Etisalat-2007.pdf

2007 ‫ إتصــاالت التقـــرير السـنـوي‬- ‫مؤسســة اإلمــارات لإلتصاالت‬

Etisalat Afghanistan Afghanistan

Emirates Telecommunications Corporation – Etisalat Annual Report 2007

PTCL Pakistan

Excelomindo

Atlantique Moov

Etisalat Misr

Etisalat Etihad Mobily

Egypt

KSA

Benin Burkina Faso Togo Niger Central African Republic (CAR) Gabon

Canar Sudan

EMTS

Nigeria

Zantel Tanzania

Indonesia

2007 ‫التقرير السنوي‬

Annual Report 2007

Etisalat UAE

Reports and Consolidated Financial Statements

‫التقارير والبيانات المالية الموحدة‬

for the year ended 31 December 2007

2 4 6 8 10 12 14 16 20 26 33 34 35 36 37 38 39 51

2007 ‫ ديسمبر‬31 ‫للسنة المنتهية في‬

Etisalat Corporation Chairman’s Statement Board of Directors and Executive Committee Group Highlights Etisalat UAE CEO’s Statement UAE Highlights Management Review – UAE Management Review – International Management Review – Services Financial Statements Independent Auditors’ Report to the Shareholders Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders’ Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Meeting

Etisalat Afghanistan Afghanistan

Atlantique Moov

Etisalat Misr

Etisalat Etihad Mobily

Egypt

KSA

Benin Burkina Faso Togo Niger Central African Republic (CAR) Gabon Côte d’Ivoire

Canar

PTCL Pakistan

‫مؤسسة اإلتصاالت‬

2

‫كلمة رئيس مجلس اإلدارة‬

4

‫مجلس اإلدارة واللجنة التنفيذية‬

6

‫المؤشرات الهامة‬

8

‫إتصاالت اإلمارات‬

10

‫كلمة الرئيس التنفيذي‬

12

‫المؤشرات الهامة المحلية‬

14

‫ محـلي‬- ‫تقرير اإلدارة‬

16

‫ دولــي‬- ‫تقرير اإلدارة‬

20

‫ الخدمات‬- ‫تقرير اإلدارة‬

26

‫البيانات المالية الموحدة‬

33

‫تقرير مدققي الحسابات المستقلين إلى السادة المساهمين‬

34

‫بيان الدخل الموحد‬

35

‫الميزانية العمومية الموحدة‬

36

‫البيان الموحد للتغيرات في حقوق المساهمين‬

37

‫بيان التدفقات النقدية الموحد‬

38

‫إيضاحات حول البيانات المالية الموحد‬

39

‫إعالن إنعقاد اإلجتماع‬

51

Etisalat UAE

Sudan

EMTS

Nigeria

HEAD OFFICE: Etisalat Building Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838 Abu Dhabi, UAE

Telephone: +971 2 6283333 Fax: +971 2 6317000 Telex: 22135 ETCHO EM www.etisalat.ae

REGIONAL OFFICES: Abu Dhabi, Dubai, Al Ain, West Coast, East Coast, Ras Al Khaimah

Zantel

Excelcomindo

Tanzania

Indonesia

+971 2 6283333 : ‫هاتف‬ +971 2 6317000 : ‫فاكس‬ .‫م‬.‫ اتكو أ‬22135 : ‫تلـكس‬

www.etisalat.ae

:‫المركز الرئيسي‬

‫بناية اتصاالت‬ ‫تقاطع شارع الشيخ زايد األول مع شارع‬ ‫الشيخ راشد بن سعيد المكتوم‬ 3838 ‫ رقم‬.‫ب‬.‫ص‬ ‫ اإلمارات العربية المتحدة‬،‫أبوظبي‬

:‫مكاتب المناطق‬

‫ رأس الخيمة‬،‫ الساحل الشرقي‬،‫ الساحل الغربي‬، ‫ العين‬،‫ دبي‬،‫أبوظبي‬

Reports and Consolidated Financial Statements

‫التقارير والبيانات المالية الموحدة‬

for the year ended 31 December 2007

2 4 6 8 10 12 14 16 20 26 33 34 35 36 37 38 39 51

2007 ‫ ديسمبر‬31 ‫للسنة المنتهية في‬

Etisalat Corporation Chairman’s Statement Board of Directors and Executive Committee Group Highlights Etisalat UAE CEO’s Statement UAE Highlights Management Review – UAE Management Review – International Management Review – Services Financial Statements Independent Auditors’ Report to the Shareholders Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders’ Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Meeting

Etisalat Afghanistan Afghanistan

Atlantique Moov

Etisalat Misr

Etisalat Etihad Mobily

Egypt

KSA

Benin Burkina Faso Togo Niger Central African Republic (CAR) Gabon Côte d’Ivoire

Canar

PTCL Pakistan

‫مؤسسة اإلتصاالت‬

2

‫كلمة رئيس مجلس اإلدارة‬

4

‫مجلس اإلدارة واللجنة التنفيذية‬

6

‫المؤشرات الهامة‬

8

‫إتصاالت اإلمارات‬

10

‫كلمة الرئيس التنفيذي‬

12

‫المؤشرات الهامة المحلية‬

14

‫ محـلي‬- ‫تقرير اإلدارة‬

16

‫ دولــي‬- ‫تقرير اإلدارة‬

20

‫ الخدمات‬- ‫تقرير اإلدارة‬

26

‫البيانات المالية الموحدة‬

33

‫تقرير مدققي الحسابات المستقلين إلى السادة المساهمين‬

34

‫بيان الدخل الموحد‬

35

‫الميزانية العمومية الموحدة‬

36

‫البيان الموحد للتغيرات في حقوق المساهمين‬

37

‫بيان التدفقات النقدية الموحد‬

38

‫إيضاحات حول البيانات المالية الموحد‬

39

‫إعالن إنعقاد اإلجتماع‬

51

Etisalat UAE

Sudan

EMTS

Nigeria

HEAD OFFICE: Etisalat Building Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838 Abu Dhabi, UAE

Telephone: +971 2 6283333 Fax: +971 2 6317000 Telex: 22135 ETCHO EM www.etisalat.ae

REGIONAL OFFICES: Abu Dhabi, Dubai, Al Ain, West Coast, East Coast, Ras Al Khaimah

Zantel

Excelcomindo

Tanzania

Indonesia

+971 2 6283333 : ‫هاتف‬ +971 2 6317000 : ‫فاكس‬ .‫م‬.‫ اتكو أ‬22135 : ‫تلـكس‬

www.etisalat.ae

:‫المركز الرئيسي‬

‫بناية اتصاالت‬ ‫تقاطع شارع الشيخ زايد األول مع شارع‬ ‫الشيخ راشد بن سعيد المكتوم‬ 3838 ‫ رقم‬.‫ب‬.‫ص‬ ‫ اإلمارات العربية المتحدة‬،‫أبوظبي‬

:‫مكاتب المناطق‬

‫ رأس الخيمة‬،‫ الساحل الشرقي‬،‫ الساحل الغربي‬، ‫ العين‬،‫ دبي‬،‫أبوظبي‬

Reports and Consolidated Financial Statements

‫التقارير والبيانات المالية الموحدة‬

for the year ended 31 December 2007

2 4 6 8 10 12 14 16 20 26 33 34 35 36 37 38 39 51

2007 ‫ ديسمبر‬31 ‫للسنة المنتهية في‬

Etisalat Corporation Chairman’s Statement Board of Directors and Executive Committee Group Highlights Etisalat UAE CEO’s Statement UAE Highlights Management Review – UAE Management Review – International Management Review – Services Financial Statements Independent Auditors’ Report to the Shareholders Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders’ Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Meeting

Etisalat Afghanistan Afghanistan

Atlantique Moov

Etisalat Misr

Etisalat Etihad Mobily

Egypt

KSA

Benin Burkina Faso Togo Niger Central African Republic (CAR) Gabon Côte d’Ivoire EMTS

Canar

PTCL Pakistan

‫مؤسسة اإلتصاالت‬

2

‫كلمة رئيس مجلس اإلدارة‬

4

‫مجلس اإلدارة واللجنة التنفيذية‬

6

‫المؤشرات الهامة‬

8

‫إتصاالت اإلمارات‬

10

‫كلمة الرئيس التنفيذي‬

12

‫المؤشرات الهامة المحلية‬

14

‫ محـلي‬- ‫تقرير اإلدارة‬

16

‫ دولــي‬- ‫تقرير اإلدارة‬

20

‫ الخدمات‬- ‫تقرير اإلدارة‬

26

‫البيانات المالية الموحدة‬

33

‫تقرير مدققي الحسابات المستقلين إلى السادة المساهمين‬

34

‫بيان الدخل الموحد‬

35

‫الميزانية العمومية الموحدة‬

36

‫البيان الموحد للتغيرات في حقوق المساهمين‬

37

‫بيان التدفقات النقدية الموحد‬

38

‫إيضاحات حول البيانات المالية الموحد‬

39

‫إعالن إنعقاد اإلجتماع‬

51

Etisalat UAE

Sudan

Nigeria

HEAD OFFICE: Etisalat Building Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838 Abu Dhabi, UAE

Telephone: +971 2 6283333 Fax: +971 2 6317000 Telex: 22135 ETCHO EM www.etisalat.ae

REGIONAL OFFICES: Abu Dhabi, Dubai, Al Ain, West Coast, East Coast, Ras Al Khaimah

Zantel

Excelomindo

Tanzania

Indonesia

+971 2 6283333 : ‫هاتف‬ +971 2 6317000 : ‫فاكس‬ .‫م‬.‫ اتكو أ‬22135 : ‫تلـكس‬

www.etisalat.ae

:‫المركز الرئيسي‬

‫بناية اتصاالت‬ ‫تقاطع شارع الشيخ زايد األول مع شارع‬ ‫الشيخ راشد بن سعيد المكتوم‬ 3838 ‫ رقم‬.‫ب‬.‫ص‬ ‫ اإلمارات العربية المتحدة‬،‫أبوظبي‬

:‫مكاتب المناطق‬

‫ رأس الخيمة‬،‫ الساحل الشرقي‬،‫ الساحل الغربي‬، ‫ العين‬،‫ دبي‬،‫أبوظبي‬

Simplicity

Energy

Openness Reliability

Caring

Enabling

Optimism

1

Etisalat

Corporation

…A world where people’s reach is not limited by matter and distance…

2

Understanding the needs of our customers remains the centrepiece of the Corporation’s strategy

63 million aggregated subscribers

3.46

CAGR (Five years)

Market Cap

Across sixteen countries in two continents

Capital Expenditure of AED

billion

Growth

49%

EPS AED 21.3 AED

1.46

billion (US $5.8 b)

net revenue

Revenue

22%

CAGR (Five years)

Net Profit

24%

3

4

Chairman’s Statement

The Corporation made material progress in its endeavour to become one of the world’s top telecommunication service providers by consolidating its position inside the United Arab Emirates while continuing to enhance its global footprint.

Etisalat has made 2007 another landmark year in its 31 years of continued success, and it is with great pleasure that I present the Annual Report of 2007 of Etisalat Corporation on behalf of the Board, shareholders and staff. I am proud to state that today the Corporation’s reach spans across sixteen countries in two continents – Asia and Africa. Its services are today available to 668 million people, of whom 63 million are our aggregated subscribers. This represents 103% growth in Active Subscribers compared with 2006. Understanding the needs of our customers remains the centrepiece of the Corporation’s strategy. In line with the changing demographic profile in our areas of operation, the Corporation tailored its product offerings to meet the various needs of our customers locally and internationally. Led by visionary leadership, the economy continues to grow at an unprecedented rate. In meeting the growing expectations of our customers inside and outside the UAE, the Corporation introduced varied products which underline Etisalat’s strategic intent to continue creating value for its customers through innovative communication solutions. In 2007 the Corporation passed the 6,300,000 mark in mobile subscriptions in the UAE alone, which shows the continued faith our customers place in our services. The Etisalat brand has become a distinctive sign of quality and leadership in the telecommunication world, an achievement that stakeholders of the Corporation have worked toward and can take pride in. A commitment to provide the world’s latest products and services to its customers drives the Corporation’s investment in cutting-edge technology. It invested AED 3,460 million in 2007 alone, preceded by AED 1,432 million in 2006. Rollout of the Next Generation Network (NGN) continued in 2007, while we increased our investment in Gigabit Passive Optical Network (GPON) to support internet subscribers.

As part of its strategy to become one of the world’s largest communications companies, the Corporation consolidated its position in Africa by increasing its investments to obtain more stocks in Canar in Sudan, Zantel in Tanzania, and Atlantique Telecom, which has operations in seven countries in West Africa. In addition, the Corporation has entered Nigeria – one of the fastest-growing markets in Africa. Our greenfield operation in Egypt has rapidly grown in just over one year to register 3.1 million subscribers by the end of 2007. Etihad Etisalat (Mobily) in Saudi Arabia continues to grow rapidly, achieving 41% of market share in the Kingdom with subscribers exceeding 11 million. These investments enabled the Corporation to strengthen its presence in one of the world’s fastest-growing markets. At the end of 2007 the Corporation stepped into the rapidly growing South East Asian market by acquiring 15.97% of Excelcomindo Indonesia. The Indonesian market complements the Corporation’s existing operations in Pakistan and Afghanistan. Indonesia is Asia’s third most populated country with high growth potential in terms of mobile penetration. The Corporation’s successful marketing and technical expertise in international markets has contributed significantly in achieving its goals. These successes reinforce the faith the Corporation has placed in its talented staff, who have grown these operations to make them significant players in their respective markets. On behalf of the Board, I would like to take this opportunity to thank these wonderful men and women across two continents, led by our Chief Executive Officers and their dedicated and strong management teams, for relentlessly striving to achieve the position we are in today. During 2007, the Corporation’s efforts were recognised and rewarded by the international community and media. On behalf of all the stakeholders of the Corporation, I would like to thank the international community and media for all the honours and awards bestowed on us. We feel humbled, yet invigorated to strive for even greater success in 2008.

