MTN SYRIA INTERIM CONDENSED FINANCIAL STATEMENTS … · 2019. 6. 10. · annual financial...

MTN SYRIA

INTERIM CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

30 June 2018

MTN Syria

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS As 30 June 2018

6

1 CORPORATE INFORMATION

MTN Syria (the "Company") is a public shareholding company registered and incorporated in the Syrian Arab

Republic and offers a range of voice and data cellular communication services. The Company is 72.98% owned

subsidiary of Investcom Mobile Communication Ltd. The Company operates in Syria, and its registered address

is Daria, Damascus Suburbs - Syria.

The ultimate parent company of Investcom Mobile Communication Ltd. is MTN Group Limited incorporated

and operating in Johannesburg, South Africa.

On 12 February 2001, Investcom Global Ltd (the "Contractor") and The Syrian Telecommunication Company

of the Syrian Arab Republic (STC) (formerly the Syrian Telecommunication Establishment) (the

“Management”) signed a Build - Operate - Transfer (BOT) Contract number 10/A under which the Contractor

undertakes to deliver and install the equipment required for building cellular communication network "GSM",

enabling the Company to put the project into operation and investment before 14 February 2001.

On 10 July 2014, an agreement was reached to provide a cellular telecommunication license in Syria and to

terminate the Build – Operate – Transfer (BOT) Contract number 10/A between STC, Invescom Global Ltd. and

MTN Syria. Accordingly, the termination agreement was signed on 30 October 2014. The license agreement

and termination agreement of BOT contract number 10/A was approved by the Council of Ministers in the Syrian

Arab Republic by decision No.20730/1 dated 31 December 2014.

On 1 January 2015, MTN Syria started operating under the license granted by the Syrian Telecommunications

Regulatory Authority (SyTRA) (as a representative of the Syrian government). The license is valid from 1

January 2015 to 31 December 2034. The license gives the Company the right to build, install, own, operate,

manage and earn revenues through operations and provide licensed services using the public cellular

telecommunication network (GSM). In addition, the frequency license gives the Company the right to

exclusively use allocated microwave frequency bands to operate its mobile network and provide related services.

According to the license granted by SyTRA, MTN Syria (the licensee) paid license fees amounting to Syrian

Pounds 25,000,000,000 during August 2014 and January 27015. The Company will also pay to the Syrian

Government through SyTRA revenue shares over the license period of 20 years as follows:

50% of revenues subject to revenue sharing form the date of the license commencement on 1 January 2015 to

31 December 2015.

30% of revenues subject to revenue sharing for the years 2016 and 2017.

20% of revenues subject to revenue sharing for the remaining years from 2018 to 2034.

MTN Syria


7

2 BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES

2.1 Basis of preparation

The interim condensed financial statements for the six-month period ended 30 June 2018 have been prepared in

accordance with the accounting policies as stated in note 2.2. The interim condensed financial statements are

prepared by the Company’s management to meet the requirements of the Accounting and Auditing Council.

The interim condensed financial statements do not include all the information and disclosures required in the

annual financial statements. Results for the six-month period ended 30 June 2018 are not necessarily indicative

of the expected results for the financial year ending 31 December 2018.

The interim condensed financial statements are presented in Syrian Pounds (SP), which is the functional currency

of the Company.

2.2 Summary of significant accounting policies

The accompanying financial statements have been prepared in accordance with the following accounting

policies:

Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and

the revenue can be reliably measured.

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales

taxes or duty. The following specific recognition criteria must also be met before revenue is recognized:

Rendering of services

Revenue from postpaid lines upfront connection fees is recognized at point of sale while revenue from prepaid

lines upfront connection fees is recognized when the customer makes the first call, revenue from

telecommunication services is recognized when earned. Unbilled revenue from the billing cycles dating to the

end of each month is determined based on traffic and is accrued at the end of each month. Services of prepaid

airtime cards that will be provided in future are recognized as unearned revenue in the statement of financial

position, and the related revenue then is recognized based on the value of services actually consumed by

customers.

Interest income

Revenue is recognized as the interest accrues using the effective interest rate.

Taxation

Taxation is provided in accordance with Syrian fiscal regulations and IAS 12. Current income tax assets and

liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to

the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or

substantively enacted at the date of the statement of financial position.

Deferred income tax is provided using the liability method on all temporary differences at the date of the

statement of financial position. The carrying amount of deferred income tax assets is reviewed at each reporting

date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow

all or part of the deferred income tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the

asset is realized or the liability is settled, based on laws that have been enacted at the date of the statement of

financial position.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current

tax assets against current tax liabilities and the deferred tax relate to the same taxable entity and the same taxable

authority.

MTN Syria


8

2 BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES (continued)

2.2 Summary of significant accounting policies (continued)

Foreign currencies

Transactions in foreign currencies are initially recorded at the rate ruling at the date of the transaction. Monetary

assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange ruling at the

reporting date. All differences are taken to the statement of comprehensive income. Non-monetary items that

are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the

dates of the initial transactions.

Employee benefits

Employees’ End of Service Benefits

For national and expatriate employees, the Company makes contributions to the Social Security Department

calculated as a percentage of the employees' salaries. The Company's obligations are limited to these

contributions, which are expensed when due.

Other short-term employee benefits

Remuneration to employees in respect of services rendered during a reporting period is recognized as an expense

in that reporting period. Provision is made for accumulated leave and for non-vested short-term benefits when

there is no realistic alternative other than to settle the liability, and at least one of the following conditions is

met:

there is a formal plan and the amounts to be paid are determined before the time of issuing the financial

statements; or

achievement of previously agreed bonus criteria has created a valid expectation by employees that they

will receive a bonus and the amount can be determined before the time of issuing the financial

statements.

