Annual Report 2012 - Ooredoo Oman...mobile licence by Royal Decree. March Nawras network launched...

Annual Report 2012

His Majesty Sultan Qaboos bin Said

3 Vision, Mission, Values 4 The Nawras Story6 Financial Highlights of 20128 Operational Highlights of 201210 Board of Directors’ Report12 Board of Directors14 Management Review26 Executive Management30 Nawras in the Community32 Financial Review34 Corporate Governance Report43 Auditor’s Report (Corporate Governance)44 Auditor’s Report (Financial Statements)45 Audited Financial Statements and Notes

Our Vision To enrich the lives of people in Oman through better communication

Our Mission To be the communications provider and employer of choice in Oman

Our Values To be caring, excellent and pleasingly different

Annual Report 2012 | 3

04DecemberCompany incorporation, Nawras began site acquisition and staff recruitment.

05FebruaryNawras awarded Oman’s second mobile licence by Royal Decree.

MarchNawras network launched with more than 60 per cent of Oman’s population covered.Nawras secures $220 million start-up funding from a consortium of banks.

AprilMobile coverage provided throughout Oman, from the northernmost region of Musandum to Dhofar in the far south.

NovemberLaunch of Nawras Business Solutions.

DecemberOver 100 international roaming partners signed, covering more than 95 per cent of Omani travel destinations.

The Nawras Story

Nawras has quickly become one of Oman’s most respected and innovative companies, winning prestigious awards and achieving a number of notable firsts since its formation in 2004.

08JanuaryNawras signs up its millionth customer.

FebruaryAgreement signed with UK-based AeroMobile enabling Nawras customers to make in-flight calls and check email.

AprilInternational rates cut for customers calling Pakistan, India, Sri Lanka, Bangladesh, and The Philippines.

JuneNawras wins its first global award Above And Beyond the Call of Duty at the World Business Support Systems Awards in Amsterdam.Nawras launches BlackBerry services.

JulyNawras launches Oman’s then fastest mobile broadband internet service.

AugustLaunch of Nawras Rewards, Oman’s first telecoms loyalty programme.

DecemberNawras ranked Oman’s most popular telecom brand(Best Brands survey)

09JuneNawras named Middle East Call Centre of the Year at the INSIGHTS Awards in Dubai.Nawras awarded Oman’s second fixed-line licence by Royal Decree.

AugustIntroduction of self-service machines for quick and easy bill payment and recharge.

NovemberNawras awarded Superbrand status by Oman’s Superbrands Council.

DecemberCommsMEA honours Nawras with the Customer Service Provider of the Year, Middle East and Africa award.Nawras named Oman’s Best Telecom Service Provider for the third successive year.

06AprilSuccessful testing of Nawras’ 3G+ network

JulyNawras Sales Training Academy inaugurated.

AugustLaunch of mobile number portability, enabling new customers to keep their existing number when transferring to Nawras.

DecemberCustomer numbers reach 500,000.

07MayNawras cuts internet and data prices by as much as 80 per cent.

SeptemberNawras named Middle East Mobile Operator of the Year in the CommsMEA Awards.

OctoberLaunch of WebSMS, enabling customers to send SMS messages directly from computers.

NovemberLaunch of third generation 3G+ services, a first from Nawras.Nawras wins Middle East Business Achievement Award for Corporate Social Responsibility at the Leader Conference.

DecemberNawras and Oman Arab Bank launch mobile banking services.

| Nawras – Omani Qatari Telecommunications Company SAOG4

11JanuaryElite Points Program launched, bringing benefits for all customers enrolled in the programme.

MarchNawras receives Strategic Leadership Award at 2011 Global HR Excellence Awards.Nawras listing named Best IPO in the Middle East 2010 by EMEA Finance magazine.ISO IEC 27001:2005 certification achieved for Nawras information security management system.

AprilNawras lands its first sea cable as part of the Tata Global Network-Gulf cable project.

MayNawras CEO Ross Cormack named 2011 Outstanding Leader at TMT Finance Middle East Awards.

June Alam Al-Iktisaad Wal A’mal designates Nawras Best Performing Company – Large Cap.New Nawras store opens in Salalah Lulu location.

July Nawras wins Innovation in HR Strategy at Asia’s Best Employer Brand Awards

October Nawras trials fibre-to-the-home (FTTH) broadband with speeds of up to 100Mbps.Nawras wins Diamond Award Website of the Year at Oman Web Awards.

November Nawras wins Corporate Finance Award at the ACT ME Deals of the Year.Nawras goes live with Tata Global Network-Gulf cable.

DecemberNawras wins Operational Expansion of the Year at the CommsMEA Awards in Dubai.Nawras achieves 87 per cent broadband coverage of Omani households.New store opens in Al Khoud, taking the Nawras store portfolio to 27.

12January Nawras voted Oman’s most popular telecom choice.

FebruaryLaunched first mobile international credit transfer service in Oman.

MarchNawras first to demonstrate 4G LTE mobile broadband in Oman.

April Nawras selects Huawei for network modernisation and managed services.

May‘Maktabi’ office bundle launched to enhance communications for small and expanding enterprises.

JuneNawras starts Network Turbocharging to enhance customer experience.

JulyNawras family united by move to Nawras Campus.

AugustCaring Nawras Goodwill Journey 8 completed.

SeptemberSheikh Saud bin Nasser bin Faleh Al-Thani appointed Vice Chairman. Launch of Fixed Number Portability for corporate customers.Achieved ISO 27001 for entire IT department.

OctoberNawras wins Best Customer Strategy at Telecoms World Middle East.

NovemberSigns exclusive marketing agreement with WhatsApp, the world’s leading cross-platform messaging service.Announces sponsorship of Kickworldwide programme to develop football career opportunities for young Omanis.

DecemberWins ‘Customer Service Provider of the Year’ at CommsMEA Awards 2012. Unveils new concept flagship store in Muscat Grand Mall.

10FebruaryAgreement signed to land one of the world’s most advanced and largest submarine cable networks in Oman.

MayNawras receives the Leader in Telecommunications award at the Arab Investment Summit in Abu Dhabi.Launch of fixed services for business customers, marking the start of a new era in broadband accessibility in Oman.

JuneLaunch of Nawras fixed services for residential customers, offering home broadband and voice services.

AugustTwo million mobile customers.

OctoberNawras’ Initial Public Offering (IPO) fully subscribed.

NovemberNawras shares traded on the Muscat Securities Market for the first time.

DecemberNawras named Best Customer Service Provider of the Year at the CommsMEA Awards in Dubai.Nawras recognised for Omanisation achievements at the 26th GCC ceremony in Kuwait.Nawras named Superbrand of the Year, Oman.


Financial Highlights of 2012

2008 2009 2010 2011 2012

OMR 194m Revenue A reduction in SMS, and on net voice revenue, resulted in the small decline in full-year revenue. ä7.5%

Total EquityTotal equity increased by OMR 12 million to OMR 180 million.

ä3.2%Total AssetsTotal assets increased by 3.2 per cent to OMR 309 million, from OMR 299 million in 2011.

49 million

92 million

143 million

168 million180 million

Total Equity OMR


OMR 180m Total Equity

OMR 309m Total Assets The rise in total assets was attributable mainly to growth in property, plant and equipment.

Encouraging growth across all customer segments, record revenue in the last quarter, and growth in mobile and fixed data revenue offset the small decline in full year revenue which was caused by a reduction in SMS and on net voice revenue.

Total customers grew steadily throughout the year to reach 2.2 million, an increase of 12 per cent from 2011, and the best acquisition figure since 2010.

The investment in upgrading the Nawras network, which will generate more broadband data across a much wider spectrum, will benefit many of these new customers with a faster and higher-quality service.

2008 2009 2010 2011 2012

Total Assets OMR

174 million

208 million

291 million 299 million 309 million

Net Profit OMR

2008 2009 2010 2011 2012

20 million

42 million

50 million 48 million

37 million

Mobile (OMR 177 million) Fixed line (OMR 16 million)

Revenue Contribution

8.4%

91.6%


Operational Highlights of 2012

97% Investments in new technology increased

capacity substantially and brought the Nawras 3G+ network within reach of more than 60 per cent of the population – expected to rise to 97 per cent once the turbocharging programme has ended.

2.2mThe total number of Nawras customers exceeded 2 million, following growth for four consecutive quarters.

In partnership with Tata Communications, we launched a range of international services, including the Sultanate’s first Global Virtual Private Network (GVPN), to offer multinational companies secure international digital communications to more than 200 of the world’s main business hubs and data centres.

What does your business need?


Nawras expanded its national backbone infrastructure to more than 5000 kilometres of fibre and microwave backbone, and will continue to invest in and expand this core infrastructure.

An exclusive marketing agreement with WhatsApp, the world’s leading cross-platform mobile messaging service, gives Nawras an opportunity to target more than one million WhatsApp customers in Oman with new services.

Nawras was the first telecoms company in Oman to showcase the latest 4G LTE ahead of its launch.

In 2012 we began an extensive programme to turbocharge our network, upgrading our systems to meet the massive surge in demand for broadband and other services now and in the future.

ä63%Nawras’ fixed service customer base rose by 63 per cent in 2012.

68%Nawras secured a 68 per cent share of the growing market for prepaid BlackBerry usage.


Board of Directors’ Report

Dear Shareholders

On behalf of the Board of Directors, I have pleasure in presenting the 2012 annual report of Omani Qatari Telecommunications Company SAOG “Nawras”.

Here in Oman, the Government’s positive attitude to business is allowing companies to operate and flourish in an environment of continuing stability. The continuing strong national economy has attracted an increasing number of regional and international firms keen to establish operations in the Sultanate, and to capitalise on the many opportunities here.

Nawras has maintained its unwavering commitment to investing in the best available technology for the benefit of our customers. This is a cornerstone of the Company’s operational strategy and will continue into 2013 and beyond. Additionally, 2012 saw considerable efforts focused on re-energising our customer experience. This involved significant investment in programmes aimed at improving our understanding of our customer needs. This investment will continue through 2013 and will result in continued enhancements to our customer experience.

In our third year as a public company, gross consolidated revenue was OMR 193.5 million (2011: OMR 196.9 million), yielding net profits of OMR 37.0 million after taxation. Earnings per share equated to OMR 0.057.

Nawras has maintained compound annual revenue growth of 45 per cent since the Company started operations in 2005. This achievement enables the Board to recommend that shareholders approve, at the AGM on 27 March 2013, a dividend of OMR 0.038 per share (38 baisa), which represents a yield of 8.2 per cent on the Company’s share price at the close of 2012.

Our focus in 2012 was on: new customer-driven initiatives; delivering the technology to increase customer choice; and to bring telecoms, media and data to a larger percentage of our population. In addition, we made substantial investments in people training and development.

By year end, for example, our plans to turbocharge our network with the introduction of 4G LTE, the latest wireless communications standard, were well-advanced, while the opening of our new flagship store in Muscat Grand Mall further enriched the customer experience, raising our brand’s profile among new and existing customers.

These important milestones would not have been realised without the dedication and contribution of the entire Nawras family – our human capital – that is the foundation of the Company’s on-going success. I offer my sincere thanks to them all for their contributions during 2012.

Their outstanding team effort resulted in continued steady growth in total customer numbers across all Nawras’ services. I am pleased to report that, as in previous years, our industry peers, the media, and other groups recognised this effort by honouring us with a number of prestigious awards covering customer service, technology, investor relations, and people and training initiatives.

How do we generate great shareholder returns?


As a Board, we also owe a considerable debt of gratitude to the Qtel Group, our major shareholder, for helping Nawras realise a number of important operational and financial goals for the year. The Group’s support is greatly appreciated and evidence of a very solid partnership.

On behalf of the Board of Directors, I offer my thanks to our shareholders, customers and partners for their trust and commitment. I join my colleagues in also acknowledging the considerable support of the Ministry of Transport and Communications, the Telecommunications Regulatory Authority (TRA), the Capital Market Authority (CMA) and Muscat Securities Market (MSM).

In closing, I offer my heartfelt gratitude to His Majesty Sultan Qaboos bin Said, may God protect him. Our leader’s vision and wisdom has been the driver for the emergence of Nawras as one of the Sultanate’s premier communications providers.

“ Nawras has maintained its unwavering commitment to investing in the best available technology for the benefit of our customers.”

Sayyed Amjad Mohamed Al BusaidiChairman


Board of Directors

Sayyed Amjad Mohamed Al Busaidi | Chairman

Mr Al Busaidi has chaired the Nawras Board since March 2011. In 1990 he joined the Diwan of Royal Court and he currently serves as Executive President of the Diwan of Royal Court Pension Fund. He was appointed Chairman of Bank Nizwa in July 2012, and also serves on the boards of NIFCO, National Mass Housing Company, and Shomookh Investment. He has a Master’s degree in Business Administration from Southern Cross University (Australia).

Mr Saleh Nasser Al-Riyami | Director

Mr Al-Riyami has been a member of the Nawras Board since the Company’s launch. He has more than 20 years’ experience as the Investment Expert for the Diwan of Royal Court and currently serves as the General Manager of National Mass Housing SAOC. He has also served as founder or director of many companies in Oman, as well as in managerial positions in the Ministry of Commerce and Public Authority of Social Security in Oman. Mr Al-Riyami is a Board member of Taageer Finance Company and Al Madina Insurance Company. He holds a Bachelor of Science in Business Administration from the University of Georgia (USA).

Sheikh Saud Nasser Faleh Al-Thani | Vice-Chairman

Sheikh Saud joined Qtel in 1990 and is currently Chief Executive Officer of Qtel Qatar. He also serves as Executive Director of Group HR and Acting Executive Director of General Services. He is also a member of the Arab Organisation for Satellite Communication. Sheikh Saud has a Bachelor of Arts in Public Administration from Western International University (USA).

Mr Mohamed Jassim Al-Kuwari | Director

Mr Al-Kuwari has been Qtel’s Chief Corporate Services Officer since 2011, having held several positions in the Group since 2005: Head of Talent Sourcing, Senior Manager of Manpower Planning and Talent Sourcing, and Assistant Director of Policy Development and HR Services. He was also appointed Executive Director, Group HR in 2011. Previously, Mr Al-Kuwari worked at Ras Laffan Liquefied Natural Gas. He holds a Bachelor of Science in Business Administration from the American University, Washington (USA).


Mr Ghassan Khamis Al Hashar | Director

Mr Al Hashar joined the Nawras Board as a representative of the Public Authority for Social Insurance (PASI) in 2011. He is currently the Authority’s Head of Asset Management – Local. He has more than 15 years’ experience in finance and investment management and represents PASI on the boards of numerous public and private companies. Mr Al Hashar is currently Chairman of Bank Muscat’s Fund Investors’ Committee and a Board member of Majan Development Company. He holds a Master’s Degree in Finance and Investment Management from the University of Aberdeen (UK).

Mr Khalil Ibrahim Al Emadi | Director

Mr Al Emadi is currently the Chief Executive Officer of Navlink lnc (one of Qtel’s partners). He has a strong background in telecommunications with 27 years of experience in mobile services and fixed telephony. Before joining Qtel, he worked at the Ministry of Transport and Communications. He was the Executive Director of Wireline Services until 2007 when, as part of an organisational restructuring, Qtel merged the previous Wireless and Wireline groups into the Networks Division, appointing Mr Al Emadi as Executive Director of Networks. He has a Bachelor of Science in Electrical/Electronic Engineering from Northrop University in California (USA).

Dr Shaikha Sultan Al Jabir | Director

Dr Al Jabir is currently Executive Director – New Businesses in Qtel Group (QG). Before joining QG, she was CIO of Qatar General Electricity and Water Corporation (Kahramaa), where she established a sophisticated ICT infrastructure, helping to put the organisation at the forefront of technology. She holds a PhD in Computer Science from the University of Surrey (UK), an MS in Telecommunications and Computers from George Washington University (USA), and a BS in Electrical Engineering from Kuwait University.

Mr Said Faraj Al Rabeea | Director

Mr Al Rabeea joined the Nawras Board in 2011. He has worked in the government sector for more than 30 years, during which time he has held a number of senior positions in human resources, information technology, and telecommunications. He currently sits on a number of a government boards in Oman. He has a Bachelor’s Degree in Business Administration.

Mr Mohanna Nasser Al Nuaimi | Director

Mr Al Nuaimi was appointed Group Chief Human Resources Officer of Qtel Group in 2008, after serving as Qtel Qatar’s Executive Director of Group Human Resources. He is a member of Qtel Group’s Management Committee and a Board member of several other Qtel Group companies. In 2009, Mr Al Nuaimi received the HR Leadership Award on behalf of Qtel Group for the World HRD Congress, an international honour for companies excelling in the field of people management. He holds a Bachelor of Science in Mechanical Engineering from Qatar University.


