We Master Excellence

Transcription

Annual Report 2012
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Table of Contents
About Paltel Group
Vision
Values
Message from the Chairman
Board of Directors
Message from the CEO
Members of the Executive Management
Group’s Financial and Management Report
Governance
Social Responsibility
Group Companies’ Performance Report
Palestine Telecommunications Co. (Paltel)
Palestine Cellular Communications Co. (Jawwal)
Hadara Technology Investment (Hadara)
Reach Communication Services (Reach)
Palmedia for Multimedia Services Co. (Palmedia)
Hulul IT Co. (Hulul)
Consolidated Financial Statements
About Paltel Group
Paltel Group started its operations in Palestine in
1997 with Paltel, the public shareholding company.
The Group provides state of the art services to the
Palestinian community. Its services include: Local
and international fixed telephony services, internet,
data communications, mobile services and next
generation services. Paltel Group was able to achieve
the highest standard in telecommunication services
by wisely investing in modern technologies, telecom
infrastructure and human resource development.
Today Paltel Group consists of the following subsidiaries:
• Palestine Telecommunications Company (Paltel)
which provides fixed line, internet and other valueadded services.
• Palestine Cellular Communications Company (Jawwal), the first mobile operator in Palestine.
• Hadara Technology Investment Company, the leading internet service provider in Palestine.
• Reach for Communications Services Company, the
first contact center in Palestine.
• Palmedia for Multimedia Services Company, the
media arm of Paltel Group.
• Hulul IT Company, the IT arm of Paltel Group.
On the off-shore investments side, the Group holds
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a 25.3% stake in Vtel holdings and Vtel MEA shares;
Vtel is registered at the Dubai International Financial
Center (DIFC) one of the most reputable financial
centers in the region. Vtel share ownership is considered to be an important achievement in the company’s goals towards growth and expansion.
Paltel Group significantly contributes to the Palestinian GDP, in addition, Paltel stock represents 33%
of the total market CAP of the Palestine Exchange
(PEX) at the end of 2012. Paltel’s net earnings grew
rapidly during the past years which provided the
company with financial stability to further invest in
technology and development across the ICT industry.
Furthermore, Paltel Group is the biggest employer
in Palestinian private sector with more than 3000
employees.
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Vision
As a market leader in Palestine, we are committed to being the
customers’ choice provider for state-of-the-art communication
services while staying true to our core values, adopting pioneering
business practices, and progressing towards becoming a distinguished
telecom player in the region.
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Our Values
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Our Ethics and Principles
Integrity and Honesty
We are committed to ethical standards
in our operations. Inspired by the value
system of our society; constituting the
basis for conducting our work and our
future direction.
We strive to preserve trust between
our shareholders and our company by
employing integrity and honesty in all
our operations, a reality that helps us
in supporting our business plans, while
moving forward in confidence to preserve shareholders value.
Transparency and Sustainability
Committed to Our Corporate and
National Responsibility
We adopt transparency standards plus
those of accountability and governance
in conducting our business, in order to
achieve our vision and strategy according to the highest of standards, ensuring sustainability to our services.
We are committed to our social responsibility in order to achieve sustainability in
development in addition to our national
responsibility towards building the future
of technology by supporting the development of the ICT sector in Palestine.
Quality and Excellence in Our Services
Strengthening Our Internal Resources and Capacities
We always strive to learn, benefiting from
our local and international experiences
in order to provide high quality services,
while innovating creative solutions and
services based on our solid reading of the
future of technology around the globe.
We work in earnest to develop the internal stills of all our employees in order
to contribute collectively in our efforts
to build the future of technology in
Palestine while servicing our subscribers, shareholders and the community at
large. We do this by constantly investing
in our youth.
Customer Satisfaction
Partnership in Building the Future of
Technology
We truly understand the needs of our
customers and as such we exert all efforts
to preserve their loyalty by ensuring quality services while going out of our way to
meet customer expectations and service
their needs.
We strive to work in partnership with every
citizen and every institution in Palestine
to combine all efforts in order to build the
future of technology in Palestine.
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Net revenues
Gross Profit
365,852
283,757
EBIT
112,059
Net income
Earnings per Share (EPS) in JOD JOD ‘000 except for EPS
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82,132
0.624
Paltel
The Gross Profit Margin grew from 76% in 2011 to 78% in 2012.
Growth rate in fixed line reached 2.9% at the end of 2012 compared to end of 2011.
Growth rate in ADSL reached 18.9% at the end of 2012 compared to end of 2011 .
Jawwal
Jawwal subscriber base grew from 2.42 million at the end of 2011 to 2.58 million at the end of 2012.
Jawwal’s market share formed 79% of the Palestinian market at the end of 2012.
Growth rate in prepaid and postpaid subscribers reached 6.4% at the end of 2012 compared to end of 2011.
Hadara
Net operating revenues reached JOD 7.5 million at the end of 2012.
Accumulative growth rate in ADSL reached 14% during the past five years.
Reach
Net operating revenues reached JOD 5.6 million at the end of 2012 compared to JOD 5.3 million in 2011.
Growth rate in total assets reached 7% at the end of 2012 compared to end of 2011.
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Chairman
Statement
Dear Shareholders,
The year 2012 was marked with exceptional events and various local and regional developments that in turn influenced the
Paltel Group environment. The most significant development was the United Nations General Assembly resolution changing membership of Palestine from being a “non-member observer entity’ to a “non-member observer state’ at the United
Nations, giving Palestinians a certain implicit degree of statehood recognition. Based on this achievement, Paltel Group has
become more ambitious in continuing its pace by developing the telecommunications and IT sector in Palestine including all
the sector’s fixed, mobile and data components. Additionally, we are more insistent on providing modern technologies that
the State of Palestine deserves entirely similar to all world countries; Palestine is abundant with investment opportunities
in the expanding and growing technology sector.
In addition to attaining the international recognition of Palestinian statehood, the year 2012 witnessed remarkable growth
in all Paltel Group’s operational indicators despite the convoluted political and economic conditions particularly in Pales-
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tine and the region as a whole, declaration of a new tax
achievement which informs our international investors
scheme, fluctuations in currency exchange rate, in addi-
that not only do we have a successfully managed telecom
tion to the illegal telecom competition of Israeli cellular
company in local standards; but with such an achieve-
operators in the West Bank and Gaza Strip.
ment we are getting an independent proof point from
On the other hand, the string of challenges is further
leading indices that our company’s performance is at par
exacerbated by additional Israeli obstacles, which are
with regional peers listed on these important indices. Our
directly affecting the company’s business in the West
stock is also marked with its active turnover, as we con-
Bank and Gaza Strip. Thus, we are still committed to
tinue to represent 33% of the total market capitalization
continue fighting all kinds of external operational impedi-
of the Palestine Exchange. This milestone development of
ments such as the siege around our market place, access
Paltel Group’s performance and financial position on both
restrictions to Area “C’, the constant fuel and electricity
the local and regional levels are in line with our ambition
cutoff in Gaza, in addition to lack of network coverage and
of positioning Palestine on the global technology map.
roaming arrangements inside Area “C’ in the West Bank
The year 2012 was exceptional in its opportunities and
and delay in equipment movement between the West
in its list of accomplishments Paltel Group strived to
Bank and Gaza Strip. At the same time, the occupation
maintain a steady and continuous growth, both at the
continues to withhold 3G and 4G frequencies, however;
level of subscriber base and at the level of performance
we consider this as an opportunity for future growth and
and services. This continued success could not have been
serious elevation and development in the telecom sector
achieved on the ground without the growing subscrib-
in Palestine. In spite of the many ongoing external chal-
ers’ base and their valued trust and loyalty that compel
lenges, total number of subscribers (mobile, fixed line and
us to further develop our services and quality standards
ADSL) not only was preserved but further grew by 6.6%
and continue our commitment towards our sharehold-
amounting to 3.16 million subscribers by the end of 2012
ers through continued distribution of annual dividends.
compared to 2.97 million as of end of 2011. Additionally,
Furthermore, with a leading position in the competitive
the Group companies have maintained their leadership
market in which we operate, I see endless opportunities
status among the telecommunications and digital ser-
for Paltel Group companies to grow and prosper, thus
vices industries in the Palestinian market.
empowering future generations and stimulating technol-
Growth in the Operational indicators was also reflected
ogy initiatives. I believe we are on the right track and that
in the stability and strength of our financial position. The
we have a solid management team with a vision and a
consolidated revenues reached JOD 365.9 million by the
strategy that is both applicable and achievable.
end of 2012 compared with JOD 370.6 million by the end
Lastly, I would like to thank you for your trust and
of 2011 declining by 1.3% mainly due to the amendment in
congratulate you for what your Group has achieved in
the Palestinian Income Tax Law raising the rate of corpo-
the year 2012 and look forward to more successes and
rate income tax from 15% to 20% and fluctuations in cur-
achievements in the coming year.
rency exchange rate. Equally, the consolidated net income
decreased by 9.5% to stand at JOD 82.1 million at the end
Sincerely Yours
of 2012 compared with JOD 90.7 million at the end of 2011
Sabih Masri
as a result of the same external upsets to operational
Chairman of the Board of Directors
indicators, in addition to the increse in the operating expenses by 6.6% during 2012. However, the year end 2012
results are satisfactory, taking into account all the difficult
political and economic conditions in Palestine.
On the other hand, we are proud that the (PalTel) share
is now listed on international and regional indices, an
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Members of the Board of Directors
Mr. Sabih Masri
Chairman
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Dr. Farouq Zuaiter
Cairo Amman Bank
Mr. Ghiath Sukhtian
GMS Holding
Mr. Leith Masri
Palestine Development and Investment Co.
(PADICO)
Mr. Talal Nasiruddin
Birzeit Pharmaceutical Co.
‫أعضاء مجلس اإلدارة‬
Mr. Sharhabil Al-Zaim
(PADICO)
Mr. Samir Hulileh
(PADICO)
Mr. Basil Abdel-Nabi
Arab Bank
Mr. Mamoun Abushahla
Al-Maseera International Company
Mr. Basem Abdel Halim
Aswaq Portfolio Investments Company
(Palestine Investment Fund)
Mr. Ammar Aker
The Arab Supply and Trading Co.
(ASTRA)
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CEO Statement
Dear Shareholders,
The year 2012 has passed with specific and tremendous strides for Paltel Group. The year brought notable achievements
along with inevitable challenges, yet as expected, our extraordinary team stepped up to the plate, overcoming those challenges and exceeded expectations. The enthusiasm to innovate, grow, expand and excel have driven the strategy for 2012 as
the year of excellence. This year, Paltel Group can be proud of its achievements as we seek to continue focusing our collective resources to secure sustainable growth and innovation in the telecom in Palestine.
This year we achieved growth in the subscribers base, however the Consolidated net income decreased by 9.5% to stand at
JOD 82.1 million at the end of 2012 compared with JOD 90.7 million at the end of 2011. This decrease is attributed to the
additional costs incurring from amendment in the Palestinian Income Tax Law raising the rate of corporate income tax
from 15% to 20%, fluctuations in currency exchange rate as well as the increase in operating expenses related to increase in
depreciation, advertising and Gaza generators’ fuel expenses.
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The Group was able to achieve a 2.9% growth in its
subscribers’ base was 90% and 10% respectively main-
subscriber base, growth in the numbers of fixed line
taining a market share rate of 79% in a market that has a
subscribers to stand at 396 thousand at the end of 2012
penetration rate of about 77%.
compared with 385 thousand at the end of 2011. This
Paltel Group has taken giant steps in its maturity not only
coincided with the growth in the numbers of ADSL lines
at the Group level but also at the level of the telecom and
by 18.9% to stand at 185 thousand lines at the end of
IT sector in Palestine as a whole by signing an agreement
2012 compared with 156 thousand at the end of 2011. The
with the PANTEL company, a Turkish Telecoms Group
growth in the numbers of fixed line subscribers and ADSL
subsidiary, whereby Palestine would be connected to
lines is attributed to the campaigns made by the Group
the world through a submarine cable without the need
companies during the year in addition to the development
for Israeli companies which provides our company with
of the telecommunications network and enhancement
extra capacity in order to offer better internet services to
of the service quality to exceed our customers’ expecta-
consumers and be freed from the Israeli domination on
tions and fulfill their needs. On the other hand, the new
the quality of services.
lower BSA (Bit Stream Access) rates set by the Ministry
Our record on the community and social development
of Telecommunications and Information Technology have
level is also full of many achievements and Paltel Group
resulted in a noticeable growth in the subscriber base
is still committed to continue launching leading initiatives
along with a decrease in the ARPU by 26.4% compared to
in important sectors such as education and technology as
previous year. One of the important results achieved dur-
well as its commitment towards sustainable community
ing the year 2012 is the growth of penetration rate of the
development programs targeting information technology
ADSL lines (per fixed line) by 46.8% end of 2012 compared
sector and the basic, pre-primary, higher and vocational
with 40.5% end of 2011. This ratio indicates the inevitable
education that would continuously contribute to the em-
digital approach of the Palestinian society, which in turn
powerment of individuals at both public and civil society
motivates us to invest more in the data services sector
institutions.
and to constantly be a step ahead in providing the latest
We will continue our growth momentum and further
digital services.
improve our profitability. We made a shift in the way we
Despite the fact that 2012 passed without facing pecu-
approach business by putting our customers at the heart
liar challenges affecting the company’s operations and
of our plans. In other words, we began to build a base
impacting its financial performance, Paltel Group contin-
management capability through which we renewed our
ued to progress and grow having several advanced stages
pledge to our customers to always provide better services
on the way to achieve our strategic goals and meet the
for our subscribers by enhancing the value of services we
ambitious expectations. Even with the growing competi-
offer and implementing effective segmentation strategies.
tion and the accelerating intense offers from the other
In light of last year’s achievements which offer a predic-
licensed operator, Jawwal was able to not only maintain
tion for a very promising 2013, we thank all of our respect-
a stable customer base but also to increase it by 6.4%
ful shareholders for their continued support and trust, our
from 2.42 million at the end of 2011 to 2.58 million at the
administrative and technical teams for their efforts and
end of 2012. This growth is attributed to Paltel Group’s
our valued subscribers for choosing our services.
excellence in service lines: mobile, fixed, and ADSL services
I am truly honored to lead the Group into the next stage,
on the one hand, and the expansion of their campaigns
and I have no doubt that 2013 will be challenging yet suc-
and services to accommodate more subscribers, while
cessful.
responding to the demand growth for services on another
hand. At the same level, the distribution of custumers
Yours truly
between prepaid and postpaid subscribers out of total
Ammar Aker
Chief Executive Officer
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Executive Management
Paltel Group
Ammar Aker
Chief Executive Officer
Kamal Abu Khadija*
Financial & Human Resources Vice President
Kamal Ratrout
Chief Technical Officer
Mahmod Yasin
Chief Strategic Planning Officer
Imad Lahham
Public Relations Senior Director
Waleed Ftieha
Supply Chain Senior Director
Sameer Masri
Human Resources Director
Mazen Najjar
Chief Internal Auditor
Khalil Hamad
Secretary of the Board of Directors
Hatem AlNatsheh
Regulation Affairs Director
Fareeda Diab
Director of Investor Relations
Khalid Hijjeh
Planning and Quality Assurance Director
Neda Morrar
International Corporate Affairs Director
*Resigned on the November 10th, 2012 and Salameh Khalil was assigned as Chief Financial Officer on March 1st, 2013.
Paltel Group Foundation for Community Development
Samah Abu Oun
General Manager
Paltel Company
AbdulMajeed Melhem
General Manager
Ahmed AbuMarzouq
Gaza Chief Officer
Ali AbedAllatif Ibrahim
Chief Technical Officer
Husam Wadi*
Strategic Planning & Development Director
Ibrahim Dweik
Wholesales Director
Zahi Kanaan
Finance Director
Suleiman Abu Hijleh
Ibrahim Kharman
Marketing Director
Yaser Tuqan
Supply Chain Director
Ehab AlSalous
Carriers Relations Director
Mahmoud Jallad
Customer Care Director
Issa Duibes
Sales Acting Director
Kamal Darwish
Field Operations Acting Director
*Resigned on 1st October 2012 and Khalid Sayeh was assigned in lieu.