Share based payment transactions – Cash settled transactions

Employees (including senior executives) of the Company receive remuneration in the form of share appreciation

rights, which can only be settled in cash (‘cash settled transactions’).

The cost of cash settled transactions is measured initially at fair value at the grant date with reference to the

published prices of the head office securities. The liability is remeasured to fair value at each reporting date up

to and including the settlement date, with changes in fair value recognized in employee benefits expense.

Current versus non-current classification

The Company presents assets and liabilities in the statement of financial position based on a current/non-current

classification.

An asset is current when it is:

- Expected to be realised or intended to be sold or consumed in the normal operating cycle

- Held primarily for the purpose of trading

- Expected to be realised within twelve months after the reporting period; or

- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve

months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in the normal operating cycle

- It is held primarily for the purpose of trading

- It is due to be settled within twelve months after the reporting period; or

- There is no unconditional right to defer the settlement of the liability for at least twelve months after the

reporting period.

The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as

non-current assets and liabilities.

MTN Syria


9



Financial assets

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans

and receivables as appropriate. All financial assets are recognised initially at fair value plus, in the case of

financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the

acquisition of the financial asset.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date. The fair value measurement is based on the presumption

that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability

Or

In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use

when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate

economic benefits by using the asset in its highest and best use or by selling it to another market participant that

would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data

are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of

unobservable inputs.

Inventories

Inventories are valued at the lower of cost and net realizable value.

Costs are those expenses incurred in bringing each inventory item to its present location and condition including

purchase cost on a weighted average basis, custom duties and freight charges.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of

completion and the estimated costs necessary to make the sale.

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash on hand, bank balances,

and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Accounts receivable

Accounts receivable are stated at original invoice value less any provision for any uncollectable 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 probability of recovery. Carrying amount is reduced through use of an

allowance account.

Impairment of financial assets

The Company assesses at each reporting date whether a financial asset or group of financial assets is impaired.

A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence

of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an

incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset

or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications

that the debtors or a group of debtors is experiencing significant financial difficulty, the probability that they

will enter bankruptcy or the financial reorganization and where observable data indicate that there is a

measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that

correlate with defaults

MTN Syria


10



Impairment of financial assets (continued)

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Company first assesses whether impairment exists individually

for financial assets that are individually significant, or collectively for financial assets that are not individually

significant. If the Company determines that no objective evidence of impairment exists for an individually

assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar

credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed

for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective

assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the

difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding

future expected credit losses that have not yet been incurred). The present value of the estimated future cash

flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss

is recognized in the statement of comprehensive income.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event

occurring after the impairment was recognized, the previously recognized impairment loss is increased or

reduced by adjusting the allowance account.

Financial liabilities

Interest bearing loans are stated at fair value of the consideration received less any direct costs. Loans are

subsequently measured at amortized cost using the effective interest rate method. Gains or losses on

derecognition or the amortization of loans is recognized in the statement of comprehensive income.

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.

Provisions

Provisions are recognized when the Company 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. The expense relating to

a provision is presented in the statement of comprehensive income net of any reimbursement.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is

derecognized when:

the rights to receive cash flows from the asset have expired;

the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a “pass-through”

arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset,

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

but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-

through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the

asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing

involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset

and the associated liability are measured on a basis that reflects the rights and obligations that the Company has

retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of

the original carrying amount of the asset and the maximum amount of consideration that the Company could be

required to repay.

MTN Syria


11



Derecognition of financial assets and liabilities (continued)

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms,

or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a

derecognition of the original liability and the recognition of a new liability, and the difference in the respective

carrying amounts is recognized in the statement of comprehensive income.

Dividends on ordinary shares

Dividends on ordinary shares are recognized as liability and deducted from equity when such dividends are

approved by the Company’s shareholders.

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position if,

and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention

to settle on net basis to realize the assets and liabilities simultaneously.

Property and equipment

Property and equipment is stated at cost net of accumulated depreciation and any accumulated impairment losses,

if any. Such cost includes the cost of replacing part of the property and equipment and borrowing costs of long-

term construction projects, if the recognition criteria are met. When significant parts of property and equipment

are required to be replaced in intervals, the Company recognizes such parts as individual assets with specific

useful lives, and depreciation, respectively. Likewise, when a major inspection is performed, its cost is

recognized in the carrying amount of the property and equipment, as a replacement if the recognition criteria are

satisfied. All other repairs and maintenance costs are recognized in the statement of comprehensive income as

incurred.

Depreciation is calculated on a straight line basis over the estimated useful lives of assets as follows:

Office equipment over 3 years

Equipment - Technical equipment over 5 years

Equipment - IT equipment over 3 years

Motor vehicles over 4 years

Office furniture over 5 years

Capital work in progress is not depreciated.

An item of property 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 net disposal proceeds and the carrying amount

of the asset) is included in the statement of comprehensive income 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.

Operating leases

Operating lease payments are recognized as an expense in the statement of comprehensive income on a

straight line basis over the lease term. All of the Company’s leases are operating leases.

MTN Syria


12



Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,

intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment

whenever there is an indication that the intangible asset may be impaired. The amortization period and the

amortization method for an intangible asset with a finite useful life are reviewed at least at each financial

year-end.