Management Review “ 2012 was marked by seismic changes in the country’s telecoms industry and in telephony provision.”

Ross CormackChief Executive Officer

What did we achieve in 2012?


Our new flagship store features a lounge where our business customers can access the latest telecoms technology to stay connected.

Renewed customer focus and state-of-the-art technology were the main highlights of 2012, contributing to a year in which Nawras demonstrated its ability to capitalise on the many opportunities presented by the rapid transformation of communications in Oman.

There can be no question that we witnessed the end of the beginning of the data revolution, a period which has seen Nawras move from a traditional telecoms operator to a data-centric company supported by a full IP network, serving customers with data, media and technology.

This marks a significant step towards realising the vision of Qtel Group, our majority shareholder, and is an extraordinary achievement considering that Nawras has been operational for only eight years.

Another noteworthy initiative was the research we conducted to give us detailed market intelligence. The outcome of this was a three-step programme: Researched, Analysed and Took Action. This has underpinned the revitalisation of our business proposition, with the introduction of new products, services and tariffs, and in effect supported the adoption of a new business model that is much more attuned to evolving customer needs.

The analysis has given us the ability to develop innovative strategies for customer acquisition and retention, a key advantage in a market that is set to become much more competitive, and to focus even more on making our customer experience dynamic, rewarding and different.

On the back of these far-reaching initiatives, it is pleasing to report that our customer numbers continued their upward trend during the year, the best acquisition since the third quarter of 2010. We now have approximately 2.2 million customers, an increase of more than 11 per cent on 2011.

The grassroots review of our operation also examined how we could enhance the dialogue with our independent distributors, who are important to our sales effort. We have now put in place a programme to work more closely with our top dealers and sub-distributors, to ensure more proactive merchandising, as well as to monitor efficiency. Their feedback has proved invaluable in helping us to shape and refine our sales strategy.

The explosive growth in data has driven the telecoms revolution in recent years: the demand for data-based services, particularly from under-25s who account for approximately half of the country’s population, has fuelled this growth.

Our recognition of the importance of this youth market helped us to create really powerful youth-friendly strategies. These are designed to capitalise on the surge in data usage, yet must be adaptable enough to accommodate more smart phones on our network, using video through sites like YouTube and data apps like WhatsApp, the leading cross-platform mobile messaging service in Oman and globally. The exclusive agreement we signed with WhatsApp made Nawras just the eighth operator worldwide to enter into such a relationship.

Nawras was the only Middle Eastern telecoms company to be shortlisted in Ragan’s PR Daily Digital PR and Social Media Awards 2012 in the ‘Best Use of Facebook’ category. This is a ringing endorsement of our youth communications strategy, and commitment to dynamic social media interaction, which resulted in 81,179 ‘fans’ on Facebook and 400,000 interactions between us and customers on Facebook and Twitter, by the end of the year.

In continuing our support for the community, the Company joined forces with Kickworldwide and the Oman Football Association to support a grassroots football programme. This was one of several exciting initiatives to bring our country’s youth and communities closer together.

We will continue to maintain our high profile in sports and community activities in the long term, and are proud to support the health and well-being of Omani citizens in this way.

Working with two of the Middle East’s best-known and successful sportsmen – Ali Al Habsi, the Oman and Wigan goalkeeper, and Ahmad Al Harthy, champion Omani racing driver – brings our brand directly into the community and reinforces our commitment to sport. We also sponsored a number of major sporting events throughout the year, including the Muscat Regatta 2012, as platinum sponsor, and Summer of Sports organised by the Ministry of Sports.

Since the first Goodwill Journey in 2005, Nawras has reached out to more than 7,000 individuals and families. We have visited more than 150 charitable organisations and NGOs, travelling 48,000 kilometres during the Holy Month of Ramadan to bring joy to the people of Oman.

We continued to support Government initiatives and made Nawras even more business-friendly, our launch of bulk SMS packages and Maktabi Mobile for small and medium sized businesses being good examples of this. We remain committed to the development of a telecoms infrastructure that supports Oman’s growing international commercial ambitions, and reflects its strategic geographic location.

The contribution of Oman’s Telecommunications Regulatory Authority (TRA) in this respect – particularly the release of new frequencies – was no less far-reaching. The TRA has shown substantial support for our industry by easing regulatory constraints, promoting a vision of broadband for all, and maintaining an environment that supports investments.

Membership of the Qtel Group brought experience and muscle to support the modernisation of the Nawras network, as well as the launch of new customer services and shared people training and development initiatives.


How can we best serve Oman?We contribute to the development of our country by providing the technology and services that help business and people communicate effectively - wherever they are.

Management Review Continued

2011

First sea cable landedThe first sea cable landed as part of the Tata Global Network - Gulf cable project and fibre-to-the-home (FTTH). Broadband speeds of up to 100Mbps trialled.

2010

New era for fixed services Fixed services launched for business and residential customers, a new era for broadband accessibility in the Sultanate.

2012

Turbo chargedTurbocharging our network continues and we demonstrate 4G LTE Mobile broadband for the first time in Oman.

4G




Our deal with WhatsApp

In November 2012, we entered into a strategic partnership with WhatsApp, the leading social media chat service, to offer exclusive branded plans to our customers.

There are currently more than 1 million customers in Oman using WhatsApp. This number will continue to grow - in parallel with the increase in the number of mobiles that can connect to the Internet - and as ‘chat’ moves from traditional SMS to ‘Instant Messaging’ over the Internet.

The under 25s market

Oman has one of the youngest populations in the region, with approximately 30 per cent between the ages of 15 and 24. This is expected to grow to nearly 40 per cent by 2020 and has become a key target market for Nawras.

Over the past three years, we have used in-depth research to develop award-winning youth products and services, with a particular focus on accessing music and social media from mobile phones. Our Shababiah product, for example, has quickly become a market leader, thanks to its competitive tariffs and easy access to social media.

We have also formed exclusive strategic partnerships with WhatsApp and Universal Music to launch services which have caught the imagination of our younger customers. Initiatives like these have served to consolidate our leadership position in the youth market.

We intend to build on this successful strategy during 2013 and beyond by continuing to bring our customers the best content from the best providers.

1mOne million Omanis using WhatsApp

30%Omani population in 2012between 15 and 24 years old

40%Expected increase in 2020


2012 was marked by seismic changes in the country’s telecoms industry and in telephony provision. Where competition was previously based around infrastructure and scale, access and service provision is the new territory now being fought over.

But Nawras is prepared for these fresh challenges, having started to turbocharge our network infrastructure, and upgraded our systems to meet the massive demand for broadband and other services now and in the future.

Cherishing our customers – new and oldAn organisation that receives an average of 10,000 calls a day is clearly in the public eye, so customer satisfaction is, and will continue to be, the cornerstone of the Nawras philosophy.

Our own research indicates that 82 per cent of our customers are happy with their experience, but we are working hard to improve this figure through a number of customer initiatives that we expect will deliver results in 2013.

A determination to build on this customer-centric culture, which has quickly become part of our DNA, was a feature of the year. Customer-facing companies like Nawras need to evolve, stay nimble, exceed expectations and convert customer promises into actions.

So we focused heavily on addressing three key issues: offering more personalised choices, enriching the customer experience, and making the customer journey more engaging and exciting. A Customer Experience Programme provided the impetus for these initiatives.

Although Nawras has a reputation for listening, we still carried out a far-reaching analysis of usage patterns to better understand how our market is segmented, so we could make more personalised offers to existing and potential customers.

We carried out hundreds of interviews and activated many focus groups in order to better understand how our customers view the ‘Nawras experience’. One of our objectives was to use this information to strengthen loyalty to the brand. The full impact of this exercise will be felt in the first half of 2013.

A complete re-evaluation of all our customer touch points and points of sale resulted in the commitment of further resources to up-skilling our family of sales and customer champions, and equipping all our front-line people with the tools necessary to help our customers. A suite of exciting new offers further served to re-energise the customer experience.

The opening of the Nawras flagship store at Muscat Grand Mall at the end of the year marked an important breakthrough for the Company, and one that we are confident will quickly earn ‘best in class’ status among Oman’s retailing businesses.

This shift from transaction-based to relationship-based retailing is an interesting development in the customer journey. We expect this trend to continue, particularly with the increase in new apps and data services.

We received the strongest possible endorsement for our customer initiatives, winning Best Customer Strategy at Telecoms World Middle East; Best Loyalty Programme Award at the CMO Asia Awards 2012; Telecoms Sector Winner at the Oman Customer Service Excellence Awards; and the CommsMEA Award for Customer Service Provider of the Year. We are delighted to have been nominated to receive these prestigious awards.

However, while we are confident that our initiatives have put us on track to deliver customer satisfaction consistently, we will not rest. Our aim is to become the benchmark for positive consumer relationships, not just in the telecoms sector, but for industry in Oman generally. Customer growth in successive quarters this year is an encouraging step towards achieving this ambition.

The Nawras family In promoting his vision for Oman’s on-going development, His Majesty Sultan Qaboos bin Said also emphasised the importance of the contribution that people could make individually. Nawras continued to play a valuable role in this process, not only as one of the country’s major employers, but in helping people get closer through the power of communications.

The Company has always taken very seriously its duty of care to develop the skills of Omani nationals in the workplace, so we welcome the news that the number of Omani managers doubled during the year, giving deserved promotions to some of our most promising people.

We sought to promote our talent wherever possible, so also appointed a number of new line managers – people changes that reflect the Company’s move to a more lifestyle-focused model, based on quality service.

Our HR teams worked to define clear career paths for our sales and store people, a major accomplishment among a number of other milestones that were reached during the year. We organised a two-day ‘All Hands’ gathering, which brought everybody in the Company together to celebrate our achievements, set shared goals for the year ahead, and underscore the importance of outstanding customer experience.

In close collaboration with our colleagues in Qtel Group, we formed a new People Experience Department, to make work more rewarding and motivating for all Nawras family members. The Department is responsible for conducting motivational and awareness workshops, communicating benefits and managing weekly team activities.

We received further recognition for our HR policies, winning the category for the Best Organisation with Innovative HR Practices at the 2012 Asia Pacific HRM Congress Communications Awards.

In progressing towards the adoption of international best practice across a number of operational areas, we developed a template for a more performance-based culture, only deploying staff with the right skill sets for specific roles and rewarding them accordingly.

A central plank in our HR strategy is to customise training to develop national talent, since it ensures long-term stability and continuity. We will continue to invest in specialist workshops, seminars and events, such as ‘Me and My Customer’ and ‘Me and My Manager,’ which are typical of the effort we devote to up-skilling people throughout the organisation.

Looking ahead, we intend to act on His Majesty’s call to change perceptions of the private sector. Our recruitment message is clear: the private sector offers similar opportunities to the public sector; has high standards of training and development; is well remunerated; and individuals can have great fun and make a real and positive contribution to the country’s future commercial success by working for leading companies like Nawras.


How can we work smarter?We re-evaluated our customer touch points and points of sale, resulting in the commitment of further resources to up-skilling our family of sales champions.



Oneteam

We work together as one team, equipping our front-line people with the tools necessary to help

ensure our customers receive the best possible service.


Management Review Continued Turbocharging our technology Turbocharging has now laid the foundations to support future technologies and, in effect, to future-proof the Company.

The release of spectrum under Oman’s National Broadband Strategy will mean that we can provide a faster and better data experience, as the use of a second carrier for the 2100 spectrum means that we have another lane to our 3G data highway. Further, the TRA has provided us with the spectrum for 4G (LTE), which will lead to even faster speeds and less latency in areas where it is deployed.

It has proved to be the best possible solution in allowing us to evolve our network in response to rapidly changing market conditions. This has involved upgrading all 2G sites to 3G+, boosting speed and capacity, and finalising plans for the launch of 4G LTE at 1800 MHz, which will make the very newest technology available to our customers.

The TRA’s approval for additional spectrums will double the data capacity and create a network to meet the evolving demands of customers. We continue to support the TRA in its ambition of bringing telephony services to remote areas.

Nawras expanded its national backbone infrastructure to more than 5,000 kilometres of fibre and microwave backbone, and will continue to invest in and expand this core infrastructure.

Nawras has also swapped out and expanded parts of its core network to cope with the increase in data traffic. This equipment was deployed in our new state-of-the-art Data Centre located in Muscat, of which the first phase was completed in September 2012. Further, we continue to support our business customers’ facilities by deploying fibre to more and more buildings, as well as to our business customers wherever they may be located in Oman.

WiMAX is a technology that has proved successful with more than 40,000 customers, an increase of 63 per cent on 2011, and we also intend to roll out plans for further Home Broadband and Voice services lines.

The year witnessed a massive growth in data applications and usage, demanding forensic capacity planning and forecasting. We expect no let-up in this phenomenon into 2013 and beyond, but remain confident that the programme of investment in new technology will feed through with a substantial increase in the number of base stations.

The upsurge in data usage prompted a dramatic increase in data-related revenues. Another significant financial highlight was real, substantive growth in international traffic. Continued growth in data revenues is on track to compensate for the decline in SMS revenues, which was reported previously and is a symptom of the industry’s natural migration towards data services.

The Turbocharging Programme will increase capacity and bring the 3G+ network within reach of 97 per cent of the population by the end of the Turbocharging Programme in 2015. Improving our 3G+ network, redeploying existing equipment wherever possible is, and will continue to be, a consideration for our technology teams.

Three further units in our IT department achieved ISO 2700 certification during 2012, confirming that Nawras’ information handling, processing and storage is aligned to best international practice and ensures security and consistency. Our IT department also received ISO 27001 certification for secure data storage and handling, making Nawras one of the first companies in the Sultanate to be granted ISO status for its entire IT Department.

Our goal is to become the benchmark in Oman for positive customer experiences and overall satisfaction, with a target of 97 per cent of happy customers.

The growth in customer numbers to 2.2 million during 2012 was matched by rising customer satisfaction, reaching 85 per cent, but we will continue to strive to offer the ultimate customer experience.

12

85%

13

97%

2.2mGrowth in customer numbersOur goal is to achieve even higher levels of customer satisfaction, in line with growing our overall customer base.


While we are closer to our ambition of operating at the cutting edge of technology, nothing will distract us from our primary goal: harnessing its power and resources to improve communication and data services for the benefit of our existing and future customers.

Turning challenges into opportunitiesOur future is one of immense potential and growth. The challenge – and opportunity – is to provide communications access to the majority of the population; to reduce operating costs while investing to maintain our market position; to retain existing customers; and to welcome new ones.

Our opportunity – and challenge – is to harness the huge untapped potential among customers currently not making use of data services with exciting, cost-effective offers; to encourage existing customers to spend more; to acquire new, higher-spending customers; and to make better use of the network by offering customers off-peak data bundles.

Partnerships with manufacturers and application providers will feature strongly in the next phase of the Nawras evolution. We are already working side by side with Tata Communications to offer a comprehensive range of international services, including the first Global Virtual Private Network (GVPN) in Oman. These alliances will undoubtedly help create efficiencies and economies of scale, and speed the time to market.

Revenue and network sharing, with regional or international partners, offers further exciting options once these are assessed as being in the best interests of our stakeholders.

Over 400 base stations were upgraded during the year, the latest phase in an ongoing logistical and financial commitment by the Company. Such substantial investments are but various stages on the journey towards achieving the wider coverage and capacity footprint that is now firmly within our grasp.

While we do not underestimate the scale of the task ahead, we are confident in our ability to realise the TRA’s strategy for Oman.

Nawras firstsContinued emphasis on making our customers’ lives easier and increasing their choices saw a number of notable firsts in social media, apps and data: the Facebook SMS service; new data bundles, including an off-peak monthly mobile broadband bundle; a free SMS notification service to show data usage when roaming; an SMS news service in association with Reuters; and international credit transfer.

We showcased the latest 4G for the first time in Oman; were one of the first companies to obtain ISO status for its entire IT Department, with the award of ISO 27001 certification for secure data storage and handling; and our flagship store in Muscat Grand Mall opened at the end of the year – the first of its kind in the Sultanate.

The introduction of a fixed number portability (FNP) service in Oman gives our business customers the opportunity to keep their existing numbers when joining Nawras from another telecommunications operator. Additionally, the first Global Virtual Private Network (GVPN), in association with Tata Communications, offers multinational companies global reach, via our domestic network, to more than 200 of the world’s main business hubs and data centres.

AwardsOver the years, Nawras has achieved widespread industry recognition by receiving a remarkable variety of awards, and 2012 was no exception.