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Jawwal Company
Maen Melhem
General Manager
Younes Abu Samra
Gaza Region General Manager
AbdelRahim Abu Zaydeh
Finance Director
Maher Barrouk
Network Operations Director
Amjad Bishtawi
Applications Director
Alaa Hijazi
Sales Director
Nadia Mansour
Customer Care Director
Malak Ziadni
Marketing Director
Fayez Emter
Corporate Supply Chain Director
Mamoon Fares
Hulul
Mustafa Hasan
General Manager
Salim Daghamin
Technical Services Systems Director
Thaer Ayasi
Business Support Systems Director
Alaa Abadi
Finance & Admin Director
Reach
Ghassan Anabtawi
General Manager
Yousef Jabr
Acting Director for System Development & Support
Mahmoud Khatib
Operations Director
Hadarat
Rami Shamshoum
General Manager
Rami Qutteineh
Commercial Director
Jamal Taweel
Technical Director
Palmedia
Hisham Zaid
General Manager
Saher Koni
Acting Director for Operations Management
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Financial and Administrative performance
Paltel Group, the telecommunications leader in
Palestine is keen to provide distinctive services
with high quality at reasonable prices in ordder to
keep pace with the aspirations of the Palestinian
market and the evolution of the world’s telecommunications technology. Paltel Group is committed
to providing various service lines: Mobile, fixed and
data services in different geographic areas in Palestine. In addition, the Group relies on its distributors and sales agents to unite all efforts in order
to serve subscribers everywhere at anytime. Group
companies also depend on direct sales method to
meet and fulfill its customers’ needs.
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Group’s Strategy in 2012
Paltel Group sought to achieve its objectives for the year 2012 by leading the Telecom and IT (ICT) sector. In addition to the
Group’s commitment to develop its IT infrastructure and introduce the latest global technologies in the service lines; mobile,
fixed, and ADSL. The Group also worked on the development of value added services in order to satisfy all the subscribers’
needs and desires. It also worked through its special offers to commensurate with the nature of its subscribers in order
to maintain the subscribers base and increase their loyalty on one hand and attract new subscribers and to fulfill their
needs on the other. The Group maintains core investment in the ICT sector by enriching it with world-class experiences and
expertise to remain the leader of this sector. Moreover, Paltel Group remains committed to building the future of technology
in Palestine in an effort to place Palestine on the global digital map. Thus, the Group worked hard to enhance its technical
performance and broadband services and to provide the latest applications while maintaining the highest levels of security
and privacy. In the same context, the Group continued its devotion towards the community and public sector by launching
creative initiatives and sustainable development programs ranging from more widespread environmental technology and
Internet access to computer literacy. Under its social responsibility, the Group has empowered marginalized groups in an
aim to have them look ahead for a future filled with all the needed resources to sustain a decent life.
Commercial and community activities had a positive impact on the financial results and operational indicators, especially in
light of intense competition in the sectors of cellular telecommunications and digital services. The subscriber base of Paltel
Group grew to reach 3.16 million subscribers at the end of 2012 compared with 2.97 million subscribers at the end of 2011
by a 6.6% growth rate.
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Growth Indicators
Paltel Group maintained its leadership among providers of telecommunications and digital services in the Palestinian market as evidenced by the positive growth indicators across all service lines:
• Growth of active fixed line operations of Paltel from 358
thousand at the end of 2011 to 396 thousand at the end
operator Jawwal from 2.42 M customers at the end of
of 2012 growing by 2.9%. This growth was induced by
2011 to 2.58 M customers at the end of 2012 achieving
a series of concerted and intensive commercial cam-
a 6.4% growth rate despite the illegal competition in the
paigns aimed at driving demand for fixed line services.
Palestinian market. ARPU dropped from JOD 10.4 per
Average revenue per user (ARPU) decreased from
month at the end of 2011 to JD 9.2 at the end of 2012
JOD15.0 at the end of 2011 to JOD13.6 at the end of
due to the growth in subscribers’ base and the socio-
2012, as a result of the intensive campaigns. economic pressures.
• Growth in ADSL from 156 thousand customers at the
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• Growth in the number of subscribers in our mobile
• Jawwal installed 136 base stations in 2012, raising the
end of 2011 to 185 thousand customers at the end
coverage rate in the West Bank and Gaza Strip to 98%.
of 2012 achieving a 18.9% growth rate in yet another
According to Jawwal’s studies, the penetration rate
competitive landscape. As a result, penetration rate
in Palestine has reached 77%, while Jawwal’s market
of the ADSL lines (per fixed line) grew from 40.5% at
share reached 79% of the Palestinian market. Jawwal’s
the end of 2011 to 46.8% at the end of 2012. On the
network includes 29 equipped showrooms and service
other hand, ARPU decreased by 26.4% compared to
centers at the highest levels, more than 1,000 main
previous year which is attributed to the new lower BSA
dealers and sub dealers and more than 10,000 retail
(Bit Stream Access) access rates set by the Ministry of
outlets in Palestine. The company provides mobile
Telecommunications and Information Technology at the
roaming as well with more than 397 operators deployed
beginning of the current year.
in more than 161 countries around the world.
Promising Growth Prospects
Growth in the number of subscribers’ numbers is mainly related to the increase in service market size offered by Paltel Group due to the openness of the Palestinian society in terms of information technology, especially the youth who
are most likely to benefit from these services. The number of young people aged between 15-30 years in the Palestinian
community form more than 30% of the total population, thus, it is expected that the coming period will witness an increase
in the number of subscribers and users of telecom services in the local market. In addition, the number of those aged less
than 15 years form more than 40% of the Palestinian society; therefore, Paltel Group has a promising future ahead for
growth in services targeting more young people.
Paltel Group has reached beyond its local scope to the potential international opportunities and markets. In September
2012, Paltel was offered an opportunity to strengthen its global presence by signing an agreement with Turk Telekom Group
subsidiary (PANTEL). This partnership is a turning point in the technology sector in Palestine as a whole, as it connects
Paltel Group with the biggest international telecom companies through a submarine cable without the need for Israeli companies. This partnership formed an opportunity that provides the company with additional capacity to offer better internet
services to subscribers and to eliminate Israeli domination on the quality of service.
Even with the growing legal and illegal competition and the accelerating intense offers from other operators, Paltel Group
was able to maintain its market share leadership through its commitment to provide high quality services for its customers
and at the best prices. Paltel Group was also able to understand the needs of customers and the diversity of new lifestyles
through its constant market studies. Thus, the Group is proud of providing creative, innovative and distinctive services in
fixed line, mobile, ADSL and other value added services. The society is also segmented according to needs and interests,
therefore, Paltel Group pays attention not only to quality services but to further match each segment’s needs with the latest
technologies.
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Future Prospects
• Continue leading the market of telecom and IT in Palestine
in terms of excellence in all services lines: Mobile, fixed, and
internet/ADSL services.
• Maintain the highest levels of efficiency and productivity
with optimum utilization of resources and capabilities.
• Increase diversity in value added services, keep up with
the latest technological applications as well as foster local
innovations and initiatives in the field of technology and its
applications.
• Focus on the needs of various segments of society in line
with the global technological development requirements in
order to meet their expectations and interests.
• Continue to develop and modernize the network to provide
modern and broadband services with the fastest and highest quality of service.
• Focus on increasing the level of security and privacy with
respect to the network, the data and information exchange
in all Group companies.
• Enhance international relations and strengthen partnership
bridges with foreign markets.
• Offer 3G services when acquiring the necessary frequencies
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Financial and operational Performance indicators
Consolidated Revenue
The consolidated net revenues of the Group declined by 1.3% to reach JOD 365.9 million for the year 2012 compared with JOD
370.6 million the same period of last year mostly affected by exchange currency fluctuations. Growth rates in revenues and
operating results have been affected by the devaluation of the Israeli Shekel (the Group’s collection currency) against the
Jordanian Dinar (the Group’s reporting currency), where the average exchange rate during the year 2012 was 5.44 ILS/JOD
compared to 5.04 ILS/JOD in the year 2011.
Consolidated EBITDA
The consolidated EBITDA of the Company decreased by 7.1% reaching JOD 153 million at the end of 2012 compared with
JOD 164.6 million at the end of 2011. This decrease is attributed to the exchange currency effect as well as the increase in
operating expenses by 6.6%.
Consolidated Operating Profit (EBIT)
The consolidated operating profit amounted to JOD 112.1 million (31% operating profit margin) by the end of 2012 compared
with JOD 127.4 million (34% operating profit margin) by the end of 2011. EBIT decreased by 12.1% mainly due to the decline in
operating revenues by 1.3% and the growth in operating expenses by 6.6%. The latter was affected by the increase in depreciation, advertising and Gaza generators’ fuel expenses.
Consolidated Net Income, EPS and Dividends
The consolidated net income decreased by 9.5% to stand at JOD 82.1 million at the end of 2012 compared with JOD 90.7
million at the end of 2011. The decline is mainly attributable to the devaluation of the Israeli Shekel and as a direct result to
the company’s decision to postpone the 50% tax exemption for two years; Paltel is entitled for this exemption as part of the
Investment Encouragement Law in Palestine. Consequently, the company started paying 20% income tax this year compared to 7.5% the year before. More on the latter, the tax authorities in Palestine have declared a new tax schema and raised
the corporate income tax rate from 15% to 20% starting January 2012. Excluding tax rate/regime difference between the two
periods, the consolidated net income before tax increased by 4.6% which better reflects the operational advancement and
achievement of the Group.
Accordingly, the earnings per share decreased to reach JOD 0.624 by the end of 2012 compared to JOD 0.689 by the end of
2011.
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Total Assets
Total assets of the Company grew by 7.3% from JOD 575 million at the end of 2011 to JOD 617 million at the end of 2012. The
growth was driven by the increase in non-current assets balance by 13.6% reaching JOD 434 million by end of 2012 compared
to JOD 382 million at the end of 2011. The growth in the noncurrent part of the assets is mainly attributed to the increase in
the balances of “Available for Sale Investments” and “Other Financial Assets” accounts by a total of JOD 65.5 million during
the year. On the other hand, current assets declined by 5.4% to reach JOD 182 million.
Ratio
2012
2011
% Change
Total Assets
617
575
%7.3
Total Liabilities
158
146
8.1%
Shareholders’ Equity
459
429
7.0%
Total Liabilities
The Company’s total liabilities grew by 8.1% as of end of 2012 reaching JOD 158 million compared with JOD 146 million on
December 31, 2011. This is attributed to the increase of the short-term liabilities by JOD 23.0M (23.3% more than the balance
of 2011). This is influenced by the increase in “Accounts Payables” and ”Other Current Liabilities” by a total of JOD 21.0 M, or
an increase of 25.2% compared to their balances as end of 2011.
The increase in accounts payables resulted from the increase in the license fees payables’ account as a result of the completion of the clearing process of the license fees against the advance payments made to the Palestinian Authority in previous
periods. On the other hand, the company’s long-term liabilities have declined by JOD 11.1 million; a decrease of 23.5% compared to end of 2011 due to the decline of long-term loans by JOD 14.2 million at the end of 2012.
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Shareholders’ Equity
The shareholders’ equity witnessed a growth by 7.0% to reach JOD 459 million at the end of 2012 compared with JOD 429
million as on December 31, 2011. This growth is attributed to the increase in retained earnings by 12% to reach JOD 280 million by end of 2012 compared with JOD 250 million at the end of 2011, taking into consideration that a decision for distributing JOD 52.7 million cash dividends was declared during the period.
Cash Flow
The net cash flow from operating activities decreased by 11.2% for the year of 2012 to reach JOD 149 million compared with
JOD 168 million the same period in 2011. This decline is attributed to the drop in operating revenues and profit as well as the
increase in the change in working capital, where the change was JOD 4.9 million in 2011, versus a change of JOD 16.6 million
in the year 2012. It should be noted that the change in tax policies had a major effect on this item, as mentioned earlier.
The net cash flows from investing activities reached (JOD 101 million) in 2012 compared to (JOD 106 million) in 2011; this decrease is mainly attributed to the drop in the value of capital expenditures “PP&E” and “Investments in Associates” by JOD
29.4 million and JOD 15.0 million respectively during the year of 2012 in comparison with the previous year, besides lending
associate companies a total of JOD 30.5 million during 2012. Finally, the cash flow from financing activities reached (JOD 66.5
million) during 2012 compared to (JOD 67.9 million) in 2011.
Investments
The Group has a portfolio of financial securities as part of its strategy in diversifying its revenue streams with adopting well
established methodologies in managing these investments. The portfolio of financial securities mainly consists of equity
securities with growth potential. The Group’s securities investments are grouped into two main categories: Held for trading
and Available for Sale (AFS).
28
The split of those securities between the local market and regional markets is as follows:
JOD million
Local
Regional
Total
Trading
3.06
4.35
7.41
AFS
15.54
69.18
84.72
Total
18.60
73.53
92.13
The Group adopts The International Financial Reporting Standards (IFRS) in presenting the financial investments above.
IFRS requires marking the trading and AFS securities to market (MTM) at each reporting date and to recognize the unrealized gains/losses on trading securities in the income statement, whereas the unrealized gains/losses on AFS securities are
recognized in the equity section of the balance sheet. AFS securities that are not quoted in an active market are stated at
cost as long as their fair values cannot be reliably determined due to the unpredictable nature of future cash flows; nevertheless, these unmarketable securities represent a very minor portion of the total company’s investment portfolio.
Investment Risks
Despite diversity in Paltel Group’s revenue streams, the group still faces several investment risks as follows:
• Risks related to financial performance of the Group’s major operating segments due to decreased profitability ratios as a
result of increased competition, in addition to the low growth rates as a result of the partial saturation in a large part of
the local market, which in turn forms the largest share of the overall of Group Companies’ results.
• Operational constraints resulting from the Israeli occupation, including the scarcity of necessary frequencies and withholding 3G license for the cellular network along with the many obstacles that limit the ease of movement for the maintenance and modernization of network equipment. In addition to that, the difficulty of delivering network equipment into
Gaza Strip hinders the fulfillment of growing demand for services and therefore leads to not take advantage of growth
opportunities in that region.
• Probability of low trading prices of investments listed in the financial markets due to operational and profitability factors, taking into account the volatility of economic and political factors in the region, where most of the investments are
concentrated in the surrounding Arab region.
• The continuity of the current political situation in the region and its impact on the overall investment activity due to the
foreign investors’ reluctance to risk investing in the Palestinian market and the low profile of trading in the financial
markets.
29
There is a difference between the closing statements and the preliminary data
• Due to the reduction in the Company’s investment losses and the increased losses in other investments, some totals in the
financial position statement were changed without encountering any changes in the income statement totals.
• As a result of the different classification of these investments, both assets and equity totals were increased; the Company’s
net income grew as well.
• Different classification of insubstantial amounts of long-term assets to short-term assets leading to the decline in cash used
in operating and investing activities.
The Jordanian Dinar exchange rate was worth 5.44 shekels, which was calculated based on the average price of buying and
selling in the market. The exchange rate referred to is the average of the fiscal year 2012.
Management’s Report on Financial Position and Operating Results during 2012
• The Group manages its working capital to achieve its operational goals and maintains assets in order to attain rewarding
revenues for its shareholders. The Group succeeded in reaching strong growth rates in managing its short-term assets
that increased the collection rates and in managing cash to raise its returns.
• The Group has an impeccable record in the cash distributions to its shareholders, and as part of its endeavor to maintain
that, the Group strives to protect its operations from currency fluctuations and the economy negative impact.
• In regards to the capital sources, the Group mainly depends on equity financing and boosting expansion and growth
by operational returns. The Group may resort sometimes to borrowing depending on the advantage this may offer its
companies. The Group has an impeccable record in meeting its obligations; and it does not expect a change to its capital
structure in the near future.
Transactions with related parties
During 2012, the Group had transactions with some related parties as reported in note 35 from the Consolidated Financial
Statements.
30
Internal Community and Environment
Paltel Group’s main objective is reaching all customers in all geographic locations, and facilitating access to any showroom
and service center whenever the need arises. Thus, Paltel Group has made sure to have physical presence in all Palestinian
cities and towns, either through its headquarter premises or through showrooms, service centers, authorized dealers and
distributors present in every locality in Palestine.
The Group provides an encouraging and creative work environment to complement the Group’s efforts to recruit the best
Palestinian talents, especially the youths in a sector depending mainly on human talent in its development, growth and
prosperity. Paltel Group employs the following numbers of human resources:
Numbers of Paltel Group employees
No. of Employees
Jawwal
Paltel
Hadara
Reach
Hulul
Palmedia
Paltel Group
Total 897
1,238
101
563
131
58
67
3,055
Paltel Group Employees by Gender
No. of Employees
Percentage
2,437
79.8%
618
20.2%
3,055
100.00%
Males
Females
Total
Paltel Group Employees by Level of Education
Level of Education
Undergraduate degree
Diploma
Bachelor
No. of Employees
460
567
Postgraduate
1,911
117
Training courses Summary
Type of training courses
No. of courses
No. of trained employees
Courses related to job
167
773
Courses related to competencies
49
667
Paltel Group’s total expenses on training and development in 2012 reached JOD 1.79 million.