Intangible assets include the value of the operating license, frequency license, software licenses. The operating

license is amortized over 20 years which is the term of the license while frequency license is amortized over 19

years and software licenses are amortized over 3 years.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied

in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as

changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in

the statement of comprehensive income in the expense category consistent with the function of the intangible

assets.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually either

individually or at the cash generating unit level. The assessment of the indefinite life is reviewed annually to

determine whether the indefinite life continues to be supportable at each financial reporting date. If not, the

change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses from derecognition of an intangible asset are measured as the difference between the net disposal

proceeds and the carrying amount of the asset and are recognized in the statement of comprehensive income

when the asset is derecognized. The impairment losses are recognized in the statement of comprehensive income.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired.

If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the

asset’s recoverable amount. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s

(CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset

does not generate cash inflows that are largely independent of those from other assets or group of assets.

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired

and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are

discounted to their present value using a pretax discount rate that reflect the current market assessments of the

time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate

valuation model is used.

An assessment is made at each reporting date as to whether there is any indication that previously recognized

impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates

the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed

only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last

impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed

its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation,

had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement

of comprehensive income.

MTN Syria


13


2.3 Changes to accounting policies and interpretations

Accounting policies for Revenues

The new accounting policies establish a five-step model to account for revenue arising from contracts with

customers. Revenue is recognised at an amount that reflects the consideration to which an entity expects to be

entitled in exchange for transferring goods or services to a customer.

The new accounting policies require the Company to exercise judgement, taking into consideration all of the

relevant facts and circumstances when applying each step of the model to contracts with their customers. The

new accounting policies also specify the accounting for the incremental costs of obtaining a contract and the

costs directly related to fulfilling a contract.

The Company adopted the new accounting policies using the modified retrospective method of adoption and

resulted in a decrease in the revenue of prepaid lines due to the change in the timing of prepaid offers and bundles

obligation fulfillment.

Under the modified retrospective method, the new accounting policies were applied only to contracts that are

not completed as at 1 January 2018.

The effect of adopting the new accounting policies is, as follows:

Impact on the statement of financial position (increase/(decrease)) as at 1 January 2018:

SP

Equity and liabilities

Current liabilities

Due to the Syrian Government (61,601,769)

Due to related parties (6,844,641)

Other current liabilities 195,561,173

Deferred tax liability (21,355,280)

Total current liabilities 105,759,483

Total liabilities 105,759,483

Impact on the statement of profit or loss items (increase/(decrease)) as at 1 January 2018:

SP

Gross revenue (195,561,173)

MTN Syria share of revenues (195,561,173)

Operating expenses 61,601,769

Gross operating profit (133,959,404)

Administrative, marketing and selling expenses 6,844,641

Operating profit (127,114,763)

Net profit before tax (127,114,763)

Income tax expense 21,355,280

Net effect on profit as at 1 January 2018 (105,759,483)

Net effect on total comprehensive income as at 1 January 2018 (105,759,483)

MTN Syria


14


2.4 Significant accounting judgments, estimates and assumptions

The preparation of the Company’s interim condensed 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 the

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 estimates are listed below:

Going concern

The Company's management has made an assessment of the Company's ability to continue as a going concern.

Despite the current events that the Syrian Arab Republic is experiencing and the inherently uncertain future

outcomes of these events, the Company's management is satisfied that the Company has the adequate resources

to continue in business for the foreseeable future. Furthermore, the management is not aware of any material

uncertainties that may cast significant doubt on the Company’s ability to continue as going concern. Therefore,

the financial statements continue to be prepared on a going concern basis.

Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount,

which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation

is based on available data from binding sale transactions in arm’s length transaction of similar assets or

observable market price less incremental costs for disposing of the asset.

Impairment of inventories

Inventories are held at the lower of cost and net realizable value. When inventories become old or obsolete, an

estimate is made of their net realizable value. For individually significant amounts this estimation is performed

on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are

assessed collectively and a provision is applied according to the inventory type and the degree of ageing or

obsolescence, based on anticipated selling prices. Differences in the actual amounts realized and the amounts

expected in the future will be recognized in the interim statement of comprehensive income.

Impairment of accounts receivable

An estimate of the collectible amount of accounts receivable is made when collection of the full amount is no

longer probable. For individually significant amounts, this estimation is performed on an individual basis.

Amounts which are not individually significant, but which are past due, are assessed collectively and a provision

applied according to the length of time past due. Differences between actual and collected amounts in the future

will be recognized in the interim statement of comprehensive income.

MTN Syria


15

3 GROSS REVENUES

For the six-month period ended 30 June

2017 2018

(Unaudited) (Unaudited)

Syrian Pounds Syrian Pounds

24,101,128,270 21,896,983,463 Prepaid Lines

6,966,375,979 7,164,788,912 Postpaid Lines

5,336,127,973 6,802,304,666 3G revenues

487,964,180 402,200,441 Visitors roaming revenues

121,786,542 166,727,344 Other services revenues

37,013,382,944 36,433,004,826

4 SYRIAN GOVERNMENT/STC SHARE OF REVENUES

On 1 January 2015, MTN Syria started operating under the granted license. Accordingly, the Company will pay to the

Syrian Government through SyTRA its revenue share over the period of the license.

The revenue share for the year 2018 is 20% (2017: 30%). In addition, the Company has to pay the Syrian Government

an annual fee of 1.5% from the revenue subject to revenue sharing, which comprise of: annual license fees, use of

telecom infrastructure, and contribution to the comprehensive services fees.