In addition to the customer service awards noted earlier, our other awards were for Best Merchant Kiosks Services (Bank Muscat Partners Progress); Top Brand – Popular Choice of Telecom Service Providers and Top Brand – Management Choice of Telecom Service Providers (Business Today – Best Brands Survey); Oman’s Largest Corporates 2011 – Top 10 (Oman Economic Review); and Best Corporate Website 2012 Oman – Investor Relations (KWD Webranking).

Our ‘7x7’ Facebook competition was shortlisted in Ragan’s PR Daily Digital PR and Social Media Awards 2012 in the ‘Best Use of Facebook’ category, having impressed the judges with our innovation, ability to engage with customers and the lasting impact of the promotion. Nawras was the only Middle Eastern telecoms company to be shortlisted.

We were also recognised as Best Organisation with Innovative HR Practices at the Asia Pacific HRM Congress Communications Awards and received an Al Mar’a Excellence Award for Technology.

AcknowledgementsOur values – to be caring, excellent and pleasingly different – are worth restating in the context of this review, because they guided every one of us in the organisation and influenced key Nawras initiatives during the year.

It is a mark of a company’s maturity to be able to accept rapid change and adapt accordingly. We achieved this, meeting the many challenges of the year with the customary resolve and focus on customers that have become our trademark.

We can now celebrate that achievement and look forward to the year ahead when, as before, we will pull together as one team in the interests of our customers, this great Company and its many stakeholders.



How do we grow the Nawras brand?We focus on making every interaction with our customers as pleasant as possible. Our aim is to become the benchmark for positive consumer relationships, not just in the telecoms sector, but in Oman generally.

Customers visiting our new flagship store in Muscat Grand Mall are greeted by a Brand Ambassador who welcomes them, asks their requirements and then directs them to the appropriate zone or sales pod where an expert Sales Champion can provide assistance.

Rewarding loyalty and commitment Our Elite Program is a points-based reward scheme designed to build long-term relationships with our residential and business customers and to recognise their loyalty.

1,100Brand Ambassadors Every single member of the Nawras Family – our staff – is an official ambassador for the brand.

1.4mElite ProgramMore than 1.4 million customers joined our Elite Program.


The new website highlights our core brand values by being customer-friendly and encouraging positive interaction with businesses and consumers. We have also introduced an audio facility, in Arabic and English, to help customers who are visually impaired or dyslexic or who have reading difficulties.

A key element in our brand strategy is the under-25 market, which accounts for almost half the country’s population.

72,000 ‘likes’ on Facebook, and counting...

400,000 interactions with our customers on Twitter and counting...

Prompt and efficient handling of more than 10,000 enquiries a day helps make customers’ lives easier and strengthens loyalty to the brand.

We are raising the bar to reach our target of 97 per cent happy customers.

97%Customer satisfaction

CommunityWorking with two of the Middle East’s best-known and successful sportsmen – Ali Al Habsi, the Oman and Wigan goalkeeper, and Ahmad Al Harthy, champion Omani racing driver – brings our brand directly into the community and reinforces our commitment to sport.


Executive Management

Ross CormackChief Executive Officer (CEO)

Ross has been CEO of Nawras since 2004 and has more than 25 years of experience in the telecommunications industry, having led four different telecommunications companies, served on the Board of Directors of six companies, and shareholder-managed 16 companies across Europe, the Middle East and Asia.

Abdulla Issa Al-RawahyChief Strategy Officer (CSO)

Abdulla has been Chief Strategy Officer of Nawras since 2008 and has over 30 years of experience in the telecommunications sector, with leading roles in network planning and projects, and strategy and corporate business development for both fixed and mobile telecommunications.

Said SafrarChief Customer Experience Officer (CCXO)

Said has worked for Nawras since 2008, originally as the Customer Service Director. He was appointed to his new role as Chief Customer Experience Officer in September 2011, as part of the Company’s focus on customer experience.

James MaxwellGeneral Counsel (GC)

James joined Nawras in 2007 and has over 15 years’ experience in providing legal and regulatory advice to leading corporates, with 10 years working exclusively in telecommunications.

Hussain Al-LawatiChief Government Relations Officer (CGRO)

Hussain joined Nawras in 2004 as a Section Head – Key Account Manager – Business Sales Head. Prior to Nawras he served at Oman National Dairy Products, British Petroleum Oman, and Mehdi Foods.


Jorgen Latte Chief Financial Officer (CFO)

Jorgen has been Chief Financial Officer of Nawras since 2009. Jorgen has almost 20 years of financial and managerial experience in the telecommunications sector, with 10 years in stand-alone CFO roles for mobile services companies.

Wolfgang Wemhoff Chief Technology Officer (CTO)

Wolfgang joined Nawras in 2011 and has more than 20 years of experience in the telecommunications industry, working for Mannesmann and Vodafone. He had leading roles in Vodafone Germany, in Vodafone Group, and recently in Vodafone Turkey.

John Vickerman CEO Advisor

John has more than 25 years’ experience with a number of high-profile global telecoms and media companies, including the first wholly owned 3G mobile business in Europe of which he was founder director.

Kumail Al-MoosawiDirector of People (DP)

Kumail has been with Nawras since 2004 and brings over 13 years’ experience in numerous business functions that include retail, operations, finance, customer service, audit, and human resources management.

Sean Casey Chief of Sales and Distribution (CSD)

Sean joined Nawras in 2012. He has over 15 years’ sales and managerial experience in the telecommunications sector in Australia, Saudi Arabia and now Oman.

Martin Lyne Chief Marketing Officer (CMO)

Martin joined Nawras in 2012, bringing over 20 years of commercial experience. He was previously Consumer Commercial Director of Orange UK, which achieved the fastest growth of any operator launching fourth to market.


How do we engage our many fans?Sponsoring music concerts and sporting events associates Nawras as a popular, youth-friendly brand in the minds of our country’s young people.


Social media such as Facebook and Twitter feature strongly in our

communication to 16-25 year olds.


Nawras in the Community

Corporate Social Responsibility (CSR) comes naturally to Nawras and is now firmly embedded in our culture. We serve the community both as employer and partner, sponsoring and supporting initiatives that go well beyond the norm in terms of their scope and positive impact.

Our engagement with the community embraced sponsorship, or support, for an extraordinary range of interests, events and causes. These included health (National Association of Cancer Awareness); employment (JOBEX); IT (Comex); sailing (Muscat Regatta); tourism (Salalah Tourism Festival); and arts and culture (Muscat Festival, Sohar Music Festival), as well as the less abled, the environment and many more.

Further, the Company’s active involvement in the community recognises no political or geographical boundaries. We continued to work with government ministries, NGOs and voluntary organisations with the sole aim of bettering our society for the benefit of others less fortunate or able.

This approach has served to create a level of interaction with our community – and, therefore, many of our customers – that goes well beyond the simply transactional, leading to a level of relationship that bonds us more closely and naturally than many other organisations.

Our Nawras Goodwill Journey is a prime example of this. Now in its eighth year, a group of fasting volunteers visited different charitable organisations across the country, over a ten-day period, to make essential donations which will have an enduring impact because they meet real local needs.

Since the first Goodwill Journey in 2005, Nawras has reached out to more than 7,000 individuals and families. Our volunteers have visited more than 150 charitable organisations and non-government organisations in the Sultanate, travelling 48,000 kilometres to bring joy to the people of Oman during the Holy Month of Ramadan.

Another highlight was our agreement with Kickworldwide, an organisation committed to ‘changing lives through football’. It is tasked with creating social awareness among young people, leading to a new employment stream for Omani nationals, including coaching, refereeing, sports science and law, journalism, and photography.

In December alone, we sponsored and supported the Muscat Youth Summit 2012, the first GCC Businesswomen’s Forum, and Oman Debate 2012, maintaining our commitment to engage with the local community and customers at every level.

While we continued to enjoy a strong profile as a result of our wide-ranging association with sporting and other events, the Company’s less public initiatives proved to have no less powerful an impact.

The SMS Charity Donation Service – also in its eighth successful year – proved, once again, the perfect marriage of technology, convenience and charitable giving, by enabling customers to make donations via SMS to Oman Charitable Organisation (OCO).

We have always recognised the role of women in our workplace. We are proud to be an equal opportunities employer and to reward the contribution of our female staff at many different levels. This included appointing nine of our most talented women to senior roles as store managers during the year.

How can we serve our community better?


We marked the third Omani Women’s Day with a colourful celebration, during which we showed Nawras family members a specially commissioned video highlighting the impact of Nawras women in the Company, as well as their contributions to family life and small businesses.

We also run the ‘Springboard’ programme in collaboration with the British Council, as part of a long-term commitment by us to empower women. This course enables women to grow their potential in the Company and community by giving them the confidence and skills to achieve their professional and personal goals.

To date, there have been more than 85 Nawras Springboard graduates, a statistic of which we are very proud.

Our duty of care to the community also extends to the environment and our impact upon it.

We are a member of the Environment Society of Oman and support the global drive for the preservation and responsible consumption of the world’s natural resources.

We backed that support with our participation in Earth Hour 2012 for the third consecutive year, ensuring that lights and all non-essential electrical appliances in the Nawras Campus, multimedia contact centre, and all 26 stores across the country were switched off for an hour, a tangible effort to reduce our carbon footprint.

Further ‘green’ initiatives include encouraging our customers to switch to electronic bills instead of paper ones and to use e-recharge through 75 convenient self-service machines located across the Sultanate. We also promoted mobile-to-mobile credit transfer as another way to avoid the use of plastic recharge cards.

A good corporate citizen is judged on many fronts, including its role in the community. For Nawras, 2012 reinforced the Company’s reputation in this respect, but also shaped the lasting legacy that is a hallmark of a strong and effective CSR policy.

That legacy is already taking many forms: improving fitness and health through our support for sporting activities; simply bringing people closer together to strengthen communities; boosting knowledge and education; generating well-being and a sense of belonging; and, through our various local programmes, giving communities the means to thrive.

Our proactive engagement with the community is now widely acknowledged. Its value to the Company cannot be overstated, since every member of the Nawras family benefits from the common goals and sense of purpose that it gives them as part of their daily working lives.

We will continue to be a responsible, caring Company by maintaining the high level of commitment to our community through an association with sporting, cultural and social events, for the benefit of the wider community and the country as a whole.

A private-public partnership between Nawras and Oman’s Ministry of Education (MoE) uses technology to support education, successfully linking the Ministry and every state school with a fast internet connection – meaning faster access, improved web browsing and data connectivity, and enhanced study support.

Faster Internet access benefits young students by helping them with their studies, and also allows their parents to monitor progress.

150The number of charitable organisations in Oman visited by Nawras volunteers since the annual Goodwill Journey started in 2005.


Financial Review

Encouraging growth across all customer segments, record revenue in the last quarter, and growth in mobile and fixed data revenue combined to offset a small decline in full-year revenue.

The 1.7 per cent decline in full-year revenue, to OMR 193.5 million from OMR 196.9 million in 2011, was driven by a reduction in SMS and on net voice revenue. However, Q4 revenue from international voice, and fixed and mobile data helped the company to achieve record quarterly revenue of OMR 51.4 million, compared to OMR 50.8 million in 2011.

Total customers grew steadily throughout the year to reach 2.2 million, an increase of 12 per cent from 2011 and the best acquisition figure since 2010.

The investment in upgrading the Nawras network, which will generate more broadband data across a much wider spectrum, will benefit many of these new customers with a faster and higher-quality service.

Revenues and EBITDAEBITDA, which stands for ‘earnings before interest, taxes, depreciation and amortisation’, compares over time the profitability of a company’s operations without the potentially distorting effects of changes in depreciation, amortisation, interest and tax.

Lower revenue and an increase in international call volumes, which led to higher operating expenses, caused EBITDA to decline during 2012 to OMR 94.9 million, against OMR 103.4 million in 2011, a fall of 8.2 per cent.

Margin and operating expenditureNawras’ EBITDA margin (EBITDA as a percentage of sales) was 49.1 per cent, against 52.5 per cent in 2011, reflecting the increase in international call volumes, which impacted gross margins. However, we were able to increase our international customer base by exploiting our international capacity.

As in previous years, the company’s focus on operational efficiency and tight cost control, allied to high levels of staff productivity, slowed the growth in total expenses. General, administrative and sales costs were OMR 44.3 million, a drop of approximately OMR 0.2 million on 2011.

Capital expenditureThe first half of 2012 was occupied with the renegotiation of a major vendor contract, to turbocharge the Nawras Radio Access Network (RAN) by upgrading all sites to enhanced 3G+, enhancing penetration, and increasing the entire network’s coverage, capacity and speed. The contract was awarded at the end of June.

Selected Financial and Operating Data

For the year ended 31 December 2012 2007 2008 2009 2010 2011 2012

(OMR million, except where stated)Revenues Prepaid 74 104 117 124 126 123

Postpaid 18 32 43 53 57 52Other 2 3 12 12 14 19Total 94 139 172 189 197 194

EBITDA (note 1) 25.5 53.8 87.5 102.5 103 95EBITDA Margin (%) 27.0 38.7 51.0 54.2 52.5 49.1Net Profit 8 20 42 50 48 37Net Debt (note 2) 47.6 38.0 39.3 21.6 10.7 2.9 Cash Flow Before Working Capital 21.5 44.0 72.5 87.0 86 77Capital Expenditure (note 3) Mobile 30 36 27 24 29 56

Fixed — — 25 50 12 5Total 30 36 52 74 41 61

ARPU (OMR) Mobile Prepaid 9.4 7.2 6.1 5.7 6.9 5.6 Mobile Postpaid 29.8 28.0 27.1 26.0 26.6 24.2 Mobile Blended 10.3 8.8 7.7 7.4 8.7 7.2

Customers (thousands) Mobile Prepaid 938 1,401 1,714 1,857 1,760 1,970Mobile Postpaid 79 111 147 169 173 179 Mobile Total 1,016 1,511 1,861 2,026 1,933 2,149 Fixed 8 27 44

Employees (number) 493 636 757 873 1,019 1,027

(1) EBITDA = Revenues minus operating expenses minus general and administrative expenses (excluding service fees). (2) Net debt = Gross debt minus cash and cash equivalents. (3) Including licensing fees.

Total customers grew steadily throughout the year to reach 2.2 million, an increase of 12 per cent from 2011 and the best acquisition figure since 2010.


However, the company has invested a total of OMR 331 million in network and IT-related capital expenditure since operations started in 2004, against a total of OMR 272 million by end 2011. Capex for the mobile network amounted to OMR 56.6 million during the year, with a further OMR 4.8 million invested in the fixed network. Nawras has also paid OMR 64 million towards licence fees since its inception.

ProfitabilityNet profit, which was affected by lower EBITDA and higher depreciation, declined 22.2 per cent to OMR 37 million, compared to OMR 47.5 million the previous year. The fall in net profit was partially offset by lower interest costs. Increased investment in network modernisation contributed to the higher depreciation, while a decrease in overall outstanding debt and the end of an above LIBOR interest rate swap agreement resulted in lower interest costs.

Tight control of total expenses (excluding royalties) contained the increase to 6 per cent, up from OMR 130.5 million to OMR 138.5 million.

Earnings per share of OMR 0.057 were down from the previous year’s OMR 0.073, and the Board has recommended a dividend of OMR 0.038 per share for approval at the annual general meeting on 27 March 2013.

Net debtA strong cash flow position supported the on-going reduction in long-term debt, resulting in a 72.9 per cent improvement in the net debt position, from OMR 10.7 million to OMR 2.9 million.

Cash flowNet cash from operating activities totalled OMR 73.9 million, compared to OMR 77.8 million in 2011. Cash and cash equivalents at the year-end stood at OMR 25 million, down from OMR 44 million in 2011.

Balance sheetThe 3.2 per cent rise in total assets, to OMR 309 million from OMR 299 million, was attributable mainly to growth in property, plant and equipment.

Total equity of OMR 180 million increased by OMR 12 million (7.5 per cent) over 2011, and net assets per share from OMR 0.257 to OMR 0.277. There was a decline in total liabilities from OMR 132 million to OMR 129 million, largely due to a reduction of OMR 27.5 million in interest-bearing borrowings. Total equity and liabilities increased to OMR 309 million, from OMR 299 million, an increase of 3.2 per cent.

ProspectsEfforts to maximise productivity through operating efficiencies, and continuing the preparations for the introduction of 4G LTE, a major cornerstone of our plans to boost the Nawras network to achieve higher levels of performance, remain firmly on track.

Our comprehensive network modernisation programme will provide the platform for the increased coverage, and the range of new data services, that will drive volumes and future revenue growth.

There will be an on-going focus on customer acquisition and retention, particularly in the business sector, where there is massive underlying demand. Nawras will use the results of the comprehensive market research and analysis it conducted during 2012 to develop the appropriate strategies to meet these objectives and to retain its competitive advantage.