31
Human resources policies
Paltel Group offers many benefits for employees and their families, including the Provident Fund, the Social Insurance Fund,
Health Insurance as well as other programs to support higher education. From the outset, Paltel Group also established
two funds to support its employees namely: The Medical Care Fund that helps employees in cases where health insurance
doesn’t cover the illness, and the Social Welfare Fund, which helps employees in social circumstances where the Social
Insurance Fund doesn’t provide coverage. It is worth mentioning that certain policies govern the use of these two funds in
order to achieve the optimal benefit to a greater number of employees. In addition, Paltel Group is keen on continuing the
development of its human resources as well as keeping pace with all the developments through motivating employees to
participate in training courses, conferences and workshops. In addition, Paltel Group presents a scholarship program for
academically distinguished sons and daughters of Paltel Group employees, 11 scholarships are offered annually, reaching a
total of 64 offered scholarships by the end of 2012.
Paltel Group Club and Training Center
The Club and Training Center of Paltel Group consists of two main centers of activity namely Paltel Group training center
which aims at providing training facilities for Group companies, along with an environment for brainstorming and capacity
building meetings, in addition to providing logistics services which are essential for the success of the training programs.
The other space for activities is the Paltel Group Club, which is designed to provide a comfortable relaxing and recreational
resort for Group employees and their families.
32
33
Governance
Commitment to Governance Rules and Regulations
Good governance is one of the reasons behind the success and distinction of Paltel Group throughout the previous years,
whether in the financial realm or Paltel’s stock attractiveness to investors. Paltel Group’s commitment to rules and regulations of governance is an integral value that the Group abided by voluntarily since it was incorporated and even before
approving and ratifying relevant regulations by the Palestine Exchange.
Governance is based on a series of operations, policies and internal regulations that govern the management behavior according to international best practices. Paltel Group governance is centered on the regulation of the relationship between
different stakeholders like investors, board of directors, executive management, employees, suppliers, customers, government bodies and surrounding community and environment; which aims at achieving goals of the Group in general.
Paltel Group did not undertake any joint projects, contractual or other commitments with any relevant party outside the
Group’s targets and main scope of work during the year 2012.
There was no first kin or affinity relation between members of the Board of Directors and Executive Management members.
There was no reported bankruptcy, conviction, banning or sentence on any current member of the Board of Directors or
Executive Management during the past five years.
34
Board of Directors and Its Committees
The Board of Directors is responsible for the overall performance of the Group; the board membership is ruled by the Group
bylaws and regulations that include articles of member’s aptitude to guarantee all members’ complete control of the Group
performance. One of the conditions is the ownership of no less than 30,000 stock of the Group as a minimum requirement
for board membership, this in addition to the selection of board members according to highest standards of qualification
and experience in the Group’s field of work. This in turn will enable the board to define the Group’s strategies and direct its
operations according to real conditions and surroundings. The Board’s major tasks include the following:
• Approving strategies, budgets and work plans that cover economic, social, environment and ethical performance sides
• Ensuring the professionalism and transparency of executive management performance to ascertain that it is up to
international best practice levels.
• Assigning the Board’s specialized work committees, guiding their work and monitoring their output.
• Monitoring financial and operational performance of the Group
• Presenting recommendations to investors and shareholders in the general assembly meetings
The Board of Directors holds periodic meetings; in 2012 the board held six meetings. In each meeting, the board discussed
a previously prepared agenda that usually included the periodic financial results and operational performance indicators of
Group companies in addition to any relevant strategic agenda items that need the Board’s decisions within its jurisdiction;
voting on strategic decisions is made when necessary. It is worth mentioning here that the Board did not make decisions
outside formal board meetings subject to disclosure according to the valid disclosure regulations.
35
Shareholders have voted during the last Ordinary General Assembly Meeting held in April 2012 to approve the financial
statements and to discharge the members of the Board of Directors from liabilities for the fiscal year ended 31st December
2011. The company’s auditors were elected for the year 2012, and the Board’s recommendation regarding the dividends
distribution for the fiscal year ended 31st December 2011 was also approved, in addition to electing a new Board of Directors
for the Company.
The Board of Directors holds the Ordinary General Assembly Meeting once a year in the presence of shareholders in order
to approve the audited financial statements and previous year’s dividend distribution policy. In light of the election of the
current Board of Directors during the Fifteenth General Assembly Meeting on 5th April 2012, under the Paltel Group’s bylaws
and regulations, management positions for the current Board of Directors were distributed in terms of selecting the Chairman and Board committees. Mr. Sabih Masri was unanimously selected as chairman of the Board of Directors. The Board
also unanimously decided to form board committees as follows:
Investment committee: It is comprised of Mr. Samir Hulileh, Mr. Ammar Aker and Dr. Farouq Zuaiter who was assigned as
head of this committee. This committee is tasked with the following:
• Develop an investment strategy for the Group as well as monitor and follow up its implementation.
• Present recommendations to the Board regarding the investment opportunities.
• Identify the proper investment policies.
• Present reports regarding Paltel Group investments to the Board of Directors and the General Assembly.
Internal audit committee: It is comprised of Mr. Basil Abdel-Nabi, Mr. Basem Abdel Halim and Mr. Talal Nasiruddin who was
assigned as head of this committee. This committee is tasked with the following:
• Liaise with the Internal Audit and the Board of Directors.
• Supervise the implementation of policies and accounting and operational standards.
• Take proactive actions around revenue assurance and risk reduction.
• Monitor the process of internal audit in the Group to ensure effective implementation according to the agreed criteria.
• Preserve the independence and neutrality of internal audit.
Gaza Committee: It is comprised of Mr. Sharhabil Al-Zaim, Mr. Ammar Aker and Mr. Mamoun Abushahla who was assigned
as head of this committee. This committee is tasked with the following:
• Follow up all Paltel Group interests in Gaza Strip.
• Preparing action plans for Gaza Strip, especially for exceptional circumstances.
• Presenting reports and recommendations to the Board regarding the Group’s activities in Gaza Strip.
36
Current key positions held by PG Executive Management in other locally listed companies
Members of Executive Management
Names of listed companies where an Executive Management member is a
member of its Board of Directors
Ammar Aker
Palestine Telecommunications Company (PALTEL), Palestine Development and
Investment Ltd. (PADICO), Jericho Gate Real Estate Investment Co.
Abdul Majed Melhem
Palestine Plastic Industries Co. (PPIC) and Golden Wheat Mills Co.
Rami Shamshoum
Golden Wheat Mills Co.
Ghassan Anabtawi
PalAqar for Real Estate Development & Management Co.
Board of Directors Performance
The Board of Directors’ performance is measured through the General Assembly Meeting which normally takes place after
the investors have the chance to review the results of the Group performance. The Board’s performance is also monitored
by the Companies’ General Controller and Palestinian Capital Market Authority. The Board presents comprehensive reports
that highlight financial and operational progress and Group performance in general; the Board assesses the reports against
agreed plans that are normally approved in the board meeting in December of every year when the Board approves next
year’s plan and budget.
The top management’s benefits and remuneration reached JOD 1.663 million as short-term benefits and JOD 193 thousand
as short-term benefits in addition to JOD 412 thousand being Board of Directors’ benefits.
There are no work contracts between the company and the Board members; as for Executive Management, their contracts
do not include limitation or exemption of responsibilities considering that the CEO is also a board member of the company.
Internal Control and Monitoring Regulations
The Group’s Executive Management is committed to taking internal control and monitoring measures to be fully
implemented through a set of procedures and regulations related to the decision-making process. This occurs on disclosure
of all operations that achieve the Group’s objectives and targets and also assesses performance whether from productivity,
quality or managerial sides; this includes the different accounting sides and fixed assets accounting and reliability of
accounting books and records. Based on this, the Executive Management follows best internal control practices that
guarantee definition of responsibilities, authorities and roles. The Executive Management works closely on enhancing the
function of the internal audit across the Group, being one of the main control functions in the company. The Internal Audit
presents its periodic reports to the Executive Management and the Internal Audit Committee to project the soundness and
efficacy of control systems. Furthermore, the Internal Audit highlights the control and preventive measures for any possible
risks in Group operations to be dealt with by the Internal Audit Committee and the Executive Management take all necessary
remedial measures for any arising points.
37
Commitment to Disclosure
Paltel Group proved its commitment to disclosure and transparency standards since its establishment and implementation
of the stock exchange law afterwards; this commitment was embodied in announcing and disclosing publicly all necessary
information that influence the Group’s profitability or its financial position or any other information that has any reflection
on the stock price or value in full accordance with article (9) of the valid disclosure law. The Group’s commitment to disclosing and providing such information periodically to the Palestinian Capital Market Authority and Palestinian Stock Exchange
enables for equal-opportunity access to information as an original right tor all shareholders or whoever is in their position.
Legal Procedures and Issues
• Paltel Group filed a lawsuit in 2008 against the decisions of the Tax Valuation Officer in the Court of Tax Appeals.
• Paltel Group had no unexpected fundamental financial obligations until 31st December 2012.
• That, in addition to other non-essential legal issues.
Investor Relations
Paltel Group continues to work on giving investors the attention they deserve, by turning the attention to investors into a
well-established culture among the Group’s companies. The Group is constantly trying to remain in touch with its shareholders through its Investor Relations Directorate. This Directorate is devoted to managing and developing investor affairs
in line with the growth of the Group’s assets and investments so as to maintain shareholders’ equity. Moreover, the directorate is committed to communication with shareholders from inside and outside Palestine through various communication
mechanisms. Hence, the investors’ inquiries can be answered through announced fixed-line numbers, mobile numbers, fax,
mail, e-mail and other media channels, such as the Group’s website which contains a section dedicated to provide investors with all the necessary information about the Group and its investments. The main functions of the Investor Relations
Directorate are as follows:
• Communicate with investors, answer all inquiries promptly, efficiently and professionally in the fastest manner.
• Prepare and hand out required reports to the investor through various channels of communication.
• Manage and implement the Ordinary General Assembly Meetings and extraordinary meetings if needed.
• Manage the distribution of shareholders’ dividends and ensure they receive them in a timely manner.
• Manage shareholders’ equity and update their records in coordination with the relevant parties.
• Promote investors’ affairs and communicate on their behalf with the relevant official and legal parties.
38
Information communication with shareholders
Technology has enabled tremendous improvements in the shareholder communication processes; whether through the
Group website or through email and newspaper ads, and soon as the date for the annual Ordinary General Assembly meeting is set, invitations are sent to all shareholders along with soft copies of the annual report on CDs at least two weeks prior
to the meeting pursuant to the relevant regulations of the Annual Report disclosure law. A printed copy of the annual report
is also distributed to shareholders in the General Assembly meeting and is published on Paltel Group’s website (www.
paltelgroup.ps).
Sustainability
As one of the management and operational pillars of the Group, sustainability is given attention according to the nature of
these operations and the diversity of its business and geographic extension. The Board of Directors and Executive Management compelled by their value systems have spared no effort to abide by the highest standards of sustainability in various
economic, environmental and social perspectives. In respect to sustainability principles and standards, Paltel Group takes
the following actions:
• The Board of Directors strongly supports the companies’ compliance with environment protection standards, to this end,
Jawwal has obtained ISO (14001) certificate for Environmental Management Systems and Reach obtained ISO (27001) certificate for Information Security Management Systems.
• The Board is very keen on and passionate about community development and takes its social responsibility towards the
community very seriously. In 2008, the Board launched the Paltel Group Foundation for Community Development to serve
as a community support arm through community development projects in education, technology and other fields.
• The Board and management both adhere to the highest levels of ethical behavior in Group companies that includes obviating any conflict of interest at the Board and the Executive Management level.
• Paltel Group ensures its commitment to license obligations and all other relevant laws and regulations.
• Paltel Group issues the sustainability report as per the Global Reporting Initiative (GRI) standards in collaboration with the
UN Global Compact (UNGC) as of October 2011.
• Paltel Group is now preparing its first UNGC report which will be part of the third Sustainability report for 2013.
• Paltel Group seeks to transform the concept of sustainability into a integrated culture amongst employees, suppliers and
stakeholders through the adoption of policies and programs that achieve this aim.
• The Group explores the community development needs through various channels and most notably through direct communication with community members.
39
Relationship with the Telecommunications Regulator
The Palestinian telecommunications market is governed by a number of laws and regulations adopted by the Palestinian National Authority under which the Ministry of Telecommunications and Information Technology operates to achieve
continuous development within it. Paltel Group succeeded through its direct and fruitful cooperation with the Ministry of
Telecommunications and Information Technology by launching several new technologies that serve the telecommunications
sector in general and the Palestinian investor in particular. The Group is also seeking positive cooperation with the Ministry
to strengthen its strategic relationship with them through the application of various regulations and instructions issued
by the Ministry, which is reflected positively not only on the performance of the Palestinian market but also on the performance of the ICT sector in particular. In light of Palestine’s membership in the United Nations as a “non-member observer
state”, the Group strives to gain membership in the International Telecommunication Union and work to attain all the rights
of Palestine in 3G frequencies and other features generally known in the ICT field.
By virtue of its license agreement, Paltel Group has the right to establish, manage and operate all kinds of lines of service:
Fixed, mobile, ADSL, data services and other telecommunications services for a period of twenty years.
Paltel Group is subject to all laws in Palestine and its amendments including tax laws; for instance provisions of Income Tax
law No. (8) for 2011 which increased the tax burden on taxpayers.
40
Shareholders and Stock Performance
Achievements in Investment Attraction to Paltel Stock
Paltel Group volume and diversity of technical and commercial operations arms the company’s stock with higher stability
as a result of service diversity and different growth rates in these services. Furthermore, Paltel stock is distinguished with
its remarkable and sustainable return during the past years based on stable dividends which is an indicator on the Group’s
stable growth and solid performance. Paltel stock listed as (PALTEL) in Palestine Exchange has 131,625,000 stocks with
7,579 shareholders as of 31/12/2012.
Paltel Group reinforced the trust of its investors by distributing the highest dividend rates in 2012 from 2011 net income
compared to other listed companies on the Palestine Stock Exchange; the total amount of dividends in the mentioned year
reached JOD 57.7 million. Moreover, Paltel stock is endowed with a high ratio of free float to exceed 50% which reflects the
stock liquidity and public trading. The market value of Paltel stock forms 33% which is the highest in the market to reach US$
956,091,166 of the Palestine Stock Exchange value as of 31/12/2012. In addition, Paltel stock achieved the highest trading value in 2012 to reach US$ 100,263,578 which forms 37% of the total trading on the Palestine Exchange. Paltel’s stock
weight is the highest and most influential in the Al-Quds Index to reach 40% of the index sample according to the Palestine
Exchange.
Rasmala Coverage Report about the Group
The results of Rasmala Investment Bank ltd. analyst coverage on 11 December 2012 recommends investment in Paltel
Stock based on the Group’s profitability, feasibility and return on investment. The analyst coverage report stated that Paltel
Group leads the Palestinian Stock Exchange in addition to its solid financial status and stability of dividends. Rasmala is one
of the leading regional investment groups with operational presence in KSA, UAE, Oman and Egypt. Rasmala Holdings manages about a billion in assets for its customers in the private sector. Rasmala published another analyst report about the
promising investment opportunities in Palestine. Both reports are available on the Rasmala website in addition to the Paltel
Group website www.paltelgroup.ps
Shareholders of more than % 5 of the Group capital
Shareholders whose ownership
exceeds 5% of the Group’s Capital
No. of Shares
Percentage of Total Capital
As of 31/12/2012
As of 31/12/2011
As of 31/12/2012
As of 31/12/2011
PADICO
40,086,874
40,400,374
30.46%
30.69%
)Palestine Investment Fund (PIF
11,156,498
11,000,000
8.48%
8.36%
There is no majority shareholder of Paltel stock who has a majority share voting or could assign a majority of voting board
members in board meetings, taking into consideration the ratio of stock Padico Holdings has as mentioned in the table
above.
Paltel Share Close Price for the Last 5 Years
Share Close Price (JOD)
2012
2011
2010
2009
2008
5.15
5.29
5.28
5.14
4.94
41
Paltel Share Trading Activity
Exchange
Palestine Exchange (PEX)
Year
No .of
Transactions
)Transaction(
Trading
Volume
)Share(
Trading Value
)USD(
Open Price
)JOD(
Highest Price
)JOD(
Lowest Price
)JOD(
2012
5,485
13,731,826
100,263,578
5.29
5.58
4.4
2011
6,672
18,191,089
133,403,099
5.22
5.55
4.95
Earnings per Share
Year
2012
2011
EPS (JOD)
0.624
0.689
The Board of Directors recommended in its meeting on 5 March 2013 to the General Assembly Meeting planned on 4 April a
45% dividends distribution.
Paltel Share Dividends Yield*
Year
2012
2011
2010
2009
2008
Dividends Yield
8.7%
7.6%
7.6%
6.8%
8.1%
* The Dividends Yield was calculated based on the close price as end of each year.
The year 2012 had remarkable achievements through which Paltel Group aimed at attracting external investments. Furthermore, Paltel Group appeared through its co-sponsorship with PADICO of the sixth annual Palestinian Capital Market Forum
which was held on 11 December 2012. The forum discussed the existing challenges and future horizons of stock exchange
sector; experts from Palestine, Jordan, UAE and USA attended the forum alongside with Palestinian businesses, official
representative bodies and the media.