The table below shows the revenues subject to revenue sharing and the Syrian Government’s share from these revenues

based on the revenue share percentage:


2017 2018

(Unaudited)

(Unaudited)


Syrian

government

share

Revenues subject

to revenue

sharing

Syrian

government

share

Revenues

subject to

revenue sharing

Revenue subject to 20% + 1.5%

annual fees

- - 4,563,093,095 21,223,688,816 Prepaid Lines

- - 1,533,489,437 7,132,509,010 Postpaid Lines*

- - 1,462,330,584 6,801,537,601 3G revenues

- - 85,282,942 396,664,842 Visitors roaming revenues

- - 7,644,196,058 35,554,400,269

Revenue subject to 30% + 1.5%

annual fees

7,312,939,011 23,215,679,400 46,697,968 148,247,518 Prepaid Lines

2,191,763,861 6,957,980,510 770,115 2,444,811 Postpaid Lines*

1,689,214,397 5,362,585,388 7,314,607 23,220,973 3G revenues

152,175,511 483,096,861 613,253 1,946,834 Visitors roaming revenues

11,346,092,780 36,019,342,159 55,395,943 175,860,136

(407,540) (815,079) - - Revenue subject to 50%***

11,345,685,240 36,018,527,080 7,699,592,001 35,730,260,405

MTN Syria


16

4 SYRIAN GOVERNMENT/STC SHARE OF REVENUES (continued)

The breakdown of the interconnect revenues with the Syrian Telecommunication Company are as follows:


2017

2018

(Unaudited)

(Unaudited)

Syrian Pounds

Syrian Pounds

Interconnect

Fees Interconnect

Revenues Interconnect

Fees Interconnect

Revenues

772,739,288 772,739,288 443,410,915 443,410,915 Prepaid Lines

89,942,558 89,942,558 64,542,941 64,542,941 Postpaid Lines

4,867,750 4,867,750 3,587,610 3,587,610 Visitors roaming revenues

867,549,596 867,549,596 511,541,466 511,541,466

5 OPERATING EXPENSES

For the six-month period ended 30

June

2017 2018



672,490,384 655,202,918 Dealer costs and other related expenses

5,318,697,620 7,265,251,239 Depreciation expense of network equipment (note 6)

777,108,868 757,838,369 License fees amortization and amortization of frequency license (note 7)

867,549,596 511,541,466 Interconnection costs with STC (note 4)

813,179,738 1,301,862,316 Microwave links, protection fees and other infrastructure costs

2,544,464,431 2,883,250,309 Network maintenance

448,846,691 749,224,454 Sites’ rents

3,041,681,386 2,941,537,095 Other sites’ costs

247,195,397 181,892,057 Roaming costs

82,110,956 94,553,257 Prepaid cards’ costs

369,122,241 480,257,330 Added value services costs

223,971,749 153,601,594 Other operating charges

23,902,417 58,903,782 3G service costs

15,430,321,474 18,034,916,186

MTN Syria


17

6 PROPERTY AND EQUIPMENT

Movement of property and equipment during the six-month period ended 30 June 2018 is as follows:

Network

equipment

Office

equipment

Equipment

Motor vehicles

Office

furniture

Capital work in

progress(*)

Total

Syrian Pounds

Syrian

Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2018 110,913,251,818 9,410,397,097 1,355,920,484 201,284,771 238,072,878 16,563,313,756 138,682,240,804

Additions 2,686,975,140 51,481,950 49,763,138 - 13,399,500 498,312,600 3,299,932,328

Reclass (note 7) - - - - - (910,886,101) (910,886,101)

Disposals (1,305,230) - (11,965,960) - (446,546) - (13,717,736)

Transfers 11,726,323,762 359,171,190 77,062,682 - 21,915,099 (12,184,472,733) -

At 30 June 2018 125,325,245,490 9,821,050,237 1,470,780,344 201,284,771 272,940,931 3,966,267,522 141,057,569,295

Depreciation

At 1 January 2018 56,006,421,148 6,169,489,815 905,515,719 181,087,816 195,205,726 - 63,457,720,224

Depreciation charge for the period 7,265,251,239 845,487,590 74,417,630 3,553,551 7,540,907 - 8,196,250,917

Disposals (1,304,412) - (11,400,021) - (431,029) - (13,135,462)

-

At 30 June 2018 63,270,367,975 7,014,977,405 968,533,328 184,641,367 202,315,604 - 71,640,835,679

Net Book Value

At 30 June 2018 (unaudited) 62,054,877,515 2,806,072,832 502,247,016 16,643,404 70,625,327 3,966,267,522 69,416,733,616

* Capital work in progress represents the cost of equipment, motor vehicles, office furniture, and office fixtures purchased from foreign suppliers and their ownership has been transferred

to the Company during the period. However, custom clearance procedures have not been finalized by the end of the period.

- Property and equipment include fully depreciated assets at a total cost of Syrian Pounds 40,789,017,846 which are still being used by the Company in its operating activities as of 30 June

2018 (30 June 2017: Syrian Pounds 35,458,297,636).

- Property and equipment include assets at a total cost of Syrian Pounds 12,417,902,696 which are not used by the Company as of 30 June 2018 and expected to be installed and used within

2018 (30 June 2017: Syrian Pounds 6,597,427,505).