09

72.5

08

44.0

0721.5

10

87.0

11

85.0

12

77.0

Cash Flow Before Working Capital

OMR million

09

208

08

174

07

158

10

291

11

299

12

309

ä3.2%Total Assets

OMR million

2012 Revenues Prepaid – OMR 123 million Postpaid – OMR 52 million Other – OMR 19 million

27%

63%

10%

ä7.5%Total Equity

OMR million

09

92

08

49

07

31

10

143

11

168

12

180

63%

ä49%Capital Expenditure

OMR million

Mobile Fixed 08

36

07

30

10

61

41

74

52

09 11 12


Corporate Governance Report

Nawras has always been committed to internationally recognised corporate governance practices and ethical business conduct. Nawras’ Board of Directors and Senior Management understand that their implementation of good governance practices and ethical business conduct results in sound business decisions. They also have a positive impact on public perceptions of the Company and benefit the wider economic and social development of Oman.

Nawras’ corporate governance practices meet Oman’s Capital Market Authority (CMA) requirements. Nawras currently has relevant policies and regulations that include:

• Acorporategovernancemanualdetailingtheroleandapplicationof corporate governance throughout the Company.

• Cleardelegationofpower,assetoutinacomprehensivemanual of authority.

• Clearrolesandresponsibilities,assetoutintherespectivecharters for each Board committee: the Executive Committee, the Audit Committee, and the Remuneration Committee – and each management committee: the Management Committee, the Promotion Committee, the Tender Committee, the Pricing Committee, and the Sponsorship Committee.

• Anorganisationstructurethatidentifiestheresponsibilitiesrelatedto the various executive positions within the Company and the corresponding reporting structures and procedure, including the extent of the authority of each position for approval of expenditure.

• Policiestogovernexpenditure,includingpoliciesandproceduresfor accounting and procurement.

• Policiesrelatedtohumanresourcesincludingsalaries,appointments,development, training, promotions, and termination of services.

• Apolicycoveringrelated-partytransactions,togetherwithappropriate codes of ethics that apply to the Board and the Company.

• AclearapproachtoindependenceinthecontextofDirectors that is (and was already) in compliance with the recent changes announced by the Capital Market Authority (CMA).

Board of DirectorsThe Board of Directors that managed Nawras throughout 2012 is shown in table 1 (page 35).

There was one change to the composition of the Board during 2012 as Nawras’ former Vice Chairman, Mr Khalid Al-Mahmoud, resigned following his promotion to a new role within Qtel Group: Group Chief Officer – Small and Medium Businesses. Nawras is grateful for the time given by Mr Khalid Al-Mahmoud as Vice Chairman and Director, as well as during his time working for Nawras as Chief Operating Officer between 2005 and 2010.

Mr Khalid Al-Mahmoud was replaced on the Board by Mr Mohamed Jassim Al-Kuwari. He was appointed as a temporary Director in accordance with the Company’s Articles of Association, and the Company will seek permanent appointment at the Annual General Meeting. Mr Khalid Al-Mahmoud was replaced as Vice Chairman of the Board by Sheikh Saud Al-Thani.

Further information on current Board members Sayyed Amjad Mohamed Al Busaidi ChairmanMr Al Busaidi has chaired the Nawras Board since March 2011. In 1990 he joined the Diwan of Royal Court and he currently serves as Executive President of the Diwan of Royal Court Pension Fund. He was appointed Chairman of Bank Nizwa in July 2012, and also serves on the boards of NIFCO, National Mass Housing Company, and Shomookh Investment. He has a Master’s degree in Business Administration from Southern Cross University (Australia).

Sheikh Saud Nasser Faleh Al-Thani Vice-ChairmanSheikh Saud joined Qtel in 1990 and is currently Chief Executive Officer of Qtel Qatar. He also serves as Executive Director of Group HR and Acting Executive Director of General Services. He is also a member of the Arab Organisation for Satellite Communication. Sheikh Saud has a Bachelor of Arts in Public Administration from Western International University (USA).

Mr Khalil Ibrahim Al Emadi DirectorMr Al Emadi is currently the Chief Executive Officer of Navlink lnc (one of Qtel’s partners). He has a strong background in telecommunications with 27 years of experience in mobile services and fixed telephony. Before joining Qtel, he worked at the Ministry of Transport and Communications. He was the Executive Director of Wireline Services until 2007 when, as part of an organisational restructuring, Qtel merged the previous Wireless and Wireline groups into the Networks Division, appointing Mr Al Emadi as Executive Director of Networks. He has a Bachelor of Science in Electrical/Electronic Engineering from Northrop University in California (USA).

Mr Ghassan Khamis Al Hashar Director Mr Al Hashar joined the Nawras Board as a representative of the Public Authority for Social Insurance (PASI) in 2011. He is currently the Authority’s Head of Asset Management – Local. He has more than 15 years’ experience in finance and investment management and represents PASI on the boards of numerous public and private companies. Mr Al Hashar is currently Chairman of Bank Muscat’s Fund Investors’ Committee and a Board member of Majan Development Company. He holds a Master’s Degree in Finance and Investment Management from the University of Aberdeen (UK).


Nawras’ Board of Directors and Senior Management understand that their implementation of good governance practices and ethical business conduct results in sound business decisions.

Table 1: The composition of the Board of Directors during 2012 was:

Name Date of appointment Type of representationMembership of other Nawras Committees

Membership of Boards of other Joint Stock Companies

Sayyed Amjad Mohamed Al Busaidi (Chairman)

26 March 2011 Non-executive, non-independent Nil One

Sheikh Saud Nasser Faleh Al-Thani* (Vice Chairman)

16 March 2008 Non-executive, non-independent Executive Committee Nil

Mr Khalil Ibrahim Al Emadi 12 December 2010 Non-executive, non-independent Executive Committee NilMr Ghassan Khamis Al Hashar 26 March 2011 Non-executive, independent Audit Committee OneDr Shaikha Sultan Al Jabir 26 March 2011 Non-executive, non-independent Executive Committee NilMr Mohamed Jassim Al-Kuwari 29 July 2012 Non-executive, non-independent Executive Committee,

Remuneration Committee Nil

Mr Khalid Ibrahim Al-Mahmoud**(Vice Chairman)

26 March 2011 Non-executive, non-independent Executive Committee, Remuneration Committee

Nil

Mr Mohanna Nasser Al Nuaimi 26 March 2011 Non-executive, non-independent Remuneration Committee, Audit Committee

Nil

Mr Said Faraj Al Rabeea 27 July 2011 Non-executive, independent Executive Committee NilMr Saleh Nasser Al-Riyami 11 December 2004 Non-executive, independent Audit Committee

Remuneration Committee Two

* Sheikh Saud Nasser Faleh Al-Thani was appointed as the Vice Chairman at the Board Meeting on 29 July 2012.** Mr Khalid Al-Mahmoud was Vice Chairman until his resignation on 19 June 2012.

Table 2: Board meetings and attendance in 2012

1 2 3 4 5 6 7 8

30.1.12 22.2.12 27.3.12 24.4.12 18.6.12 29.7.12 21.10.12 16.12.12

Sayyed Amjad Mohamed Al Busaidi Yes Yes Yes Yes No Yes Yes YesMr Khalil Ibrahim Al Emadi Yes Yes Yes Yes Yes Yes Yes YesDr Shaikha Sultan Al Jabir Yes Yes Yes Yes No Yes Yes YesMr Saleh Nasser Al-Riyami Yes Yes Yes Yes Yes Yes Yes YesMr Khalid Ibrahim Al-Mahmoud Yes No Yes Yes Yes N/A N/A N/AMr Ghassan Khamis Al Hashar Yes Yes No Yes Yes Yes Yes YesMr Mohanna Nasser Al Nuaimi Yes Yes Yes Yes No Yes Yes YesSheikh Saud Nasser Faleh Al-Thani No No Yes Yes Yes Yes Yes YesMr Said Faraj Al Rabeea No Yes Yes Yes No Yes Yes YesMr Mohamed Jassim Al-Kuwari N/A N/A N/A N/A N/A N/A No Yes


Corporate Governance Report Continued Nawras has three Board committees: the Executive Committee, the Audit Committee and the Remuneration Committee.

Dr Shaikha Sultan Al Jabir Director Dr Al Jabir is currently Executive Director – New Businesses in Qtel Group (QG). Before joining QG, she was CIO of Qatar General Electricity and Water Corporation (Kahramaa), where she established a sophisticated ICT infrastructure, helping to put the organisation at the forefront of technology. She holds a PhD in Computer Science from the University of Surrey (UK), an MS in Telecommunications and Computers from George Washington University (USA), and a BS in Electrical Engineering from Kuwait University.

Mr Mohamed Jassim Al-Kuwari Director Mr Al-Kuwari has been Qtel’s Chief Corporate Services Officer since 2011, having held several positions in the Group since 2005: Head of Talent Sourcing, Senior Manager of Manpower Planning and Talent Sourcing, and Assistant Director of Policy Development and HR Services. He was also appointed Executive Director, Group HR in 2011. Previously, Mr Al-Kuwari worked at Ras Laffan Liquefied Natural Gas. He holds a Bachelor of Science in Business Administration from the American University, Washington (USA).

Mr Mohanna Nasser Al Nuaimi Director Mr Al Nuaimi was appointed Group Chief Human Resources Officer of Qtel Group in 2008, after serving as Qtel Qatar’s Executive Director of Group Human Resources. He is a member of Qtel Group’s Management Committee and a Board member of several other Qtel Group companies. In 2009, Mr Al Nuaimi received the HR Leadership Award on behalf of Qtel Group for the World HRD Congress, an international honour for companies excelling in the field of people management. He holds a Bachelor of Science in Mechanical Engineering from Qatar University.

Mr Said Faraj Al Rabeea Director Mr Al Rabeea joined the Nawras Board in 2011. He has worked in the government sector for more than 30 years, during which time he has held a number of senior positions in human resources, information technology, and telecommunications. He currently sits on a number of a government boards in Oman. He has a Bachelor’s Degree in Business Administration.

Mr Saleh Nasser Al-Riyami Director Mr Al-Riyami has been a member of the Nawras Board since the Company’s launch. He has more than 20 years’ experience as the Investment Expert for the Diwan of Royal Court and currently serves as the General Manager of National Mass Housing SAOC. He has also served as founder or director of many companies in Oman, as well as in managerial positions in the Ministry of Commerce and Public Authority of Social Security in Oman. Mr Al-Riyami is a Board member of Taageer Finance Company and Al Madina Insurance Company. He holds a Bachelor of Science in Business Administration from the University of Georgia (USA).

Board meetings and Board members’ attendance in 2012Attendances at Board meetings in 2012 are shown in table 2 (page 35).

Board committeesNawras has three Board committees: the Executive Committee, the Audit Committee and the Remuneration Committee.

Executive Committee The Executive Committee focuses on strategic issues and has responsibility for all budget and procurement related matters. The Committee comprises five members.

The only change in the composition of the Executive Committee in 2012 was the resignation of Mr Khalid Al-Mahmoud (explained in the preceding section on the Board of Directors) and the appointment of Mr Mohamed Al-Kuwari as his replacement.

The Executive Committee met four times during 2012. The dates and attendance at these meetings is shown in table 3 (page 37).

The Executive Committee’s terms of reference are:

• ApproveexpenditurewithinthelimitsspecifiedbytheBoard of Directors.

• Reviewandapproverecommendationsfortheawardoftenders.Approve procurements and contracts of values within the limits authorised under the Authority Manual or as delegated by the Board.

• Reviewthequalityandefficiencyofservicesandproductsprovidedby the Company and suggest means of developing and upgrading such services and products.

• FurnishManagementwithstrategicdirectivesonthepriorities and risks relating to financial and strategic investment operations.

• Approvefinancialandstrategicinvestmentsandrelatedmatterswith a maximum limit of US$ 10,000,000 (US Dollars ten million) for each investment operation, or US$ 100,000,000 (US Dollar one hundred million) for all investment operations in each whole calendar year.

• Approveinvestmentoperationsandtreasuryaffairs.• ReviewtheperformanceoftheCommitteeandpresentperiodic

updates on its activities to the Board of Directors.• ReviewdraftregulationsandpoliciesoftheCompanythatfallwithin

the Committee’s scope of work, and submit recommendations on the same to the Board of Directors.

• ReviewtheAuthorityManualandsubmitproposalsforamendmentof the same to the Board of Directors.

• SubmitreportstotheBoardofDirectorsincludingrecommendationson the scope, directives, quality, and level of investments undertaken by the Company, if any.


The Executive Committee focuses on strategic issues and has responsibility for all budget and procurement related matters.

Table 4: Audit Committee meetings and attendance in 2012

1 2 3 4 5 6 7

29.1.12 22.2.12 26.3.12 24.4.12 28/29.7.12 17.10.12 19.12.12

Mr Saleh Al-Riyami Yes Yes Yes Yes Yes Yes YesMr Mohanna Nasser Al Nuaimi Yes Yes Yes Yes Yes Yes YesMr Ghassan Khamis Al Hashar Yes Yes Yes Yes Yes Yes Yes

Table 5: Remuneration Committee meetings and attendance in 2012

RC.01 RC.02 RC.03 RC.04 RC.05 RC.06 RC.07 RC.08 RC.09

30.1.12 22.2.12 26.3.12 24.4.12 25.6.12 28.7.12 11.9.12 21.10.12 19.12.12

Mr Mohanna Al-Nuaimi (Chairman)

Yes Yes Yes Yes Yes Yes Yes Yes Yes

Mr Khalid Al-Mahmoud Yes Yes Yes Yes N/A N/A N/A N/A N/AMr Saleh Al-Riyami Yes Yes Yes Yes Yes Yes Yes No YesMr Mohamed Al Kuwari N/A N/A N/A N/A N/A N/A Yes No Yes

Table 6: Total remuneration paid to Directors in respect of 2012

Position Amount OMR

Sayyed Amjad Mohamed Al Busaidi Chairman 3,500Mr Khalid Ibrahim Al Mahmoud* Vice Chairman 5,000Sheikh Saud Nasser Faleh Al-Thani** Vice Chairman 4,500Mr Saleh Nasser Al-Riyami Director 10,000Mr Khalil Ibrahim Al Emadi Director 6,000Dr Shaikha Sultan Al Jabir Director 5,500Mr Ghassan Khamis Al Hashar Director 6,500Mr Mohanna Nasser Al Nuaimi Director 10,000Mr Said Faraj Al Rabeea Director 5,000Mr Mohamed Jassim Al Kuwari Director 2,000

* Mr Khalid Al-Mahmoud was Vice Chairman until his resignation on 19 June 2012.** Sheikh Saud Nasser Faleh Al-Thani was appointed as the Vice Chairman at the Board Meeting on 29 July 2012.

Table 3: Executive Committee meetings and attendance in 2012

1 2 3 4

26.03.12 18.4.12 5.6.12 15.8.12

Mr Khalil Ibrahim Al Emadi Yes Yes Yes YesMr Khalid Ibrahim Al Mahmoud Yes Yes Yes N/ADr Shaikha Sultan Al Jabir Yes Yes Yes YesSheikh Saud Nasser Faleh Al-Thani Yes No Yes YesMr Said Faraj Al Rabeea Yes Yes Yes YesMr Mohamed Al Kuwari N/A N/A N/A Yes


The Audit Committee assists the Board to oversee the integrity of the Company’s policies and financial statements, including validating and recommending them for Board approval.

Audit Committee The Audit Committee assists the Board to oversee the integrity of the Company’s policies and financial statements, including validating and recommending them for Board approval. It also oversees the performance of the Company’s internal audit function. The Committee comprises three directors.

The Audit Committee met seven times during 2012. The dates and attendance at these meetings is shown in table 4 (page 37).

The Audit Committee’s terms of reference are:

• EstablishtheInternalAuditdepartment’sobjectives,policies and scope.

• ReviewInternalAudit’squarterlyreportsraisedtotheCommittee,withcopies to the Chairman and the members of the Board of Directors.

• ReviewtheExternalAuditors’Report.• Raiseobservationsandrecommendationsregardingthepoints

included in such reports to the Board of Directors.• ApprovetheInternalAuditdepartment’sannualplans.• SelecttheCompany’sExternalAuditorsandraiserecommendations

on their appointment and fees.• SelecttheCompany’sChiefInternalAuditor,makerecommendations

on his/her appointment and appraise his/her performance.• Overseeadministratively,financiallyandtechnicallytheInternal

Audit department including the proposal and implementation of its operating and capital budget, its organisational structure, training, development and promotion of staff, all in accordance with the applicable regulations of the Company.