42
Social Respontsibility
During the year 2012, Paltel Group continued to reinforce its commitment to social responsibility based on the Group’s belief
in the importance of community empowerment and sustainability. Depending on a clear strategic vision and a precise action
plan, Paltel Group contributed collectively to help in achieving the Group’s social goals and supporting those who need this
help most. Through the Social Responsibility Fund, Paltel Group sought to achieve all the Social Responsibility objectives in
the short-term programs and urgent needs particularly in marginalized areas, whereas Paltel Group Foundation for Community Development is dedicated to long-term sustainability and socio-economic development progress in Palestine.
Paltel Group Foundation for Community Development
Throughout the past four years, Paltel Group has introduced a new vision and approach to CSR in Palestine through PG
Foundation’s projects and programs for long-term sustainable development. PGF has systematically directed its contribution to focus on important and vital sectors in order to support the Palestinian society as well as the marginalized groups of
society and those in need for empowerment beside technical and financial support. Under this direction, the Group allocates
2% of its profits on an annual basis as part of its commitment to contribute to sustainable human development in Palestine
in parallel with short term humanitarian interventions.
It’s worth noting that all of Paltel Group’s activities and achievements in CSR and community development areas are published in the annual report issued by PGF. The report can be viewed at PGF website www.pgfoundation.ps.
The Social Responsibility fund for short-term initiatives has served around 250 institutions of which150 work within development and humanitarian programs while nearly 50 institutions work in all of women’s empowerment programs and
technological development programs. The Fund’s objectives and areas of work for 2013 include the following:
• Continue its support for women empowerment programs
• Use of technology as an intervention tool to improve community conditions
• Provide speedy humanitarian interventions for marginalized areas
• Raising awareness about the value of social programs
43
Social Responsibility
Achievements in the Education Sector,2012
Paltel Group Scholarship Program:
• PGF offers 400 scholarships annually enabling a total of 1,995 students to enroll in Palestinian universities by the end of
2012, girls form 61%, while 3% are students with special needs.
• Orphans living in orphanage houses form 14% of the beneficiaries.
• Students from Gaza Strip form 36% of the beneficiaries.
Efad Program
This community-based scholarship grants professors a Ph.D from international universities in the specializations of IT,
Nursing, Geography and Media fields.
Qalandia Institute for Vocational Training
In cooperation with UNRWA44 , students have graduated from the Vocational Training Institute; 90% of whom entered the
job market. AbjadNet program for technological development at Palestinian schools
• Connecting 60 schools to the Internet.
• Development of Arabic educational e-content in compliance with the Palestinian curriculum.
Sesame street project for kindergarten
• Distribution of 1,000 educational materials to Kindergartens in the West Bank and training teachers on use of such
materials.
• Several shows were held for 1,500 kids in various cities.
44
45
Achievements in the Technology Sector
As a way of spreading the culture of internet and computing among Palestinian people, 250 PCs with internet access
were distributed to 69 community institutions;of which 23 were granted operating laboratories, including 8-12 devices per
institution.
Mobile Applications Development Initiative (MADI)
• This initiative was implemented in cooperation with the Palestinian incubator for Information Technology (PICTI) and has
benefited 34% of Gaza Strip.
• As for the first phase, 20 young people were trained, five of whom were selected to represent the final entrepreneurs who
were able to put their ideas into practice
46
47
Group Companies’ Performance Report
48
49
Palestine Telecommunications Co.
(Paltel)
About Paltel
Paltel aims at enriching the lives of it subscribers through providing creative and entertaining solutions for both corporate
and residential lines as a reward to their loyalty. The company achieves this through providing innovative and distinguished
telecom services of high quality including fixed line, internet and data in addition to value added services. To this end, Paltel
strives to continue leading the telecom and IT sector in Palestine since it was incorporated more than 15 years ago as the
first company in Paltel Group.
Vision
To enrich the life of our subscribers with innovative communication and entertainment solutions that allow the subscriber
to live life the way he wants it”
Mission
We are keen on providing high quality services, with competitive prices that meet our customers’ expectations which lead
them to new horizons in the world of telecommunications.
Paltel Strategy in 2012
Paltel adopted a specific strategy in 2012 which was the company’s fifteenth commercial anniversary and in which the
company achieved notable results at both local and regional levels. Besides valuing its customers, the company strived to
retain its market share and enhance the culture of using fixed lines. Paltel also excelled in providing high quality broadband
services at preferred prices combined with innovative solutions for corporate customers. Furthermore, Paltel succeeded in
establishing international networks which enabled improvement of telecom services for Palestinian customers and simultaneously strengthened the IT infrastructure in Palestine. Paltel achieved its strategy through the following:
• Continued investment in the network and using most up to date infrastructure technologies
• Launching a series of distinctive campaigns that attracted new subscribers
• Providing a diversity of corporate services worldwide and providing high bandwidths at preferable prices
The results of 2012 reflected a growth in different products and subscriber base compared to previous years and this was
achieved through:
50
• Launching an intensive series of campaigns in order to attract the biggest number of subscribers and increase
the company’s market share.
• Developing a group of loyalty programs that retain subscribers and meet their expectations
• Enhancing use of fixed telephony through a bundle of programs that enforce originality of residential fixed lines
• Launching aggressive awareness campaigns that highlight the advantages of access line via (BSA) that include preserving
privacy and information secrecy which is guaranteed when subscribing through Paltel.
Paltel Achievements and projects in 2012
• Partnership with Pantel, a Turkish Telecoms Group subsidiary, the first Palestinian independent and direct connection
through submarine cable which formed a new direction in Palestinian technology sector and placed Paltel amongst the
leading telecom operators in the Middle East. This also enabled Paltel to provide a diversity of corporate services worldwide with high bandwidths at preferable prices.
• Widening the networks of Metro Ethernet project in all West Bank cities and establishing for the project initiation in the
Gaza Strip.
• Developing and expanding the strategic fiber optics network in all West Bank and Gaza Strip cities which helps in connecting corporate customers’ sites and providing high quality bandwidths.
• Closing the year 2012 planned part of the Shortening the Loop project in West Bank and Gaza Strip which helps Paltel
provide high bandwidth in un-served locations.
• Through the fixed line service, Paltel connected voice and internet services to a number of less advantaged bordering
villages living under military occupation threats.In spite of the logistical and political hardships the company faced in
implementing such projects like in Bethlehem and Mawasi Khan Younes.
• Paltel entered into agreements with broadband providers under which the companies obtain high bandwidths via Paltel’s
fiber optics network to provide high quality bandwidth to their customers.
• Entering into agreements with international operators to provide high quality (IP-VPN/ MPLS) services with high security
and at competitive prices for corporate customers in local, Arab and European markets.
• Entering into agreements with leading international companies like (British Telecom, BICS) for international traffic routing
at high quality and preferred prices through direct routes of these companies globally..
• Connecting a number of branches of corporate customers to their HQ through fiber optics network and (IP-VPN) at high
quality, security and best prices.
• Upgrading switching capacity using modern technologies to accommodate the growing numbers of subscribers.
51
Paltel’s Future Strategies
The year 2012 willwitness launching new products and high quality services with preferred prices, additionally; the company
will use latest technologies that will contribute to improving corporate customers’ operations and enriching subscribers’
lives. This will place Paltel in the rank of the best telecom and IT service providers in the Palestinian market maintaining the
company’s excellence through distinguished campaigns that reward existing subscribers and attracting new ones.
Key Performance Indicators
• Fixed line subscribers grew at 2.9% from previous year to reach 396 thousand lines.
• Capacity of fixed line switches expanded to reach 519 thousand lines at the end of 2012.
• The total number of countries that have direct connection with Palestine reached 123 countries at the end of 2012.
• Telephone and internet service were extended to new unserved less advantaged localities and clusters.
Fixed line service penetration rate reached 9.9%
of population at the end of 2012
396
400
385
390
380
Number of active fixed lines at
the end of 2012 compared to four
previous years (‘000) lines
371
370
360
363
358
350
340
330
2008
52
2009
2010
2011
2012
• Number of ADSL reached 185 thousand lines with a growth rate of 18.9$ from the previous year.
• An increase of 45% in ADSL capacity average .
• Providing services to corporate customers, connecting them to the world and providing high quality services at the best
prices.
• Developing and expanding the fiber optics network in both West Bank and Gaza Strip cities.
ADSL penetration rate reached 46.8% from total
fixed lines at the end of 2012
185
200
180
156
160
140
108
92
120
Number of (ADSL) at the end of
100
2012 compared to four previous
80
years (‘000) lines
60
72
40
20
2008
2009
2010
2011
2012
• Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) remained stable at 31% same as previous year
• The Gross Profit Margin grew from 76% in 2011 to 78% in 2012
53
Palestine Cellular Communications Company
Jawwal
About Jawwal
In 1999, Jawwal was established as the first cellular
company in Palestine, where it has managed to achieve
consecutive and concrete achievements since its launch.
As the leading mobile operator, Jawwal has succeeded in
the Palestinian market by reaching more than 2.5 million
subscribers by the end of 2012.
Jawwal has proved its superior ability to build bridges
of trust, efficiency and reliability with the community,
through its outreach to individuals and groups throughout the Palestinian Territories. Since its launch, Jawwal
succeeded to achieve its goals, which is represented in its
market share of 79% of the Palestinian market. In 2004, it
In addition, Jawwal offers international roaming services
with more than 397 operators in over 161 countries and
has coverage up to 98% of the West Bank and Gaza Strip.
Vision
Jawwal aims to maintain its lead in a market where all
Palestinians enjoy the benefits of an efficient and quality
wireless communications. Jawwal also seeks to play a pivotal role in uniting hearts and enriching lives of individuals in its local community, going ahead with its continued
development in line with the national economic growth.
also obtained the “Environmental Quality Management”
certificate (ISO14001).
With its network of 29 highly equipped service centers
and more than 1,000 distributers and 10,000 point of sales
Major Campaigns and Packages in
2012
in the West Bank and the Gaza Strip, Jawwal was able to
complete the difficult task of becoming an integral part of
The company launched a number of commercial cam-
its subscribers lives were they depend on our services in
paigns and offers that targeted all segments of subscrib-
order to conduct their daily business and communication
ers in 2012, the campaigns included:
needs.
54
Company Achievements in 2012
• The company maintained its leading role in mobile telephony with a 79%* market share in Palestine.
• Launching a series of new and distinguished commercial campaigns that meet different segments of customers
• Successful retention of key and strategic accounts through a specific loyalty program
• Enhancing the positive image about service rates and prices amongst subscribers through intensive awareness cam
paigns about the most convenient package for each segment of subscribers.
• The company paced in implementing its telecoms and IT strategies in Palestine in addition to developing the internal work
environment in accordance with international pace; all whch was achieved through the following:
Developing the systems and procedures of customer service center which resulted in minimizing the number of incoming complaints, reducing work load at the contact center and increasing the number of successfully-served calls. The
auto-reply systems were also developed to enable subscribers activate or deactivate their subscription in any of the
services or offers.
Launching Jawwal’s website with a new design and applications that ease the access to information in addition to developing “Hisabi” page through which customers can activate services.
• More focus on social media where likes on Jawwal Facebook official page exceeded 650.000 to place
Jawwal as the biggest corporate Facebook page in Palestine.
• Launching ”Go Professional”, a training program for fresh graduates and young talent in commercial, management, finance, languages and technology specialties. Trainees spend 18 months of work in different company departments in order
to develop their talents and build their career paths through practical work experience and training courses that will make
their transition into the job market easier.
• Renewal of Jawwal’s (ISO 14001) license
• Qualifying three showrooms according to highest customer service standards in addition to improving the service
level by reducing waiting time to less than three minutes.
*according to Jawwal’s market research results.
55
Jawwal in the Community
Jawwal is committed to the natural role and responsibility
it should have in the community, therefore; the company
focuses on youth through supporting initiatives that
builds their skills and talent. These initiatives include:
• Sponsoring Jawwal’s professional football league for
three consecutive years and sponsoring
the premier league in the Gaza Strip.
• Sponsoring the major football, basketball and volleyball
championships.
• Supporting 15 leading sports clubs in different championships.
• Sponsoring the major basketball championships organized by the Palestinian Basketball Union.
• Sponsoring the major volleyball championships organized by Palestinian Volleyball Union.
• Launching “Dardoosh” championship in universities and
implementing “dardoshi nights” –a project for university
students and many other activities for key subscribers in
West Bank and the Gaza Strip.
• Sponsoring different activities and scientific conferences
in several Palestinian universities.
• Implementing summer camp projects for Palestinian
children
Jawwal also advocated Palestinian national issues and
concerns by launching “Think of Others” campaign that
highlighted the hunger strikers taking place by Palestinian
prisoners in Israeli jails. That in addition to an initiative to
support our people in Gaza Strip during the Israeli war on
Gaza in 2012.
Jawwal’s Future Strategies
• To stay in the leading position in Palestinian cellular
communication.
• Retaining the company’s market share and increasing
the subscriber base to reach 2.6 million by the end of 2013
• Retaining subscribers and increasing their loyalty.
• Continued development of Jawwal’s network by evoking
latest cellular communications technologies that help
provide up to date services
• Increasing revenues.
• Providing a variety of services and offers that meet
expectations of different segments of subscribers
56
• Planning for the launching of 3G services once necessary frequencies are liberated
Our ambition is to remain trusted by our subscribers and
to keep up with the market growth in addition to overcoming all obstacles against serving our subscribers and
enriching their lives through providing the latest IT and
telecomservices.
• Jawwal subscriber base grew from 2.42 million at the end of 2011 to 2.58 million at the end of 2012
Growth rate in prepaid and postpaid subscribers reached
6.4% at the end of 2012 compared to end of 2011
3.00
2.42
2.50
2.58
2.25
2.00
1.80
1.50
1.31
1.00
0.50
2008
• Revenues decreased at 1.8% to reach JOD 273 million
at the end of 2011 compared to JOD 278 million at the
end of 2012, this is referred in the fluctuation of currency
exchange rates between JOD and NIS during 2012.
• Jawwal network coverage in West Bank and Gaza Strip
reached 98% at the end of 2012.
• Mobile phone market penetration rate in Palestine
reached 77% at the end of 2012
2009
2010
2011
2012
• Jawwal’s market share reached 79% of Palestinian cellular mobile market at the end of 2012
• Jawwal’s series of service centers which includes 29
fully-equipped at high standards, more than 1,000 dealers
and more than 10,000 points of sales in the West Bank
and Gaza Strip by the end of 2012.
• A total of 136 stations were installed and operated under the extension works in the West Bank and Gaza Strip
during 2012.
* Jawwal revenues above before excluding the inter-group revenues
Monthly ARPU in JOD
16.0
14.0
13.7
12.6
12.0
10.5
10.4
10.0
9.2
8.0
6.0
4.0
2.0
0.0
2008
2009
2010
** 2011
2012
** Monthly revenue was calculated without any changes on 2011 revenues
57
Hadara Investment Company
About Hadara
Hadara is the first internet company in Palestine providing the highest internet speed. Hadara works on bringing the
most recent internet provision technologies to serve its customers. In addition, the company provides other related
internet services such as : Domain registration, web hosting, bulk sms services, internet security and other value added
services for individual and corporate customers. Since its launch, Hadara has maintained a leading position in the Palestinian internet market which was made possible through continued investment in high-tech equipment in order to
enrich the Palestinian internet market with a diversity of services that present Hadara as a distinguished company at
the local, regional and international levels.
Vision
Continued search for employing most recent technologies that provide best solutions and highest internet speeds in
Palestine, in addition to providing customers with the latest technologies and services that meet their needs, expectations and ambitions by bridging the digital gap and building a knowledge-based society and economy.
Mission
Innovation and employing the two pillars of knowledge and technology advancement as way of utilizing all our innate
abilities and strengths in order to enrich Palestinian society with high quality services at international standards that
meet individual and corporate users’ expectations.
Company Strategies in 2012
Hadara strategies in 2012 included the following:
58
Company Strategies in 2012
Hadara strategies in 2012 included the following:
• Excellence in internet service provision in Palestine by providing high quality
services to individual and corporate internet users.
• Commitment to providing best offers and diversity of services to Hadara customers.
• Expanding the points of sale networks in the West Bank and Gaza Strip.
Strategies were implemented through:
• Diversification of services at high quality level and focusing on post-sales services.
• Inaugurating customer service centers in Jenin, Tulkarem and Rafah in order to improve service level and
enhance direct communications with customers.
• Launching value added services like “Aman” which provided security and audiovisual broadcasting through the internet.
• Duplication of internet speed at the same price for Hadara customers
59
The year 2012 market a group of achievements that include:
• Expanding the internet network that provided Hadara customers with highest speeds and bandwidth in Palestine
• Increasing the number of customer service centers to become 12 centers in West Bank and Gaza Strip
• Widening Hadara dealers’ network to reach 200 dealers in West Bank and Gaza Strip.