MTN Syria


18

6 PROPERTY AND EQUIPMENT (continued)

The movement of property and equipment during the year ended 31 December 2017 is as follows:

Network

equipment

Office

equipment Equipment

Motor

vehicles

Office

furniture

Capital work in

progress (*) Total

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2017 84,127,436,738 6,840,355,101 1,139,318,963 181,330,579 207,100,164 782,353,797,19 112,292,895,327

Additions 17,337,528,289 1,511,860,891 201,026,969 1,575,000 846,000 12,746,425,386 31,799,262,535

Adjustment - - - - - (1,699,200,000) (1,699,200,000)

Reclassification (note 7) - - - - - (2,744,451,574) (2,744,451,574)

Disposals (945,221,091) (5,703,843) (13,859,865) (555,808) (924,877) - (966,265,484)

Transfers 10,393,507,882 1,063,884,948 29,434,417 18,935,000 31,051,591 (11,536,813,838) -

At 31 December 2017 110,913,251,818 097,9,410,397 1,355,920,484 1201,284,77 78238,072,8 616,563,313,75 138,682,240,804

Depreciation

At 1 January 2017 45,067,299,617 4,946,958,874 782,820,175 175,042,419 187,644,982 - 51,159,766,067

Depreciation charge for the year 11,814,959,959 1,228,234,783 125,557,726 6,601,205 8,475,671 - 13,183,829,344

Disposals (875,838,427) (5,703,843) (2,862,181) (555,808) (914,928) - (885,875,187)

At 31 December 2017 56,006,421,149 46,169,489,81 20905,515,7 181,087,816 5195,205,72 - 63,457,720,224

Net Book Value

At 31 December 2017 54,906,830,669 3,240,907,283 450,404,764 20,196,955 42,867,153 16,563,313,756 75,224,520,580

MTN Syria


19

6 PROPERTY AND EQUIPMENT (continued)

Movement of property and equipment during the six-month period ended 30 June 2017 is as follows:

Network

equipment

Office

equipment

Equipment

Motor vehicles

Office

furniture

Capital work in

progress

Total

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

At 1 January 2017 84,127,436,738 6,840,355,101 1,139,318,963 181,330,579 207,100,164 19,797,353,782 112,292,895,327

Additions 2,980,924,595 57,212,731 77,724,470 - 147,000 - 3,116,008,796

Disposals (note 7) - - - - - (1,889,982,384) (1,889,982,384)

Transfers (223,229,419) (5,058,925) (13,837,865) - - - (242,126,209)

4,611,956,524 251,694,196 76,424,026 20,510,000 4,248,904 (4,964,833,650) -

At 30 June 2017 91,497,088,438 7,144,203,103 1,279,629,594 201,840,579 211,496,068 12,942,537,748 113,276,795,530

Depreciation

At 1 January 2017 45,067,299,617 4,946,958,874 782,820,175 175,042,419 187,644,982 - 51,159,766,067

Depreciation charge for the

period 5,318,697,620 554,814,627 58,190,257 2,988,756 3,783,549 - 5,938,474,809

Disposals (218,024,942) (5,058,925) (2,840,181) - - - (225,924,048)

At 30 June 2017 50,167,972,295 5,496,714,576 838,170,251 178,031,175 191,428,531 - 56,872,316,828

Net Book Value

At 30 June 2017 (Unaudited) 41,329,116,143 1,647,488,527 441,459,343 23,809,404 20,067,537 12,942,537,748 56,404,478,702

Depreciation charges of property and equipment are allocated in the interim statement of comprehensive income as follows:

30 June 2017 30 June 2018



5,318,697,620 7,265,251,239 Expenses allocated to operating expenses (note 5)

619,777,189 930,999,678 Expenses allocated to administrative expenses

5,938,474,809 8,196,250,917

MTN Syria


20

7 INTANGIBLE ASSETS

The movement of intangible assets during the six-month period ended 30 June 2018 is as follows:

Total

Software licenses

Frequency license **

License

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

36,002,924,144 5,896,924,144 5,106,000,000 25,000,000,000 Balance at 1 January 2018*

170,322,692 170,322,692 - - Additions

910,886,101 910,886,101 - - Reclass (note 6)

37,084,132,937 6,978,132,937 5,106,000,000 25,000,000,000 Balance at 30 June 2018

Amortization

8,402,205,493 4,275,750,031 376,455,462 3,750,000,000 Balance at 1 January 2018

1,348,188,222 590,349,853 137,975,355 619,863,014 Amortization charge for the period

9,750,393,715 4,866,099,884 514,430,817 4,369,863,014 Balance at 30 June 2018

Net Book Value

27,333,739,222 2,112,033,053 4,591,569,183 20,630,136,986 At 30 June 2018 (unaudited)

* Intangible assets include fully amortized assets at a total cost of Syrian Pounds 3,543,144,928 which are being used by the Company in its operating activities at 30 June 2018

(30 June 2017: Syrian Pounds 2,248,488,107).

MTN Syria


21

7 INTANGIBLE ASSETS (continued)

The movement of intangible assets during the year ended 31 December 2017 is as follows:

Total Software

Licenses

Frequency

License

License

SP Syrian Pounds Syrian Pounds Syrian Pounds

Cost

29,431,052,282 2,931,052,282 1,500,000,000 25,000,000,000 Balance at 1 January 2017

3,827,420,288 1,721,420,288 2,106,000,000 - Additions

2,744,451,574 1,244,451,574 1,500,000,000 - Reclassification (note 6)

36,002,924,144 5,896,924,144 5,106,000,000 25,000,000,000 Balance at 31 December 2017

Amortization


3,331,037,368 1,783,529,275 297,508,093 1,250,000,000 Amortization charge for the year

8,402,205,493 4,275,750,031 376,455,462 3,750,000,000 Balance at 31 December 2017