• EvaluatetheInternalandExternalAuditperformance.• ReviewandstudytheCompany’sregulationsandpolicies,

whenever exigency dictates this, and raise suggestions on their amendments to the Board of Directors.

Remuneration Committee The Remuneration Committee focuses on the compensation and benefits of employees and supervises the Company’s Omanisation and succession programmes. The Committee comprises three directors.

The Remuneration Committee met 9 times during 2012. The dates and attendance at these meetings is shown in table 5 (page 37).

The Remuneration Committee’s terms of reference are:

• RecommendtheappointmentandterminationoftheCEOandallGrade 1 executive managers.

• ApprovetheappointmentandterminationofallGrade2managers.• RecommendtheannualperformanceratingoftheCEO.• ApprovetheannualperformanceratingofallGrade1

executive managers.• ApprovetheNawrascorporatescore.

• OverseetheRemunerationpoliciesoftheCompany,includingvariable compensation systems and incentive programmes. Approve any changes to such systems and programmes.

• PeriodicallyreviewtheCompany’sHRandTrainingPolicies,the Job Evaluation Policy, and the employee performance evaluation.

• ApproveanyexceptionstoHRpolicies,includingforcompensationand benefits that are outside the authority of management.

Total remuneration paid to Directors in respect of 2012Nawras Directors are each paid a sitting fee of OMR 500 per Board or Committee meeting. Table 6 (page 37) details the total sitting fee amounts paid to the Directors during 2012.

Additionally, at the Company’s Annual General Meeting held on 27 March 2012, the shareholders approved a further distribution to the Directors of OMR 138,750, to be divided between the Directors.

Related-party transactions 2012Related-party transactions entered into by the Company during 2012 are shown in table 7 (page 39).

The majority of the increase is attributable to Long Term Incentives (LTI) obligations for senior management (2011 amount 0). The balance of the increase is attributable to the addition of new senior management in Q4 2011. The service fee payable to Qtel International as per the Technical Services Agreement comprised 3 per cent of gross revenues for 2012.

Senior managementNawras’ senior management team during 2012 is shown in table 8 (page 39).

Table 9 (page 39) is an outline of the current organisational structure:

Ross CormackChief Executive OfficerRoss has been CEO of Nawras since 2004 and has more than 25 years of experience in the telecommunications industry, having led four different telecommunications companies, served on the Board of Directors of six companies, and shareholder-managed 16 companies across Europe, the Middle East and Asia. His recent experience has included serving as Executive Director Wireless for Qtel, CEO and founder of Singapore-based Virgin Mobile Asia and Managing Director of Hong Kong CSL. Ross holds a Double Honours Bachelor of Science and Bachelor of Communications in Engineering Production and Economics from the University of Birmingham (UK). Ross is also serving as Acting Chief People Officer until an appointment is made.

Corporate Governance Report Continued


The Remuneration Committee focuses on the compensation and benefits of employees and supervises the Company’s Omanisation and succession programmes.

Table 7: Related-party transactions during 2012

TransactionOMR 2012

OMR 2011 % Change

Directors and Key Management remuneration comprising: 1,976,935 1,417,753 39%Salaries/remuneration and benefits 1,726,624 1,177,105 47%Directors’ remuneration 200,000 200,000 0%Employees’ end of service benefits 50,311 40,648 24%The majority of the increase is attributable to Long Term Incentives (LTI) obligations for senior management (2011 amount 0). The balance of the increase is attributable to the addition of new senior management in Q4 2011.

Service fee payable to Qtel International as per Technical Services Agreement comprising 3% of gross revenues for 2012 5,821,486 5,889,412 -1%

Other expenses, comprising: 1,003,716 1,297,338 -23%•Reimbursementofsalariesofsecondedstaffandothercostreimbursements

(Qatar Telecommunication) 54,258 54,583 -1%•Reimbursementofsalariesandotherexpensesofsecondedstaff

(Qtel Group) 264,611 323,426 -18%•Siterentalexpenses

(ISS Pension Fund) - 149,607 -100%•Sitemaintenanceexpenses

(Elite Technology LLC) 684,847 769,722 -11%

Table 8: Senior management

Ross Cormack Chief Executive OfficerJorgen Latte Chief Financial OfficerAbdulla Al-Rawahy Chief Strategy OfficerWolfgang Wemhoff Chief Technical OfficerSaid Safrar Chief Customer Experience Officer Martin Lyne Chief Marketing Officer James Maxwell General CounselHussain Al-Lawati Chief Government Relations Officer Sean Casey Chief Sales and Distribution Officer Kumail Al-Moosawi Director of People

Table 9: Nawras organisational structure

Chief Financial Officer(CFO)

Chief People Officer(CPO)

Chief Technical Officer(CTO)

Chief Marketing Officer(CMO)

Chief Sales & Distribution

Officer(CSDO)

Chief Customer Experience

Officer(CCXO)

General Counsel

(GC)

Chief Strategy Officer(CSO)

Chief Government

Relations Officer

Finance People Technology Marketing Sales & Distribution

CustomerExperience GC Strategy Government

Relations

Chief Executive Officer(CEO)


The Nawras website has a comprehensive Investor Relations section where shareholders can view the Company’s quarterly financial information, disclosure policy, and frequently asked questions.

Jorgen LatteChief Financial OfficerJorgen has been Chief Financial Officer of Nawras since 2009. Jorgen has almost 20 years of financial and managerial experience in the telecommunications sector, with 10 years in stand-alone CFO roles for mobile services companies and additional prior experience at TeliaSonera and Tele2. Jorgen holds a Bachelor of Arts in Finance and Accounting from Stockholm University (Sweden).

Abdulla Issa Al-RawahyChief Strategy OfficerAbdulla has been Chief Strategy Officer of Nawras since 2008 and has over 30 years of experience in the telecommunications sector, with leading roles in network planning and projects, and strategy and corporate business development for both fixed and mobile telecommunications. Prior to joining Nawras, Abdulla served as Technical Advisor to the Minister of Transport and Communications, President of Omantel, and Chairman and founding Member of the Oman Fibre Optic Company. Abdulla holds a Bachelor of Engineering Technology and Master of Science in Electrical Engineering from the University of Central Florida (USA).

Wolfgang WemhoffChief Technology OfficerWolfgang joined Nawras in 2011 and has more than 20 years of experience in the telecommunications industry, working for Mannesmann and Vodafone. He had leading roles in Vodafone Germany, in Vodafone Group, and recently in Vodafone Turkey. Wolfgang holds a Bachelor of Engineering Technology from University Munster (Germany) and a Bachelor of Business Administration from University Dortmund (Germany).

Said SafrarChief Customer Experience Officer Said has worked for Nawras since 2008, originally as the Customer Service Director. He was appointed to his new role as Chief Customer Experience Officer in September 2011, as part of the Company’s focus on customer experience. Prior to joining Nawras Said worked in the banking industry and has more than 15 years’ working experience with Oman International Bank and Bank Dhofar. Said holds a Masters in Business Administration from the University of Hull (UK).

Martin Lyne Chief Marketing OfficerMartin joined Nawras in 2012, bringing over 20 years of commercial experience. He was previously Consumer Commercial Director of Orange UK, which achieved the fastest growth of any operator launching fourth to market. Most recently he was Managing Director for Small and Medium Enterprises with Everything Everywhere (the joint venture between Orange and T Mobile). Martin is a member of the Institute of Chartered Accountants of England and Wales. He holds a BA (Hons) in Economics and Business Studies from Leeds University (UK).

James MaxwellGeneral CounselJames joined Nawras in 2007 and has over 15 years’ experience in providing legal and regulatory advice to leading corporates, with 10 years working exclusively in telecommunications. His past roles include working in M&A and securities at Linklaters in the UK and Minter Ellison in Australia, and as an in-house Corporate Counsel at Vodafone UK and more recently SingTel Optus in Australia. James holds a Bachelor of Laws (LLB Hons) from Melbourne University (Australia).

Hussain Al-LawatiChief Government Relations Officer Hussain joined Nawras in 2004 as a Section Head – Key Account Manager – Business Sales Head. Prior to Nawras he served as a Product Manager in Oman National Dairy Products, as Commercial Sales Executive and Fuel Card Section Head in British Petroleum Oman, and as Sales & Marketing Manager in Mehdi Foods. Hussain holds a Bachelor’s degree in Business Administration from Camden University (USA).

Sean CaseyChief of Sales and DistributionSean joined Nawras in 2012. He has over 15 years’ sales and managerial experience in the telecommunications sector in Australia, Saudi Arabia and now Oman. Sean has managed and led multiple national sales functions in both the consumer and business segments, and has experience with Telstra, Vodafone, VHA, Sale-Co and STC.

Kumail Al-MoosawiDirector of PeopleKumail has been with Nawras since 2004 and brings over 13 years’ experience in numerous business functions that include retail, operations, finance, customer service, audit, and human resources management. Kumail completed his undergraduate education at Florida Atlantic University in the United States, majoring in Finance. He is also a continuing member of the Chartered Institute of Personnel and Development (CIPD) and an active member of the GCC HR Forum.

Channels and methods of communication with shareholders and investorsThe Nawras website has a comprehensive Investor Relations section where shareholders can view the Company’s quarterly financial information, disclosure policy, and frequently asked questions. They can also register to receive financial news alerts and contact the Investor Relations Manager by email.

Quarterly conference sessions with analysts are planned throughout the year, and quarterly financial statements are published in national newspapers within five days of being presented on the Muscat Securities Market website.

The ‘Management Review’ section of the Nawras annual report contains detailed management discussion and analysis.



Qtel is the only shareholder that holds more than 10 per cent of Nawras’ issued shares. The Company does not have any securities or financial instruments convertible to shares.

Table 10: Nawras share trading throughout 2012

Month Volume Turnover Trades High price Low priceClosing

pricePrevious

closeDifference

%Difference

(OMR) Last priceSecurity Cap

(OMR)

January 5,152,607 3,304,698 863 0.655 0.627 0.632 0.650 -2.8 -0.018 0.627 411,396,753February 9,346,404 5,826,197 1,598 0.639 0.610 0.629 0.632 -0.5 -0.003 0.630 409,443,921March 11,054,056 6,915,339 1,024 0.636 0.595 0.599 0.629 -4.8 -0.030 0.596 389,915,594April 4,608,831 2,719,970 875 0.606 0.549 0.551 0.599 -8.0 -0.048 0.549 358,670,271May 4,614,885 2,377,513 765 0.550 0.491 0.518 0.551 -6.0 -0.033 0.525 337,189,111June 4,298,192 2,196,191 335 0.523 0.501 0.509 0.518 -1.7 -0.009 0.508 331,330,613July 1,941,251 955,419 387 0.510 0.469 0.470 0.509 -7.7 -0.039 0.470 305,943,788August 3,201,420 1,497,071 333 0.475 0.461 0.469 0.470 -0.2 -0.001 0.470 305,292,844September 12,274,859 5,909,948 1,138 0.517 0.429 0.501 0.469 6.8 0.032 0.505 326,123,059October 9,558,267 4,856,120 1,026 0.552 0.483 0.488 0.501 -2.6 -0.013 0.486 317,660,784November 3,675,919 1,783,059 498 0.495 0.469 0.470 0.488 -3.7 -0.018 0.470 305,943,788December 8,081,400 3,793,603 881 0.484 0.456 0.461 0.470 -1.9 -0.009 0.457 300,085,290

Total 77,808,091 42,135,131 9,723

Table 12: Nawras Share Distribution (in terms of ownership)

Month Omani Non Omani GCC (Non Omani) Arab (Non Omani) Foreigner

January 35.3% 64.7% 61.8% 0.1% 2.9%February 35.6% 64.4% 61.9% 0.1% 2.4%March 35.6% 64.4% 62.2% 0.1% 2.1%April 35.6% 64.4% 62.1% 0.1% 2.2%May 35.7% 64.3% 62.1% 0.1% 2.1%June 35.7% 64.3% 62.4% 0.2% 1.8%July 35.8% 64.2% 62.3% 0.2% 1.8%August 35.7% 64.3% 62.4% 0.2% 1.7%September 35.4% 64.6% 62.7% 0.2% 1.8%October 35.4% 64.6% 62.7% 0.2% 1.8%November 35.4% 64.6% 62.7% 0.2% 1.8%December 35.2% 64.8% 63.0% 0.2% 1.7%

Table 11: Nawras share price compared to MSM30 index throughout 2012

6,300

6,100

5,900

5,700

5,500

5,300

0.700

0.600

0.500

0.400

0.300

0.200

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecMSM30 Share Price

MSM 30Nawras


Nawras has established an organisation that ensures risk management is an essential part of the Company’s culture and strategic decision-making through an Enterprise Risk Management (ERM) function.

Nawras share trading detailsNawras shares traded on the Muscat Securities Market during 2012 as shown in table 10 (page 41). Nawras’ share price compared to the MSM30 index throughout 2012 is shown in table 11 (page 41). Nawras’ share distribution in 2012 is shown in table 12 (page 41).

Qtel is the only shareholder that holds more than 10 per cent of Nawras’ issued shares. The Company does not have any securities or financial instruments convertible to shares.

Details of non-compliance by the CompanyNawras, as a regulated telecommunications operator, is subject to oversight by the Telecommunications Regulatory Authority (TRA). From time to time, Nawras has been subject to regulatory action by the TRA related to compliance with the terms of its licences and the Telecommunications Regulatory Act. Nawras has an excellent relationship with the TRA and has worked with it to remedy any concerns raised.

Below is a summary of the material regulatory decisions that relate to Nawras made by the TRA during 2012:

• Frequencypenalties–in2012theCompanyworkedwiththeTRA to perform a reconciliation of certain Nawras information against the corresponding information held by the TRA. One outcome of the process was that it was determined that Nawras was in breach of certain obligations relating to the frequencies utilised by Nawras. The TRA penalised Nawras in an amount of OMR 10,782.56 in respect of the breaches. The penalty was paid during 2012.

• WiMAXviolation–theTRAissuedNawraswithaviolationnotice for making WiMAX modem installation service mandatory. This was against the TRA’s approval for the service, in which it requested Nawras to make the installation service optional. No fine was issued and the matter was closed with Nawras changing its process.

• WiMAXviolation–inNovember2012,theTRAissuedNawras with a violation notice for differentiating outdoor and indoor WiMAX modem prices. The TRA’s approval was subject to non-differentiation in modem prices regardless of coverage strength. Nawras was requested to propose remedies for this violation. A penalty has not yet been determined and the issue is on-going.

Apart from the above regulatory non-compliance, Nawras has no material legal or regulatory non-compliance to disclose.

Disclosure policyNawras rigorously applies its disclosure policy so as to develop and maintain reasonable market expectations of the Company’s current and future trading prospects. This is achieved by making disclosure on a widely disseminated basis, through a realistic understanding of prospects for future performance, and by ensuring that information does not intentionally or unintentionally mislead investors.

Managing riskNawras has established an organisation that ensures risk management is an essential part of the Company’s culture and strategic decision-making through an Enterprise Risk Management (ERM) function. The ERM’s strategic objectives bring a systematic approach to assessing, evaluating, managing and controlling the overall enterprise risk. It also assists in providing practical and cost-effective solutions to manage and mitigate risk.

Enterprise Risk Management is called for under the Nawras corporate governance framework. The Company is required to present the status of internal control and arrangements for risk management to its senior management and report the same to the Board of Directors on a quarterly basis.

External auditor The Company’s external auditors in respect of 2012 were Deloitte & Touche. The total fees for audit and related services paid to the auditors in respect of 2012 were OMR 49,576.

Board declarationThe Board of Directors acknowledges that:

• Nawrashasallitssystemsandproceduresformallydocumented and in place. The Company’s internal regulations comply with relevant regulatory requirements and have been formalised, reviewed and approved by the Board of Directors.

• TheBoardofDirectorsisresponsibleforensuringthatthefinancialstatements are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), the requirements of the Commercial Companies Law of the Sultanate of Oman 1974 (as amended), and the rules for disclosure requirements prescribed by the Capital Market Authority.

• NomaterialeventsaffectthecontinuationofNawrasanditsoperations during the next financial year.



TO THE SHAREHOLDERS OF OMANI QATARI TELECOMMUNICATIONS COMPANY SAOG (NAWRAS)We have performed the procedures prescribed in Capital Market Authority (CMA) Circular No. 16/2003 dated 29 December 2003 with respect to the accompanying corporate governance report of Omani Qatari Telecommunications Company SAOG (NAWRAS) and its application of corporate governance practices in accordance with CMA Code of Corporate Governance issued under circular No. 11/2002 dated 3 June 2002 as supplemented by the Rules and Guidelines on Disclosure by Issuers of Securities and Insider Trading approved by Administrative Decisions no. 5/2007 dated 27 June 2007 and the Executive Regulation of the Capital Market Law issued under the Decision No. 1/2009 dated 18 March 2009 (collectively the Code and additional regulations and disclosures). Our engagement was undertaken in accordance with the International Standards on Related Services applicable to agreed-upon procedures engagements. The procedures were performed solely to assist you in evaluating the Company’s compliance with the code as issued by the CMA.