• Providing diversity of value added services like safe internet, bulk SMS, web hosting and many other
services that exceed customers’ expectations.
• Based on Hadara’s attention to education, the company sponsored a series of activities in this sector in the West Bank
and Gaza Strip such as:
Sponsoring activities of the Internet Safe Day in a cluster of villages west of Ramallah in which many cultural and arts
activities targeted school students to raise their awareness on safe use of the internet.
Sponsoring a series of extracurricular educational activities in more than 35 schools across Palestinian communities.
Sponsoring activities that encourage deployment of internet service in Palestine.
• Hadara launched its “Hadara Aman” service which provides safer internet services in Palestine since it is supported by
technologies that categorizes websites into 80 different groups according to their content.This provides safe browsing of
the internet and controlling of the service at the end-users’ location.
• Hadara launched a new Virtual Private Server (VPS) service which is one of the most recent hosting service globally where
the customer can have a dedicated server without purchase of any hardware and the service is available at any time with
a reasonable price.
• The company launched the live streaming service which enables TV and radio stations to broadcast their content through
the internet with high quality and ease to enhance their presence amongst their viewers locally and internationally.This is
made possible by providing best live streaming solutions through the internet.
• Hadara launched its page on different social media sites to work as an additional communication channel with customers
and the public.
• The company launched Hadara Portal for customers to facilitate their communication with the company
• Hadara launched the SMS service with Shasha news to provide quick news services to different community members;
similarly, SMS service with Jobs career portal in the West Bank and Gaza Strip.
60
Year 2012 Products, Campaigns and Services
(Da’afnaha, Mother of Campaigns, Internet & Router) campaigns that provide the best offers to customers and encourages
them to use the internet and benefit from the technology knowledge base in Palestine and make the internet available in
each Palestinian home. Below is a brief description of these campaigns:
• Da3afnaha: Existing and new customers may duplicate their internet speed at the same price
• Mother of Campaigns: The campaign gives free threemonth internet, prizes for Hadara customers; free months, eight gold
Liras and two Peugeots 206.
• Internet and Router: The new customer receives a free router in the West Bank and Gaza Strip
Company Future Strategies
The company looks to remain as the leading internet service provider in Palestine and the company adopted
the following strategies for 2013:
• To continue offeringrecent products and services that meet the needs and expectations of customers and which will keep
Hadara at the top of the internet service providers list
• Developing customer services
• Revenues reached JOD 7.5 million at the end of 2012
The compound growth rate in ADSL reached 14% in the past five years
• Hadara showrooms reached eight in the West Bank and four in the Gaza Strip at the end of 2012
• Dealers reached 103 in the West Bank and 100 in the Gaza Strip at the end of 2012
• Total number of Hadara employees reached 100 in the West Bank and Gaza Strip at the end of 2012
• Revenues in 2012 increased at 22% compared to 2011 with a compound growth rate of 13% during 2008-2012.
61
Reach Communication Services Co.
About Reach
Reach is the first Palestinian customer care and contact center management company offering high‐quality, performance
driven services through multi-communication channels at affordable rates. Reach aims to help clients expand their customer base through creative, yet strategic solutions. Reach is able to file over 67,000 calls per day through the use of the
260 Cisco IPCC technology system seats.
Reach works around the clock to serve customers and global markets with 563 multilingual employees in Ramallah, 20 of
who are located in Bethlehem. The company also includes 248 part-time university students in Nablus.
Reach services are customized to meet our strategic clients’ needs by understanding their goals and providing their services
in a way that promotes the concept of customer service. Reach also turn the customers’ needs and requirements into policies, procedures and technological requirements while training their employees on service delivery mechanisms over the
phone to offer high-quality services.
In 2012, Reach renewed its (ISO 27001) certification successfully, indicating the enhancement to the quality and high standard of our business services. In addition, Reach ensures that at least 5% of its employment capacity is dedicated to those
with special needs while females consist of et 22% of the company..
Vision
To be a leading customer management service provider company, regionally and internationallyby offering high quality services to a wide range of customers through multiple communication channels and service platforms.
Mission
To provide and perform comprehensive customer management and quality customer care services to its customers, through
enhanced multi-interaction venues in line with Group goals.
Reach Strategy in 2012
Focus on expanding customers’ base locally and internationally while making sure of having the equivalent number of employees to provide that number of customers with high-quality services and deliver more value to its customers that earns
their respect and loyalty.
62
Major achievements of 2012
• Expand the local customer base of Reach in the following sectors:
Banking sector: Signing an agreement with the Bank of Palestine
Automotive sector: Signing an agreement with Gargour Motor Company – the Mercedes agent in Palestine.
Advertising sector: Signing an agreement with YellowPages.
Palestinian startups and entrepreneurs: Signing an agreement with “Yamsafer” company, an online travel website
• Reach celebrated the opening of its third branch in Bethlehem.
• Renewal of Reach’s (ISO 27001) certification for Information Security Management. • Deployment of IVR project to enhance our business services quality and accelerate their access to information.
• The use of cell phone messages as a means of customer care service, where they receive answers to their questions
through SMS, such as Telephone Directory service (144).
• Implementation of the employee information security awareness project about information security and protection.
• Expanding vertically in serving the company’s customers in the United States of America.
Reach’s Future Strategies
• Increase the company’s market share locally, regionally and globally
• Enhance quality of business services
• Introduce new customer care channels
• In 2012, international revenue increased by 15% compared to 2011
• In 2012, local revenue increased by 5% compared to 2011
• In 2012, AHT decreased by 00:16 seconds (from 1:42 in 2011 to 1:26 in 2012)
• In 2012, ASA decreased by 00:28 seconds (from 0:50 in 2011 to 0:22 in 2012)
• In 2012, Abandoned Rate decreased by 6% (from 12% in 2011 to 6% in 2012)
• Operating revenue reached JOD 5.6 million by the end of 2012 compared with JOD 5.3 million by the end of 2011
• Growth in fixed assets before depreciation by 7% by the end of 2012 compared with the end of 2011.
• In 2012, Accessibility Rate increased by 6% ( from 88% in 2011 to 94% in 2012)
• The number of outgoing calls exceeded 3,000 calls per day.
• Growth in revenue by 6.9% end of 2012 compared with end of 2011.
63
Palmedia for Multimedia Services Co. (Palmedia)
About Palmedia
Palmedia, the media arm of Paltel Groupwas launched in November 2004 as one of the leading media production and broadcasting centers in Palestine. Palmedia succeeded in securing a media center in the region at an advanced level to serve
its customers through Paltel’s fiber optics and transmission network and via satellite as well. Palmedia is also capable of
securing new coverage and high quality media production services for satellite channels, news agencies globally through the
company’s central studios, production facilities, media centers and Satellite News Gatherings (SNGs). Palmedia has become
the preferred choice for government and private bodies in breaking news coverage, events coverage and continued coverage
using its qualified and talented team members.
Vision
Palmedia is the leading and biggest media center in Palestine that provides broadcast connectivity, media content and services to different media through ICT and satellite broadcasting with high quality and efficacy.
Mission
Strengthening the media market in Palestine through upgrading quality and technical know-how and aligning the company’s service with Paltel Group’s widespread bundle of services.
Company Strategy in 2012
Palmedia was restructured in 2012 based on a long-term
strategy with more flexible range of services in serving
media channels. The strategy also includes closer coordination in resource management with Paltel in order to
improve the communication services at high quality. This
will secure long-terms profitable contracts based on investment in infrastructure and building local and regional
alliances for this purpose.
64
Achievements of the Year 2012
• Events and Activities Coverage
Palmedia excelled in covering important nationwide events in 2012 like the Israeli war on Gaza, Jerusalem events, Palestine
State (Resolution 194) events which reached a wide range of Arab, International satellite channels and news agencies. That
in addition to events recurrently covered by Palmedia as Expotech, Christmas Eve events, Presidential Bureau and Prime
Minister’s office activities and Paltel Group’s events and activities. New customers joined Palmedia’s customer list like the
English Russia Today and IHA Turkey and some other European Channels.
• Media Production and Editing
Palmedia produced many distinguished films like: Jerusalem Investment Forum film, WEF Istanbul film in addition to producing documentaries about Jerusalem and villages of the displaced people. The company also produced films in festivals
like Oman Film Festival.
Palmedia Future Strategies
Palmedia will work on the strategy formed in 2012 to accomplish the restructuring and improve the quality of streaming
and other existing services. The company will focus on enhancing the infrastructure of media production companies through
utilizing the satellite broadcasting and availing Paltel’s fiber optic networks at the requested bandwidth. The company
extended its geographic extension under which satellite broadcasting contracts will be signed with customers in Jordan
and Europe. The current fiber optics network will be expanded to play an important role in Palmedia’s operations in 2013.
Palmedia will build strategic alliances with regional partners and will enhance the role of Paltel’s fiber optics network in
satellite broadcasting to place Palmedia in a reputable location in Palestinian media sector and reduce operations costs in a
major portion. At the end of 2013, Palmedia will be ready to storm the satellite transmission market seriously and in a way
that provides customers with a band of services and satellite coverage.
The operational revenues decreased at 7% to reach JOD 1.64 million at
the end of 2012 compared to JOD 1.76 million at the end of 2011.
• Growth rate in fixed assets reached 9.6% at the end of 2012 compared with 2011.
65
Hulul IT Company (Hulul)
About Hulul
Hulul is specialized in providing different IT services for Paltel Group Companies including support to fixed line, mobile and
internet billing systems. Hulul also supports the applications, databases and customer service systems in the Group companies. The company’s qualified human resources manage the technical systems with data centers, networks and information security.
Vision
Providing best technology services for Paltel Group companies through building the technical capacity and its applications in
a remarkable manner
Mission
Applying the best systems in Paltel Group companies and providing latest technologies that improve performance and increase efficacy and preserve information security and privacy measures for users and customers. Hulul supplies the equipment and systems that achieve these results.
Company Strategy in 2012
Hulul worked in 2012 on building its technological capacity and improving it to match with latest technologies; this was
achieved through hard work and wise selection of talent and providing best training to this talent in order to enable it to
provide the best services and applications for Paltel Group companies and in turn, enable these companies to serve their
customers properly and securely.
66
Hulul installed several systems for Paltel Group companies, some of these support customer service and others organize
internal work procedures. Hulul also installed new technologies for central remote control in computer maintenance which
helps in tracking access to computers for higher security. The remote maintenance system also limits the help desk access
to PCs unless the PC owner permits this access. Hulul installed a total of 25 systems in 2012 as follows: 11 for Jawwal, nine
for Paltel and five other inter-company systems.
Company Future Strategies
• Building a high level technology capacity and matching with latest technologies through direct attention to company talent and training the human resources according to highest international standards.
• Building logical plans to reach targets and provide the Group companies with latest equipment that enable performance
excellence at local and international levels.
67
68
69
70
71
PALESTINE TELECOMMUNICATIONS COMPANY P.L.C.
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2012
Notes
2012
JD ‘000s
2011
JD ‘000s
Assets
Non‑current assets
Property, plant and equipment4
Intangible assets5
Projects in progress6
Materials 7
Investment in associates8
Available‑for‑sale investments9
Investment properties10
Other non‑current financial assets11
198,651
34,264
3,503
15,827
38,290
84,718
7,138
51,826
434,217
207,508
29,722
6,809
16,229
44,124
49,818
6,753
21,270
382,233
Total Assets
8,881
89,500
30,296
7,414
46,213
182,304
616,521
6,592
73,963
40,632
8,243
63,179
192,609
574,842
Equity and liabilities
Equity
Paid‑in share capital17
Statutory reserve18
Voluntary reserve18
Special reserve18
Foreign currency translation
Available‑for‑sale reserve9
Retained earnings
131,625
32,906
6,756
7,950
(50)
(593)
279,979
131,625
32,906
6,756
7,950
(31)
(973)
250,497
Total equity
458,573
428,730
7,090
29,151
36,241
21,270
26,112
47,382
41,907
15,198
4,373
60,229
121,707
157,948
616,521
32,414
14,180
2,967
49,169
98,730
146,112
574,842
Current assets
Inventories12
Accounts receivable13
Prepayments and other current assets14
Financial assets held for trading15
Cash and cash equivalents16
Non‑current liabilities
Non‑current interest‑bearing loans and borrowings20
Provision for employees› indemnity21
Current liabilities
Accounts payable22
Current interest‑bearing loans and borrowings23
Provision for income tax24
Other current liabilities25
Total liabilities
Total Equity and Liabilities
The attached nots 1 to 39 from part of these consolidated financial statements.
72
Notes
Revenues26
Telecommunication services costs27
License fees28
Other costs29
Operating and administrative expenses30
Loss from investments31
Finance costs
Other income (expenses)32
Profit before income tax
Income tax expense24
Profit for the year
Basic and diluted earnings per share33
2012
2011
JD ‘000s
JD ‘000s
365,852
(32,374)
(26,636)
(23,085)
283,757
370,605
(29,728)
(27,185)
(25,215)
288,477
(171,698)
(6,845)
(1,478)
1,903
105,639
(23,507)
82,132
(161,036)
(18,169)
(2,127)
(6,135)
101,010
(10,266)
90,744
0.624
0.689
73
Profit for the year
2012
2011
JD ‘000s
JD ‘000s
82,132
90,744
(2,933)
(4,916)
3,313
4,183
Foreign currency translation
(19)
(5)
Other comprehensive income for the year
361
(738)
Total comprehensive income for the year
82,493
90,006
Other comprehensive income:
Net losses on available‑for‑sale investments
Impairment loss recognized in the income statement
74
Available
‑for‑sale
Retained
Total
Reserves
428,730
Foreign
currency
Paid‑in
share
250,497
82,132
equity
(973)
82,132
361
earnings
(31)
-
-
82,493
reserve
7,950
-
380
82,132
(52,650)
translation
6,756
-
(19)
380
(52,650)
458,573
Special
32,906
-
-
(19)
-
279,979
391,374
Voluntary
131,625
-
-
-
-
(593)
212,403
90,744
Statutory
-
-
-
(50)
(240)
90,744
(738)
capital
Profit for the year
-
-
7,950
(26)
-
-
90,006
JD “000s
Other comprehensive income
-
-
6,756
7,950
-
(733)
90,744
(52,650)
JD “000s
-
32,906
6,756
-
(5)
(733)
(52,650)
428,730
JD “000s
Cash dividends (Note 19)
131,625
32,906
-
-
(5)
-
250,497
JD “000s
Balance at December 31, 2012
131,625
-
-
-
-
(973)
JD “000s
Balance at January 1, 2011
-
-
-
-
(31)
JD “000s
Profit for the year
-
-
-
7,950
JD “000s
Other comprehensive income
-
-
6,756
JD “000s
-
32,906
Balance at January 1, 2012
Cash dividends (Note 19)
131,625
Balance at December 31, 2011
75
Notes
Operating activities
Profit before income tax
Adjustments for:
Depreciation and amortization
Provision for doubtful debts
Intangible assets impairment loss
Loss from investments
Loss on disposal of property and equipment
Provision for employees› indemnity
Finance costs
Other non‑cash items
Working capital adjustments:
Accounts receivable
Inventory
Prepayments and other current assets
Accounts payable
Other current liabilities
Income taxes paid
Employees› indemnity paid
Net cash flows from operating activities
Investing activities
Purchase of available‑for‑sale investments
Sale of financial assets held for trading
Sale of available‑for‑sale investments
Dividends received
Investment in an associate
Sale of investment in an associate
Loans to associates
Purchase of intangible assets
Purchase of investment properties
Disposals of property, plant and equipment
Additions to projects in progress, property, plant, and
equipment and materials
Net cash flows used in investing activities
Financing activities
Cash dividends paid
Settlements of interest‑bearing loans and borrowings
Finance costs paid
Decrease in restricted deposits
Net cash flows used in financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
16
2012
JD ‘000s
2011
JD ‘000s
105,639
101,010
40,906
3,975
2,000
6,845
69
4,838
1,478
(19)
165,731
37,145
5,071
3,000
18,169
292
5,944
2,127
(5)
172,753
(19,512)
(2,289)
10,336
9,493
9,234
(22,101)
(1,799)
149,093
(15,178)
2,334
22,513
(2,209)
(1,048)
(6,040)
(5,297)
167,828
(37,833)
253
2,845
(636)
669
(30,556)
(8,545)
(385)
780
(35,813)
286
1,072
(15,600)
399
(27,187)
(100,595)
(56,611)
(106,267)
(50,897)
(14,180)
(1,405)
(66,482)
(51,545)
(15,619)
(1,745)
1,012
(67,897)
(17,984)
(6,336)
63,179
45,195
69,515
63,179
76
1.Corporate information
Palestine Telecommunications Company P.L.C. (PALTEL) is a limited liability public shareholding company registered and incorporated in Nablus ‑
Palestine on August 2, 1995. PALTEL commenced its operations on January 1, 1997. PALTEL operates under the Telecommunication Law No. (3) of 1996
decreed by the Palestinian National Authority (PNA). PALTEL is engaged in providing, managing, and rendering wireline and wireless services.