Net Book Value

27,600,718,651 1,621,174,113 4,729,544,538 21,250,000,000 At 31 December 2017

MTN Syria


22

7 INTANGIBLE ASSETS (continued)

The movement of intangible assets during the six-month period ended 30 June 2017 is as follows:

Total

Software licenses

Frequency license

License

Syrian Pounds Syrian Pounds Syrian Pounds Syrian Pounds

Cost

29,431,052,282 2,931,052,282 1,500,000,000 25,000,000,000 Balance at 1 January 2017

198,792,829 198,792,829 - - Additions

1,889,982,384 389,982,384 1,500,000,000 - Reclassification (note 6)

31,519,827,495 3,519,827,495 3,000,000,000 25,000,000,000 Balance at 30 June 2017

Amortization


1,088,535,667 311,426,799 157,245,854 619,863,014 Amortization charge for the period

6,159,703,792 2,803,647,555 236,193,223 3,119,863,014 Balance at 30 June 2017

Net Book Value

25,360,123,703 716,179,940 2,763,806,777 21,880,136,986 At 30 June 2017 (unaudited)

Amortization charges of intangible assets are allocated in the interim statement of comprehensive income as follows:

30 June 2017 30 June 2018



777,108,868 757,838,369 Expenses allocated to operating expenses (note 5)

311,426,799 590,349,853 Expenses allocated to administrative expenses

1,088,535,667 1,348,188,222

MTN Syria


23

8 DUE TO/FROM THE SYRIAN GOVERNMENT (SYTRA) AND STC

DUE FROM/TO THE SYRIAN GOVERNMENT (SYTRA)

31 December 2017

(Audited) 30 June 2018

(Unaudited)


(6,089,753,064) (3,462,896,778) Due to the Syrian Government

2,491,510,923 2,873,319,485 Prepayments to the Syrian Government

(3,598,242,141) (589,577,293)

The balance due to the Syrian Government include its share of revenues which is 20% (2017: 30%) of revenues subject

to revenue sharing for April and May 2018.

The prepayment to the Syrian Government represents its share from the estimated monthly revenue share which is paid

during the first week of each month. The difference between the estimated and actual figures will be settled immediately

after the actual figures are provided by the Company within two months from the month under settlement.

DUE FROM/TO THE SYRIAN TELECOMMUNICATION COMPANY OF THE SYRIAN ARAB REPUBLIC

(STC)

30 June 2018

(Unaudited)

31 December 2017

(Audited)


Due to STC (98,053,017) (172,577,815)

Due from STC 943,251,832 894,752,486

845,198,815 722,174,671

Balance due to STC represents STC’s share of the Company's revenues of interconnection revenues. Balance due from

STC represents the Company's share of interconnection revenues.

MTN Syria


24

9 CASH AND BANK DEPOSITS

31 December 2017

(Audited) 30 June 2018

(Unaudited)


13,523,202,842 9,077,964,562 Bank deposits

4,551,983,662 8,200,669,289 Cash on hand and current accounts with banks

18,075,186,504 17,278,633,851

Bank deposits at 30 June 2018 include an amount of Syrian Pounds 145,458,995 (31 December 2017: Syrian Pounds

145,458,995) which represents restricted cash for the benefit of Syrian Telecommunication Company related to the

settlement of the frequency protection fees cases and foregone revenues case based on the requirements of Appendix A/10

of the BOT termination contract which requires depositing half of the disputed amounts in special accounts (note 16).

In addition, there are restricted cash margins at banks against letters of guarantee, bills of lading and other commitments amounting

to Syrian Pounds 4,254,798,768 as at 30 June 2018 (31 December 2017: Syrian Pounds 6,271,668,751) (note 16).

For the purpose of preparing the interim statement of cash flows, cash and cash equivalents comprise the following

amounts:

30 June 2018 30 June 2017

(Unaudited) (Audited) Syrian Pounds Syrian Pounds

Bank deposits 9,077,964,562

20,057,230,147

Less: Restricted cash related to forgone returns case settlement with STC (145,458,995)

(145,458,995)

Less: restricted cash margins at banks against letters of guarantee, bills

of lading and other commitments

(4,254,798,768)

(4,059,304,555)

Less: Long-term bank deposits (4,677,706,799)

(12,917,747,688)

Short term deposits – original maturities not exceeding three month -

2,934,718,909

Cash on hand and current accounts with banks 8,200,669,289 6,751,619,375

8,200,669,289 9,686,338,284

10 SHARE CAPITAL

The Company’s authorized, subscribed and paid capital at 30 June 2018 and 31 December 2017 is Syrian Pounds

1,500,000,000 divided into 15,000,000 shares with par value of Syrian Pounds 100 each.

According to the Company's articles of association and the Syrian commercial law, the chairman and each member of

the board of directors must own a minimum of 1% and 0.5% respectively, of the Company's share capital. Such shares

are restricted from trading before the elapse of six month after the end of the related membership in the board.

MTN Syria


25

11 (LOSS) GAIN ON FOREIGN EXCHANGE

Foreign exchange gains and losses result from the Company’s activities with foreign suppliers, roaming partners’

transactions, related parties transactions and bank accounts and deposits in foreign currencies. Gains and losses are

considered to be realized when the Company’s transactions from operating activities in foreign currencies are settled or

collected during the fiscal year. Unrealized gains and losses on foreign exchange result from transactions that have not

been settled or collected by the date of the financial statements.