We report our findings as below:We found that the Company’s corporate governance report fairly reflects the Company’s application of the provisions of the Code and is free from any material misrepresentation.

Because the above procedures do not constitute either an audit or a review made in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the corporate governance report.

Had we performed additional procedures or had we performed an audit or review of the corporate governance report in accordance with International Standards on Auditing or International Standards on Review Engagements, other matters might have come to our attention that would have been reported to you.

Our report is solely for the purpose set forth in the first paragraph of this report and for your information and is not to be used for any other purpose. This report relates only to the accompanying corporate governance report of Omani Qatari Telecommunications Company SAOG (NAWRAS) to be included in its annual report for the year ended 31 December 2012 and does not extend to any financial statements of Omani Qatari Telecommunications Company SAOG (NAWRAS), taken as a whole.

Deloitte & Touche (M.E.) & Co. LLCMuscat, Sultanate of Oman20 February 2013

Mark DunnPartner

Deloitte & Touche (M.E.) & Co. LLCMuscat International CentreLocation: MBD AreaP.O. Box 258, Ruwi, Postal Code 112Sultanate of Oman

Tel: +968 2481 7775, Fax: +968 2481 5581www.deloitte.com


INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF OMANI QATARI TELECOMMUNICATIONS COMPANY SAOG

Report on the financial statementsWe have audited the accompanying financial statements of Omani Qatari Telecommunications Company SAOG (the “Company”) which comprise the statement of financial position as of 31 December 2012, and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 51 to 74.

Board of Directors’ responsibility for the financial statementsThe Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the relevant disclosure requirements of the Commercial Companies Law of 1974, as amended, of the Sultanate of Oman and the Rules and Guidelines on disclosure issued by the Capital Market Authority, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these 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 financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirementsIn our opinion, the financial statements comply, in all material respects, with the relevant disclosure requirements of the Commercial Companies Law of 1974, as amended and the Rules and Guidelines on disclosure issued by the Capital Market Authority.

Deloitte & Touche (M.E.) & Co. LLCMuscat, Sultanate of Oman20 February 2013

Mark DunnPartner

Deloitte & Touche (M.E.) & Co. LLCMuscat International CentreLocation: MBD AreaP.O. Box 258, Ruwi, Postal Code 112Sultanate of Oman

Tel: +968 2481 7775, Fax: +968 2481 5581www.deloitte.com


46 Statement of Income47 Statement of Comprehensive Income48 Statement of Financial Position49 Statement of Changes in Equity50 Statement of Cash Flows51 Notes to the Financial Statements

Financial Statements


Notes2012

OMR ‘0002011

OMR ‘000

Revenue 4 193,500 196,865Other income 365 337

193,865 197,202Operating expenses 5 (60,134) (54,846)General and administrative expenses 6 (44,256) (44,461)Depreciation and amortisation (32,769) (28,040)Royalty (13,216) (12,665)Financing costs (net) 7 (1,351) (3,201)

PROFIT BEFORE TAX 42,139 53,989Income tax expense 8 (5,163) (6,477)

PROFIT FOR THE YEAR 36,976 47,512

Basic and diluted earnings per share (OMR) 9 0.057 0.073

Statement of Income | Year ended 31 December 2012

The attached notes 1 to 29 form part of these financial statements


2012OMR ‘000

2011OMR ‘000

Profit for the year 36,976 47,512

Other comprehensive incomeNet unrealised gain on cash flow hedges 329 1,631Income tax effect (39) (196)

Other comprehensive income for the year 290 1,435

Total comprehensive income for the year 37,266 48,947

Statement of Comprehensive Income | Year ended 31 December 2012



Notes2012

OMR ‘0002011

OMR ‘000

ASSETS

Non current assetsProperty, plant and equipment 10 214,136 182,138Licence fee 11 39,075 42,425Positive fair value of derivatives 16 12 -

Total non current assets 253,223 224,563

Current assetsInventories 1,025 670Receivables and prepayments 12 30,055 29,702Bank balances and cash 13 24,738 44,462

Total current assets 55,818 74,834

TOTAL ASSETS 309,041 299,397

EQUITY AND LIABILITIES

Capital and reservesShare capital 14 65,094 65,094Statutory reserve 15 20,378 16,680Cumulative changes in fair values 16 (7) (297)Retained earnings 94,584 86,042

Total equity 180,049 167,519

Non current liabilitiesInterest bearing borrowings 17 20,939 21,940Site restoration provision 18 2,256 3,643Employee benefits 19 926 783Deferred tax liability 8 1,224 616

Total non current liabilities 25,345 26,982

Current liabilitiesPayables and accruals 20 79,478 54,877Interest bearing borrowings 17 6,701 33,215Employee benefits 19 72 1,355Negative fair value of derivatives 16 20 337Deferred revenue 12,575 8,729Income tax payable 8 4,801 6,383

Total current liabilities 103,647 104,896

Total liabilities 128,992 131,878

TOTAL EQUITY AND LIABILITIES 309,041 299,397

Net assets per share 9 0.277 0.257

These financial statements were approved and authorised for issue by the Board of Directors on 20 February 2013 and were signed on their behalf by:

Sayyed Amjad Mohamed Al BusaidiChairman

Saleh Nasser Al-RiyamiBoard Member and Chairman of the Audit Committee


Statement of Financial Position | At 31 December 2012



Share capital

OMR ‘000

Statutory reserve

OMR ‘000

Cumulative changes in fair values

OMR ‘000

Retained earnings

OMR ‘000Total

OMR ‘000

At 1 January 2011 65,094 11,929 (1,732) 68,017 143,308Profit for the year - - - 47,512 47,512Other comprehensive income for the year - - 1,435 - 1,435Transfer to legal reserve (note 15) - 4,751 - (4,751) -Dividends (note 14) - - - (24,736) (24,736)

At 1 January 2012 65,094 16,680 (297) 86,042 167,519Profit for the year - - - 36,976 36,976Other comprehensive income for the year - - 290 - 290Transfer to legal reserve (note 15) - 3,698 - (3,698) -Dividends (note 14) - - - (24,736) (24,736)

At 31 December 2012 65,094 20,378 (7) 94,584 180,049

Statement of Changes In Equity | At 31 December 2012



Notes2012

OMR ‘0002011

OMR ‘000

OPERATING ACTIVITIESProfit before tax 42,139 53,989Adjustments for: Depreciation 10 29,069 24,346 Amortisation 11 3,700 3,694 Interest income (326) (77) Accrual for employees’ end of service benefits 315 297 Financing costs 1,577 3,074 Loss / (profit) on disposal of property, plant and equipment 388 (8) Unwinding of discount of site restoration provision 18 100 204

Operating profit before working capital changes 76,962 85,519Working capital changes: Inventories (355) (288) Receivables and prepayments (353) (54) Payables, accruals and deferred revenue 6,878 2,534

Cash from the operations 83,132 87,711Payment of IPO incentive – shadow shares 19 (1,283) (277)Interest paid (1,577) (3,074)Income tax paid (6,176) (6,450)Employees’ end of service benefits paid (172) (128)

Net cash from operating activities 73,924 77,782

INVESTING ACTIVITIESPurchase of property, plant and equipment 10 (41,373) (42,232)Payment of licence fee 11 (350) -Interest income 326 77Proceeds on disposal of property, plant and equipment - 8

Net cash used in investing activities (41,397) (42,147)

FINANCING ACTIVITIESRepayment of term loan (84,029) (15,780)Long term loan draw down 56,514 -Dividends paid 14 (24,736) (24,736)

Net cash used in financing activities (52,251) (40,516)

DECREASE IN CASH AND CASH EQUIVALENTS (19,724) (4,881)Cash and cash equivalents at the beginning of the year 44,462 49,343

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 24,738 44,462

Statement of Cash Flows | Year ended 31 December 2012

Note: The amounts under purchase of property, plant and equipment represent the net additions for capital expenditure adjusted for timing differences.



Notes to the Financial Statements | Year ended 31 December 2012

1 LEGAL STATUS AND PRINCIPAL ACTIVITIESOmani Qatari Telecommunications Company SAOG (the “Company”) is an Omani joint stock company registered under the Commercial Companies Law of the Sultanate of Oman. In accordance with Royal Decree 17/2005, effective 19 February 2005, the Company was granted a licence to provide mobile telecommunication services in the Sultanate of Oman for a period of 15 years ending 18 February 2020.

In accordance with Royal Decree 34/2009, effective 6 June 2009, the Company was also awarded a licence to provide fixed line telecommunication services in the Sultanate of Oman for a period of 25 years. The Company’s activities under this licence will be installation, operation, maintenance and exploitation of fixed public telecommunications systems in the Sultanate of Oman.

The Company’s current principal activities are the operation, maintenance and development of mobile and fixed telecommunications services in the Sultanate of Oman.

The Company is a subsidiary of Qatar Telecom (Qtel) Q.S.C whose registered address is PO Box 217, Doha, Qatar.

In accordance with the requirements of the Company’s mobile licence, the Company proceeded with an initial public offering (IPO). The promoting shareholders at the Company’s Extraordinary General Meeting held on 7 March 2010 approved the conversion of the Company from a Closed Joint Stock Company (SAOC) to a Public Joint Stock Company (SAOG) by offering their 260,377,690 shares for the public subscription. The Company closed its IPO on 21 October 2010 and its shares were listed on the Muscat Securities Market on 1 November 2010. The IPO proceeds and share issue expenses were recorded by the promoting shareholders.

BASIS OF PREPARATIONThe financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS). These financial statements also comply with the applicable requirements of the Commercial Companies Law of the Sultanate of Oman and the rules and guidelines on disclosure issued by the Capital Market Authority.

The accounting records are maintained in Omani Rial, which is the functional and reporting currency for these financial statements. The financial statements’ numbers are rounded to the nearest thousand except when otherwise indicated.

The financial statements are prepared under the historical cost convention modified to include the measurement at fair value of certain financial instruments.

2 ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)For the year ended 31 December 2012, the Company has adopted all the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for the year beginning on 1 January 2012.

2.1 STANDARDS AND INTERPRETATIONS ADOPTED WITH NO EFFECT ON THE FINANCIAL STATEMENTSThe following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements, but may affect the accounting for future transactions or arrangements.

Amendments to IFRS 7 – Disclosures – Transfer of Financial Assets

The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures of transactions where a financial asset is transferred but the transferor retains some level of continuing exposure in the asset.

Amendments to IAS 12 – Deferred Tax: Recovery of Underlying Assets

The amendments to IAS 12 provide an exception to the general principle set out in IAS 12 Income Taxes that the measurement of deferred tax should reflect the manner in which an entity expects to recover a carrying amount of the asset. Specifically, the amendments established a rebuttable presumption that the carrying amount of an investment property measured using the fair value model in IAS 40 Investment Property will be recovered entirely through sale.



2 ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) (Continued)

2.2 NEW AND REVISED IFRS IN ISSUE BUT NOT YET EFFECTIVEAt the date of authorisation of these financial statements, the following new and revised Standards and Interpretations were in issue but not yet effective:

New IFRS and relevant amendmentsEffective for annual periods beginning on or after

Financial Instruments

IFRS 9: Financial Instruments (as revised in 2010 to include requirements for the classification and measurement of financial liabilities and incorporate existing derecognition requirements) January 2015

Amendments to IFRS 9 and IFRS 7: Mandatory Effective Date of IFRS 9 and Transition Disclosures January 2015

Consolidation, joint arrangements, associates and disclosures

IFRS 10: Consolidated Financial Statements January 2013

IFRS 11: Joint Arrangements January 2013

IFRS 12: Disclosure of Interests in Other Entities January 2013

Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosures in Other Entities: Transition Guidance and investment entities January 2013

IAS 27: Separate Financial Statements (as revised in 2011) January 2013

IAS 27: Separate Financial Statements amendments for investments entities January 2014

IAS 28: Investments in Associates, reissued as IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) January 2013

Fair value measurement

IFRS 13: Fair Value Measurement January 2013

Revised IFRS

Employee benefits

IAS 19: Employee Benefits (as revised in 2011 for the post - employment benefits and termination benefits) January 2013

Amendments to IFRSs

IAS 1: Presentation of items of other comprehensive income July 2012

IAS 32: Offsetting Financial Assets and Financial Liabilities January 2014

Annual improvements to IFRSs 2009 to 2011 Cycles January 2013

IFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities January 2013

New Interpretations and amendments to Interpretations:

IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine 1 January 2013

The directors anticipate that the adoption of the above standards and interpretations in future periods will have no material impact on the financial statements of the Company in the period of initial application.



3 SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies are as follows:

Revenue and deferred incomeRevenue from rendering of services:Revenue from rendering of services represents the value of telecommunication services provided to customers. Revenue is recognised over the period to which it relates.

Interconnection revenue:Revenues from network interconnection with other domestic and international telecommunications operators are recognised based on the actual traffic.

Operating revenues for local and international interconnections are based on tariffs as stipulated by the Telecommunication Regulatory Authority of the Sultanate of Oman or as agreed between the operators. Interconnection revenue and cost are reported on a gross basis in the statement of comprehensive income.

Sales of prepaid cards:Sales of prepaid cards is recognised as revenue based on the estimated utilisation of the prepaid cards sold. Sales relating to unutilised prepaid cards are accounted as deferred income. Deferred income related to unused prepaid cards is recognised as revenue when utilised by the customer or upon termination of the customer relationship. Revenue is recognised net of any upfront discount given.

Sales of equipment:Revenue from sales of equipment is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Reseller revenue:Revenue from resellers is recognised based on the traffic usage.

Interest revenue:Interest revenue is recognised as the interest accrues using the effective interest method, under which the rate used exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed as incurred. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds.

TaxationCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Taxation is provided in accordance with Omani regulations.

Deferred taxDeferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have been enacted at the reporting date.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses, if any, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.



3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation (Continued)

Current and deferred tax for the yearCurrent and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Directors’ remunerationThe Company follows the Commercial Companies Law 1974 (as amended), and other latest relevant directives issued by Capital Market Authority, in regard to determination of the amount to be paid as Directors’ remuneration. Directors’ remuneration is charged to profit or loss in the year to which they relate.

Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements only in the period in which the dividends are approved by the Company’s shareholders.

Foreign currency transactionsTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences are recognised in profit or loss.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Capital work-in-progress is not depreciated. The estimated useful lives are as follows:

Mobile/fixed exchange and network equipment 5 – 15 years

Subscriber apparatus and other equipment 2 – 10 years

Building 10 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recognised in profit or loss as the expense is incurred.

When each major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognising of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in profit or loss in the period the asset is derecognised.

The assets’ residual values, useful lives and methods are reviewed, and adjusted prospectively, if appropriate, at each financial year end.




Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the statement of income in the period in which the expenditure is incurred.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

A summary of the useful lives and amortisation methods of the Company’s intangible assets are as follows:

Mobile licence costs Fixed licence costs

Useful lives Finite (15 years) Finite (25 years)

Amortisation method used Amortised on a straight line basis over the periods of availability.

Amortised on a straight line basis over the periods of availability.

Internally generated or acquired Acquired Acquired

InventoriesInventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventory is based on the weighted average principle and includes expenditure incurred in acquiring inventories and bringing them to their existing location and condition. Provision is made for obsolete, slow-moving and defective inventories, where appropriate.

Employees’ benefitsEnd of service benefitsEnd of service benefits are accrued in accordance with the terms of employment of the Company for employees at the reporting date, having regard to the requirements of the Oman Labour Law. Employee entitlements to annual leave are recognised when they accrue to employees and an accrual is made for the estimated liability for annual leave as a result of services up to the reporting date.

Defined contribution planContributions to a defined contribution retirement plan for Omani employees in accordance with the Omani Social Insurance Scheme are recognised in profit or loss as incurred.

ProvisionsGeneralA provision is recognised in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate of the amount thereof can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Site restoration provisionThe provision for site restoration costs arose on construction of the networking sites. A corresponding asset is recognised in property, plant and equipment. Site restoration costs are provided at the present value of expected costs to settle the obligation using estimated cash flows. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the site restoration liability. The unwinding of the discount is expensed as incurred and recognised in the profit or loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.




LeasesFinance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised in profit or loss on a straight-line basis over the lease term.