The aforementioned achievements translated into sound financial results, with Consolidated Group Revenue growing 31% and Net Profits registering a 25% increase compared with last year. On a Compounded Annual Growth Rate (CAGR), our Group Revenue and Net Profit have grown 22% and 24% respectively over the last five years. Our shareholders have been rewarded for their vision and strategic intent, through an impressive Shareholder Return. The Corporation’s market capitalisation has grown by 49% in this one year, reflecting the market’s confidence in us. The Corporation declared an Interim Dividend of AED 0.25 per share in July 2007. This was followed by a Final Dividend of AED 0.35 per share, making the total Dividend AED 0.60 per share for 2007. As we enter a new year, the Corporation is well poised to fulfil the vision set for it by our shareholders: creating value for our customers and shareholders in this dynamic and exciting world of telecommunication, both in our home market and in the international arena that we have successfully entered.

With best wishes for 2008!!

Mohammad Hassan Omran Chairman 25 February 2008

5

Board of Directors and Executive Committee

H.E. Mohammad Hassan Omran

H.E. Khalaf Bin Ahmed Al Otaiba

Chairman Chairman Executive Committee

Vice Chairman

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

H.E. Abdul Rahman Al Rustomani

Member Member Executive Committee

H.E. Dr. Omar Mohammad Bin Sulaiman

Member Member Executive Committee

6

Member H.E Eisa Bin Nasser Bin Abdullatif Al Serkal

Member Member Executive Committee

H.E. Saeed Mohamed Al Sharid

H.E. Hamad Mohammad Al Hur Al Suwaidi

H.E. Abdulla Ibrahim Al Daboos

Member

Member

Member

H.E. Saeed Mubarak Rashid Al Hajeri

H.E. Omar Saif Mohammad Bin Huraiz

Member Member Executive Committee

Member

Mr. Isam Meccawi Suliman Akrat

Corporation Secretary

7

Group Highlights

etisalat UAE

etisalat International

etisalat Services

Enterprise Solutions Small and Medium-sized Business Consumer Customer Care E-Vision Network and Data Mobile Internet Fixed Line Etisalat Software Solutions (Pvt.) Ltd

Atlantique Telecom Canar Emerging Markets Telecommunications Services Limited (EMTS) Etisalat Misr Zantel Etihad Etisalat (Mobily) Thuraya Etisalat Afghanistan Excelcomindo Pratama TBK Pakistan Telecommunication Company (PTCL)

e-Facility management e-Real Estate Etisalat Academy Ebtikar Card System Emirates Data Clearing House (EDCH) e-marine Special Projects Directory Services

Mobiles 63%

Other 5%

Telephones 14% Internet 7%

Data Services 10%

Interconnect 1%

Breakdown of Revenue – Group (Year Ended December 31, 2007)

8

115

9,226

03

10,434

04

12,866

102

05 06

16,290

07

21,340

74

77

Revenue (AED millions)

2,873

03

3,418

04

4,256

05

5,860

06

44

07

7,297

Net Profit (AED millions)

03 04 05 06 03

04

05

06

07

Etisalat Market Capitalisation (AED billions)

07

997 1,364 1,259 1,432 3,460

Capex (AED millions)

Financial Results The Corporation closed the year 2007 with impressive growth in terms of Revenue and Net Profits. It registered 31% growth in Revenue and 25% growth in Net Profit compared to 2006. On a Compounded Annual Growth Rate (CAGR) basis, the Corporation registered 22% growth in Revenue and 24% growth in Net Profit over the five years from FY 2002 up to end 2007. This resulted in a return of 32% on capital employed, and raised earnings per share from AED 1.17 in 2006 to AED 1.46 in 2007. These sound financial results were driven by a healthy growth in subscribers. In the UAE, which has one of the world’s highest mobile penetrations, mobile subscribers grew by 15% to pass the 6.3 million mark. Internet lines grew by 32% on a year to year basis in the UAE alone. Overall, total aggregated mobile subscribers grew to exceed 56 million worldwide, in addition to over 7 million fixed line subscribers. In 2007, the Corporation consolidated its shareholding in three of its erstwhile associates to take over effective control, thus converting them to subsidiaries. In addition, it acquired a 15.97% equity stake in Excelcomindo, Indonesia for AED 1.6 billion.

The Corporation’s overall investment acquisitions overseas amounted to AED 2.48 billion as against AED 4.82 billion in 2006. The Corporation continued to invest in its network and other fixed assets. It invested a total of AED 3.46 billion as against AED 1.43 billion in 2006, an increase of 142%. These investments were primarily funded from its own free cash. It closed the year with a total bank borrowing of AED 3.48 billion as against AED 6.98 billion in 2006.

9

3989 17770

million international minutes

million national minutes

Etisalat gives you

more…

Call

101 6.3 million Mobile subscribers

Best Middle East Enterprise Service Provider

10

AED 25 million each

Emirates Foundation and Dubai Cares

Best Overall

Operator

2007 Mobile

TV ...leading position in the UAE Pay TV market...

31

Etisalat UAE

years of service

Enterprise customers see continued benefits in the portfolio of services offered by Etisalat to meet their needs...

11

CEO’s Statement

2007 has been yet another successful year for Etisalat in the United Arab Emirates. We have continued to renew, invigorating our purpose and determination to maintain our position as the telecommunications provider of choice for all segments of UAE’s diverse community, and delivering healthy results in terms of revenues, profitability and customer growth.

Our Revenue and Net Profit from the UAE alone grew by 25% and 33% respectively compared to 2006. This was at a time of a changing regulatory environment and the market opening up to competition, both of which were welcomed. Whilst enhancing the customer experience and choices in the form of bundles and special offers to all users of our services, we have demonstrated the ability to successfully adapt to changing market conditions. The growth in the home market with our mobile users crossing six million three hundred thousand and registering 32% growth in Internet connections, as well as continued growth of fixed lines to 28% of the population, demonstrates a continued support and trust in Etisalat by our customers. We continue not only to retain our existing customers, but also to acquire a major share of the new additions to the market. We are proud of Etisalat’s long-standing reputation as a technology leader and product innovator. We continue to invest to ensure that our customers are able to benefit from the latest developments and innovations in telecommunications technology. The continued rollout of Next Generation Networks (NGN) will give customers a full portfolio of new services delivered over an all IP network. In line with this we are investing in Gigabit Passive Optical Network (GPON), Fibre to the X(FTTX) and WiMax to extend Triple Play and other IP-based services.

Our efforts and technological advancements were recognised by the market, with Etisalat taking home the ‘Best New Technology’ citation by ITP’s Network Middle East Innovation Awards 2007, and ‘Middle East Enterprise Service Provider of the Year’ by ACN Arab Technology Awards. Etisalat was also voted ‘Best Overall Operator in 2007’ at the Telecom World Middle East Awards. During 2007 we introduced several initiatives to enhance our service offerings. Our product offering addressed the different market segments with tailored products. The Favourite Country Plan, which offers preferential call rates to selected destinations, was well received by our individual customers, as was MobileCam, an innovative remote monitoring product using 3.5G technology. Our Mobile TV offering and Location Based Services have proved to be popular with individual customers and businesses alike. During the year we introduced BlackBerry to the retail market. In addition we launched our innovative Audio Conferencing Service, 4MBpS Al Shamil Residential Broadband package, Credit Transfer and Voice SMS. Our product portfolio and choice of mobile services continues to grow. Additional service enhancements are being introduced on all levels from GSM to 3.5G – for example, translation services, and a special service for our customers with special needs. Looking at the convenience aspect and in order to get closer to our customers we expanded the ‘online’ banking network in addition to opening additional service counters around the country.

Etisalat demonstrated its dedication to helping the community and awareness of its Corporate Social Responsibility, supporting various social and educational undertakings and also donating to worthwhile initiatives like Emirates Foundation and Dubai Cares. Etisalat’s success is founded on the commitment and quality of our employees who made all this happen. During 2007 we completed the organisational restructuring plan initiated in 2006, to ensure that all our activities are efficiently aligned towards enhancing our services to our customers. We have continued to develop our employees through both inhouse and external training programmes. To ensure that we are able to attract and retain the best available talent, we have also reviewed and restructured our remuneration scheme in line with international market requirements. We have great confidence and trust in our employees and will continue to ensure that, along with being the telecommunications provider of choice, we also remain an employer of choice. As we look forward to 2008 and beyond, we intend to continue playing our role as an enabler in the ongoing development of the UAE, which is headed to become a regional hub and a role model for others to follow. At the same time, we stand committed to the Corporation’s endeavour to join the elite league of the world’s top telecommunication service providers.

With best wishes!

Mohammed Khalfan Al Qamzi Chief Executive Officer 25 February 2008

12

13

UAE Highlights

The growth in the home market with our mobile users crossing six million three hundred thousand and registering 32% growth in Internet connections, as well as continued growth of fixed lines to 28% of the population, demonstrates a continued support and trust in Etisalat by our customers.

Other 3.6%

Mobiles 64%

Telephones 15% Internet 7%

Data Services 10%

Interconnect 0.4%

Breakdown of Revenue – UAE (Year Ended December 31, 2007)

14

1,285

2,252 03 04 05 06 07

Mobile Subscribers

Fixed Line Subscribers

Internet Subscribers

National Calls

International Calls

(thousand subscribers)

(thousand subscribers)

(thousand subscribers)

(million minutes)

(million minutes)

347

2,972

418

3,683

527

11,597

4,534

2,875

660

13,618

3,386

15,650

1,188 1,136

3,989

17,770 10,004 03 04 05 06 07

3,769

875 03 04 05 06 07

1,237

1,325

6,372

03 04 05 06 07

5,520 03 04 05 06 07

15

Management Review – UAE

NGN ETISALAT UAE 2007 saw Etisalat break new barriers in achieving over 6.3 million mobile subscribers in the UAE, representing a market penetration in excess of 140%, placing the UAE amongst the most highly penetrated markets in the world. This success can be attributed to the quality and coverage of Etisalat’s extensive network, which has made UAE one of the most advanced countries globally in terms of seamless and high quality connectivity. This has been accomplished through a combination of best of its kind technology; a commitment to providing the best services whilst maintaining a competitive edge through consolidation of services; development of new pricing strategies and customer reward programmes; and the launch of innovative new services. In international connectivity, the Corporation is now the largest voice traffic carrier in the Middle East, terminating calls at over 600 destinations and with 118 direct connections worldwide. This enables Etisalat to offer the most comprehensive international mobile, voice and data services across the region. Energised by a rapidly evolving marketplace and with an increasingly diversified and sophisticated customer base across all segments, Etisalat launched numerous new services and opened several new retail outlets across the UAE to meet customer needs and improve user experience.

16

Etisalat’s 3.5G network now covers 97% of the UAE’s most populated areas, and with the successful launch of additional products such as the Mobile Cam and Mobile TV Services customers have demonstrated that they value the convenience and facilities of these advanced services. Removing barriers in language and capabilities, Etisalat also launched specialised services such as Interactive Voice Recognition (IVR) in two additional languages (Urdu and Malayalam), and a ‘Freedom package’ for customers with special needs. Whilst the mobile market has continued to grow steadily, the fixed line telephony customer base grew more modestly in keeping with expectations and past years’ experience. Internet subscriber numbers continued to rise, registering an increase of 32% over 2006, giving the UAE one of the highest broadband penetration rates in the GCC. Etisalat continued its strategy of delivering a strong and innovative service portfolio where reliability and customer service are always at the forefront. Plans for the convergence of fixed, mobile and Internet services will continue to become more visible in the service offerings for 2008. The migration to Next Generation Networks (NGN) and subsequently to Internet Multimedia Subsystems (IMS) will provide a wide range of value-added services from a single network, enabling video, voice, and data on a single network with a single connection.

The migration to Next Generation Networks (NGN) and subsequently to Internet Multimedia Subsystems (IMS) will provide a wide range of value-added services from a single network, enabling video, voice, and data on a single network with a single connection.

Enterprise Solutions

Enterprise customers see continued benefits in the portfolio of services offered by Etisalat to meet their needs. Organised in eleven industry segments including Banking & Finance, Transportation & Logistics, Healthcare and Airlines, the Enterprise Solutions teams are empowered and equipped to tailor solutions for each customer. Etisalat continues to build on its experience and capabilities in application integration and project management to provide voice, data services and e-Business infrastructure solutions such as eHosting, eSecurity, and managed end-to-end solutions that enable customers to focus on their core business. Service offerings launched for larger corporations include Business 24x7 mobile packages offering significant savings to businesses around the clock, and smallerscale IP-based closed networks for organisations with multiple locations. The Enterprise Solutions teams also piloted new solutions for bank transfers as well as additional online bill payment services for facilitating secure transactions between banks and other stakeholders.

Mobile Transfer and International Money Remittance services were additional services which continued to grow in usage, the latter being pioneered by Etisalat in the region.

Small and Medium-sized Business

The Small and Medium Business segment grows in tandem with the UAE’s rapid economic growth. Offering value-added services and cost-effective solutions targeted to the varied industry sectors, Etisalat has enabled customer organisations to enhance their own efficiencies and capabilities. With the deployment of solutions such as Business Club and B2B services supported by dedicated key account managers, Etisalat continues to serve and support this segment better, as further evidenced by the launch of BlackBerry and BusinessOne SMB services to provide integrated and affordable high-speed access solutions.

Consumer

The consumer segment enjoyed a buoyant year of multiple service launches, special offers and enhanced services through a comprehensive plan to meet the needs of all targeted sub-segments. A major development in interaction with customers has been the continued addition of retail outlets in malls and other high traffic locations such as airports, making Etisalat’s services more accessible to customers. In addition, these new channels provide advanced test areas for customers to explore and test new products and services. Partnering with branded retailers such as Virgin Megastore, Etisalat opened direct channels to target important market segments. Following the success of last year’s launch of the Weyak mobile portal, the initiative has grown in popularity with the added portfolio of multiplayer gaming, allowing gamers to rank themselves against each other and establish teams within the community. The Favourite Country Plan and Global Friends & Family packages have proved to be popular with customers, particularly with expatriate communities, fulfilling their desire to talk more with family back home. Mobile Transfer and International Money Remittance services were additional services which continued to grow in usage, the latter being pioneered by Etisalat in the region.