The sources of (losses) and gains from the revaluation of monetary items in foreign currency are as follows:

Unrealized Realized

30 June 2017 30 June 2018 30 June 2017

30 June 2018

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

641,396,220 591,298,128 85,627,038 136,761,920

Gain from revaluing current

assets

(67,906,809) 1,420,322,482 (982,346,094) (1,673,011,448)

Loss from revaluing current

liabilities

573,489,411 2,011,620,610 (896,719,056) (1,536,249,528)

Changes on unrealized gains from foreign exchange are as follows:

30 June 2018 31 December 2017 30 June 2017

(Unaudited) (Audited) (Unaudited)

Syrian Pounds Syrian Pounds Syrian Pounds

Balance as at 1 January 364,716,204 (1,082,670,827) (1,082,670,827)

Unrealized gain (loss) on foreign exchange

during the period/year 2,011,620,610 1,447,387,031 573,489,411

Balance at period/ year end 2,376,336,814 364,716,204 (509,181,416)

Based on the requirements of the Syrian Commission on Financial Markets & Securities circular No. 12 dated 15

February 2015, the Company separated unrealized gains resulting from foreign exchange revaluation of monetary items

from the retained earnings in the statement of changes in equity.

12 RELATED PARTY TRANSACTIONS

DUE TO RELATED PARTIES

31 December 2017

(Audited)

30 June 2018

(Unaudited)


16,890,138,929 18,097,709,982 Due to Investcom Mobile Communication Ltd (IMC)

2,605,043,332 2,829,427,440 Due to Teleinvest

3,047,198,315 4,026,121,527 Due to other operators

22,542,380,576

24,953,258,949

MTN Syria


26

12 RELATED PARTY TRANSACTIONS (continued)

Balances with related parties are unsecured and have no fixed terms of repayment. These balances represent the balance

due to Investcom Mobile Communication Ltd (IMC) of Syrian Pounds 18,097,709,982 as of 30 June 2018 (31 December

2017: Syrian Pounds 0,138,92916,89 ) and the balance due to Teleinvest of Syrian Pounds 2,829,427,440 as of 30 June

2018 (31 December 2017: Syrian Pounds 2,605,043,332).

Balances due from other operators amounted to Syrian Pounds 785,229,392 as of 30 June 2018 (31 December 2017:

Syrian Pounds 792,447,100) are included in other current assets balance in the interim statement of financial position.

Transactions included in the interim statement of comprehensive income, which have been entered into with related

parties are as follows:

30 June 2017

(Unaudited) 30 June 2018

(Unaudited) Syrian Pounds Syrian Pounds

1,124,992,169

1,092,839,942

Management fees to Investcom Mobile Communication Ltd

(IMC)

185,045,120 183,117,796 Management fees to Teleinvest

904,141,794 767,999,473 Management fees to MTN Dubai

176,731,509 126,732,352 Interest on credit balances to IMC and dividends

65,938,165 42,244,117 Interest on credit balances to Teleinvest and dividends

2,456,848,757 2,212,933,680

Compensation of key management personnel

The remuneration of directors and other members of key management during the six-month period ended 30 June was

as follows:

30 June 2017

(Unaudited) 30 June 2018

(Unaudited) Syrian Pounds Syrian Pounds

70,155,281 63,694,278 Basic salaries for key management personnel

12,117,565 1,171,718 Allowances for key management personnel

82,272,846 64,865,996

The compensation of executive managers and key management personnel consist of six main elements targeting the

balance between long and short term goals and they are: basic salaries, the annual performance-oriented bonuses, and

long term bonuses as payments based on shares. The last two elements are designed to encourage and compensate

superior performance, ensure the continuation of employees, and make the executive managers and key management

personnel interests match the interests of shareholders as much as possible. In addition to these main elements, the

Company provides the executive managers and key management personnel medical insurance and other benefits.

MTN Syria


27

13 INCOME TAX

Income tax expense is calculated at 14% for the six-month period ended 30 June 2018 (14% for the six-month period

ended 30 June 2017). The movement in the accrued tax liabilities is as follows:

30 June 2018

(Unaudited)

31 December 2017

(Audited)


Balance at the beginning of the period / year 874,105,594 1,519,879,261

Income tax expense for the period / year 206,556,014 874,105,594

Income tax paid during the period / year (874,105,594) (1,514,704,869)

Income tax calculation differences (****) - (5,174,392)

Balance at the end of the period / year 206,556,014 874,105,594

The reconciliation between the taxable profit and the accounting profit is detailed as follows:

30 June 2018 30 June 2017



Profit before tax 3,112,429,117 2,375,774,497

Non deductible expenses and revenues already taxed at source:

Provisions 298,168,570 90,412,347

Unrealized (gain) loss on foreign exchange (2,011,620,610) (573,489,411)

Interest income (169,476,989) (242,669,674)

Taxable income 1,229,500,088 1,650,027,759

Effective income tax rate %14 %14

Income tax expense for the period 172,130,012 231,003,886

Local administrative tax 10%** 17,213,001 23,100,389

Reconstruction tax (10% & 5% of income tax)*** 17,213,001 11,550,194

Total income tax expense for the period* 206,556,014 265,654,469

(*) Income tax expense for the period ended 30 June 2018 comprises of income tax expense for the period of Syrian Pounds

172,130,012, local administrative tax of Syrian Pounds 17,213,001 and reconstruction tax of Syrian Pounds 17,213,001.

(Income tax expense for the period ended 30 June 2017 comprises of income tax expense for the period of Syrian Pounds

231,003,886, local administrative tax of Syrian Pounds 23,100,389, and reconstruction tax of Syrian Pounds

11,550,194).

(**) In accordance with legislative decree no 10 for year 2015, the Company included the local administrative tax which

represents 10% of the income tax expense.