RoyaltyRoyalty is payable to the Telecommunication Regulatory Authority of the Sultanate of Oman on an accrual basis.

Financial instrumentsTrade and other receivablesTrade and other receivables are initially recognised at cost and subsequently measured at amortised cost, using the effective interest method. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

Cash and cash equivalentsFor the purpose of the statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Interest-bearing borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense of the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the net carrying amount of the financial liability. Instalments due within one year at amortised cost are shown as a current liability.

Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process. Interest costs are recognised as an expense when incurred except those that qualify for capitalisation.

Accounts payable and accrualsTrade payables are initially measured at their fair value at the time of transaction and subsequently measured at amortised cost, using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the net carrying amount of the financial liability. Liabilities are recognised for amounts to be paid for goods and services received, whether or not billed to the Company.

Derivative financial instrumentsThe Company makes use of derivative instruments to manage exposures to interest rate, including exposures arising from forecast transactions. In order to manage interest rate risks, the Company applies hedge accounting for transactions which meet the specified criteria.

At inception of the hedge relationship, the Company formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge, and the method that will be used to assess the effectiveness of the hedging relationship.




Derivative financial instruments (Continued)

Also at the inception of the hedge relationship, a formal assessment is undertaken to ensure that the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item. A hedge is regarded as highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%. For situations where that hedged item is a forecast transaction, the Company assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the profit or loss.

Cash flow hedgesFor designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognised directly in the statement of comprehensive income in the cash flow hedge reserve. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in profit or loss.

When the hedged cash flow affects the profit or loss, the gain or loss on the hedging instrument is ‘recycled’ in the corresponding income or expense line of the statement of comprehensive income. When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in other comprehensive income remains in equity until the forecasted transaction or firm commitment affects profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss recorded in equity is recognised in profit or loss.

The fair value of unquoted derivatives is determined by the discounted cash flows method.

Derecognition of financial assets and financial liabilitiesFinancial assets:A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• therightstoreceivecashflowsfromtheassethaveexpired;or

• theCompanyhastransferreditsrightstoreceivecashflowsfromtheassetorhasassumedanobligationtopaythereceivedcashflowsinfullwithoutmaterialdelaytoathirdpartyundera‘pass-through’arrangement;and

• Either(a)theCompanyhastransferredsubstantiallyalltherisksandrewardsoftheasset,or

(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities:A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

Significant accounting judgements, estimates and assumptionsThe preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are set out in note 25.



4 REVENUE

2012OMR ‘000

2011 OMR ‘000

Traffic 170,442 171,683One time and recurring charges 1,531 1,927Interconnection revenue 24,108 26,490Inbound roaming 5,360 4,724

201,441 204,824Less: Distributor discounts (7,941) (7,959)

193,500 196,865

5 OPERATING EXPENSES

2012OMR ‘000

2011OMR ‘000

Interconnection charges, net of volume rebate 29,903 25,128Cost of equipment sold and other services 3,796 4,656Repairs and maintenance 13,125 11,805Lease lines and frequency fee 8,254 9,501Rental and utilities 4,979 3,759Allowance for inventory obsolescence 77 (3)

60,134 54,846

6 GENERAL AND ADMINISTRATIVE EXPENSES

2012OMR ‘000

2011OMR ‘000

Employees’ salaries and associated costs 22,424 23,192Service fees (note 21) 5,822 5,889Sales and marketing 4,193 3,958Legal and professional charges 1,968 2,093Allowance for impairment losses on trade receivables (note 12) 1,720 2,072Commission on cards 221 217Rental and utilities 3,280 2,710Others 4,628 4,330

44,256 44,461



7 FINANCING COSTS (NET)

2012OMR ‘000

2011OMR ‘000

Interest on term loan 1,554 2,992Site restoration – unwinding of discount (note 18) 100 204Interest income on deposits (326) (77)Other interest 23 82

1,351 3,201

8 INCOME TAX

2012OMR ‘000

2011OMR ‘000

Statement of incomeCurrent year 4,594 6,210Deferred tax relating to origination and reversal of temporary differences 569 267

5,163 6,477

Current liabilityCurrent year 4,594 6,210Prior year 207 173

4,801 6,383

Deferred tax liabilityBeginning of the year (616) (153)Movement for the year through profit or loss (569) (267)Movement for the year through statement of other comprehensive income (39) (196)

At the end of the year (1,224) (616)



8 INCOME TAX (Continued)

The deferred tax asset/(liability) comprises the following types of temporary differences:

2012OMR ‘000

2011OMR ‘000

Property, plant and equipment (1,851) (1,489)Provisions 626 833

(1,225) (656)Net unrealised gains on cash flow hedges 1 40

(1,224) (616)

Set out below is a reconciliation between income tax calculated on accounting profits with income tax expense for the year:

2012OMR ‘000

2011OMR ‘000

Profit before tax 42,139 53,989

Tax at applicable rate 5,053 6,475Non-deductible expenses and other permanent differences (459) (265)Deferred tax relating to origination and reversal of temporary differences 569 267

5,163 6,477

The tax rate applicable to the Company is 12% (2011: 12%). Deferred tax asset/liability is recorded at 12% (2011: 12%). For the purpose of determining the taxable results for the year, the accounting profit of the Company has been adjusted for tax purposes. Adjustments for tax purposes include items relating to both income and expense. The adjustments are based on the current understanding of the existing laws, regulations and practices.

The Company’s tax assessments up to 2006 have been completed. Management is of the opinion that additional taxes, if any, that may be assessed on completion of the assessments for the open tax years would not be significant to the Company’s financial position at 31 December 2012.

9 BASIC AND DILUTED EARNINGS PER SHAREBasic earnings per share are calculated by dividing the profit for the year by the weighted average number of shares outstanding during the year as follows:

2012 2011

Profit for the year (OMR’000) 36,976 47,512Weighted average number of shares outstanding for the year (number in thousand) 650,944 650,944

Basic earning per share (OMR) 0.057 0.073



9 BASIC AND DILUTED EARNINGS PER SHARE (Continued)

No figure for diluted earnings per share has been presented as the Company has not issued any instruments which would have an impact on earnings per share when exercised.

Net assets per share is calculated by dividing the equity attributable to the shareholders of the Company at the reporting date by the number of shares outstanding.

2012 2011

Net assets (OMR’000) 180,049 167,519Number of shares outstanding at the reporting date (number in thousands) 650,944 650,944

Net assets per share (OMR) 0.277 0.257

10 PROPERTY, PLANT AND EQUIPMENT

Mobile/fixed exchange and

network equipmentOMR ‘000

Subscriber apparatus and

other equipmentOMR ‘000

BuildingsOMR ‘000

Capital work in progressOMR ‘000

TotalOMR ‘000

Cost1 January 2012 225,464 27,754 1,459 22,763 277,440Additions 33,880 2,760 1,073 23,742 61,455Capitalised during the year 10,350 1,551 3,320 (15,221) -Disposals (776) (14) - - (790)

31 December 2012 268,918 32,051 5,852 31,284 338,105

Depreciation1 January 2012 74,033 21,109 160 - 95,302Charge for the year 25,120 3,582 367 - 29,069Disposals (388) (14) - - (402)

31 December 2012 98,765 24,677 527 - 123,969

Net book value31 December 2012 170,153 7,374 5,325 31,284 214,136



10 PROPERTY, PLANT AND EQUIPMENT (Continued)

Mobile/fixed exchange and

network equipmentOMR ‘000

Subscriber apparatus and

other equipmentOMR ‘000

BuildingsOMR ‘000

Capital work in progress

OMR ‘000Total

OMR ‘000

Cost1 January 2011 175,293 24,762 363 36,181 236,599Additions 15,054 2,835 662 22,312 40,863Capitalised during the year 35,117 179 434 (35,730) -Disposals - (22) - - (22)

31 December 2011 225,464 27,754 1,459 22,763 277,440

Depreciation1 January 2011 52,544 18,368 66 - 70,978Charge for the year 21,489 2,763 94 - 24,346Disposals - (22) - - (22)

31 December 2011 74,033 21,109 160 - 95,302

Net book value31 December 2011 151,431 6,645 1,299 22,763 182,138

Addition for the year ended 31 December 2012 is net of reversal of provision for site restoration of OMR 1,487,000 (year ended 31 December 2011 includes provision for site restoration cost of OMR 207,000) (note 18). This has been adjusted in the cash outflow on purchase of property plant and equipment in the statement of cash flows.

11 LICENCE FEE

Mobile licenceOMR ‘000

Fixed line licenceOMR ‘000

TotalOMR ‘000

CostBalance at 1 January 2012 42,331 21,403 63,734Additions during the year 350 - 350

Balance at December 2012 42,681 21,403 64,084

AmortisationBalance at 1 January 2012 19,165 2,144 21,309Amortisation during the year 2,844 856 3,700

Balance at 31 December 2012 22,009 3,000 25,009

Net book value At 31 December 2012 20,672 18,403 39,075



11 LICENCE FEE (Continued)

Mobile licenceOMR ‘000

Fixed line licenceOMR ‘000

TotalOMR ‘000

CostBalance at 1 January 2011 42,331 21,403 63,734Additions during the year - - -

Balance at December 2011 42,331 21,403 63,734

AmortisationBalance at 1 January 2011 16,327 1,288 17,615Amortisation during the year 2,838 856 3,694

Balance at 31 December 2011 19,165 2,144 21,309

Net book valueAt 31 December 2011 23,166 19,259 42,425

Licence fee represents the amount paid to the Telecommunication Regulatory Authority of the Sultanate of Oman for obtaining the licence to operate as fixed and mobile telecommunication service provider. Licence fee is stated at cost less accumulated amortisation and impairment losses.

In accordance with the terms of mobile and fixed line licences granted to the Company, a royalty is payable to the Government of the Sultanate of Oman. The royalty payable is calculated based on 7% of the net of predefined sources of revenue and interconnection expenses to local operators.

12 RECEIVABLES AND PREPAYMENTS

2012OMR ‘000

2011OMR ‘000

Post paid receivable 3,880 4,325Amount due from distributors 9,406 10,073Receivable from other operators 5,754 5,718Unbilled receivables 4,047 4,268

23,087 24,384Less: allowance for impaired receivables (2,836) (2,907)

20,251 21,477Prepaid expenses and other receivables 9,436 7,710Deferred cost 368 515

30,055 29,702



12 RECEIVABLES AND PREPAYMENTS (Continued) As at 31 December 2012, trade receivables at nominal value of OMR 2,836,067 (2011: OMR 2,907,348) were impaired. Movements in allowance for impairment of receivables were as follows:

2012OMR ‘000

2011OMR ‘000

At 1 January 2,907 1,698Charge for the year (note 6) 1,720 2,072Written off during the year (1,791) (863)

2,836 2,907

As at 31 December, the ageing of unimpaired trade receivables is as follows:

TotalOMR ‘000

Neither past due nor impaired

OMR ‘000

Past due but not impaired

30-60 daysOMR ‘000

60-90 daysOMR ‘000

Over 90 daysOMR ‘000

2012 20,251 17,348 471 255 2,177

2011 21,477 18,152 780 755 1,790

Unimpaired receivables are expected, on the basis of past experience, to be substantially recoverable. It is not the practice of the Company to obtain collateral over receivables, and virtually all are therefore unsecured. However, sales made to distributors are backed with their corporate/bank guarantees and certain post paid customers’ balances are secured by deposits.

13 BANK BALANCES AND CASHIncluded in bank balances and cash are bank deposits of OMR 554,704 (31 December 2011: OMR 2,003,304) with certain commercial banks in Oman.

The Company is required to maintain certain service deposit balances to comply with the requirements of its term loan agreement. As of 31 December 2012, the balances in these service deposit accounts amounted to OMR 569 (31 December 2011: OMR 15,236,157) and these are denominated in USD.

14 SHARE CAPITAL AND DIVIDENDS

Authorised Issued and fully paid

2012OMR ‘000

2011OMR ‘000

2012OMR ‘000

2011OMR ‘000

Ordinary shares 70,000 70,000 65,094 65,094

Major shareholdersDetails of shareholders who hold 10% or more of the Company’s shares are as follows:

2012 2011

Number of shares % Number of shares %

TDC-Qtel Mena Investcom BSC 358,019,310 55 358,019,310 55



14 SHARE CAPITAL AND DIVIDENDS (Continued)

DividendsThe Company’s shareholders at the annual general meeting held on 26 March 2012 approved a payment of baisa 38 per share as dividend for the financial year ended 31 December 2011 and this was paid in April 2012.

The Directors have proposed a dividend of baisa 38 per share for year ended 31 December 2012, amounting to OMR 24,735,881. This is subject to approval of the Company’s shareholders at the Annual General Meeting to be held in March 2013.

15 STATUTORY RESERVEArticle 106 of the Commercial Companies Law of 1974 requires that 10% of the Company’s profit for the year be transferred to a non-distributable statutory reserve until the amount of statutory reserve becomes equal to one third of the Company’s issued share capital. This reserve is not available for distribution.

16 DERIVATIVE FINANCIAL INSTRUMENTSIn 2006, the Company entered into two interest rate swap arrangements with Qatar National Bank and BNP Paribas to cap its exposure to fluctuating interest rates on its term loan. The loan amount covered under the swap agreement has been fully paid and the swap arrangement expired in March 2012. Under the swap agreements, the Company was committed to pay a fixed interest rate of 5.348% per annum and receive a floating interest rate based on 3 month US $ LIBOR.

During 2012, the Company entered into two interest rate swap arrangements with Qatar National Bank to mitigate the risk of the fluctuating interest rates on its term loan (note 17). The key terms of the arrangements are as below:

SN Notional Amount Effective Date Termination Date Pay Fixed Receive Floating

1 USD 10,000,000 27 Dec 2012 29 Dec 2014 0.335% 1 month USD LIBOR

2 USD 12,000,000 27 Dec 2012 29 Dec 2016 0.555% 1 month USD LIBOR

The swap arrangement qualifies for hedge accounting under IAS 39, and as at 31 December 2012, the unrealised loss of OMR 8,000 relating to measuring the financial instruments at fair value is included in equity in respect of these contracts (31 December 2011: OMR 336,682).

The table below shows the negative fair value of the swaps, which is equivalent to the market values, together with the notional amounts analysed by the term to maturity.

Negativefair value

OMR ‘000

Notional amount total

OMR ‘000

Notional amount by term to maturity

1 - 12 months

OMR ‘000

More than 1 up to 5 years

OMR ‘000

Over 5 years

OMR ‘000

31 December 2012 Interest rate swaps 8* 8,472 - 8,472 -

31 December 2011 Interest rate swaps 337* 27,727 27,727 - -

*Negative fair value shown under equity in the statement of financial position is net of deferred tax of OMR 874 (2011: OMR 40,402).



17 INTEREST BEARING BORROWINGS

2012OMR ‘000

2011OMR ‘000

Total interest bearing borrowings 28,479 55,166Less: deferred financing costs (839) (11)

27,640 55,155Less: current portion of term loan (6,701) (33,215)

Non-current portion 20,939 21,940

The Company entered into a new syndicated loan facility agreement in February 2012 by repaying its original facility of USD 143 million fully. The new facility consist of a long-term five year amortising loan facility of USD 87 million (OMR 33.5 million) and a 5 year Revolving Credit Facility of OMR 24 million.

The banking syndicate included international and national banks.

The term loan of USD 87 million is repayable in twenty quarterly instalments commencing from May 2012.

Both facilities bear interest at US LIBOR plus margin.

The loan agreement contains two financial covenants, being a maximum leverage ratio and a minimum interest cover ratio.

18 SITE RESTORATION PROVISIONSite restoration provision as of the reporting date amounted to OMR 2,255,645 (31 December 2011: OMR 3,642,583). The Company is committed to restore each site as it is vacated. A movement schedule is set out below:

2012OMR ‘000

2011OMR ‘000

Balance at 1 January 3,643 3,232(Reduction) / additional provision during the year (1,487) 207Unwinding of discount (note 7) 100 204

Balance at the end of the year 2,256 3,643

19 EMPLOYEE BENEFITS

2012OMR ‘000

2011OMR ‘000

Non-current

Employees’ end of service benefits 926 783

Current

IPO incentive – Shadow shares 72 1,355



19 EMPLOYEE BENEFITS (Continued)

The Company has granted to its employees a certain number of shadow (virtual) shares as per the announcement made during its IPO and these are to be settled in cash. The cost of the shadow shares is measured initially at the fair value at the grant date with reference to the market price of the Company’s shares. The fair value is expensed immediately. On 1st July 2011 the Company entered into a hedge agreement to reduce its risk of share fluctuation, and any gain or loss from re-measuring the hedge instrument at fair value is expensed immediately. The liability is re-measured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in profit or loss. During the year the obligation under the shadow shares scheme relating to the employee retention programme were settled, based on the market value in March 2012.