More, the loyalty programme for the consumer segment, was introduced in the latter part of 2007. Customers are rewarded through a points system based on their spend with Etisalat and this has also proved to be very popular with customers. Etisalat further expanded the service portfolio to meet the demands of customers with special needs with the introduction of ‘Freedom’ Services, part of Etisalat’s ‘Reach Regardless’ campaign. The initiative offers products and services for people with special needs.

Customer Care

Aiming to simplify interactions with customers by developing a single point of contact for all Etisalat’s services, the year has seen further convergence of services onto the ‘101’ number, with inclusion of eVision’s services and products. This is yet another step in the ongoing commitment to ensure a positive and effective customer experience across all sectors. Using IVR phone instruction prompts, customers can now be assisted in Urdu and Malayalam in addition to Arabic and English. Further simplifying interactions, many services no longer require customers to visit Etisalat outlets, instead receiving all assistance through the Customer Care centres.

E-Vision

E-Vision continued to consolidate its leading position in the UAE Pay TV market. The growth in subscribers and revenue is driven by a combination of top-quality channels, the introduction of new packages, and one-off event broadcasts. The 226 channel line-up reflects the fast-changing mix of diversity in its audience, with a choice of 13 different packages and over 26 à-la-carte options. During 2007, E-Vision broadcast the ICC Cricket World Cup, introduced the Orbit Cable Pinoy package and a number of new channels, in addition to tying up with Warner Brothers and World Wrestling Entertainment to enhance its Pay-Per-View ‘e-View’ channels. E-Vision’s sales operations and service delivery system are now merged with those of Etisalat, to enhance the customer experience by providing a single contact point for all customer requirements. The initiatives launched to enhance network coverage, add channel capacity, invest in new value-added services such as video-on-demand and high-definition services, and develop triple play service offerings have set the stage for further growth through innovation and investment in the future.

17

Management Review – UAE continued

Etisalat continued its strategy of network convergence with the rollout of the Next Generation Network (NGN), which is in progress, with the next phase of Fibre to Home being rolled out across the UAE, utilising Gigabit Passive Optical Networks (GPON) as the main access point.

Networks

Etisalat covers the UAE nationwide in fixed, data and mobile networks, as well as some of the most advanced international gateways in the region. Etisalat has always aspired and endeavoured to be at the forefront of technology to serve customers through state-of-the-art products and solutions. Etisalat continued its strategy of network convergence with the rollout of the Next Generation Network (NGN), which is in progress, with the next phase of Fibre to Home being rolled out across the UAE, utilising Gigabit Passive Optical Networks (GPON) as the main access point. One of the main components in the NGN network is the Internet Protocol/ Multi-Protocol Layered Switching (IP/MPLS), a Digital Wave Division Multiplex (DWDM) nationwide transport layer that allows for ease in connectivity with other service providers nationally and internationally. Expanded Media Gateways were introduced for further network efficiency and capability as digital media on both data and mobile increases. Additionally fixed Worldwide Interoperability for Microwave Access (WiMAX) is being introduced into the network as a second alternative in the access layer, with the potential to replace much of the copper wire network. WiMAX technology offers further scope for connectivity for both fixed and mobile networks. Mobile WiMAX is currently in field trials for future evaluation. On the mobile networks, 3.5G enhancement continued with High Speed Downlink Packet Access (HSDPA) and High Speed Uplink Packet Access (HSUPA), which has resulted in 97% of the country now being covered; in tandem with further expansion of the GSM network, as required as the customer base increases.

18

Human Resources

In 2007 the Human Resource department continued its restructuring project in line with the corporate strategy of ensuring there is continued emphasis on core telecommunications services and technology. This ensures optimal support for Etisalat’s strategy and the upcoming challenges. The restructuring included reducing the number of administrative regions from seven to four, centralising departments, and streamlining HR-related processes. The restructuring project transforms Etisalat into a more agile organisation, prepared to meet and overcome challenges in its strategy to become one of the top telecom companies in the world. The project will also help in getting closer to customers through multiple channels. The emphasis on staff development and training continues. All employees are encouraged to develop their skills and are provided all the necessary support to attend training courses. A separate section has been created to identify training requirements and needs and develop initiatives accordingly. During 2007 a total of 2,807 staff underwent training courses for 10,600 training days on technical as well as management courses. At various management levels, nearly half of Etisalat’s employees (4,300) have participated in more than 650 different local and overseas events, gatherings, telecom conferences and training workshops. These figures highlight Etisalat’s efforts in developing its most precious resource. To gain international experience and to make best use of our employees, experienced and well-trained staff are given assignments in setting up international operations. This ensures that their knowledge is used to achieve rapid rollout of operations in new territories. At the end of 2007, 143 employees were on foreign assignments.

Corporate Social Responsibility

Etisalat remains committed to supporting the local communities in which it operates. In 2007 Etisalat augmented its traditional activities (sponsoring local initiatives, events and charitable fundraisers or awarenessbuilders) with three sustainable platforms, which are relevant across each area of its operations – the Environment, CapacityBuilding, and Enablement. In terms of environment, Etisalat is one of the main sponsors of the UAE Mobile Phone Recycling Campaign, which is being organised in partnership with the Telecommunications Regulatory Authority, the Federal Ministry for Environment and Water, and the UAE Federal Environment Agency. This is the first programme of its kind in the region and seeks to educate UAE citizens about the environmental dangers of old mobile phones, and to encourage consumers to help rid the environment of harmful chemicals and non-biodegradable substances. Etisalat is also reinforcing its commitment to supporting people with special needs. At this year’s Gulf Comms, Etisalat launched special packages for customers and social centres, called ‘Freedom’. Etisalat’s new packages offer discounted rates for subscriptions and services to everyday telecommunications services, as well as some services which are particularly useful to people with vision or hearing difficulties. Etisalat also has solutions for the visually impaired, such as Email Reader and Push to Talk. Etisalat is committed to helping people with special needs fulfil their potential and be fully integrated into the connected community. Earlier in the year, a Memorandum of Understanding was signed by the Ministry of Social Affairs, the Zayed Higher Organization for Humanitarian Care – Special Needs & Minor Affairs, the Sharjah City for Humanitarian Services, and Etisalat to develop special telecom services for residents of the UAE with special needs. This was signed with the aim of bringing specialised telecommunications products and packages to people with special needs, tailored to their unique needs.

25 million Etisalat has extended its commitment to education and capacity-building to a new level with the donation of AED 25 million to the Dubai Cares campaign. This will help bring education to impoverished children across Africa and Asia. The Dubai Cares initiative is a hugely valuable programme for the children who will benefit from a better education. Etisalat is proud to sponsor this initiative and to be a technology partner in the programme, enabling all its mobile customers to use SMS codes to make their donations without any extra fees. Etisalat also sponsored the Emirates Foundation to provide education resources to UAE nationals. Etisalat contributed AED 25 million to the programme. The Emirates Foundation aims to enhance the overall quality of education and provide outlets for the youth of the UAE to develop their natural talents and skills. For the Holy Month of Ramadan, Etisalat teamed up with the Red Crescent Society and set up tents to serve 160,000 Iftar meals throughout the month. In addition to the tents spread around the Emirates, 2,000 meal boxes were distributed each day to needy people and families. Etisalat also handed out more than 150,000 CDs of the Holy Quran during Ramadan. The CD contained a recording of the Holy Quran by four famous Quran readers, a soft copy of the Quran text, prayers, stories and morals, and translation of the verses in 11 different languages. In conjunction with the UAE Zakat Fund, one of the leading independent federal entities in the UAE, the Corporation has established a partnership to launch a new free service that helps customers calculate and pay their ‘Zakat’ amounts using their mobile phones.

Etisalat University College (EUC)

Etisalat University College (EUC) is one of the leading institutions for Higher Education in the UAE, as demonstrated by the high level of programmes approved by the UAE Ministry of Higher Education and the College’s international accreditation with the IET (Institution of Engineering and Technology, UK). The College enrols approximately 60 students each year and is financially supported by Etisalat. It provides B.Eng. (Honours) programmes in Communication, Computer and Electronic Engineering for male nationals. In addition the University College also runs the only Master’s by Research in Engineering in the country. EUC is commencing a Ph.D. programme and has received initial accreditation from the Ministry of Higher Education. This is the first Ph.D. programme in Engineering to receive the Ministry’s approval and puts EUC at the forefront of postgraduate studies in the UAE. The College also initiated and led the development of the Buhooth scholarship programme, which is sponsored by H.H. Sheikh Mohammed Bin Zayed and offers postgraduate scholarships to UAE nationals. Under the patronage and attendance of H.H. Dr Sheikh Sultan Bin Mohammad Al Qasimi, Supreme Council Member and Ruler of Sharjah, the College organised a graduation ceremony on 28 February 2007. During the event 273 Bachelor’s and 6 Master’s graduates were honoured. Two students won the Common Design Project Competition, and one was second in the Software Engineering Competition in the Institute of Electrical and Electronic Engineers (IEEE) Student Day Contests. EUC students were ranked first and third in the National Mobile Applications Competition; another student came third in the National Software Development Competition; whilst a team of three students was ranked third in the IEEE region 8 (Europe, Middle East and Africa) Student Website Competition. EUC was recently granted AED 50 million by the UAE Information and Communication Technology (ICT) fund to establish the UAE research and educational internet network – ANKABUT (‘Spider’).

Etisalat has extended its commitment to education and capacity-building to a new level with the donation of AED 25 million to the Dubai Cares programme.

Etisalat Software Solutions (Pvt.) Ltd

Driven by growing demand and booming business prospects, Etisalat set up the first of its software companies in Bangalore, India. The company is registered as Etisalat Software Solutions (Pvt.) Ltd and markets under the brand name ‘Technologia’. Technologia will be working primarily for Etisalat and its subsidiaries, developing software for IT solutions. It will also offer its services to other telecommunications companies in the region. With the vast expansion of Etisalat internationally, the needs are exceeding the current capacity of Etisalat’s inhouse development capability. Set up in Bangalore, the IT hub of India, the company has been launched initially with about 50 well qualified software developers with vast experience in the telecommunication sector. They are working primarily on new product development, system integration and consultancy services in its primary portfolio offering. Technologia is an independent company from Etisalat, although wholly owned by the Corporation. It will serve as the preferred partner to Etisalat as well as working with other operators in the region.

19

Largest fixed wireless telephony network in Pakistan

Best New Entrant Etisalat Misr

One brand four countries

PTCL

Atlantique

Emerging

11 million

Markets

customers in three years Mobily

1 million 15.97% Indonesian ...in only Inoperator as it into the 50 days steps Far East market Etisalat Misr

20

Excelcomindo

Fastest Growing Mobile Operator Zantel

Best Gulf Joint Stock Company Mobily

668

Million people in 16 Countries in 2 Continents

Najma Canar Go BlackBerry Tayman Family & Friends, Ring back tones, Missed call notification, Broadband Pakistan, Mobile broadband

Etisalat

Management Review – International

International

...core strategy for market selection remains woven around low penetration and high population

21

Management Review – International continued

Its core strategy for market selection remains woven around low penetration and high population. This is backed by strong market research on high growth potential, consumer behaviour, and value creation opportunities.

ETISALAT INTERNATIONAL Etisalat management recognises the importance and responsibility of balancing profitability and growth with long-term sustainability. Over the last five years, the Corporation has continued its high growth trajectory and has been progressively looking beyond the borders of the UAE. All of these initiatives are geared towards fulfilling its vision of joining the league of major telecommunication players in the world. Its core strategy for market selection remains woven around low penetration and high population. This is backed by strong market research on high growth potential, consumer behaviour, and value creation opportunities. Today, customers demand not only basic services but also want to take advantage of the value chain in terms of product and service segments. Innovative technology offerings from Etisalat’s stable produce a strong ‘me too’ element. Etisalat’s UAE strategy of delivering the latest technology has established its reputation across the world, so its subsidiaries find it easier to enter new markets. As a result, Etisalat is warmly welcomed as a new entrant whose new products and services are eagerly anticipated. As it expands its global footprint, the Corporation has been conscious of ensuring that it optimises the synergies existing in regional markets such as the Middle East or West Africa. In addition, it encourages sharing lessons learned in one operation with others. It has effectively utilised its experience of setting up greenfield operations in Mobily in Saudi Arabia to the market in Egypt. This ensured Etisalat’s Egyptian operations passed the 1 million subscriber mark within 50 days of starting operations. Over the years, Etisalat’s brand equity has grown in profile. In order to leverage its strong brand, the Corporation launches all greenfield projects under the ‘Etisalat’ brand. However, in acquired assets where there is an existing strong brand (like ‘Moov’ in West Africa), it nurtures and strengthens the existing brand.

22

In 2007 Etisalat acquired new assets and consolidated its position in existing markets. It entered two new and exciting markets – Nigeria and Indonesia. With their large populations and relatively low penetration, these markets match Etisalat’s core corporate strategy perfectly. Aligned with the Corporation’s mission of extending people’s reach, other promising additions to Etisalat’s investment portfolio can be expected in 2008 and beyond.

Africa Atlantique Telecom (AT)

Atlantique Telecom (AT) was Etisalat’s first venture into the promising West African market in April 2005, with a 50% equity acquisition. Initially AT had six GSM operations in Benin, Burkina Faso, Togo, Niger, Central African Republic (CAR) and Gabon. In 2006 it launched its seventh operation in Côte d’Ivoire (Ivory Coast). In 2007, Etisalat acquired an additional 20% in AT, taking its share to 70%, a controlling majority. This paved the way for some exciting new developments. 2007 saw AT focus on two key elements in its evolution – network upgrading and re-branding. AT completed a swap-out of the existing telecom asset base with the latest technology, which is GPRS-Edge enabled. In addition AT initiated a new network rollout, which is expected to complete in mid-2008. This will expand the network by over 60% compared with the beginning of the year in terms of population coverage. Following the launch and success of the new brand ‘Moov’ in Côte d’Ivoire, to exploit the synergies that exist in regional operations, AT re-branded three other operations in the Group (Gabon, Benin and Togo). Recent market research shows high brand awareness for ‘Moov’ in these markets. AT plans to finish the re-branding programmes for the remaining three operations (Niger, CAR and Burkina Faso) in 2008. These initiatives paid off handsomely. AT finished the year with 2.9 million subscribers in seven operations, as against 1.4 million subscribers at the end of 2006 – growth of 107%.