The consolidated financial statements of Palestine Telecommunications Company P.L.C. for the year ended December 31, 2012 were authorised for
issuance in accordance with a resolution of the Board of Directors on March 5, 2013.
2.Consolidated Financial Statements
The consolidated financial statements comprise the financial statements of PALTEL and its subsidiaries (the Group) as of December 31, 2012. PALTEL’s
direct and indirect ownership in its subsidiaries’ subscribed capital was as follows:
Company
JAWWAL
HADARA
PALMEDIA
HULUL
REACH
AYLA
Ownership %
2012
2011
100
100
100
100
100
100
100
100
100
100
100
100
Share Capital
2012
Subscribed JD
Paid JD
25,000,000
25,000,000
7,100,000
6,833,750
7,000,000
7,000,000
12,500,000
12,500,000
3,500,000
3,500,000
1,800,000
1,800,000
Subsidiaries are companies over which PALTEL exercises control over the financial and operational policies. The Group operates in the Palestinian
National Authority territories, except for Ayla which operates in Jordan.
77
3.Significant accounting policies
The consolidated financial statements of Palestine
Telecommunications Company Plc. and all its subsidiaries
have been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board.
The consolidated financial statements have been prepared
under the historical cost basis, except for financial assets held
for trading and available‑for‑sale investments that have been
measured at fair value.
The consolidated financial statements have been presented in
Jordanian Dinars, and all values except when otherwise indicated,
are rounded to the nearest thousand (JD ‘000s).
Basis of consolidation
The consolidated financial statements comprise the financial
statements of PALTEL and its subsidiaries as of December 31,
2012. The financial statements of the subsidiaries are prepared
for the same reporting year as PALTEL, using consistent
accounting policies.
Subsidiaries are fully consolidated from the date of acquisition,
being the date on which the Group obtains control, and continue
to be consolidated until the date when such control ceases. A
change in the ownership interest of a subsidiary, without a loss
of control, is accounted for as an equity transaction.
All intra‑group balances, transactions, unrealised gains and
losses resulting from intra‑group transactions and dividends are
eliminated in full.
Changes in accounting policies
The accounting policies adopted are consistent with those of the
previous financial year, except for the following amendments to
IFRS effective as of 1 January 2012:
‑IFRS 1 First‑Time Adoption of IFRS (Amendments)
‑IAS 12 Income Taxes (Amendment)–Deferred Taxes: Recovery of
Underlying Assets
‑IFRS 7 Financial Instruments: Disclosures – Enhanced
Derecognition Disclosure Requirements
The following standards have been issued but are not yet
mandatory, and have not been adopted by the Group. These
standards are those that the Group reasonably expects to have
an impact on disclosures, financial position or performance
when applied at a future date. The Group intends to adopt these
standards when they become effective.
IAS 1 ‑ Financial Statement Presentation – Presentation of Items
of Other Comprehensive Income
The amendments to IAS 1 change the grouping of items
presented in other comprehensive income. Items that could
be reclassified (or ‘recycled’) to profit or loss at a future date
would be presented separately from items that will never be
reclassified. The amendment affects presentation only and has
no impact on the Group’s financial position or performance. This
amendment is effective for annual periods beginning on or after
July 1, 2012.
IFRS 9 ‑ Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASBs work on
the replacement of IAS 39 and applies to classification and
measurement of financial assets and financial liabilities as
defined in IAS 39. The adoption of the first phase of IFRS 9 will
have an effect on the classification and measurement of the
Group’s financial assets, but will potentially have no impact on
classification and measurements of financial liabilities. The Group
will quantify the effect in conjunction with the other phases,
when issued, to present a comprehensive picture. This new
standard is effective for annual periods beginning on or after
January 1, 2015.
78
IFRS 10 ‑ Consolidated Financial Statements, IAS 27 ‑ Separate
Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate
Financial Statements that addresses the accounting for
consolidated financial statements. IFRS 10 establishes a single
control model that applies to all entities including special purpose
entities. The changes will require management to exercise
significant judgment to determine which entities are controlled,
and therefore, are required to be consolidated by a parent. This
new standard is effective for annual periods beginning on or after
January 1, 2013.
IFRS 11 ‑ Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC‑13
Jointly‑controlled Entities — Non‑monetary Contributions by
Venturers. This new standard is effective for annual periods
beginning on or after January 1, 2013.
IFRS 12 ‑ Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in
IAS 27 related to consolidated financial statements, as well as
all of the disclosures that were previously included in IAS 31 and
IAS 28. A number of new disclosures are also required, but has
no impact on the Group’s financial position or performance. This
new standard is effective for annual periods beginning on or after
January 1, 2013.
IFRS 13 ‑ Fair Value Measurement
IFRS 13 provides guidance on how to measure fair value under
IFRS when fair value is required or permitted. The Group is
currently assessing the impact that this standard will have on
the financial position and performance. This new standard is
effective for annual periods beginning on or after January 1, 2013.
IAS 28 ‑ Investment in associates and Joint Ventures
As a consequence of the new IFRS 11 Joint Arrangements,
and IFRS 12 Disclosure of Interests in Other Entities, IAS
28 Investments in Associates, has been renamed IAS 28
Investments in Associates and Joint Ventures. The revised
standard is effective for annual periods beginning on or after
January 1, 2013.
Significant accounting judgments, estimates and assumptions
The preparation of the Group’s consolidated 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 reporting date. However, uncertainty about these
assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amount of the
asset or liability affected in the future. The key areas involving a
higher degree of judgment or complexity are described below:
Fair value of financial instruments
Where the fair value of financial assets and financial liabilities
recorded in the statement of financial position cannot be
derived from active markets, their fair value is determined using
valuation techniques including the discounted cash flow model.
The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of
judgment is required in establishing fair values. The judgments
include considerations of inputs such as liquidity risk, credit risk
and volatility. Changes in assumptions about these factors could
affect the reported fair value of financial instruments.
Interconnection revenues and costs
The Group’s management uses certain estimates to determine
the amount of interconnection revenues, costs, receivable and
payable.
Providing for doubtful debts
The Group provides services to a broad based clientele, mainly
on credit terms. Estimates, based on the Group’s historical
experience, are used in determining the level of debts that the
Group believes will not be collected.
period of time to get ready for its intended use or sale are
capitalized as part of the cost of the asset. All other finance costs
are expensed in the period they occur. Finance costs consist of
interest and other costs that an entity incurs in connection with
the borrowing of funds.
Impairment of goodwill
The determination whether goodwill is impaired requires an
estimation of the ‘value in use’ of the cash‑generating units
to which the goodwill is allocated. Such estimation requires
management to make an estimate of the expected future cash
flows from the cash‑generating units and also to choose a
suitable discount rate in order to calculate the present value of
those cash flows.
Income tax
Useful lives of tangible and intangible assets
The Group’s management reassesses the useful lives of tangible
and intangible assets, and makes adjustments if applicable, at
each financial year end.
Provision for income tax
The Group’s management uses certain estimates in determining
the provision for income tax.
The Group’s management believes that the estimates and
assumptions used are reasonable.
The Group provides for income taxes in accordance with the
Palestinian Income Tax Law (or in accordance with the applicable
tax regulations where the entity operates and generates taxable
income) and IAS 12 which requires recognizing the temporary
differences, at the date of financial statements between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes, as deferred taxes. Such temporary
differences might result in recognizing deferred tax assets.
Income tax expense represents the accrued income tax which
is calculated based on the Group’s taxable income. Taxable
income may differ from accounting income as the later includes
non‑taxable income or non‑deductible expenses. Such income/
expenses might be taxable/deductible in the following years.
Revenue recognition
Revenues are recognized to the extent that it is probable that
the economic benefits will flow to the Group and the revenue
can be reliably measured, regardless of when the payment is
being made. Revenues are measured at the fair value of the
consideration received or receivable, excluding discounts. The
following specific recognition criteria must also be met before
revenue is recognized:
Rendering of services
•Revenues from wireline, wireless, and data services are
recognized when the outcome of the transaction can be
estimated reliably, by reference to the stage of completion of
the transaction.
•Revenues from media services are recognized when the
outcome of the transaction can be estimated reliably, by
reference to the stage of completion of the transaction
according to the progress reports.
•Revenues from prepaid cellular phone and other calling cards
are recorded as deferred revenues and are recognized based
on the units used.
Sale of goods
Revenues from sale of cellular phone sets and other electrical
equipment are recognized when the significant risks and rewards
of ownership of the goods have passed to the buyer.
Interest income
Interest income is recognized 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.
Dividends
Dividend revenue is recognized when the right to receive the
dividend is established.
Expenses recognition
Expenses are recognized when incurred based on the accrual
basis of accounting.
Finance costs
Finance costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial
79
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost
includes the cost of replacing part of the property, plant and equipment and borrowing costs for long‑term construction projects if the recognition
criteria are met. All other repair and maintenance costs are recognized in the consolidated income statement as incurred. Land is not depreciated.
Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows:
Buildings and leasehold improvements
Wireline network
Wireless network
Computer hardware and software
Office furniture and equipment
Motor vehicles
Heavy duty equipment
Small tools and equipment
Useful lives (Years)
20‑10
16‑7
10
7‑4
7‑4
7‑4
7
10‑4
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement when the asset is derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if
appropriate.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition‑date fair value, and the amount of any non‑controlling interest in the acquiree. For each business
combination, the Group measures the non‑controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s
identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
If the business combination is achieved in stages, the acquisition‑date fair value of the Group’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through profit or loss.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for
non‑controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash‑generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Where goodwill forms part of a cash‑generating unit, and part
of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash‑generating unit
retained.
Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
in a business combination is its fair value as at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortization and any
accumulated impairment losses.
The useful lives of the intangible assets are assessed to be either
finite or indefinite.
Intangible assets with indefinite useful lives are tested
for impairment on annual basis. Such intangibles are not
amortized. The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to
be supportable. If not, the change in useful life from indefinite to
finite is made on a prospective basis.
Intangible assets with finite lives are amortized over the useful
80
economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortization period and the amortization method for an
intangible asset with a finite useful life is reviewed at least at
each financial year end. The amortization expense on intangible
assets with finite lives is recognized in the consolidated income
statement.
License and lines costs
License and lines costs are amortized using the straight‑line
method over the license period of 20 years. Amortization expense
is recognized in the consolidated income statement.
Rights of use of fiber cables
Rights of use are amortized using the straight‑line method over a
period of 10 years.
Projects in progress
Projects in progress comprise costs incurred to construct and
expand the wireline and wireless networks and other projects
as of the financial statements date. These costs include costs of
direct labour, direct materials, equipment, and contractors costs.
After completion, projects in progress are transferred to property,
plant and equipment.
The carrying values of projects in progress are reviewed for
impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable. If any such
indication exists and where the carrying values exceed the
estimated recoverable amount, the projects are written down to
their recoverable amount.
Materials and inventories
Materials are stated at cost while inventories are stated at the
lower of cost or net realizable value using the weighted average
method. Costs are those amounts incurred in bringing each
product to its present location and condition.
their classification as follows:
The carrying values of materials are reviewed for impairment
when events or changes in circumstances indicate that the
carrying value may not be recoverable. If any such indication
exists and where the carrying values exceed the estimated
recoverable amount, the materials are written down to their
recoverable amount.
Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the
category ‘financial assets at fair value through profit or loss’. Financial
assets are classified as held for trading if they are acquired for the
purpose of selling or repurchasing in the near term. Gains or losses,
including changes in fair values, on investments held for trading are
recognized in the consolidated income statement.
The Group evaluates its financial assets held for trading whether
the intent to sell them in the near term is still appropriate. In rare
circumstances, when the Group is unable to trade these financial
assets due to inactive markets and management’s intent to sell
them in the foreseable future significantly changes, the Group may
elect to reclassify these financial assets. The reclassification to other
categories depends on the nature of the financial asset.
Investment in associates
The Group’s investment in its associates is accounted for using
the equity method of accounting. An associate is an entity in
which the Group has significant influence.
Under the equity method, the investment in the associate is
carried in the consolidated statement of financial position at cost
plus post‑acquisition changes in the Group’s share of net assets
of the associate. Goodwill relating to the associate is included in
the carrying amount of the investment and is neither amortized
nor individually tested for impairment.
The consolidated income statement and the statement of
comprehensive income reflect the share of the results of the
associate. Profits and losses resulting from transactions
between the Group and the associate are eliminated to the extent
of the interest in the associate.
The financial statements of the associate are prepared for
the same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line
with those of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an additional impairment
loss on its investment in its associate. The Group determines
at each reporting date whether there is any objective evidence
that the investment in the associate is impaired. If this is the
case, impairment is measured as the difference between the
recoverable amount of the associate and its carrying value, and is
recognised in the consolidated income statement.
Investment properties
Investment properties are measured at cost less any
accumulated impairment in value. The carrying value of
investment properties is reviewed for impairment when events
or changes in circumstances indicate that the carrying value
may not be recoverable. If any such indication exists and where
the carrying values exceed the estimated recoverable amount,
investment properties are written down to their recoverable
amount.
Investment properties are derecognised when either they
have been disposed of or when the investment property is
permanently withdrawn from use and no future economic
benefit is expected from its disposal. The difference between the
net disposal proceeds and the carrying amount of the asset is
recognised in the consolidated income statement in the period of
derecognition.
Investments in financial assets
The Group’s financial assets within the scope of IAS 39 are
classified as either financial assets at fair value through profit or
loss or available‑for‑sale investments. The Group determines the
classification of its financial assets upon initial recognition.
All financial assets are recognised initially at fair value plus
transaction costs, except in the case of financial assets recorded
at fair value through profit or loss.
All regular way purchases and sales of financial assets are
recognized on the trade date i.e. the date that the Group commits
to purchase or sell the asset. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of
assets within the period generally established by regulation or
convention in the marketplace.
The subsequent measurement of financial assets depends on
Available‑for‑sale investments
Available‑for‑sale investments include equity and debt securities.
Equity investments classified as available‑for‑sale are those, which
are not designated at fair value through profit or loss. Debt securities
in this category are those which are intended to be held for an
indefinite period of time and which may be sold in response to needs
for liquidity or in response to changes in the market conditions.
After initial measurement, available‑for‑sale investments are
subsequently measured at fair value with unrealized gains or losses
recognized as other comprehensive income in the available‑for‑sale
reserve until the investment is derecognized, at which time the
cumulative gain or loss is recognized in the consolidated income
statement, or determined to be impaired, at which time the
cumulative loss is reclassified to the consolidated income statement
and removed from the available‑for‑sale reserve.
Available‑for‑sale investments are stated at cost when their fair
value cannot be reliably determined due to the unpredictable nature
of future cash flows.
Fair values
The fair values of financial instruments that are traded in active
markets at each reporting date is determined by reference to quoted
market prices or dealer price quotations with no deduction for
transaction costs.
For financial instruments not traded in an active market, the
fair value is determined using appropriate valuation techniques.
Such techniques may include using recent arm’s length market
transactions; reference to the current fair value of another instrument
that is substantially the same; discounted cash flow analysis or other
valuation models.
Impairment of financial assets
An assessment is made at each reporting date whether there is any
objective evidence that a financial asset or a group of financial assets
is impaired. If such evidence exists, any impairment loss is recognized
in the consolidated income statement.
(a)For assets carried at amortised cost: impairment is the difference
between carrying amount and the present value of future cash flows
discounted at the original effective interest rate;
(b) Equity investments classified as available‑for‑sale: the
objective evidence of impairment would include a significant or
prolonged decline in the fair value of the investment below its cost.
‘Significant’ is evaluated against the original cost of the investment
and ‘prolonged’ against the period in which the fair value has been
below its original cost. Impairment is the difference between the
acquisition cost and the current fair value, less any impairment
loss on that investment previously recognized in the consolidated
income statement. Impairment losses on equity investments are not
reversed through the income statement; increases in their fair value
after impairment are recognized directly in other comprehensive
income;
(c)Debt instruments classified as available‑for‑sale: impairment is the
difference between the amortized cost and the current fair value, less
81
any impairment loss on that investment previously recognized in
the consolidated income statement.
Accounts receivable
Accounts receivable are stated at original invoice amount less a
provision for any uncollectible amounts. An estimate for doubtful
debts is made when collection of the full, or part of the, amount
is no longer probable. Bad debts are written off when there is no
possibility of recovery.
Cash and cash equivalents
For 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 restricted bank deposits and outstanding bank
overdrafts.
Accounts payable and accruals
Liabilities are recognized for amounts to be paid in the future for
goods or services received, whether billed by the supplier or not.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings
are measured at amortized cost using the effective interest rate
method. Gains and losses are recognized in the consolidated
income statement when the liabilities are derecognized as well
as through the effective interest rate method (EIR) amortization
process.
