. shareholders and senior management of the company, and companies of 

which they are principal owners. Pricing policies and terms of these transactions are approved by the company’s management. 

Transactions with related parties included in the consolidated statement of income are as follows: 

Management fees 

Operating expenses 

Senior management salaries, wages, and compensations 

Revenues 

Government revenue share 

2005 

JD 

2,875,481 

2,505,865 

521,565 

24,563,947 

8,061,033 

2004 

JD 

8,216,327 

2,960,232 

616,606 

25,615,861 

16,904,993

Balances due from and to related parties are disclosed in notes 10 and 19 to these consolidated financial statements. 

24. Contingencies 

Operating lease commitments 

The Company has entered into operating leases on lands and building, these leases have an average life between 1 and 3 years. 

Within one year 

After one year but not more than five years 

2005 

JD 

3,133,068 

32,951 

3,166,019 

2004 

JD 

2,729,387 

- 

2,729,387 

Capital Commitments 

The Company enters into commitments 

during the ordinary course of business 

for major capital expenditures, primarily 

in connection with network expansion 

projects. Outstanding capital expenditure 

amounted to JD 7,886,774 as of 

December 31, 2005 (2004 10,380,503). 

Legal Claim 

The Company is a defendant in a 

number of lawsuits with a value of JD 

13,202,270 (2004: JD 24,202,270) 

representing legal actions and claims 

incident to its ordinary course of 

business. Related risks have been 

analyzed as to likelihood of occurrence. 

Although the outcome of these matters 

cannot always be ascertained with 

precision, the management and their 

legal consultants, believe that no 

material liabilities are likely to result, 

therefore, no provision has been made. 

Guarantees 

The Group has given letters of guarantee 

limited to JD 319,982 (2004: JD 

1,264,608) in respect of legal claims and 

performance bonds. 

25. RISK MANAGEMENT 

A. Interest Rate Risk 

Interest rate risk results from the 

changes that could happen to interest 

rates that might affect the value of the 

financial instruments. The Company 

continuously reviews and monitors the 

fluctuations on interest rates to 

manage the Company’s recourses in 

more efficient and effective manner. 

The Company manages its cash flows 

by controlling the timing between cash 

inflows and outflows. Surplus cash is 

invested in short-term and long-term 

bank deposits, however the related 

interest rate risk is not considered to be 

significant. Consequently, the Company 

has not used derivative financial 

instruments to mitigate the exposure 

to interest rate risk. 

78

B. Credit Risk 

It is the risk that other parties will fail 

to discharge their obligations to the 

Company. The Company manages the 

credit risk with its customers by 

establishing credit limits for customers 

balances and also disconnect the service 

for customers exceeding certain limits 

for certain period of time. Also, the 

diversity of the Company’s customer 

base (residential, corporate, government 

agencies) limits the credit risk. The 

Company has also credit departments 

that continuously monitor the credit 

status of the Company’s customers. 

The Company also deposits its cash 

balances with number of major high 

rated financial institutions and has 

policy of limiting its balances deposited 

with each institution. 

C. Liquidity Risk 

It is the risk that the Company will 

encounter difficulties in raising funds to 

meet its commitments at maturity 

dates. The Company manages, the 

liquidity risk by periodically analyzing 

and monitoring the financial needs of 

the Company through the Treasury 

Department, in addition to monitoring 

the budgeted monthly liquidity needs. 

except for certain revenues and 

expenses with foreign parties, which are 

settled in USD and Euros. 

The Jordanian Dinar is pegged to US 

dollar. 

26. FAIR VALUES OF FINANCIAL 

INSTRUMENTS 

Financial instruments comprise of 

financial assets and financial liabilities. 

Financial assets consist of cash and bank 

balances and receivables. Financial 

liabilities consist of term loans, 

payables, and accrued expenses. 

The fair values of financial instruments, 

with the exception of certain 

available-for-sale investments carried at 

cost (see note 7), are not materially 

different from their carrying values. 

27. COMPARATIVE FIGURES 

The 2004 figures have been reclassified in 

order to conform with the presentations 

in 2005. Such reclassification does not 

affect previously reported profit or equity. 

D. Currency Risk 

It is the risk that the value of financial 

instruments will fluctuate due to the 

change in foreign exchange rates. 

Management monitors fluctuations in 

foreign currency exchange rates, and 

believes that the Company is not 

exposed to significant currency risk 

since the majority of the Company’s 

sales are billed in Jordanian Dinars,

JORDAN TELECOMMUNICATIONS COMPANY ... - Orange Jordan

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