Entering 2008, AT plans to secure debt financing to fund its future rollout. Strong growth in subscribers and financials is again expected in 2008 and AT plans to reach 4 million subscribers by the end of the year. Canar

Canar has steadily increased its customer base in the Sudanese fixed telecom market and today enjoys 58% overall market share in fixed line in Sudan. Canar grew its customer base by over 50% in 2007 and further growth is expected. Canar services cover the main cities in Sudan, with a coverage increase of 120% compared to 2006. To accommodate current and expected business, Canar’s fibre optic backbone has been extended 1,500 km nationally and 250 km locally in the major cities to serve mobile operators, ISPs, and corporate and business clients across the country. Several products and services tailored to the consumer segment were introduced throughout 2007 to satisfy the need for voice and data services. These included the ‘Tayman+’ package for voice service, which is considered the most economical voice package in the Sudan market, as well as relaunching ‘Canar Go,’ the wireless broadband internet service with flat-rate packages and prepaid options. Canar offered a number of excellent customised business solutions for the corporate and business segment using its reliable network infrastructure. Canar launched the E1 leased circuits service and EVPN to suit all enterprise connectivity and network security requirements. 2007 also saw the commissioning of Port Sudan’s FLAG/FALCON Cable Landing Station, which was a milestone for Canar and Sudan as it was the first direct connection for Sudan to the world Submarine Cable Network. This project opened opportunities for Canar to become a major carrier for international traffic for local mobile operators in Sudan.

In the first half of 2008, Zantel’s network will provide coverage to approximately 65% of the population and by year end 2008 this will increase to over 75%.

Following the launch and success of the new brand ‘Moov’ in Côte d’Ivoire, to exploit the synergies that exist in regional operations, AT re-branded three other operations in the Group (Gabon, Benin and Togo).

Concentrating its efforts on Capacity Wholesale activities, Canar signed multiannual contracts with two of the three mobile operators in Sudan to backhaul their MSCs and BSCs, and to carry their national and outgoing international traffic. These two agreements made Canar the leader in the backhaul and wholesale business in Sudan. Etisalat underlined its commitment in Sudan, increasing its equity stake in Canar by US$ 159 million. This increased its shareholding from 37% to 82%, giving it a controlling majority. Emerging Markets Telecommunications Services Limited (EMTS)

As a strategic investment, Etisalat signed a Term Sheet to acquire a 40% stake in Emerging Markets Telecommunications Services Limited (EMTS), promoted by Mubadala Development Company. EMTS has acquired a new licence to provide integrated telecommunication services in Nigeria. As required by the new agreement, Etisalat will be responsible for managing the new company. The licence, originally granted to Mubadala Development Company, is a 15-year renewable Universal Access Service Licence (UASL) and enables Etisalat to reach the country’s population of 146 million people. Nigeria is regarded as one of the most strategically important markets in Africa, with the largest population in the region and mobile penetration of around 22%, backed by strong economic growth of 13% (nominal GDP growth in 2007). Its untapped addressable market represents high growth potential for mobile telephony. This will be the largest investment for Etisalat in a greenfield operation in Sub-Saharan Africa. It will give the Corporation the opportunity to take advantage of significant synergies with current operations in West Africa (Atlantique Telecom). Commercial launch of services is expected in mid-2008.

Etisalat Misr

Zantel

Etisalat Misr launched its operations in May 2007. Within the first 50 days of operations, the company achieved over 1 million customers signing up for its services, thus announcing its arrival with a bang. It simultaneously launched 2G and 3.5G (prepaid, post paid and hybrid) services, with the introduction of the first 3.75G (HSDPA) services in the country. Etisalat Misr used Egypt’s first 3.5G network to carry rich multimedia content, facilitating mobile business across Egypt. It brought mobile television, high-speed internet access and video calling to the marketplace. Aware of the importance of customer service and accessibility, it has a state-ofthe-art network as well as over 18,000 points of sale, including in 1,500 Post Offices across the nation. The portfolio on offer is diverse and meets the many varied needs of the Egyptian customer, with commensurate price ranges and bundled products in a differential marketing mix. Etisalat Misr acquired an International Gateway licence, the first company to end Telecom Egypt’s monopoly in that segment. This complemented its strategic move to acquire 2 Class-A ISPs to enrich its bundled product offering. In its short time of commercial operations, the company has also signed roaming agreements with over 213 partners in 90 countries. By December 2007, the customer base stood at 3.1 million, well in line with the targeted 23.5% market share by 2010. Looking at future growth, it had secured syndicated debt financing of EGP 4.75 billion by the end of 2007. Etisalat Misr was recognised for its advanced services, customer service and superior network coverage, being voted ‘Best New Entrant 2007’ by a select panel from KPMG, the Arab Advisory Group and Oliver Wyman.

2007 was a year of important milestones for Zantel. Etisalat increased its ownership in the company, acquiring a controlling majority. To refresh its corporate identity, Zantel introduced a co-branding campaign with Etisalat, and rolled out a new network which offers significantly improved quality and new value-added services. As the new network was commissioned, a simultaneous national retail programme was initiated with new customer service centres, retail outlets and regionally-based distributors. Zantel’s marketing philosophy is a cornerstone of its overall business strategy. Zantel commenced operations in Zanzibar in 1999 but is a relatively new entrant to the competitive mainland Tanzanian market. To gain market share, Zantel has planned to be market leader in innovation. It gained significant ground through its successful marketing campaign, and the results are apparent. Its subscriber base doubled over 2006 with a resulting market share increase from 6% to 9%. Zantel has now been recognised by Wireless Intelligence as the fastestgrowing mobile operator in the region in terms of proportionate customer growth. From an operations and technology viewpoint, Zantel is now making its presence felt in Tanzania. When Zantel initially entered the mainland market its operational territory was limited to Dar es Salaam, with national service being provided through a roaming agreement. In a significant forward-looking move, the existing core network was replaced in 2007 with new state-of-the-art technology, and a nationwide rollout of Zantel’s own infrastructure was initiated. In the first half of 2008, Zantel’s network will provide coverage to approximately 65% of the population and by year end 2008 this will increase to over 75%. With this initiative, Zantel will be able to offer additional value-added services over a quality network, supporting growth in both customer numbers and revenue.

23

Management Review – International continued

The Mobily network now reaches 93.7% of the population in the Kingdom of Saudi Arabia and Mobily subscribers numbered 11 million by the end of December 2007, a growth of over 60% in comparison to 2006.

Middle East Etihad Etisalat (Mobily)

Through a strategic partnership, Mobily has expanded the network by deploying the latest fibre optic network, divided into seven ‘rings’ or phases. The first and second were completed in 2007 and the remainder will be ready by the third quarter of 2008. The launch of High Speed Packet Data Access (HSPDA), which allows high-speed broadband on mobile, was well received by customers and added to customer growth. International agreements with Etisalat gave visitors to the country preferred rates during Hajj, and there was minimal or no disturbance in the network during this peak event in the Islamic year. Points of sale now stand at 23 flagship stores and 104 Franchised Business Outlets (FBOs), which means Mobily can be reached at all main locations across the country. The Mobily network now reaches 93.7% of the population in the Kingdom of Saudi Arabia and Mobily subscribers numbered 11 million by the end of December 2007, a growth of over 60% in comparison to 2006. Market share now stands at 41%, and steady growth is expected to continue as products and services attract customers by keeping up with their needs and requirements. In terms of revenue, Mobily grew by 44% year on year, with net profit growing by 97%. As a financial investment, Mobily has now reached financial breakeven in terms of profitability, in line with expectations and project plans. In line with its strategic growth plans, Mobily secured an Islamic loan of SAR 9.187 billion in March 2007. Mobily’s all-round development was recognised by investors and media alike. It won the ‘Best New Service’ award at the Telecom World Awards Middle East 2007 Conference, as well as being named the ‘Best Gulf Joint Stock Company’.

24

Thuraya

Thuraya completed a decade of operations in 2007. The year witnessed several milestones for Thuraya. One such milestone was the sale of 65,000 Thuraya SG-2520 units. The SG handset, one of the world’s smartest handheld satellite phones, was soft-launched in late 2006. This further consolidated the company’s positioning in the mobile satellite voice space, which remains the core business. Parallel to this the company gained further ground in creating new service propositions to build additional revenue streams. ThurayaIP and ThurayaMarine-II are being developed to tap into the lucrative satellite broadband and maritime communication markets. The product is aimed at major market segments such as oil & gas, Non Government Organisations (NGOs), government agencies, international travellers, and news-gathering media. Equally important from a commercial perspective was the production of ThurayaMarine-II. This is a multi-purpose communication device that supports voice, fax, data communications and GmPRS, which is aimed at small to medium sized sea vessels sailing within Thuraya’s coverage area. Thuraya currently covers several seas and international waterways, including the Arabian Gulf, Red Sea, Mediterranean, Arabian Sea, North Sea, Baltic Sea, substantial parts of the Atlantic and Indian Oceans, and international waters in most of the Asia-Pacific, which constitute a new emerging market segment for Thuraya. In line with Thuraya’s strategic expansion plans, the company’s third satellite (Thuraya-3) was successfully launched on 15 January 2008, after being rescheduled from November 2007. The expansion of Thuraya’s space system is a significant accomplishment that opens new horizons for growth. Once it is operational in early March 2008, the new satellite will nearly double the targeted market space and potentially the subscriber base under Thuraya’s footprint, by allowing it to cover two-thirds of the globe’s population.

Asia Etisalat Afghanistan

Etisalat Afghanistan launched commercially in August 2007, covering major cities such as Kabul, Herat, Mazar-i-Sherif, Kunduz, Kandahar and Jalalabad. By the end of the year its coverage also included areas of Ghazni, Poli Khumri, Baghlan and Paghman. The company aims to be at the forefront of its market based on quality, innovative services and competitive pricing, with unsurpassed coverage in every province in the country. Etisalat Afghanistan offers a wide range of services including GPRS, MMS services, ringback tones, missed call notifications, and a discounted ‘Family and Friends’ package. During 2007 Etisalat reinforced its commitment by infusing fresh capital into the company, and is planning a major network rollout in 2008. Afghanistan has a population of 31 million with only 8% mobile penetration, offering significant room for growth and development. Average Revenue Per User (ARPU) is higher than in neighbouring countries, and there is a high demand for new technologies and services. Building a modern network with unrivalled services distributed through approximately 1,000 retailers across the country, Etisalat Afghanistan aims not only to seriously increase mobile penetration, but also to become a market leader in the next few years.

In December 2007 Etisalat acquired a 15.97% equity stake in the Indonesian mobile service provider Excelcomindo Pratama TBK (Excelcomindo).

Excelcomindo Pratama TBK

In December 2007 Etisalat acquired a 15.97% equity stake in the Indonesian mobile service provider Excelcomindo Pratama TBK (Excelcomindo). Excelcomindo was the third largest mobile operator in Indonesia in December 2007. This investment is the first acquisition in the Far East and represents an important step in Etisalat’s international expansion strategy into Asia. The Indonesian market is one of the largest and fastestgrowing mobile markets worldwide, and is also the third largest mobile market in Asia excluding Japan. Excelcomindo currently has around 15 million mobile subscribers in Indonesia, representing a market share of approximately 16%. In addition, Excelcomindo has built one of Indonesia’s highest quality mobile networks, with fibre optic transmission infrastructure covering all major cities. Etisalat acquired 1.132 billion ordinary shares in Excelcomindo, granting it a right to a seat on the Board of Commissioners and a seat on Excelcomindo’s Board of Directors. TM International Sdn Bhd, an affiliate of Telekom Malaysia Berhad, and Khazanah Nasional Berhad, the investment holding arm of the Government of Malaysia, hold 67% and 16.8% in Excelcomindo respectively.

Pakistan Telecommunications Company Limited (PTCL)

With a population of over 162 million, Pakistan is one of the most promising markets in Etisalat’s investment portfolio. In 2007, Pakistan Telecommunication Company Limited (PTCL) continued its drive to transform the company into a modern, customer-focused international communication and information provider, as part of management undertakings since 2006. PTCL made several investments in infrastructure development and added network capacity to enhance services and expand its reach across the country. The introduction of Vfone, the new CDMA-based WLL platform, is poised to become the largest fixed wireless telephony network in Pakistan. On the wireless broadband front, a major upgrade of the WLL CDMA network was rolled out in order to provide wireless broadband services in 17 major cities. Technical trials are also in progress and will be followed by a pilot project in WiMax technology. PTCL succeeded in obtaining an IPTV licence from the regulator and the service will be launched in 2008. This will be a landmark addition to the PTCL service portfolio and will enable the company to provide Triple Play (voice, video and data) services over a single fixed line connection. The customer will be provided with a single interface along with single billing. The launch of ‘Broadband Pakistan’ was a major milestone in PTCL’s quest to provide customers with value-added services and convenience of use. PTCL took over the mantle as the dominant service provider in Pakistan in just five months after launch, underlining its resounding success.

Ufone, the country’s second largest mobile service provider, boosted its operations by rolling out the country’s largest ever expansion of its network, worth US$ 525 million. The new investment aims to expand capacity and coverage in existing and new cities, as well as providing high speed cellular mobile and wireless data services. By mid-2008 the two major expansions will give Ufone coverage in over 4,500 cities, towns and villages, and all major highways in the country. PTCL started restructuring its workforce in 2007 and the exercise is expected to be completed in 2008. These initiatives will serve PTCL well in its plan to evolve into a major force in the exciting and fast-growing Pakistani telecommunications market space.