Amortized cost is calculated by taking into account any discount
or premium on acquisition and fee or costs that are an integral
part of the EIR. The EIR amortization is included in finance cost in
the consolidated income statement.
Leases
Finance leases, which transfer to the Group substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalized at the commencement 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 costs are charged directly against income.
A leased asset is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset and the lease term.
Operating lease payments are recognised as an expense in the
consolidated income statement on a straight‑line basis over the
lease term.
Provisions
Provisions are recognized when the Group has an obligation (legal
or constructive) arising from a past event, and the costs to settle
the obligation are both probable and able to be reliably measured.
Earnings per share
Basic earnings per share is calculated by dividing profit for the
year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during
the year.
Diluted earnings per share is calculated by dividing the profit
attributable to ordinary equity holders of the parent (after
adjusting for interest on the convertible preference shares) by
the weighted average number of ordinary shares outstanding
during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
Foreign currencies
82
Transactions denominated in currencies other than Jordanian
Dinar (JD), occurring during the year, are translated to JD using the
exchange rate at the date of the transaction. Monetary assets
and liabilities, which are denominated in foreign currencies are
translated into JD using the rate of exchange at the reporting
date. Gains or losses arising from exchange differences are
reflected in the consolidated income statement.
The assets and liabilities of subsidiaries with functional
currencies other than Jordanian Dinars are translated into the
presentation currency of the Group at the rate of exchange ruling
at the reporting date and, their income statements are translated
at the weighted average exchange rates for the year. The
exchange differences arising on the translation are recognized in
other comprehensive income.
83
84
28,075
13,801
-
At December 31, 2012
12,767
(33)
43,101
128,319
-
(6)
9,000
119,325
171,420
-
(517)
9,220
162,717
JD ‘000s
Wireline
network
83,240
83,940
(46)
(1,517)
13,684
71,819
167,180
(330)
(1,722)
6,586
162,646
JD ‘000s
Wireless
network
34,351
47,585
46
(1,654)
10,881
38,312
81,936
323
(1,703)
9,009
74,307
JD ‘000s
Computer
hardware
and
software
9,327
16,203
-
(548)
2,869
13,882
25,530
7
(606)
1,357
24,772
JD ‘000s
Office
furniture
and
equipment
1,116
2,596
-
(134)
531
2,199
3,712
-
(134)
-
3,846
JD ‘000s
Motor
vehicles
Property, plant, and equipment include JD 111,031,000 of fully depreciated assets that are still operational as of December 31, 2012.
13,801
15,308
-
Reclassifications
Net carrying amount
-
-
Relating to disposals
1,665
-
Depreciation for the year
13,676
-
At January 1, 2012
Accumulated depreciation
-
-
Reclassifications
(58)
-
Disposals
3,039
25,094
1,420
12,381
JD ‘000s
Buildings and
leasehold
improvements
Additions
AtJanuary 1, 2012
Cost
JD ‘000s
Land
4.Property, plant and equipment
476
1,320
-
(75)
102
1,293
1,796
-
(76)
201
1,671
JD ‘000s
Heavy duty
equipment
472
1,238
-
-
172
1,066
1,710
-
-
64
1,646
JD ‘000s
Small
tools and
equipment
198,651
296,509
-
(3,967)
38,904
261,572
495,160
-
(4,816)
30,896
469,080
JD ‘000s
Total
December 31, 2011
Motor
vehicles
Heavy duty
equipment
Small
tools and
equipment
Total
419,521
Office
furniture
and
equipment
1,580
54,455
Computer
hardware
and
software
1,587
68
(4,896)
Wireless
network
3,725
168
(2)
-
Wireline
network
23,672
213
(84)
-
469,080
Buildings and
leasehold
improvements
59,480
2,496
(92)
-
1,646
229,348
Land
138,722
14,650
(410)
-
1,671
899
35,429
JD ‘000s
159,310
25,192
(768)
(986)
3,846
1,290
168
1,000
JD ‘000s
23,926
5,542
(1,309)
945
24,772
1,722
85
-
(4,205)
JD ‘000s
7,519
1,208
(2,135)
41
74,307
11,455
569
-
(1)
JD ‘000s
4,918
(40)
-
162,646
28,596
2,797
-
(82)
JD ‘000s
(56)
162,717
60,021
9,330
-
(92)
JD ‘000s
AtJanuary 1, 2011
25,094
113,146
12,721
1,000
(370)
JD ‘000s
Additions
12,381
12,219
8,299
-
(606)
JD ‘000s
Disposals
1,460
-
(931)
JD ‘000s
At January 1, 2011
-
(2,120)
JD ‘000s
Depreciation for the year
(3)
Cost
Impairment
-
-
Accumulated depreciation
Reclassifications
Relating to disposals
-
261,572
-
1,066
207,508
-
1,293
580
2,199
378
(8)
13,882
1,647
8
38,312
10,890
-
71,819
35,995
119,325
90,827
13,676
43,392
Reclassifications
11,418
-
12,381
Net carrying amount
Property, plant, and equipment include JD 102,656,000 of fully depreciated assets that are still operational as of December 31, 2011.
85
5.Intangible assets
Cost
At January 1, 2012
Impairment
Additions
Amortization
At January 1, 2012
Amortization for the year
Net book value
Goodwill
JD ‘000s
License and
lines costs
JD ‘000s
Rights of
use of
fiber cables
JD ‘000s
Other
JD ‘000s
Total
JD ‘000s
18,497
18,497
23,588
23,588
7,971
(2,000)
8,545
14,516
185
185
50,241
(2,000)
8,545
56,786
-
18,088
1,102
19,190
2,399
885
3,284
32
16
48
20,519
2,003
22,522
18,497
18,497
4,398
5,500
11,232
5,572
137
153
34,264
29,722
Impairment testing of goodwill
For impairment testing purposes, goodwill acquired through business combinations has been mainly allocated to the wireless business
segment in addition to other business segments as follows:
Wireless segment*
Others
2012
JD ‹000s
17,259
1,238
18,497
2011
JD ‹000s
17,259
1,238
18,497
*Wireless segment
The recoverable amount of the wireless segment has been determined based on the value in use calculation using the discounted cash flow method
based on financial budgets approved by senior management covering a five‑year period. The discount rate applied to cash flow projections is 12.5%. Cash
flows beyond the 5‑year period are extrapolated using a 3% growth rate.
Key assumptions used in value in use calculations:
The calculations of value in use for the wireless segment are most sensitive to the discount rate and growth rate used to extrapolate cash flows beyond
the budget period:
Discount rate: Discount rates reflect management’s estimate of the risks specific to the business segment. This is the benchmark used by management
to assess operating performance and to evaluate future investment proposals. In determining appropriate discount rates for each business segment,
regard has been given to the wireless segment’s weighted‑average cost of capital using the Capital Asset Pricing Model to determine cost of equity and
an estimated borrowing rate to determine cost of debt.
86
Growth rate estimates: Rates are based on the value of the business segment’s operations after the explicit budget period. In determining appropriate
growth rates, regard has been given to the competitive forces that are expected to prevail after the explicit budget period.
With regard to the assessment of the value in use of the wireless business segment, management believes that no reasonably possible change in any of
the above key assumptions would cause the carrying value of the segment to materially exceed its value in use.
6.Projects in progress
Information Technology and Management systems
Data transmission projects
Wireline network
Buildings rehabilitation
Sundry
2012
JD ‘000s
1,525
1,441
136
320
81
3,503
2011
JD ‘000s
939
4,418
600
677
175
6,809
The Group capitalizes direct labour cost incurred on wireline network and other projects. During 2012 and 2011, salaries of JD 220,000 and JD 165,000
respectively, were capitalized. The Group estimates total cost to complete all these projects to be JD 2,863,000.
Upon completion, each project is transferred to property, plant and equipment. Following is the movement on projects in progress during the years 2012
and 2011:
2012
JD ‘000s
Balance, beginning of year
Additions
Payments during the year
Balance, end of year
7.Materials
Wireless network materials
Wireline network materials
Installation materials
Kits and tools
Electricity and air conditioning materials
Disposables and other materials
Provision for obsolete and slow moving materials
2011
JD ‘000s
6,809
12,289
(15,595)
3,503
4,378
13,120
(10,689)
6,809
2012
JD ‘000s
10,815
5,155
411
164
137
957
17,639
(1,812)
15,827
2011
JD ‘000s
10,424
6,822
431
162
145
409
18,393
(2,164)
16,229
Materials of JD 1,812,000 and JD 2,164,000 were fully provided for as of December 31, 2012 and 2011.
87
8.Investment in associates
Country of
incorporation
VTel Holding Company
VTel MEA
PAL Aqar for real estate
Jericho Gate
United Arab Emirates
United Arab Emirates
Palestine
Palestine
% of
ownership
2012
2011
25.3
25.3
50.0
25.3
25.3
40.3
50.0
Carrying amount of
the investment
2012
2011
JD ‘000s
JD ‘000s
5,807
7,237
16,527
20,597
690
15,956
15,600
38,290
44,124
−
VTel Holding Company is a holding company established during 2006 in the United Arab Emirates. VTel Holding is specialized in management
of telecom companies.
−
VTel MEA Company is a holding company established during 2011 in the United Arab Emirates. VTel MEA is specialized in management of
telecom companies.
−
Pal Aqar for Real Estate Company is engaged in property management and development in Palestine. During the year, the Group sold its share
in PAL Aqar Company for JD 669,000 and recognized loss of JD 21,000.
−
Jericho Gate for Real Estate Investment (Jericho Gate) is an associate with a total subscribed capital of JD 35 million. Jericho Gate is engaged in
investing in real estate and tourism projects. The Group determined that it only exercises a significant influence rather than joint control over Jericho Gate.
None of the associates is listed in any public exchange. The following table illustrates summarized financial information of the Group’s investments in
its associates:
2012
JD ‘000s
Share of the associates› statements of financial positions:
Non‑current assets
Current assets
Non‑current liabilities
Current liabilities
Share of the associates› revenues and results of operations:
Revenues
Results of operations
88
2011
JD ‘000s
69,671
18,529
(22,265)
(8,294)
56,255
10,472
(8,473)
(7,524)
24,251
(5,780)
14,597
(13,500)
9.Available‑for‑sale investments
2012
JD ‘000s
Quoted
Unquoted
2011
JD ‘000s
82,682
2,036
84,718
47,782
2,036
49,818
Unquoted investments are not traded in an active market and are stated at cost less accumulated impairment as their fair values cannot be reliably
determined due to the unpredictable nature of future cash flows. The Group management believes that fair value of such investments are not materially
different from their carrying amounts.
Movements on the available‑for‑sale reserve during the years ended December 31, 2012 and 2011 were as follows:
2012
JD ‘000s
Net unrealized losses
Impairment loss recognized in the income statement
2011
JD ‘000s
(973)
(2,933)
3,313
(593)
(240)
(4,916)
4,183
(973)
10.Investment properties
During the 2012 and 2011, the Group completed the purchase of land lots, for JD 6,753,000 and JD 385,000, respectively, which were classified as investment
property. The Group’s management is currently finalizing the legal requirements to acquire the title to these land lots.
The fair values of these land lots was estimated, by certified appraisers, at JD 9,796,000.
11.Other non‑current financial assets
2012
JD ‘000s
Prepayment on account*
Loans to associates**
21,270
30,556
51,826
2011
JD ‘000s
21,270
21,270
*During 2010, the Group reached an agreement with the PNA, in relation to an amount of USD 100 million (JD 70.9 million) that was paid by the Group
during 2009. According to the agreement, a total of USD 30 million (JD 21.27 million) is to be considered as a prepayment on license to upgrade JAWWAL’s
network, while the remaining USD 70 million (JD 49.63 million) would be considered as prepaid license fees and would be settled against license fees that
would accrue during a two‑year period starting July 1, 2010. The total prepaid license fees (JD 49.63 million) have been fully settled against license fees
accrued up to December 31, 2012.
**During the year, the Group entered into long term loan agreements with two associates “VTel MEA” and “VTel Holding” to grant three long term loans
as follows:
Euro loan to VTel Holding: A total amount of Euro 5 million (JD 4.68 million), with an annual interest rate of Euribor plus a margin of 3% to be repaid on
quarterly basis. The loan principal will be repaid in one installment after a 48‑month period.
USD loan 1 to VTel MEA: A total amount of USD 25 million (JD 17.73 million), with an annual interest rate of 4% to be repaid on quarterly basis. The loan
principal will be repaid in one installment after a 48‑month period.
USD loan 2to VTel MEA: A total amount of USD 11.50 million (JD 8.15 million), with an annual interest rate of 4% to be repaid on quarterly basis. The loan
principal will be repaid in one installment after a 48‑month period.
12.Inventories
89
2012
JD ‘000s
Cellular phone sets
SIM cards and prepaid scratch cards
Sundry
2011
JD ‘000s
5,364
3,415
102
8,881
3,337
2,853
402
6,592
13.Accounts receivable
2012
JD ‘000s
Wireline subscribers
Wireless subscribers
Palestine National Authority
Dealers› receivable
Telecommunication companies
Data services subscribers
Sundry
Total trade receivable
Provision for doubtful debts*
Net trade receivable
Unbilled revenues
Sundry
2011
JD ‘000s
35,420
43,093
31,898
9,947
7,782
3,544
2,562
134,246
(55,657)
78,589
10,386
525
89,500
31,318
37,951
24,524
4,933
8,038
3,385
2,322
112,471
(52,676)
59,795
12,895
1,273
73,963
*Accounts receivable are stated net of provision for doubtful debts. The provision is computed based on certain percentages of billed revenues and the
aging of accounts receivable.
As of December 31, 2012, trade receivables at nominal value of JD 55,657,000 (2011: JD 52,676,000) were provided for. Movements on the provision for
doubtful debts during the years 2012 and 2011 were as follows:
2012
JD ‘000s
Additions
Translation difference from ILS to JD
Balances written‑off during the year
2011
JD ‘000s
52,676
3,975
853
(1,847)
55,657
50,857
5,071
(3,122)
(130)
52,676
As of December 31, 2012, the aging analysis of the unimpaired trade receivable is as follows:
2012
2011
Total
JD ‘000s
78,589
59,795
Neither past due
nor impaired
JD ‘000s
11,375
12,121
<30 days
JD ‘000s
15,828
12,639
Past due but not impaired
60 days‑31
90 days‑61
120 days‑91
JD ‘000s
JD ‘000s
JD ‘000s
9,978
5,174
3,482
9,298
3,371
3,658
The Group expects, based on its past experience, to recover all unimpaired receivables.
90
>120 days
JD ‘000s
32,752
18,708
14.Prepayments and other current assets
2012
JD ‘000s
Advances to suppliers and contractors
Advanced license fees
Prepaid expenses
Due from related parties
Customs and purchase tax refund claim
Sundry
2011
JD ‘000s
9,010
7,457
10,002
415
3,412
30,296
11,389
7,178
6,676
5,915
387
9,087
40,632
15.Financial assets held for trading
2012
JD ‘000s
Shares quoted on Palestine Securities Exchange
Shares quoted on regional markets
2011
JD ‘000s
3,062
4,352
7,414
3,349
4,894
8,243
16.Cash and cash equivalents
Cash and cash equivalents include the following amounts:
2012
JD ‘000s
Cash on hand
Cash at banks and short term deposits
2011
JD ‘000s
850
45,363
46,213
872
62,307
63,179
Short‑term deposits amounting to JD 22,080,000 as of December 31, 2012 have an average interest rate of 4%, 1% and 2% for deposits in JD, USD, and ILS,
respectively.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the following at December 31, 2012 and 2011:
2012
JD ‘000s
Cash on hand
Cash at banks and short term deposits
Bank overdraft (Note 23)
2011
JD ‘000s
850
45,363
46,213
(1,018)
45,195
872
62,307
63,179
63,179
91
17.Paid‑in share capital
As of December 31, 2012 and 2011, PALTEL’s authorized and issued share capital amounted to JD 131,625,000. Total number of subscribed ordinary
shares amounted to 131,625,000 shares for the years ended December 31, 2012 and 2011.
18.Reserves
−
−
−
Statutory reserve represents accumulation of profits transferred at 10% of annual net profit in accordance with the Companies’ Law. This reserve is
not available for distribution to shareholders. The Group ceased to transfer any portion of profits as the statutory reserve balance reached 25% of
share capital.
Voluntary reserve represents the transfers made during prior years from profits. This reserve is available for distribution to the shareholders.
Special reserve represents appropriation of profits based on the Board of Directors resolution. This reserve is available for distribution to the
shareholders.
19.Cash dividends
The Board of Directors will propose to the General Assembly in its annual meeting to be held during 2013 the approval of a proposed cash dividend of JD
0.45 per share totaling JD 59,231,000.