20 PAYABLES AND ACCRUALS

2012OMR ‘000

2011OMR ‘000

Trade accounts payable 26,457 13,431Accrued expenses – operating expenses 22,078 21,897Accrued expenses – capital expenses 28,618 17,421Amounts due to related parties (note 21) 2,100 1,800Deposits from customers 225 328

79,478 54,877

21 RELATED PARTY TRANSACTIONSRelated parties represent associated companies, major shareholders, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company’s management.

Details regarding transactions with the related parties included in the financial statements are set out below:

2012 2011

Other related parties

OMR ‘000

Directors and key management

OMR ‘000

Other related parties

OMR ‘000

Directors and key management

OMR ‘000

Directors’ and key management remuneration - 1,977 - 1,418Service fee (note 6) 5,822 - 5,889 -Other expenses 1,004 - 1,297 -

6,826 1,977 7,186 1,418

Effective 1 January 2008, the Company has entered into a technical and service agreement with a related party (other related party). In consideration of services provided, the Company pays a service fee to the related party which is calculated annually in an amount equal to 3% of the Company’s gross revenue.



21 RELATED PARTY TRANSACTIONS (Continued)Trade payable balances with related parties included in the statement of financial position are as follows:

2012OMR ‘000

2011OMR ‘000

Major shareholders 18 47Other related parties 2,082 1,753

2,100 1,800

Compensation of key management personnelThe remuneration of members of key management and directors during the year was as follows:

2012OMR ‘000

2011OMR ‘000

Salaries / remuneration and benefits 1,727 1,177Director’s remuneration 200 200Employees’ end of service benefits 50 41

1,977 1,418

The majority of the increase is attributable to long-term incentive obligations for senior management (2011: Nil). The balance of the increase is attributable to the addition of new senior management in Q4 2011.

22 EXPENDITURE COMMITMENTS

2012OMR ‘000

2011OMR ‘000

Capital expenditure commitmentsEstimated capital expenditure contracted for at the reporting date but not provided for:Property, plant and equipment 24,612 10,541

Operating lease commitmentsFuture minimum lease payments: Within one year 5,958 10,764 After one year but not more than five years 12,390 13,235 More than five years 10,317 12,974

Total operating lease expenditure contracted for at the reporting date 28,665 36,973



23 CONTINGENT LIABILITIESGuaranteesAt 31 December 2012, the Company had contingent liabilities in respect of a performance bond guarantee of OMR 6.6 million (2011: OMR 6.6 million) in the ordinary course of business from which no material liabilities are expected to arise.

ClaimsThe Company has resolved the claim with the Telecommunication Regulatory Authority (TRA) regarding the calculation of certain fees payable by the Company under its mobile and fixed licences.

24 RISK MANAGEMENTThe Company’s principal financial liabilities, other than derivatives, comprise bank loans, and payables and accruals. The main purpose of these financial instruments is to raise finance for the Company’s operations. The Company has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations. The Company also enters into derivative transactions, primarily interest rate swaps. The purpose is to manage the interest rate risks arising from the Company’s operations and its sources of finance.

The main risks arising from the Company’s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to its long-term debt obligations with floating interest rates. The Company’s bank deposits carry fixed rates of interest and therefore are not exposed to interest rate risk.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Company enters into interest rate swaps, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount.

Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company trades only with recognised, creditworthy dealers and operators. Its three largest dealers’ balances account for 45% of outstanding unimpaired trade receivable at 31 December 2012 (2011: 47%). The Company obtains bank/corporate guarantees from its dealers in order to mitigate its credit risk. It is the Company’s policy that certain credit verification is performed for all of the Company’s post paid subscribers. In addition, receivable balances are monitored on an ongoing basis.

With respect to credit risk arising from the other financial assets of the Company, including cash and cash equivalents, the Company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

The Company’s’ credit risk with regard to bank deposits is limited as the majority of funds are placed with a bank that has a Moody’s short-term deposit rating of Prime-1.

Currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s payable and accruals include amounts payable in US Dollars. As of the reporting date this USD denominated payable amount was approximately 47% (31 December 2011: 44%) of the Company’s total payables and accruals. The Company’s long-term borrowings and certain bank deposits amounting to OMR 28,478,145 and OMR 1,523,743 respectively are denominated in US Dollars. The Omani Rial is pegged to the US Dollar. There are no other significant financial instruments in foreign currency other than US Dollars and consequently foreign currency risk is mitigated.



24 RISK MANAGEMENT (Continued)

Liquidity riskThe Company limits its liquidity risk by ensuring bank facilities are available. The Company’s terms of sales require amounts to be paid within 30 days of the date of sale. A major portion of the Company’s sale is generated through sale of prepaid cards.

The table below summarises the maturities of the Company’s undiscounted financial liabilities, based on contractual payment dates and current market interest rates.

As at 31 December 2012Less than 3 months

OMR ‘0003 to 12 months

OMR ‘0001 to 5 yearsOMR ‘000

> 5 yearsOMR ‘000

TotalOMR ‘000

Interest bearing borrowings 1,675 5,026 21,778 - 28,479Payables and accruals 77,153 225 - - 77,378Due to related parties 2,100 - - - 2,100Interest on term loan 161 425 859 - 1,445

Total 81,089 5,676 22,637 - 109,402

As at 31 December 2011Less than 3 months

OMR ‘0003 to 12 months

OMR ‘0001 to 5 yearsOMR ‘000

> 5 yearsOMR ‘000

TotalOMR ‘000

Interest bearing borrowings 30,471 2,744 21,951 - 55,166Payables and accruals 52,749 328 - - 53,077Due to related parties 1,800 - - - 1,800Interest on term loan 1,829 125 997 - 2,951

Total 86,849 3,197 22,948 - 112,994

Operational riskOperational risk is the risk of loss arising from inadequate or failed internal processes, human error, systems failure or from external events. The Company has a set of policies and procedures, which are approved by the Board of Directors and are applied to identify, assess and supervise operational risk. The management ensures compliance with policies and procedures and monitors operational risk as part of overall risk management. Internal audit function is also utilised by the Company in mitigating this risk.

Capital managementThe Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2012 and year ended 31 December 2011. Capital comprises share capital and retained earnings, and is measured at OMR 159,678,000 as at 31 December 2012 (31 December 2011: OMR 151,136,000).



25 KEY SOURCES OF ESTIMATION UNCERTAINTY

Deferred tax assetsDeferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the asset can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are included in note 8.

Impairment of accounts receivableAn estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and an allowance applied according to the length of time past due, based on historical recovery rates.

At the reporting date, gross trade accounts receivable were OMR 23,087,000 (2011: OMR 24,384,000) and the provision for doubtful debts is OMR 2,836,000 (2011: OMR 2,907,000). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the profit or loss. The related details are set out in note 12.

Provision for site restorationThe Company has recognised a provision for site restoration associated with the sites leased by the Company. In determining the amount of the provision, assumptions and estimates are required in relation to discount rates and the expected cost to dismantle and remove equipment from the site and restore the land to its original condition. The carrying amount of the provision as at 31 December 2012 is OMR 2,256,000 (31 December 2011 – OMR 3,643,000). The related details are set out in note 18.

In order to reflect current market conditions affecting the site restoration costs, a review of the estimates was carried out during the year by the management including inflation rate, interest rate, number of sites and costs per site, and as a result a decrease in provision was made.

Impairment of inventoriesInventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on historical selling prices.

At the reporting date goods for resale were OMR 1,466,915 (31 December 2011: OMR 1,035,000) and the allowance for obsolete inventory amounted to OMR 442,159 (2011: OMR 365,000). Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the profit or loss.

Impairment of non-financial assetsThe Company assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. These assets are also tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

DepreciationDepreciation is charged so as to write off the cost of assets over their estimated useful lives. The calculation of useful lives is based on management’s assessment of various factors such as the operating cycles, maintenance programmes, and normal wear and tear using best estimates.

Going concernThe Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.



26 SEGMENT INFORMATIONInformation regarding the Company’s operating segments is set out below in accordance with the IFRS 8 – Operating Segments.

For management purposes, the Company is organised into business units based on their product and services and has two reportable operating segments as follows:

1. Operation of Global System for Mobile Communication (GSM) for prepaid and post paid services, sale of telecommunication equipment and other associated services.

2. Provision of international and national voice and data services from fixed line, sale of telecommunication equipment and other associated services.

Management monitors the operating results of its business for the purpose of making decisions about resource allocation and performance assessment.

Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties.

Segment revenue and resultsA segment result represents the profit earned by each segment without allocation of finance income or finance cost.

The Company commenced its fixed line services in May 2010 and its operations are mainly confined to the Sultanate of Oman.

Segmental results for the year ended 31 December 2012 are as follows:

MobileOMR ‘000

Fixed lineOMR ‘000

AdjustmentsOMR ‘000

TotalOMR ‘000

RevenueExternal sales 177,336 16,164 - 193,500Inter-segment sales 3,364 23,809 (27,173) -

Total revenue 180,700 39,973 (27,173) 193,500

ResultsDepreciation 23,038 6,031 - 29,069

Amortisation 2,844 856 - 3,700

Segment results – Profit 42,340 1,150 - 43,490

Finance expense (1,351)

Profit before taxation 42,139Taxation (5,163)

Profit for the year 36,976



26 SEGMENT INFORMATION (Continued)

Segment revenue and results (Continued)

Segmental results for the year ended 31 December 2011 are as follows:

MobileOMR ‘000

Fixed lineOMR ‘000

AdjustmentsOMR ‘000

TotalOMR ‘000

RevenueExternal sales 185,440 11,425 - 196,865Inter-segment sales 2,847 21,589 (24,436) -

Total revenue 188,287 33,014 (24,436) 196,865

ResultsDepreciation 19,702 4,644 - 24,346

Amortisation 2,838 856 - 3,694

Segment results – Profit 54,689 2,501 - 57,190

Finance expense (3,201)

Profit before taxation 53,989Taxation (6,477)

Profit for the year 47,512

Capital expenditure incurred for different segments is as follows:

2012OMR ‘000

2011OMR ‘000

Property, plant and equipment- Mobile 56,605 29,183- Fixed 4,850 11,680

61,455 40,863

27 FAIR VALUES OF FINANCIAL INSTRUMENTSFinancial instruments comprise financial assets, financial liabilities and derivatives.

Financial assets consist of cash and bank balances, and receivables. Financial liabilities consist of term loans, and payables. Derivatives consist of interest rate swap contracts.

The fair value of financial assets and liabilities are considered by the Company’s Board of Directors not to be materially different from their carrying amounts.



27 FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Fair value hierarchyThe Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

As at 31 December 2012, the Company held interest rate swap derivatives instruments measured at fair value. The fair values of the interest rate swaps arrangements are worked out using the level 2 valuation technique. The related fair value details are provided by the swap counter party.

Level 1OMR ‘000

Level 2OMR ‘000

Level 3OMR ‘000

TotalOMR ‘000

2012 Interest rate swap - 8 - 8

Level 1OMR ‘000

Level 2OMR ‘000

Level 3OMR ‘000

TotalOMR ‘000

2011 Interest rate swap - 337 - 337

There were no transfers between the levels during the current as well as the previous year.

28 COMPARATIVE AMOUNTSThe following corresponding figures for 2011 have been reclassified in order to conform with the presentation for the current period:

Statement of income

2011Previously

reportedOMR ‘000

2011Currently reported

OMR ‘000

Operating expenses (29,578) (54,846) Reclassification of repairs and maintenance, lease lines and frequency fee, and rental and utilities-network from general and administrative expense

General and administrative expenses

(69,739) (44,461) Reclassification of repairs and maintenance, lease lines and frequency fee, and rental and utilities-network to operating expense.

Reclassification of currency exchange loss/gain to other incomeOther income 424 337 Reclassification of interest income to financing costs.

Reclassification of currency exchange loss/gain from general and administrative expense.

Financing costs (3,278) (3,201) Reclassification of interest income from other income.

(102,171) (102,171)

These reclassifications have been made to improve the quality of information presented. The reclassifications do not affect the reported profit for the year 2011 and hence have no impact on the statement of financial position. Accordingly, the statement of financial position for 2010 has not been presented.

29 EVENTS AFTER REPORTING PERIODIn early 2013, the Company signed a new term loan agreement worth USD 234 million (OMR 90 million) for capital expenditure and working capital requirements with a consortium of banks. The loans consists of a term loan worth USD 182 million (OMR 70 million) with a five-year tenure and a revolving credit facility of USD 52 million (OMR 20 million) with a three year tenure.


Nawras Firsts

2005

Nawras fundamentally changed Oman’s mobile telecommunications landscape by introducing numerous innovations. These included payment through banks, data services using 2G EDGE, distant independent tariffs, web-based customer services, My Nawras, missed call notice, international roaming for prepaid, international data roaming, a new mobile office solution in cooperation with Microsoft, prepaid to prepaid credit transfer, the Nawras rewards programme, Nawras Zone, and Nawras’ web portal that provided content such as flight information, restaurants, cinema, and global weather.

2006

Firsts in 2006 included the trial of 3G services, e-recharge, post2prepaid migration, the launch of Mobile Number Portability, business CUG, e-billing for business, and a special offer for OPAL member companies, employees and families.

2007

Market-leading initiatives included postpaid to prepaid credit transfer, ‘Rannati’ personalised greeting content for customers, international data roaming for prepaid, WebSMS, 3G+ video calling, video monitoring, mobile broadband, and mobile info browsing, ‘Call Me’ notification service, and the ‘Send Me Credit’ notification service.

2008

Nawras Firsts in 2008 included the Nawras mobile store, in-flight roaming, international MMS roaming for prepaid, prepaid mobile broadband, breaking news and daily sports news sent by SMS, voice SMS, wireless data link, Elite Club, e-payment for postpaid, self-service machines, and Shababiah – Nawras youth sub-brand.

2009

An extensive range of Firsts came to the market, from BawaBaty web portal, Mobile TV, Mawjood notification service, and Nawras SMS link – to Muscat Municipality services, MyNawras for business, MobiKhazana SMS service, Asian-based content, SmartRoamer, saving on roaming within the GCC region, Future SMS, Flash SMS and SMS2Email, a new e-newsletter for business, Oman Air information via SMS, and SMS classified advertisements.

2010

Collect calls, business broadband share, micro SIMs for the Apple iPad, and the Alafasy Qur’an service were introduced. We also expanded the appeal of Oman’s only telecom customer loyalty programme – Nawras Elite Club – adding various new benefits and privileges including free car parking, access to business lounges and meet-and-greet services at Muscat Airport, roadside assistance, priority call handling at Nawras customer care, and many attractive discounts at retail outlets.

2011

The innovative spirit continued, with Nawras Backstage presenting NE-YO Live in Muscat and the MyNawras HD App for iPad being launched. The new Elite Program introduced Silver membership and product ‘firsts’ included Bill Analyser; Rannati copy tune service; Emsakeyah, Qasas Al-Anbeya, and Eazaz Al Qur’an Arabic and Qur’anic services; 6+6 international offer giving customers six free minutes after making an international call lasting six minutes; Elite rewards for receiving calls; free Internet Performance Reports for corporate customers; Business Mousbak prepaid service for corporate customers; and a prepaid solution for postpaid customers.

2012

Continued emphasis on making our customers’ lives easier and increasing their choices saw a number of notable firsts in social media, apps and data: the Facebook SMS service; new data bundles, including an off-peak monthly mobile broadband bundle; a free SMS notification service to show data usage when roaming; an SMS news service in association with Reuters; and international credit transfer.

We showcased the latest 4G for the first time in Oman; were one of the first companies to obtain ISO status for its entire IT Department, with the award of ISO 27001 certification for secure data storage and handling; and our flagship store in Muscat Grand Mall opened at the end of the year – the first of its kind in the Sultanate.

The introduction of a fixed number portability (FNP) service in Oman gives our business customers the opportunity to keep their existing numbers when joining Nawras from another telecommunications operator. Additionally, the first Global Virtual Private Network (GVPN), in association with Tata Communications, offers multinational companies global reach, via our domestic network, to more than 200 of the world’s main business hubs and data centres.

Setting the standard for telecoms in Oman

Our aim is to provide market-leading product and service innovations that provide customers with the latest outstanding features and capabilities.

PO Box 874, PC 111, Muscat, Sultanate of OmanTel.: +968 9501 1500, 2200 2200 www.nawras.om

Nawras – Om

ani Qatari Telecom

munications Com

pany SAOG Annual Report 2012

Annual Report 2012

SGS-COC-004492

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