25

Management Review – Services

Etisalat Services Holdings

30

Years of Experience in Real Estate and Facility Management

26

Management of over

1200

16,000

...partners in International Operations

GSM sites

people learnt something new in 2007

E-facilities

E-Academy

Supporting roaming services for over 57 mobile operators in 39 countries

Yellow pages online, print, cd-rom and mobile phones...

Cable laid for major operations in

EDCH

Directories Services

E-marine

Best Big

Factory

2007 Ebtikar

Easy learning

Gulf, Arabian Sea & West Indian Ocean ...portfolio of skills and competencies

E-Academy

27

Management Review – Services continued

UAE ETISALAT SERVICES Etisalat Services is the holding company for Etisalat’s varied services and support entities. In 2007 it announced its arrival and purpose in the market segments it operates in. The strategy of separating the services and varied support services from the core telephony business of Etisalat is to help optimise the potential of the individual businesses under Etisalat Services’ stewardship. Detailed business plans have been drawn up, setting out the best possible roadmap for the businesses, and significant steps have been taken. Etisalat Academy is gradually positioning itself as a premier training institution and reliable partner for both technical and academic courses in the Middle East, Asia and Africa. The targeted clientele will not only include Etisalat’s own subsidiaries and associates, but also new customers in the region. In the UAE, Etisalat Academy has finalised new assignments from the Government, which proves the trust placed in this institution and the importance of training and education as key development drivers. E-Marine continues in its quest to join the world’s best in its business segment. After securing new contracts in and around the area, it is on course to do just that. It has added customers outside the telecommu-nications sector, which will enhance its profitability and overall growth. The new customers, mainly in the oil sector, will add to the organisation’s portfolio of skills and competencies.

28

EDCH, the data clearinghouse, continues to grow and is strengthening its position as one of four clearinghouses worldwide. In the two CityScape exhibitions, Etisalat Real Estate and Facilities Management were introduced to a wider audience. As a core business, both business units enjoy over 30 years of rich experience in maintaining and operating commercial real estate. Some exciting new ventures are planned for the next few years. Internationally, the two units put their expertise to good use in Etisalat’s Pakistan and Sudan operations – PTCL and Canar. The businesses will work to position themselves as noteworthy and trusted partners in the growing realtor segment in 2008. Under a new management team, Ebtikar recently received the award for being one of the best factories in the region. Internally, the unit secured several new orders in 2007, driven by a change management programme while also reaching out to a wider market audience. It also expanded its product spread, introducing new products for the telecommunications market in the region. A new addition to the holding company is the Special Projects unit, whose main work is with federal and military bases in the country, formerly within Etisalat. In 2008, under Etisalat Services the businesses aim to consolidate their positions in their respective market segments, thus contributing to the Group’s vision.

Outside the UAE, E-facility management is undertaking a data centre project in Pakistan for PTCL, and new projects are planned for Etisalat’s operations in Nigeria.

e-Facility management (e-FM)

e-Facility management works on integrating end-to-end facility management solutions for its clients. Based on years of experience with Etisalat, the company has undertaken management not only of current Etisalat facilities including all operational buildings, but also over 1,200 GSM sites across the country. Its core competence lies in managing projects, in addition to planning, budgeting, alternative analyses, design, consulting, installation, BMS and general services for a project. In addition e-FM also does preventive, emergency and both scheduled and unscheduled maintenance programmes. e-FM participated in both CityScape Abu Dhabi and CityScape Dubai, as well as the Working Building Middle East Fair which took place in December. They provided the ideal platform to showcase its capabilities to a wider audience. e-FM is in the process of joining FMBG (Facility Management Business Group) in the UAE, and will be fully compliant with FMIA (Facility Management International Association) conditions. Outside the UAE, it is undertaking a data centre project in Pakistan for PTCL, and new projects are planned for Etisalat’s operations in Nigeria.

In the UAE, e-Real Estate has agreed on tenancy contracts with DIFC and Ministries in Dubai for the Al Kifaf building, Dubai, for ensuring full occupancy as soon as construction is completed in early 2008.

During April 2007, Etisalat Academy signed a ‘Total Training Solution’ contract with Sudatel, and in May signed a strategic collaboration agreement with the National Telecommunication Institute in Egypt, to deliver advanced training in North Africa.

e-Real Estate (e-RE)

Etisalat Academy

Etisalat’s Real Estate unit operates in all Etisalat buildings and sites, ensuring full optimisation of Etisalat owned units. During 2007 its operations have focused on the development plans for all Etisalat sites and, where required, it has negotiated with outside parties for projects. Using its inhouse expertise, e-RE has served as consultants and undertaken project management for operations outside the UAE, including Etisalat operations in Sudan and PTCL in Pakistan. In the UAE, e-RE has agreed on tenancy contracts with DIFC and Ministries in Dubai for the Al Kifaf building, Dubai, for ensuring full occupancy as soon as construction is completed in early 2008. The participation in CityScape Abu Dhabi and Dubai gave the business an opportunity to showcase its expertise and available space in buildings to new tenants. It also introduced the consultancy arm for the lucrative real estate market in the UAE. International consultancy assignments are also being undertaken for Etisalat Misr, Egypt, and Mobily, Saudi Arabia.

Etisalat Academy offers training courses and seminars, and hosts conferences on the latest developments in technology and business applications, both internally for Etisalat staff and externally throughout the UAE, Gulf Region and Middle East. 2007 was another signature year as the Academy was chosen to deliver extended training programmes to Mobily, Canar, Etisalat Misr, Etisalat Afghanistan, and recently, PTCL in Pakistan. This is in addition to numerous programmes delivered for Qtel, Omantel, and Oman Mobile. During April 2007, Etisalat Academy signed a ‘Total Training Solution’ contract with Sudatel, and in May it signed a strategic collaboration agreement with the National Telecommunication Institute in Egypt, to deliver advanced training in North Africa. Locally, the Academy continued its special training programmes for major organisations in both public and private sectors. In May 2007, the Academy signed a Memorandum of Understanding with the Ministry of Administrative Development to participate in several projects along with UAE Ministries through its e-Competence Centre. In all, over 16,000 cadres participated in more than 800 tailored programmes, registering almost 20% growth compared to 2006. In addition to its regionally recognised role in certifying IT professionals in the field of IT security since 2003, the Academy launched comprehensive globally-recognised professional certification programmes in accounting and finance in various categories and levels, in collaboration with ACCA-UK.

In 2007 the Academy arranged several regional conferences and seminars: the Sixth Middle East Human Resources Conference – Talent Management, under the patronage of H.E. Eng. Sultan Bin Saied Al Mansoori, Minister of Administrative Development; the Fifth Middle East IT Security conference, under the patronage of H.H. Sheikh Dr Sultan Bin Mohammed Al Qassemi, Ruler of Sharjah (in collaboration with Sharjah Police); 3G and Beyond, in collaboration with Qualcomm-USA; and the Telecom Services – Selling Productivity conference in collaboration with Oracle Middle East. All conferences featured the participation of regional telecom operators, major telecom industry leaders and manufacturers. After endorsement by the UAE University, Etisalat Academy extended the reach of its international exclusive representation for ‘easylearning’ to Sudan and Pakistan at a national level. It also supported its valueadded initiative ‘easylearning-Connect,’ which gives participants the chance for rewarding careers once they gain employment skills through ‘easylearning’. These are provided through affordable and convenient self-access learning. The Academy supports the initiative exclusively and runs wholesale operations throughout the region. As part of Etisalat Services, in 2008 the Academy will place more emphasis on growth and increased shareholder value through business development, partnerships and extended outreach to new marketplaces, in the Gulf and MENA regions.

29

Management Review – Services continued

In order to address the growing demand for shallow water activity, E-marine has acquired a vessel capable of conducting shallow water activities such as diving, marine survey and submarine cable installation. It is expected to join E-marine’s fleet during 2008.

Ebtikar Card System

Ebtikar is a major card manufacturer and related service provider catering mainly to the needs of telco operators in the local and regional market. Its factory in Ajman produces a wide variety of prepaid scratch, smart memory card, and GSM SIM cards for a diverse and expanding customer base. 2007 operations focused on reinforcing a customer-oriented culture while leveraging Etisalat activities. This emphasised turning a manufacturing company into a customerdriven one, where quality and price remain competitive. Using the ‘Six Sigma’ quality approach, it targeted productivity improvements and staff self-development. Ebtikar took the lead in the Group to train its staff in Six Sigma and now has eight ‘green belt’ certified staff members. The company is constantly orienting itself to be more competitive and defining its roadmap in line with new IT and marketing trends, including NFC technology and Mega SIM implementation in the Middle East. New products and services are being explored for future growth and expansion. Ebtikar was recognised for its achievements as the ‘Best Big National Factory’ in 2007, and won the 2007 ‘Ajman Award for Industrial Excellence’.

Emirates Data Clearing House (EDCH) EDCH is one of the four clearinghouses worldwide. EDCH supports the roaming business of GSM operators, enabling subscribers to use other GSM networks outside their home network to make and receive voice and data calls. To date, EDCH supports roaming services for 57 mobile operators in 39 countries worldwide, with services such as data clearing, financial clearing, record conversion, and interoperator tariff verification. During 2007, EDCH introduced various support services for its clients’ roaming facilities, including Data Processing for Roaming Replicator Service, Business Intelligence Tool (Data Warehousing), CDR Conversion of GPRS Roaming Records, and Test SIM Card Management.

30

e-marine PJSC

e-marine offers all services related to submarine cable works including installation, maintenance and repair of submarine telecommunication and power composite cables; marine route surveys; cable freight and storage services; chartering; and marine project management and consultancy services. e-marine’s current market is spread across the Gulf, Arabian Sea and the western region of the Indian Ocean. Etisalat has been in the submarine cable business since 1990 through an inhouse cable maintenance division, becoming an independent entity incorporated into Emirates Telecommunications and Marine Services FZE (e-marine) in 1998. Today e-marine is a Private Joint Stock Company. e-marine signed a Memorandum of Understanding (MOU) with several parties globally in 2007, to consolidate its presence in the oil & gas industry, in addition to the traditional telecommunications market. To facilitate faster and more efficient deployment of cable-work, e-marine opened an additional operational base in Salalah, Oman, which speeds access to further locations in the Red Sea and on the African coastline. In order to address the growing demand for shallow water activity, e-marine has acquired a vessel capable of conducting shallow water activities such as diving, marine survey and submarine cable installation. It is expected to join e-marine’s fleet during 2008.

Special Projects

Etisalat’s Special Projects Unit (SP Unit) was established in 1996 as a separate unit to undertake major Government fibre network projects. Later on it supported Etisalat in major milestone projects such as Hybrid Fibre Cable (HFC) and Junction Cables. In 2007 Special Projects continued to gain Government trust and was awarded the UAE Army Phase III Fibre Optic Project. In addition, the unit is taking a major part in Etisalat’s Fibre to the Home (FTTH) implementation and migration plan.

Directory Services

Directory Services is the newest addition to the Etisalat Services Holding group. The unit was established to take over the publication of the annual directories, which Etisalat has produced for over 30 years. This unit will continue to produce all related telecom directories, such as Yellow Pages and White Pages, in all available media channels – internet, print, CD-ROM and mobile phones. The unit will be fully incorporated within Etisalat Services by the second quarter of 2008, and its main focus will be value-added services to its customers and clients. Directory Services will sustain the quality of its products and services, and will continue the superb legacy of Etisalat directories, using the latest technology.

CORPORATE GOVERNANCE

The General Assembly

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

The Board of Directors

The Emirates Telecommunications Corporation (Etisalat) is managed by a Board of Directors presided over by the Chairman and consists of eleven members including the Chairman. Seven of these represent the Federal Government of the United Arab Emirates and the remaining four members are elected for a three-year term by the non-Government shareholders. The Board of Directors carries out the Corporation’s business and, for that purpose, exercises all the Corporation’s powers except those reserved by Law or Articles of Association to the General Assembly of the Corporation.

The Executive Committee

The Executive Committee is appointed by the Board of Directors in accordance with Article 20 of the Articles of Association. It is empowered to take decisions on behalf of the Board and/or to make certain recommendations to it, as the case may be, concerning particular matters. The Executive Committee’s function and powers include organisational matters of the Corporation (such as overseeing statutory, organisational and employment matters and corporate performance); planning and development (overseeing development plans and projects, and approval of the budget prior to submission to the Board); operations (reviews efficiency of service, and lays down policies concerning investment of surplus funds); projects (sets the term for project agreements, approves relevant tenders over AED 50 million, and approves project overruns and variations over AED 10 million); procurement (approves purchases over AED 50 million); and investments (including international investments and expansion projects).

The Audit Committee

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

The Compensation Committee

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

The Operating Units of the Corporation

Etisalat adopts a corporate organisation structure based on three autonomous Operating Units. These consist of the Etisalat UAE Unit (which is entrusted with the provision of Licensed Telecom Services in the United Arab Emirates); the International Investment Unit (which spearheads the Corporation’s international expansion and operational business); and Etisalat Services Unit (a wholly owned holding company entrusted with providing certain non-core, non-telecom services to the Corporation, as well as to third parties). The Operating Units exercise their respective activities and responsibilities and set their key corporate policies, prepare plans, and oversee financial and administrative matters. They report on their progress and affairs to the Executive Committee and the Board of Directors on a regular basis.

31

Simplicity

Energy

Openness Reliability

Caring

Enabling

Optimism

32

Financial Statements

Independent Auditors’ Report to the Shareholders Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders’ Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Meeting

34 35 36 37 38 39 51

33

Independent Auditors’ Report to the Shareholders

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Emirates Telecommunications Corporation (“the Corporation”) and its subsidiaries (together the “Group”) which comprise the consolidated balance sheet as at 31 December 2007 and the consolidated statement of income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting policies set out in note 2 of these financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the 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 have been prepared, in all material respects, in accordance with the accounting policies set out in note 2 of the financial statements. Report on Other Legal and Regulatory Requirements

We have obtained all the information and explanations considered necessary for the purposes of our audit. The Corporation has maintained proper books of account and has carried out physical verification of stores in accordance with properly established procedures and the financial information included in the Chairman’s statement is consistent with the books of account of the Corporation. Nothing has come to our attention, which causes us to believe that the Corporation has breached any of the applicable provisions of the UAE Federal Act No. (1) of 1991 as amended by Decretal Federal Code No. 3 of 2003, or its Articles of Association, which would materially affect its activities or financial position at 31 December 2007.