The General Assembly approved in its meeting held on April 5, 2012 the declaration of a cash dividend of JD 0.40 per share totalling JD 52,650,000.
The General Assembly approved in its meeting held on March 31, 2011 the declaration of a cash dividend of JD 0.40 per share totalling JD 52,650,000.
20.Non‑current interest‑bearing loans and borrowings
2012
JD ‘000s
Long term loans from local banks
Current portion of long‑term loans (Note 23)
2011
JD ‘000s
21,270
(14,180)
7,090
35,450
(14,180)
21,270
The Group signed loan agreements with two local banks. These long term loans are subject to an annual interest of approximately LIBOR plus 2%.
The maturities of interest‑bearing loans and borrowings are as follows:
Maturing during
92
2013
2014
JD ‹000s
14,180
7,090
21,270
21.Provision for employees› indemnity
Following is a summary of movements on the provision for end of service benefit during the year:
2012
JD ‘000s
Additions
Payments during the year
2011
JD ‘000s
26,112
4,838
(1,799)
29,151
25,465
5,944
(5,297)
26,112
22.Accounts payable
2012
JD ‘000s
Trade suppliers
License fee payable
Telecommunication companies
Subscribers› deposits
2011
JD ‘000s
18,955
15,688
4,801
2,463
41,907
18,124
5,127
7,991
1,172
32,414
23.Current interest‑bearing loans and borrowings
2012
JD ‘000s
Current portion of long‑term loans (Note 20)
Bank overdraft
2011
JD ‘000s
14,180
1,018
15,198
14,180
14,180
As of December 31, 2012, the Group had an unutilized balance of JD 11,035,000 of credit facilities. Average annual interest rates on outstanding overdraft
facilities are set at LIBOR plus 2%.
93
24.Provision for income tax
Currently, PALTEL and Jawwal’s taxable income are entitled to a partial income tax exemption at 50% of the nominal tax rate until December 31, 2014
and December 31, 2021, respectively. According to the Council of Minister resolution, the nominal income tax rate was increased during the year from
15% to 20%.
During 2012, the Group elected to voluntarily defer its right for the partial exemption for a period of two years ending December 31, 2013. Thereafter,
PALTEL and Jawwal’s taxable income will be subject to 50% of the nominal tax rate until December 31, 2016 and December 31, 2023, respectively.
Following is the movement on the provision for income tax:
2012
JD ‘000s
Provision, beginning of year
Payments
Income tax expense for the year
Payments
Translation difference from ILS to JD
Provision, end of year
2011
JD ‘000s
2,967
24,904
(1,397)
23,507
(21,951)
(150)
4,373
(1,690)
10,777
(511)
10,266
(6,040)
431
2,967
To the date of these financial statements, PALTEL did not reach a final settlement with the Income Tax Department for its taxable income for the years
2008 through 2011.
The relationship between the consolidated tax expense for the current year and the consolidated accounting profit can be explained as follows:
Accounting profit before income tax
Non‑deductible expenses
Non‑taxable income
Taxable income
Tax expense at nominal income tax rate
Effective income tax rate
2012
JD ‘000s
105,639
21,725
(2,845)
124,519
24,904
23.6%
2011
JD ‘000s
101,010
43,758
(1,072)
143,696
10,777
10.7%
2012
JD ‘000s
2011
JD ‘000s
25.Other current liabilities
Accrued expenses
Unearned revenues
VAT payable
Dividends payable
Due to employees› saving fund
Provision for employees› vacations
Sundry
29,870
10,678
10,068
7,084
977
822
730
60,229
22,799
11,773
7,035
5,331
1,046
980
205
49,169
26.Revenues
2012
JD ‘000s
Wireline and wireless services
Interconnection revenue
Subscription fees
Sale of mobile handsets
Data services
Media services
New connections fees
Sundry
94
225,188
45,265
54,380
18,720
18,612
1,554
576
1,557
365,852
2011
JD ‘000s
235,681
43,649
55,702
19,023
11,898
1,649
1,574
1,429
370,605
27.Telecommunication services costs
Telecommunication costs mainly comprise of interconnection costs and international roaming due to other telecommunication companies.
28.License fee
According to the agreement signed between PALTEL and the PNA, PALTEL and JAWWAL pay the PNA a license fee of 7% of all wireline and wireless
operating revenues and other related services.
29.Other costs
2012
JD ‘000s
Cost of mobile handsets sold
Commissions paid to employees and dealers
Cost of data services
Cost of SIM cards and prepaid scratch cards
Cost of new lines installations
Cost of media services
Sundry
2011
JD ‘000s
10,010
6,514
2,790
2,306
856
381
228
23,085
11,386
7,328
2,799
2,210
1,109
314
69
25,215
30.Operating and administrative expenses
2012
JD ‘000s
Payroll and related employees› expenses
Depreciation of property, plant and equipment
Amortization of intangible assets
Advertising
Maintenance
Utilities
Rent
Provision for doubtful debts
Corporate social responsibility
Security and cleaning
Professional and consultancy fees
Postage, billing collection and distribution
Travel, accommodation, transportation and fuel
Cars operating lease
Employees› and assets insurance
Conferences and hospitality
Stationery and printings
Port demurrage fee
Sundry
2011
JD ‘000s
63,556
38,904
2,003
19,224
10,332
6,949
4,954
3,975
3,737
3,184
3,038
2,274
2,133
1,644
1,507
771
519
198
2,796
171,698
64,887
35,429
1,716
14,361
9,326
5,416
4,481
5,071
3,843
3,126
2,217
2,504
2,091
1,766
1,077
745
557
309
2,114
161,036
31.Loss from investments
2012
JD ‘000s
Change in fair value of financial assets held for trading
Loss from sale of investments
Impairment loss on available‑for‑sale investments
Share of associates› results of operations
Dividends income
2011
JD ‘000s
(594)
(3)
(3,313)
(5,780)
2,845
(6,845)
(1,521)
(37)
(4,183)
(13,500)
1,072
(18,169)
95
32.Other income (expenses)
2012
JD ‘000s
Interest revenues
Interest revenue on loans to associates
Foreign exchange gain (loss)
Loss on disposal of property and equipment
Impairment of assets
Sundry
2011
JD ‘000s
460
845
1,687
(69)
(2,000)
980
1,903
335
(5,634)
(292)
(3,000)
2,456
(6,135)
33 Earnings per share
Basic and diluted earnings per share for the years ended December 31, 2012 and 2011 is calculated as follows:
2012
Profit for the year (JD)
Weighted average number of subscribed share capital
Basic and diluted earnings per share (JD)
2011
82,132,000
131,625,000
0.624
90,744,000
131,625,000
0.689
34.Commitments and contingencies
As of the financial statements date, the Group has outstanding contractual commitments resulting from purchases, services and construction
contracts. The contractual commitments represent the difference between total contract cost and the amounts of materials or services received as of
the financial statements date.
Following is a summary of the outstanding commitments, which are due during the following years:
2012
JD ‘000s
Purchase orders and letters of credit
Construction contracts
Most of the outstanding commitments mature within one year of the date of the financial statements.
96
2011
JD ‘000s
35,295
213
35,508
35,989
416
36,405
35.Related party transactions
Related parties represent associated companies, major shareholders, directors and key management personnel of the Group, and entities controlled,
jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s Board of
Directors.
Interest‑bearing loans and borrowings
Due from related parties
Due from an associate
Finance costs
Interest revenue
Key management personnel compensation:
Short term benefits
Termination benefits
Nature of
relationship
Major shareholders
Major shareholders
Associate
Major shareholders
Associate
2012
JD ‘000s
22,288
10,002
30,556
1,289
845
2011
JD ‘000s
35,450
5,915
1,831
-
1,663
193
1,936
116
In addition, the Group acts as a guarantor against a loan utilized by an associate. According to the guarantee agreement, the Group guarantees only 25%
of the loan’s outstanding balance which amounted to USD 25 million (JD 17.73 million) as of December 31, 2012.
Terms of interest‑bearing loans and borrowing due to related parties are not materially different from those mentioned in Notes 11 and 20.
For the years ended December 31, 2012 and 2011, the Group has not recorded any impairment of amounts owed by related parties.
36.Segment reporting
The Group’s operating segments are the wireline, wireless, data, media services, in addition to investing activities segment. The operating businesses
are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic
business unit.
The wireline segment is a provider of wireline communication services and the operator of the telephone networks in Palestine.
The wireless segment is a provider of wireless communication services and the operator of a cellular network in Palestine.
The data segment is a major provider of internet services, leased lines, and ADSL services in Palestine.
The media segment is a provider of media and marketing services in Palestine.
The investing activities segment represents all investments activities of the Group.
97
98
99,251
Total revenues
328,339
77,747
Segment assets
Segment liabilities
Assets and liabilities
The following table presents segments’ assets and liabilities as of December 31, 2012:
-
21,130
Capital expenditures
2,000
17,941
Other segment information
Segment profit (loss) before tax
18,561
23,530
Inter‑segment revenues (eliminated)
Results
75,721
JD ‘000s
Segment revenues from external customers
Revenues
Wireline
103,006
281,353
-
13,596
-
22,471
94,920
273,112
3,146
269,966
JD ‘000s
Wireless
2,291
5,493
-
870
-
326
(456)
22,362
3,751
18,611
JD ‘000s
Data
2,648
1,927
-
136
-
168
(541)
1,644
90
1,554
JD ‘000s
Media
-
-
-
(5,780)
137,560
-
-
-
-
(6,845)
JD ‘000s
Investing
-
(27,744)
(138,151)
-
-
-
-
-
(30,517)
(30,517)
JD ‘000s
Eliminations
The following tables present revenues, profit before tax, and other segment information regarding the Group›s operating segments for the year ended December 31, 2012:
157,948
616,521
(5,780)
35,732
2,000
40,906
105,639
365,852
-
365,852
JD ‘000s
Total
Segment reporting (continued)
The following tables present revenues, profit before tax, and other segment information regarding the Group›s operating segments for the year ended December 31, 2011:
370,605
Total
-
-
Eliminations
-
(35,559)
370,605
Investing
1,649
-
(35,559)
101,010
Media
11,898
102
-
-
37,145
Data
274,578
5,198
1,751
(18,169)
-
3,000
Wireless
82,480
3,673
17,096
(91)
-
-
56,611
Wireline
26,586
278,251
(1,895)
187
-
-
(13,500)
JD ‘000s
109,066
102,750
200
-
-
-
574,842
JD ‘000s
18,415
20,805
1,000
60
(13,500)
(132,568)
146,112
JD ‘000s
15,953
1,000
588
-
108,938
(17,196)
JD ‘000s
Segment revenues from external customers
1,000
31,448
-
2,317
-
JD ‘000s
Inter‑segment revenues (eliminated)
24,515
-
5,203
2,434
JD ‘000s
-
291,082
1,543
JD ‘000s
Capital expenditures
299,870
91,571
Revenues
Segment assets
67,760
Assets and liabilities
The following table presents segments’ assets and liabilities as of December 31, 2011:
Other segment information
Segment profit (loss) before tax
Results
Total revenues
Segment liabilities
99
37.Financial risk management objectives and policies
The Group’s principal financial liabilities comprise interest‑bearing loans and borrowings and accounts payable. The main purpose
of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as accounts
receivable and cash and cash equivalents which arise directly from the Group’s operations.
The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, liquidity risk, equity price risk, and
foreign currency risk. The Group’s Board of Directors reviews and approves policies for managing these risks which are summarized
below.
Interest rate risk
The Group’s exposure to the risk of changes in interest rates relates primarily to the Group’s interest‑bearing loans and borrowings
and short‑term deposits with floating interest rates. The following table demonstrates the sensitivity of the Group’s profit before tax
to a reasonably possible change in interest rates, with all other variables held constant.
2012
USD
Increase/
decrease
Effect
on profit
before tax
basis points
JD ‘000s
+20
(32)
USD
‑10
16
JD
+20
10
JD
‑10
(5)
USD
+20
(67)
USD
‑10
34
JD
+20
6
JD
‑10
(3)
2011
Credit risk
The Group has a broad based clientele. The credit risk associated with the accounts receivable is widely distributed among a large
number of individual customers, except for the risk associated with the receivable from PNA ministries and institutions which represent
24% of total trade receivable. The maximum exposure is the carrying amount as disclosed in Note 13.
In addition, services are disconnected from clients who do not pay their bills within a specified period. Also, the Group has a system of
following up collection of receivable through the management effort and the legal channels.
With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, the Group’s exposure
to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funds and flexibility through the use of bank overdrafts and other
bank loans. The Group’s terms of billing require amounts to be paid by customer within 45 days of the date of billing. The table below
summarizes the maturity profile of the Group’s consolidated financial liabilities as of December 31, 2012 and 2011, based on contractual
undiscounted payments:
100
On demand
Less than
3 months
3 to 12
months
1 to 5
years
Total
JD ‘000s
JD ‘000s
JD ‘000s
JD ‘000s
JD ‘000s
As of December 31, 2012
Interest‑bearing loans and
borrowings
-
-
16,013
7,425
23,438
Accounts payable
21,444
12,399
8,064
-
41,907
Other liabilities
17,882
15,478
15,369
-
48,729
39,326
27,877
39,446
7,425
114,074
-
-
15,202
21,873
37,075
Accounts payable
17,005
13,548
1,861
-
32,414
Other liabilities
11,477
17,662
7,277
-
36,416
28,482
31,210
24,340
21,873
105,905
As of December 31, 2011
Interest‑bearing loans and
borrowings
Equity price risk
The following table demonstrates the sensitivity of the consolidated income statement and cumulative changes in fair value to
reasonably possible changes in equity prices, with all other variables held constant. The effect of decreases in equity prices is expected
to be equal and opposite to the effect of the increases shown:
Change in
equity price %
Effect on profit
before tax
Effect on
equity
%
JD ‘000s
JD ‘000s
Shares listed on Palestine Securities Exchange
+10
306
1,011
Shares listed on the Amman Stock Exchange
+10
435
6,307
Shares listed on other markets
+10
-
950
+5
-
102
Other unquoted
Foreign currency risk
The following table demonstrates the sensitivity to a reasonably possible change in the foreign currency rate against JD, with all other
variables held constant, of the Group’s profit before tax. However, the Jordanian Dinar is linked to the U.S. Dollar, therefore, no effect,
resulting from the fluctuations in USD rate, is expected on the consolidated financial statements:
101
Increase/decrease
in ILS rate to JD
Effect
on profit before tax
2012
ILS
+5%
3,475
ILS
‑5%
(3,475)
ILS
+5%
3,104
ILS
‑5%
(3,104)
2011
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its
business and maximize shareholder value.
The Group manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made
in the objectives, policies or processes during the years ended December 31, 2012 and December 31, 2011. Capital comprises share
capital, retained earnings, and other reserves, and is measured at JD 458,573,000 as at December 31, 2012 (2011: JD 428,730,000).
38.Fair values of financial instruments
Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments carried in the
financial statements:
Carrying amount
Fair value
2012
2011
2012
2011
JD ‘000s
JD ‘000s
JD ‘000s
JD ‘000s
Financial Assets
Quoted available‑for‑sale investments
82,682
47,782
82,682
47,782
Accounts receivable
89,500
73,963
89,500
73,963
7,414
8,243
7,414
8,243
Other financial assets
44,385
10,247
44,385
10,247
Cash and cash equivalents
46,213
63,179
46,213
63,179
270,194
203,414
270,194
203,414
Interest‑bearing loans and borrowings
22,228
35,450
22,228
35,450
Accounts payable
41,907
32,414
41,907
32,414
Other financial liabilities
48,729
36,416
48,729
36,416
112,864
104,280
112,864
104,280
Financial assets held for trading
Financial liabilities
102
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
−
The fair values of accounts receivable, other financial assets, cash and cash equivalents, accounts payable, and other financial
liabilities approximate their carrying amounts largely due to the short‑term maturities of these instruments.
−
The fair values of the quoted available‑for‑sale investments and financial assets held for trading is based on price quotations at
the reporting date.
−
The fair value of interest‑bearing loans and borrowings is estimated by discounting future cash flows using rates currently available
for debt on similar terms, credit risk and remaining maturities.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of its financial instruments:
−
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 which use inputs, which have a significant effect on the recorded fair value, that are not based on observable
market data.
However, the Group used only Level 1 to determine and disclose the fair value of its financial assets held for trading and quoted
available‑for‑sale investments. None of the other two levels was used. The unquoted available‑for‑sale investments have been stated
at cost as their fair values cannot be reliably determined. The Group management believes that fair value of such investments are not
materially different from their carrying amounts.
39.Concentration of risk in geographic area
The Group is carrying out the majority of its activities in Palestine. The political and economical destabilization in the area increases the
risk of carrying out business and may adversely affect the performance.
103
Palestine, Ramallah P.O Box 636
Tel: +970 2 294 4019 Fax: +970 2 235 0022
[email protected]
104

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