DELOITTE & TOUCHE Abu Dhabi, United Arab Emirates Saba Y. Sindaha (Reg. No. 410)

25 February 2008

34

PRICEWATERHOUSECOOPERS Abu Dhabi, United Arab Emirates Jacques E. Fakhoury (Reg. No. 379)

Consolidated Statement of Income for the year ended 31 December 2007

Revenue

Notes

2007 AED’000

2006 AED’000

3

21,339,852

16,290,257

6,609,551 (503,139) 736,310 (122,296)

5,595,885 (261,692) 475,704 -

Profit for the year Minority interest

6,720,426 576,218

5,809,897 49,850

Profit for the year attributable to equity holders of the Corporation Unappropriated profit brought forward Effect of change from associates to subsidiaries

7,296,644 67,168 487,209

5,859,747 76,306 -

(2,994,750) (900,000) (924,000) (3,273) (3,003,273)

(2,722,500) (800,000) (800,000) (135) (1,546,250)

Operating profit Finance costs Other income Deferred taxes

Appropriations: Dividends Transfer to development reserve Transfer to asset replacement reserve Transfer to statutory reserve Transfer to general reserve

4

14

Unappropriated profit carried forward Earnings per share

Mohammad Hassan Omran Chairman

24

25,725

67,168

AED 1.46

AED 1.17

Khalaf Bin Ahmed Al Otaiba Vice Chairman

The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is set out on page 34

35

Consolidated Balance Sheet at 31 December 2007

2007 AED’000

2006 AED’000

11,875,953 1,686,847 12,199,498 13,407,470 365,210 12,124

8,495,580 11,230,398 11,853,648 365,210 410,175 -

39,547,102

32,355,011

175,207 2,046,838 210,470 1,035,477 9,432,564

65,857 1,090,684 1,721,489 56,270 315,118 10,304,033

12,900,556

13,553,451

13,230,521 1,299,178 1,045,734 343,000 1,746,937

8,568,450 932,494 978,883 1,537,426 1,588,125

Total current liabilities

17,665,370

13,605,378

Net current liabilities

(4,764,814)

Notes ASSETS

Non-current assets Fixed assets Intangibles Licenses Investments in joint venture and associated undertakings Other investments Loans to associated undertaking Deferred tax asset

6 5 7 8 8 11

Total non-current assets Current assets Stores Debtors and prepayments Due from associated undertakings Loans to associated undertaking Amounts due from other telecommunications administrations Bank and cash balances

9 10 11 12

Total current assets LIABILITIES

Current liabilities Creditors and accruals Amounts due to other telecommunications administrations Amounts payable on acquisition of investments and licenses Short term loans from investment partners Bank borrowings Proposed dividend

Non-current liabilities Bank borrowings Advances from investment partners Long term loans from investment partners Amounts payable on acquisition of investments and licenses Provision for staff terminal benefits Deferred tax liability Non-current portion of creditors

20 18 15 16

(51,927)

3,140,921 608,863 1,642,955 2,057,634 533,808 146,895 756,220

6,980,600 551,059 2,936,653 440,295 -

8,887,296

10,908,607

25,894,992

21,394,477

4,991,250 18,876,586 163,425 25,725

4,537,500 14,418,604 163,425 67,168

Total shareholders’ equity Minority interest

24,056,986 1,838,006

19,186,697 2,207,780

Total equity

25,894,992

21,394,477

16 17 15 18 19

Total non-current liabilities Net assets EQUITY

Shareholders’ equity Share capital Reserves Gain on dilution of interest in an associate Unappropriated profit

Mohammad Hassan Omran Chairman

13

Khalaf Bin Ahmed Al Otaiba Vice Chairman

The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is set out on page 34

36

37

14

13

14

13

-

453,750 -

-

5,000,000

900,000

-

4,991,250

-

-

-

-

4,100,000

-

-

4,537,500

-

800,000

-

907,500

-

3,300,000

-

3,630,000

Development AED’000

5,124,000

-

-

924,000

-

4,200,000

-

-

-

800,000

-

3,400,000

Asset replacement AED’000

3,408

3,273

-

-

-

135

135

-

-

-

-

-

Statutory AED’000

388,829

229,110 -

-

-

-

159,719

159,719 -

-

-

-

-

-

Translation AED’000

The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is set out on page 34

At 31 December 2007

Profit for the year Effect of change from associates to subsidiaries Transfers to reserves Bonus issue of 453.75 million fully paid shares of AED 1 each Dividends Exchange differences on translation of overseas operations Transfer to statutory reserve

At 31 December 2006

Profit for the year Amounts contributed by minority shareholders Transfers to reserves Bonus issue of 907.5 million fully paid shares of AED 1 each Gain on dilution of interest in an associate Dividends Exchange differences on translation of overseas operations Transfer to statutory reserve

At 1 January 2006

Notes

Share capital AED’000

Reserves

159,719 135

-

(907,500)

3,146,250

-

12,020,000

Total AED’000

-

229,110 3,273

(453,750) -

8,360,349 18,876,586

-

(453,750) -

(147,924) (147,924) 3,003,273 4,827,273

-

5,958,750 14,418,604

-

-

(907,500)

1,546,250

-

5,320,000

General AED’000

Attributable to equity holders of the Corporation

-

-

5,859,747

15,726,306

Total shareholders’ equity AED’000

159,719 -

7,296,644

163,425

-

229,110 25,725 24,056,986

(3,273)

- (2,994,750) (2,994,750)

339,285 -

7,296,644

67,168 19,186,697

(135)

163,425 (2,722,500) (2,722,500)

-

(3,146,250)

5,859,747

76,306

487,209 - (4,827,273)

-

163,425

-

163,425 -

-

-

-

-

Gain on dilution of interest in Unappropriated an associate profit AED’000 AED’000

241,998 -

163,425 (2,722,500)

-

2,175,321 -

5,809,897

15,726,336

Total equity AED’000

483,380 -

291,459 1,838,006 25,894,992

62,349 -

- (2,994,750)

144,095 -

(576,218) 6,720,426

2,207,780 21,394,477

82,279 -

-

-

2,175,321 -

(49,850)

30

Minority interest AED’000

for the year ended 31 December 2007

Consolidated Statement of Changes in Shareholders’ Equity

Consolidated Statement of Cash Flows for the year ended 31 December 2007

Notes

Cash flows from operating activities Operating profit Adjustments for: Depreciation Amortisation of licenses Capital projects written off Profit on sale of assets Net transfer to staff terminal benefits Dividend income from other investments Deferred taxes, net Share of results of joint venture and associated undertakings

4 7 4

8 8

Operating cash flows before movement in working capital Changes in working capital: Stores Debtors and prepayments Amounts due from/to other telecommunications administrations Creditors and accruals

2006 AED’000

6,609,551

5,595,885

1,368,182 593,756 113,595 93,513 (48,769) 12,085 (380,042)

1,391,349 5,729 25,455 23,463 (56,390) (267,018)

8,361,871

6,718,473

(46,960) (262,364) (353,675) 3,175,454

38,688 (375,655) (81,008) 2,208,252

Net cash from operating activities

10,874,326

8,508,750

Cash flows from investing activities Investments made during the year Dividends received Purchases of fixed assets, net Acquisition of subsidiaries License fees paid Interest income received

(2,488,938) 194,931 (3,460,275) (754,466) (126,696) 622,715

(4,823,902) 259,796 (1,432,084) (11,236,127) 475,704

Net cash used in investing activities

(6,012,729)

(16,756,613)

Cash flows from financing activities Due from associated undertakings Loans to associated undertaking, net Loans instalments repaid by associated undertaking Advances/loans from investment partners (Repayments of)/proceeds from bank borrowings, net Amounts contributed by minority shareholders Finance costs paid Dividends paid

1,174,579 130,495 57,804 (4,131,956) 124,165 (443,462) (2,835,938)

(422,105) 2,088,485 6,980,600 2,175,321 (129,038) (2,041,875)

Net cash (used in)/from financing activities

(5,924,313)

8,651,388

Net (decrease)/increase in cash and cash equivalents

(1,062,716)

403,525

Cash and cash equivalents at the beginning of the year Exchange differences on translation of overseas operations

10,304,033 191,247

9,658,510 241,998

9,432,564

10,304,033

Cash and cash equivalents at the end of the year

7 4

16

12

The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is set out on page 34

38

2007 AED’000

Notes to the Consolidated Financial Statements for the year ended 31 December 2007

1 Incorporation and activities

The Emirates Telecommunications Corporation Group (“the Group”) comprises the holding company Emirates Telecommunications Corporation (“the Corporation”) and its subsidiaries. The Corporation was incorporated in the United Arab Emirates with limited liability in 1976 by UAE Federal Government decree No. 78, which was revised by the UAE Federal Act No. (1) of 1991 and further amended by Decretal Federal Code No. 3 of 2003 concerning the regulation of the telecommunications sector in the UAE. The Corporation is owned by the UAE Government and UAE nationals. The principal activity of the Group is to provide telecommunications services, media and related equipment including provision of related contracting and consultancy services to international telecommunications companies and consortia. These activities are carried out through the Corporation (which holds a full service license from the UAE Telecommunications Regulatory Authority valid until 2025), its subsidiaries, joint ventures and associated undertakings referred to in Notes 8 and 21. 2 Significant accounting policies

The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below: a) Basis of preparation The consolidated financial statements are prepared under the historical cost convention and in accordance with the accounting policies set out herein. b) Consolidation Subsidiary undertakings, which are those entities in which the Group, directly or indirectly, has an interest of more than one half of the voting rights and exercises control over the operations, have been fully consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are excluded from consolidation from the date that control ceases. Intercompany transactions, balances and any unrealised gains/losses between group entities have been eliminated in the consolidated financial statements. Details of the key subsidiary undertakings are provided in Note 21. c) Joint ventures and associated undertakings Joint ventures and associated undertakings are those companies which the Group jointly controls or over which it exercises significant influence but which it does not control. Investments in joint ventures and associated undertakings are accounted for using the equity method of accounting and are initially recognised at cost. Provision is made for impairment in value, which is other than temporary in nature, such provision being determined and made for each investment individually. d) Fixed assets and depreciation Fixed assets are stated at cost, less accumulated depreciation and impairment. Cost comprises landed cost of equipment and materials, including freight and insurance, charges from contractors for installations and building works and direct labour costs incurred in the installation of exchanges and underground plant. The cost of fixed assets is depreciated from the date an asset becomes operational by equal annual instalments over the estimated useful lives of the assets as follows: Buildings:

Permanent - the lower of 20 - 50 years or the period of the land lease. Temporary - the lower of 4 years and the period of the land lease.

39

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

2 Significant accounting policies (continued)

d) Fixed assets and depreciation (continued) Plant and equipment:

Submarine - fibre optic cables - coaxial cables Cable ships Coaxial and fibre optic cables Line plant Exchanges Switches Radios/Towers Earth stations/VSAT Multiplex equipment Power plant Subscribers’ apparatus (cellular) General plant

Years

20 10 15 15 15 5 - 10 5 - 10 10 -15 5 - 10 10 5 3-8 2-5

Other assets: Motor vehicles 3-5 Computers 4-5 Furniture and fittings 4 -10 Household furniture 4

Accelerated depreciation is provided on assets, which are likely to cease to be operational earlier than the expiry of the estimated useful lives shown above. Repairs and maintenance expenses are charged to the consolidated statement of income when the expenditure is incurred. e) Business combinations The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred and assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. If reliable estimates of fair values are not available at the acquisition date, the difference between the total consideration paid and the Group’s share of the net book values of assets acquired and liabilities assumed is classified within intangible assets as goodwill pending valuation and identification of separately identifiable tangible and intangible assets. f) Intangibles Intangible assets acquired in a business combination are stated at their fair values at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight line method to allocate the cost of the intangible assets other than goodwill, over their estimated useful lives. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is carried at cost less any accumulated impairment losses. g) Licenses Acquired telecommunication licences are shown at historical cost and are amortised on a straight line basis over their estimated useful lives when the related networks are available for use. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

40

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

2 Significant accounting policies (continued)

h) Other investments Other long term investments are stated at cost less provision for impairment in value, if any. Such provision, is only made when there is impairment in value, which is other than temporary in nature and is being determined and made for each investment individually. i) Foreign currencies Foreign currency transactions are accounted for at the exchange rates prevailing at the dates of the transactions. Foreign currency monetary assets and liabilities are translated into UAE Dirhams at rates prevailing at the balance sheet date. Gains and losses arising on settlement and retranslation of foreign currency balances are recognised in the consolidated statement of income. On consolidation the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any are classified as a separate component of equity. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. j) Stores Stores are measured at the lower of cost and net realisable value. Provision is made, where appropriate, for deterioration and obsolescence. Cost is determined in accordance with the weighted average cost method. k) Deferred taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using relevant tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that sufficient taxable profits will be available in the future against which deductible temporary differences can be utilised. l) Borrowings Borrowings are initially recognised at the gross value of proceeds received whilst transaction costs are expensed in the period in which the borrowings are arranged. Borrowings are classified under current liabilities unless there is evidence of the Group’s intention to defer settlement for at least 12 months after the balance sheet date and such deferral is probable, or contractually agreed. m) Revenue Revenue, in respect of telecommunication services, is accounted for in the period when the services are provided and is stated after adjusting for amounts payable to and receivable from other telecommunications administrations and is net of discounts and rebates allowed. Equipment rental charges are recognised as income over the period to which the charges relate. Contract revenue is recognised under the percentage of completion method. Profit on contracts is recognised only when the outcome of the contracts can be reliably estimated. Provision is made for foreseeable losses estimated to complete contracts. n) Other income Other income primarily comprises interest income which is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity. o) Finance costs Interest expense is recognised on a time proportion basis, taking account of the principle outstanding and the applicable rate over the borrowing period. p) Cash and cash equivalents For purposes of the consolidated statement of cash flows, all bank and cash balances with a maturity of less than six months at the balance sheet date are considered to be cash and cash equivalents.

41

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

3 Revenue

Revenue is stated net of discounts and rebates allowed and after deducting net outpayments to other telecommunications administrations of AED 607 million (2006: AED 555 million) and discounts of AED 990 million (2006: AED 755 million). 4 Profit for the year 2007 AED’000

Profit for the year is stated after charging: Depreciation Amortisation Capital projects written off Contract costs Federal royalty Finance costs Regulatory expenses And after crediting: Share of results of associated undertakings (Note 8) Interest income Contract revenue

2006 AED’000

1,368,182 593,756 73,197 7,296,644 503,139 644,316

1,391,349 5,729 25,455 35,009 5,859,747 261,692 388,215

380,042 622,715 107,915

267,018 475,704 106,058

In accordance with the Cabinet decision No. 558/1 for the year 1991, the Corporation is required to pay a royalty, equivalent to 40% of its annual net profit before such royalty, to the UAE Government for use of Federal facilities. With effect from 1 June 1998, Cabinet decision No. 325/28M for 1998 increased the royalty payable to 50%. 5 Intangibles

In April 2005, the Group had acquired 50% (494,661 shares) of the equity of Atlantique Telecom (“AT”) for a consideration of AED 432.090 million (Euro 90 million). On 11 April 2007, the Group acquired an additional 20% (197,864 shares) of the equity of AT resulting in a total controlling equity interest of 70% (692,525 shares). The total consideration for the 20% acquisition amounted to AED 418.836 million (US$ 114 million). The additional 20% shares acquired by the Group are subject to a lien in favour of the Islamic Development Bank, Saudi Arabia, to secure certain borrowings by AT. On 26 January 1999, the Group had acquired an initial equity interest in Zanzibar Telecom Limited (“Zantel”) for a consideration of AED 8.818 million (US$ 2.4 million). On 23 July 2007, the Group acquired an additional 17% (122,400 shares) of the equity of Zantel resulting in a controlling majority interest. The total consideration for the 17% acquisition amounted to AED 55.294 million (US$ 15.05 million). On 26 September 2007, the Group resolved to convert its shareholder loan of AED 392.7 million to equity and also injected AED 191 million as additional equity into Canar Telecommunications Company Limited (“Canar”) raising its equity holding from 37% to 82%. The Group therefore holds a controlling majority interest in Canar. The difference between the Group’s share of assets acquired and liabilities assumed individually in AT, Zantel and Canar and the total consideration paid has been classified within intangible assets as goodwill pending valuation and identification of separately identifiable tangible and intangible assets which would then be amortised in accordance with the applicable accounting policies. Also included under intangibles is goodwill in overseas subsidiaries amounting to AED 186.276 million (2006: AED Nil).

42

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

6 Fixed assets

Buildings AED’000

Plant and equipment AED’000

Motor vehicles, computers & furniture AED’000

Assets under construction AED’000

Total AED’000

2,884,726 25,399 35,564 (1,422)

13,673,639 63,918 958,540 (277,020)

941,345 14,095 147,897 (14,672)

1,136,822 1,323,650 (1,142,001) (25,455) -

18,636,532 1,427,062 (25,455) (293,114)

At 31 December 2006 Additions Transfers Disposals

2,944,267 116,941 32,552 (2,356)

14,419,077 2,444,315 800,855 (106,300)

1,088,665 447,905 92,072 (28,181)

1,293,016 2,055,409 (925,479) -

19,745,025 5,064,570 (136,837)

At 31 December 2007

3,091,404

17,557,947

1,600,461

2,422,946

24,672,758

Accumulated depreciation At 1 January 2006 Charge for the year Disposals

1,331,666 139,453 (1,356)

8,241,314 1,136,488 (274,966)

816,141 115,408 (15,517)

-

10,389,121 1,391,349 (291,839)

At 31 December 2006 Additions Charge for the year Disposals

1,469,763 12,318 137,375 (2,329)

9,102,836 308,466 1,106,019 (104,445)

916,032 156,305 124,788 (27,905)

-

11,488,631 477,089 1,368,182 (134,679)

At 31 December 2007 Net book amount at 31 December 2007 Capital stores

1,617,127

10,412,876

1,169,220

-

13,199,223

1,474,277 -

7,145,071 -

431,241 -

2,422,946 402,418

11,473,535 402,418

Total fixed assets at 31 December 2007

1,474,277

7,145,071

431,241

2,825,364

11,875,953

At 31 December 2006 Capital stores

1,474,504 -

5,316,241 -

172,633 -

1,293,016 239,186

8,256,394 239,186

Total fixed assets at 31 December 2006

1,474,504

5,316,241

172,633

1,532,202

8,495,580

Cost At 1 January 2006 Additions Transfers Write offs Disposals

Additions to cost and accumulated depreciation during the year include amounts acquired on business combinations. (Note 5) 7 Licenses

At 1 January Additions Amortisation At 31 December





2007 AED’000

2006 AED’000

11,230,398 1,562,856 (593,756)

11,236,127 (5,729)

12,199,498

11,230,398

The above amounts include GSM licenses in Egypt and Afghanistan as well as those relating to Atlantique Telecom, Etisalat Benin, Zantel and Canar.

43

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

8 Investments Joint venture AED’000

Associated undertakings AED’000

Other investments AED’000

2007 AED’000

2006 AED’000

2,572,925 9,598,579 (383,089) 163,425 267,018

Net book amount at 1 January Effect of change from associates to subsidiaries Additions during the year Dividends Gain on dilution of interest in an associate Share of results

50,000 -

11,803,648 (248,842) 1,609,920 (187,298) 380,042

365,210 -

12,218,858 (248,842) 1,609,920 (187,298) 380,042

Net book amount at 31 December

50,000

13,357,470

365,210

13,772,680

12,218,858

2007 AED’000

2006 AED’000

Dividend income from other investments during the year was AED 48.8 million (2006: AED 56.4 million). Net book amount is represented by the following investments: a) Joint venture

UT Technologies LLC 50,000 50,000 The Corporation and Seven Emirates for Investment and International Trade LLC entered into a Memorandum of Association to set up UT Technologies LLC. The objectives of the company include installing infrastructure and managing home network systems. b) Associated undertakings 2007 AED’000

i. Pakistan Telecommunication Company Limited (“PTCL”)

9,268,903

2006 AED’000

9,441,311

During the year ended 31 December 2006, the Corporation, through its majority owned subsidiary Etisalat International Pakistan LLC (“EIP”), acquired the entire 1.326 billion Class B shares of PTCL for a total consideration of US$ 2,598,960,000 (AED 9,548,579,040). These Class B shares represent 26% of PTCL’s issued capital and, in accordance with PTCL’s Articles of Association, provide the Corporation with 53% of the voting rights. Under the terms of the Shareholders Agreement between EIP and the Government of Pakistan, EIP has the right to appoint five of the nine Board of Directors of PTCL in addition to the appointment of certain key management personnel. Due to certain control impediments, including but not limited to restrictions on the Corporation’s financial and operating decision making ability, PTCL has been accounted for as an associate using the equity method. Management believes that some or all of these control impediments may be alleviated in the future which may result in the consolidation of PTCL. The following is a summary of PTCL’s most recent publicly available key financial information: Quarter ended 30 September 2007 AED’000 (unaudited)

11,674,690

11,467,433

Total liabilities

4,271,859

4,271,877

Revenue

1,252,031

5,047,216

207,276

1,041,646

Total assets

Net profit

44

Year ended 30 June 2007 AED’000 (audited)

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

8 Investments (continued)

b) Associated undertakings (continued) 2007 AED’000

2006 AED’000

ii. Etihad Etisalat Company (“EEC”) 2,029,017 1,553,458 The Corporation is one of seven founding shareholders of EEC and holds a 35% equity interest in EEC, a Saudi Arabian joint stock company which was incorporated on 14 December 2004. EEC owns and operates a mobile cellular network in the Kingdom of Saudi Arabia using GSM and 3G networks. According to the requirements of the Communications and Information Technology Commission (“CITC”) in Saudi Arabia, the Corporation as the operator of EEC must maintain a 15% equity interest in EEC for the duration of the management agreement (Note 22). The founding shareholders agreed that they would not, for two fiscal years from the incorporation of EEC, transfer shares except as permitted under the Articles of Association of EEC. At 31 December 2006, the Corporation’s share of a corporate guarantee provided to a syndicate of banks in respect of an Islamic financing facility availed by EEC was AED 2,567 million. This guarantee was released during 2007. The market value of the Corporation’s investment in EEC at 31 December 2007 was AED 12,798 million (2006: AED 8,954 million). 2007 AED’000

2006 AED’000

iii. Atlantique Telecom 268,898 On 11 April 2007, the Group acquired 20% (197,864 shares) of the equity of AT resulting in a total controlling equity interest of 70% (692,525 shares) (Note 5). Consequently, with effect from April 2007 the Group has accounted for AT as a subsidiary. 2007 AED’000

2006 AED’000

iv. Thuraya Satellite Telecommunications Company PJSC 449,630 511,483 The Corporation holds a 27.427% (2006: 27.427%) interest in Thuraya which is incorporated in the UAE as a private joint stock company. During the year 2006, Thuraya increased its share capital from US$ 500 million to US$ 629.4 million through a private placement. The Corporation’s share in Thuraya’s equity was consequently diluted from 34.525% to 27.427%. A gain on dilution of investment amounting to AED 163.4 million is reflected in the consolidated statement of changes in shareholders’ equity in 2006. 2007 AED’000

2006 AED’000

v. Canar Telecommunications Company Limited 8,581 On 26 September 2007, the Group resolved to convert its shareholder loan to equity and to inject additional equity into Canar raising its shareholding from 37% to a controlling majority interest of 82% (Note 5). Consequently, with effect from October 2007 the Group has accounted for Canar as a subsidiary. 2007 AED’000

2006 AED’000

vi. Zanzibar Telecom Limited 19,917 On 23 July 2007, the Corporation acquired an additional 17% (122,400 shares) of the equity of Zantel resulting in a controlling majority interest (Note 5). Consequently, with effect from July 2007 the Group has accounted for Zantel as a subsidiary.

vii. PT Excelcomindo Pratama TBK

2007 AED’000

2006 AED’000

1,609,920

-

45

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

8 Investments (continued)

b) Associated undertakings (continued) On 12 December 2007, the Group acquired 15.97% of the issued equity shares in PT Excelcomindo Pratama TBK (“PEPT”), a GSM operator in Indonesia, for consideration of AED 1,610 million. Although the Corporation holds 15.97% of the paid-up capital of PEPT, it exercises significant influence by virtue of its representation on the Board of Directors of this Company. Accordingly, PEPT is accounted for as an associated undertaking. c) Other investments

i. Qatar Telecom QSC

2007 AED’000

2006 AED’000

60,607

60,607

This represents the Corporation’s investment in one million shares of Qatar Telecom QSC. The market value of the investment at 31 December 2007 was AED 235 million (2006: AED 220 million).

ii. Sudan Telecommunications Company Limited

2007 AED’000

2006 AED’000

74,886

74,886

This represents the Corporation’s investment in 29.24 million shares (4% holding) (2006: 2.6 million shares, 4.6% holding) in Sudan Telecommunications Company Limited, Sudan. The market value of the investment at 31 December 2007 was AED 238.6 million (2006: AED 202.7 million).

iii. Dubai Global Sukuk FZCO

2007 AED’000

2006 AED’000

128,590

128,590

This represents the Corporation’s investment of US$ 35 million in certificates (Sukuk Al-Ijara) issued by the Government of Dubai, Department of Civil Aviation. These certificates bear an annual rental in relation to six month US$ LIBOR plus 0.45% and mature in November 2009. The approximate market value of these certificates at 31 December 2007 was AED 129.6 million (2006: AED 130.2 million).

iv. Wings FZCO

2007 AED’000

2006 AED’000

91,850

91,850

This represents the Corporation’s investment of US$ 25 million in Trust Certificates (Sukuk Al-Musharaka) issued by Wings FZCO, a limited liability company incorporated in Dubai Airport Free Zone. These certificates bear a return based on US$ LIBOR plus 0.75% and mature in June 2012. The first distribution was made in June 2006 based on 12 months US$ LIBOR. Further distributions are made every six months based on six months US$ LIBOR. The Sukuk Al-Musharaka is guaranteed by the Emirates Group. The approximate market value of these certificates at 31 December 2007 was AED 91.6 million (2006: AED 92.3 million).

v. Emirates-Sudan Bank

2007 AED’000

2006 AED’000

9,277

9,277

This represents the Corporation’s investment in 2.5 million shares (2.5% holding) of Emirates-Sudan Bank. The bank offers banking and financial services to individuals and companies based on Islamic principles in the Republic of Sudan. The approximate market value of the investments at 31 December 2007 was AED 10 million.

vi. New ICO Global Communications (Holdings) Limited

2007 AED’000

2006 AED’000

-

-

The Corporation had held a 7.34% interest in ICO Global Communications (Holdings) Limited (“ICO”), which filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in August 1999. Upon gaining exit from Chapter 11 in May 2000, ICO was re-established as New ICO Global Communications (Holdings) Limited (“New ICO”) under the laws of Delaware, USA. New ICO has been listed on the NASDAQ stock market in New York. However, due to uncertainty over its future plans, the full provision against this investment has been retained. The Corporation holds 596,864 Class A shares (0.3033% interest) in New ICO. 46

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

9 Stores

Subscriber equipment Maintenance and sundry stores

2007 AED’000

2006 AED’000

34,832 140,375

17,177 48,680

175,207

65,857

2007 AED’000

2006 AED’000

1,633,702 412,737 399

631,127 447,690 11,867

2,046,838

1,090,684



10 Debtors and prepayments

Trade debtors Other debtors and prepayments Contract debtors and retentions

11 Loans to associated undertaking

The Corporation has provided loan facilities of AED 845 million (2006: AED 466.4 million) to Atlantique Telecom. The loan to AT is payable over 5 years and carries interest at rates ranging from 7% to 10% per annum. The amount due within 12 months of the balance sheet date is reflected under current assets and the balance is shown under non-current assets. Following the acquisition of an additional 20% of AT in April 2007 (Note 5), the Group has accounted for AT as a subsidiary and the loan has been eliminated on consolidation. 12 Bank and cash balances

Bank and cash balances mainly comprise short term deposits, denominated primarily in UAE Dirham, with financial institutions and banks. Interest is earned on these deposits at prevailing market rates. 13 Share capital 2007 AED’000

2006 AED’000

8,000,000,000 ordinary shares of AED 1 each

8,000,000

8,000,000

Issued and fully paid: 4,991,250,000 ordinary shares of AED 1 each (2006: 4,537,500,000 ordinary shares of AED 1 each)

4,991,250

4,537,500

Balance at 1 January Bonus issue of 453.75 million fully paid shares of AED 1 each. On 26 March 2007, the shareholders at the Extraordinary General Meeting approved the issue of one bonus share for every ten shares held (2006: 907.5 million shares issued, one bonus share for every four shares held)

4,537,500

3,630,000

453,750

907,500

Balance at 31 December

4,991,250

4,537,500

Authorised:

14 Statutory reserve

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

47

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

15 Loans from investment partners

This amount includes the minority share of a shareholders’ loan advanced to Etisalat Misr amounting to AED 1,587.96 million. This loan carries interest at a fixed rate of 10% per annum. In 2007, the shareholders of Etisalat Misr resolved to extend the loan repayment to 2011 and accordingly this is now classified as a non-current liability. In addition, this amount also includes the minority share of a shareholders’ loan advanced to AT amounting to AED 55 million. This loan carries interest at a fixed rate of 7% per annum. 16 Bank borrowings

On 17 July 2006, the Corporation entered into an agreement for a line of credit from a consortium of 22 banks amounting to US$ 3 billion. The facility is available for a period of one year from the date of the agreement and is renewable for another year at the discretion of the Corporation. In accordance with the terms of the agreement, the Corporation has the right to roll over amounts maturing for further periods within the overall duration of the two year facility. An amount of AED 2.755 billion outstanding at year end represents a drawdown against this facility net of repayments during the period which the Corporation has rolled over and intends to roll over for the duration of the facility agreement. The facility has an original maturity date of 31 July 2008. At 31 December 2007, borrowings under this facility have been classified under non-current liabilities as the Corporation is at an advanced stage of negotiation for the extension or refinancing of this loan whereby repayment would be deferred for a period of at least 12 months from the balance sheet date. The facility carries interest at the rate of LIBOR plus 22 basis points per annum during the first year and LIBOR plus 25 basis points per annum in the following year. During the year the Corporation repaid AED 4.225 billion (US$ 1.15 billion) against this facility. On January 16, 2007, Etisalat Misr entered into an agreement for a syndicated interest bearing bridge loan amounting to AED 713.44 million (Tranche A) and AED 293.92 million (Tranche B) with local banks in Egypt. Tranche A carries interest at a fixed rate of 9.5% per annum whereas Tranche B carries interest at a floating rate of LIBOR plus 0.35% per annum. An amount of AED 343 million is outstanding against these facilities at the balance sheet date. Included in bank borrowings, is an amount of AED 309 million representing the non-current bank borrowings in AT. The amount is made up of a number of loans drawn in the various countries in which AT operates. Interest on loans obtained at fixed rates range between 7.25% and 11.75% per annum, whereas the loans obtained at variable rates carry interest at EURIBOR plus 3.5% per annum. On December 13, 2007, Etisalat Misr entered into an agreement for syndicated interest bearing loans amounting to EGP 3 billion and US$ 300 million with a maturity date in January 2011. No amounts were drawn down against these facilities as at 31 December 2007. 17 Advances from investment partners

This amount represents advances paid net of repayment by the minority shareholder of EIP towards the acquisition of the 26% stake in PTCL (Note 8). The amount is interest free and does not have any fixed repayment terms. 18 Amounts payable on acquisition of investments and licenses

According to the terms of the Shareholders Agreement between EIP and the Government of Pakistan (GOP) payments of AED 6,612 million have been made to GOP with the balance of AED 2,937 million to be paid in 6 equal semi-annual instalments of AED 489.4 million each. The amount due in 2008 also includes AED 41.8 million representing the balance payable towards the additional investment in AT (Note 5) and AED 24.96 million payable against a telecommunications license in the Republic of Benin. The amount due after 2008 includes an amount of AED 99.8 million payable for the license in the Republic of Benin (Note 7).

Amount due in 2008 Amount due after 2008

2007 AED’000

2006 AED’000

1,045,734 2,057,634

978,883 2,936,653

3,103,368

3,915,536

19 Provision for staff terminal benefits

Provision is made for staff terminal benefits on the basis of the UAE Labour Law, except for UAE National staff who are members of the UAE Federal Pension Scheme into which the Group makes a contribution.

48

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

20 Creditors and accruals

Federal royalty Creditors, accruals and deferred revenue

2007 AED’000

2006 AED’000

7,296,644 5,933,877

5,859,747 2,708,703

13,230,521

8,568,450

21 Key subsidiaries

a) Emirates Telecommunications and Marine Services FZE (“the Establishment”) was incorporated in the Jebel Ali Free Zone, Dubai on 27 June 1998 and is a wholly owned subsidiary of the Group. The Establishment commenced operations effective 27th June 1998. The Establishment is primarily engaged in the business of submarine cable installation, maintenance, repair, storage and related activities. b) Emirates Cable TV and Multimedia LLC (“E-Vision”) was incorporated in the United Arab Emirates on 11 July 1999 and is a wholly owned subsidiary of the Group. E-Vision commenced commercial operations on 15 April 2000 and is engaged in the provision of cable television and home entertainment services in the United Arab Emirates. c) Etisalat International Pakistan LLC (“EIP”) was incorporated in the United Arab Emirates on 27 June 2005 and is 90% owned by the Corporation. The primary business of EIP is to hold the investment in PTCL. d) Etisalat International Egypt LLC (“EIE”) was incorporated in the United Arab Emirates on 6 August 2006 and is wholly owned by the Group. EIE in turn owns 66% of Etisalat Misr, the holder of the third GSM license in Egypt. e) Etisalat International Afghanistan Limited (“EIA”) was incorporated as an offshore company with limited liability in Jebel Ali Free Zone on 31 October 2006 and is wholly owned by the Corporation. The primary business of EIA is to hold the investment in Etisalat Afghanistan. f) E-Marine PJSC was incorporated in the United Arab Emirates on 28 June 2006 and is a wholly owned subsidiary of the Group. g) EDCH FZE (“EDCH”) was incorporated in Jebel Ali Free Zone, Dubai on 15 October 2006 and is a wholly owned subsidiary of the Corporation. It is engaged in the provision of data management services, data analysis, data collection, data facilitation and account management services. h) Etisalat Services FZE was incorporated in Jebel Ali Free Zone, Dubai on 20 September 2006 and is a wholly owned subsidiary of the Corporation. Its principal activity is to provide telecommunication industry management services. i) Etisalat Services Holding LLC (“ESH”) was incorporated in Abu Dhabi on 13 December 2006 and is a wholly owned subsidiary of the Group. The principal activities of ESH are to participate in commercial and industrial real estate, education, infrastructure and energy projects. j) Etisalat Software Solutions (Private) Limited (“ESSPL”) – “technologia” was incorporated in Bangalore, India on 13 March 2007 and is a wholly owned subsidiary of the Corporation. ESSPL was established for the purpose of providing information technology solutions for the Group. k) Etisalat International Atlantique Limited (“EIAL”) was incorporated as an offshore company with limited liability in Jebel Ali Free Zone, Dubai on 10 April 2007 and is a wholly owned subsidiary of the Corporation. The primary business of EIAL is to hold the investment in Atlantique Telecom. Atlantique Telecom, through its subsidiaries, has GSM mobile operations in seven West African countries, namely, Benin, Burkina Faso, Gabon, Niger, Togo, Central African Republic and the Ivory Coast (Note 5). l) Etisalat International Zantel Limited (“EIZL”) was incorporated as an offshore company with limited liability in Jebel Ali Free Zone, Dubai on 25 April 2007 and is a wholly owned subsidiary of the Corporation. The principal business of EIZL is to hold the investment in Zantel (Note 5). Zantel is a private company incorporated in Zanzibar, United Republic of Tanzania, providing telecommunication services (Note 5). m) The Corporation is one of ten founding shareholders of Canar and holds a 82% equity shareholding. Canar was incorporated in the Republic of Sudan on 23 April 2005. Canar owns and operates a nationwide fixed line network for the provision of fixed telephony and data services in Sudan (Note 5).

49

Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2007

22 Related party transactions

Related parties include associated undertakings of the Corporation. Pricing policies and terms of these transactions are approved by the Corporation’s management. The Corporation entered into the following significant related party transactions with associated undertakings: i. Etihad Etisalat Company Pursuant to CITC’s licensing requirements, EEC (then under incorporation) entered into a management agreement (“the Agreement”) with the Corporation as its operator from 14 August 2004. The Corporation receives an annual management fee of AED 36.7 million (US$ 10 million) for services provided under the Agreement. The term of the Agreement is for a period of seven years and can be automatically renewed for successive periods of five years unless the Corporation serves a 12 months notice of termination or EEC serves a 6 months notice of termination prior to the expiry of the applicable period. During the year, the Corporation received interest amounting to AED 16 million (2006: AED Nil) on amounts advanced to EEC. ii. Thuraya Satellite Telecommunications Company PJSC The Corporation has provided a primary gateway facility to Thuraya including maintenance and support services. A total amount of AED 20.4 million (2006: AED 18.8 million) was charged to Thuraya for the use of this facility. iii. Pakistan Telecommunication Company Limited Pursuant to the Shareholders Agreement entered into between EIP and the Government of Pakistan dated 12 April 2006, the Corporation entered into an agreement for the provision of technical services and know-how (“the Agreement”) with PTCL with effect from 10 October 2006. Under the terms of the Agreement, the Corporation is entitled to an annual service fee of 3.5% of the gross consolidated revenue of PTCL for that year. The Agreement is valid for a period of 5 years and limits the fee to US$ 50 million per annum. During the current year service fee income of AED 151 million (2006: AED 42.0 million) was recognised in the consolidated statement of income. 23 Commitments and contingent liabilities

The Board of Directors has approved future capital projects and investments to the extent of AED 5,836 million (2006: AED 4,064.2 million), of which AED 517 million (2006: AED 931.9 million) had been committed at 31 December 2007. At 31 December 2007, the Group’s bankers had issued performance bonds and advance payment guarantees for AED 12.3 million (2006: AED 12.5 million) in relation to contracts. Guarantees relating to the Corporation’s overseas investments amounted to AED 1.1 billion (2006: AED 3.1 billion). 24 Earnings per share

Net profit for the year (AED’000) Number of shares (in ’000) Earnings per share (AED)

2007

2006

7,296,644 4,991,250 1.46

5,859,747 4,991,250 1.17

Earnings per share for 2006 was adjusted for bonus shares issued in 2007 as approved by the shareholders at the Extraordinary General Meeting held on 26 March 2007 (Note 13). 25 Dividends

A final dividend for the year ended 31 December 2006 of AED 0.35 per share was paid out to shareholders registered in the shareholders’ register at the close of business on 6 March 2007. On 11 July 2007, the Board of Directors declared the first interim dividend for the year 2007 at the rate of AED 0.25 per share. This was paid out to shareholders registered in the shareholders’ register at the close of business on 19 July 2007. A final dividend of AED 0.35 per share was declared by the Board of Directors on 25 February 2008, making the total dividend to be AED 0.60 per share for the year 2007. 26 Comparatives

Certain comparative figures have been reclassified to conform to the current year presentation.

50

Notice of Meeting

Notice is hereby given that the General Annual Shareholders’ Meeting will be held at Etisalat Head Office Building, Abu Dhabi, on 24th March 2008 at 5.00 p.m. and will be followed directly by an Extra-ordinary meeting to be held in the same date and place for the purpose of transacting the following ordinary and special business. GENERAL ANNUAL SHAREHOLDERS’ MEETING A ORDINARY BUSINESS

1 To note the minutes of the Annual Shareholders’ Meeting held on 26 March 2007. 2 To listen to the report of the Board of Directors on the corporation’s activities and to consider and adopt the Corporation’s audited consolidated financial statements for the year ended 31 December 2007 as well as the external Auditors’ report. 3 To look into the Board of Directors’ recommendation on the distribution of dividends. 4 To absolve Members of the Board of Directors of liability in respect of the year ending 31 December 2007. 5 To absolve the External Auditors of liability in respect of the year ending 31 December 2007. 6 To appoint the auditors for the current financial year. Extraordinary General Assembly Meeting B SPECIAL BUSINESS

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

“Resolved that pursuant to Article 40.2 of Chapter Eleven of the Corporation’s Articles of Association a sum of AED 998,250,000 (nine hundred ninety eight million two hundred fifty thousand Dirhams) out of General Reserve as on 31 December 2007 be capitalised and distributed by issuing 998,250,000 fully paid shares of AED 1 each as bonus shares in the ratio of One share for every Five shares held ranking pari passu with the existing shares of the Corporation.



It will be noted that bonus shares so distributed shall not qualify for dividends for the year 2007.



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



Further resolved that the Board of Directors be and is hereby authorised and empowered to give effect to this resolution and to do or cause to be done all acts, deeds and things that may be required for the issue and distribution of 998,250,000 shares.”



Subject to approval by the Shareholders, Bonus Shares shall be allocated to the Shareholders registered in the Shareholders Register on close of the day of Thursday, 3rd April 2008.

By Order of the Board

Corporation Secretary Notes: (i) A shareholder entitled to attend and vote at the annual shareholders’ meeting is entitled to appoint a proxy to attend and vote on his/her behalf; a proxy need not be a shareholder of the Corporation. (ii) Proxy forms may be obtained from Etisalat offices during official working hours. (iii) Shareholders are requested to notify any change in address.

51