(***) On 20 December 2017, Law No. 46 was issued to amend Article 1 of Legislative Decree No. 13 of 2013, extended by

Legislative Decree No. 3 on 18 January 2016 which amended the reconstruction tax to be 10% of the income tax expense

instead of 5% of income tax expense.

(****) According to article /7/ of tax law, paragraph no.6, tax and fees imposed in Syrian Arab Republic and paid during the

year (except income tax) considered tax deduction, which means the local administrative tax paid in 2016 as part of the

income tax is considered tax deduction from profit of 2017.

MTN Syria


28

13 INCOME TAX (continued)

Income tax paid, as reflected in the interim statement of cash flows, is detailed as follows:

30 June 2018 30 June 2017



Income tax for the years 2018 and 2017 874,105,594 -

Less: Income tax paid in advance during the years 2017 and 2016

(included in other current assets) (542,950,258) )340,170,222(

Net income tax paid for the years 2018 and 2017 331,155,336 )340,170,222(

Prepaid income tax for the years 2018 and 2017

(included under other current assets) 226,253,970 456,476,923

557,409,306 116,306,701

14 BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the period by the weighted average number of shares

outstanding during the period as follows:

For the six-month period ended 30

June

2018 (Unaudited)

2017 (Unaudited)

Net profit for the period (Syrian Pounds) 2,905,873,103 2,110,120,028

Weighted average number of shares outstanding during the period 15,000,000 15,000,000

Basic earnings per share from the profit of the period (Syrian Pounds) 193.72 140.67

Diluted earnings per share have the same figure as the basic earnings per share since the Company has not issued any

instruments which would have an impact on earnings per share when exercised.

15 NOTES TO THE INTERIM STATEMENT OF CASH FLOWS

- There are non-cash transactions included in the operating activities represented by an increase in other current assets by

Syrian Pounds 18,796,875 against a decrease in the interest received in the investing activities by the same amount for

the six-month period ended 30 June 2018 (an increase in other current assets against a decrease in interest received by

Syrian Pounds 57,081,919 for the six-month period ended 30 June 2017).

- There are non-cash transactions included in the financing activities represented by a decrease in the interest paid by

Syrian Pounds 168,976,470 against an increase in balances due to related parties by the same amount for the six-month

period ended 30 June 2018 (a decrease in interest paid by Syrian Pounds 242,669,674 against an increase in balances

due to related parties by the same amount for the six-month period ended 30 June 2017).

- During the period ended 30 June 2018, the shareholders’ ordinary general assembly declared distribution of profits for

the year 2017 of Syrian Pounds 5,799,580,318 which caused an increase in unpaid dividends and a decrease in retained

earnings by the same amount.

MTN Syria


29

16 COMMITMENTS AND CONTINGENT LIABILITIES

- At 30 June 2018, Company had cash margins amounting to Syrian Pounds 4,254,798,768 (31 December 2017:

Syrian Pounds 6,271,668,751) (note 9), consisting of: Syrian Pounds 4,128,313,663 against letters of guarantee

(31 December 2017: Syrian Pounds 4,207,362,630), and Syrian Pounds 126,485,105 against bills of lading and

other commitments (31 December 2017: Syrian Pounds 2,064,306,121).

- In 2010, the Syrian Telecommunication Company brought a number of cases against MTN Syria in relation to

forgone revenues from subscribers who used the cellular phone network to pass international calls illegally.

Therefore, the Syrian Telecommunication Company filed a lawsuit against MTN Syria for the amount of Syrian

Pounds 277,212,963 alleging that MTN Syria did not take sufficient steps to ensure the rights of the Syrian

Telecommunication Company. However, the external legal counsel of the Company and management are of the

view that the Company’s position will prevail. During the year ended 31 December 2015, and considering the

BOT 10/A termination agreement Appendix 1/A, the Company opened a new account and put an amount of half

of the value of the cases regarding foregone revenues that amounted to Syrian Pounds 145,458,995 for the benefit

of STC (note 9).

In addition to the above, in the normal course of its activities, the Company is exposed to legal claims. After

consulting with legal counsel, management believes that the total losses and obligations that the Company may

have on such cases will not have a material effect on the Company’s financial position.

- On 7 May 2007, the Finance Department of Countryside of Damascus conducted an assessment of the Company’s

income tax for the year 2001. The assessment exceeded the income tax amount estimated and recorded by the

Company for the same year by an amount of Syrian Pounds 224,167,547. On 5 June 2007 the Company filed a

petition at the specialized authorities on the income tax assessment. As a result, on 11 December 2007, the

Company received a second assessment by which the excess amount of the tax was decreased to Syrian Pounds

113,062,957. The Company paid a refundable amount of Syrian Pounds 108,540,439 to the Finance Department

to benefit from the 4% discount for early settlement. The Company’s management, based on its independent tax

and legal advisors’ opinions, is of the view that the Company will not bear any excess liability since the Company

is in compliance with the fiscal regulations and the tax liability for the fiscal year 2001 which was estimated in

accordance with the laws prevailing in the Syrian Arab Republic. Accordingly, the Company filed a new petition

to reject the assessment at the appeal committee. On 24 May 2017, the reconsideration committee have been met

to study the filed petition which was submitted by the company for the year 2001.

- Moreover, the Company received the temporary assessment of years 2002, 2003 and 2004 with excess demands of

Syrian Pounds 135,119,898, Syrian Pounds 236,046,382 and Syrian Pounds 426,905,035, respectively. The

Company filed an objection to the tax authorities. As a result it received a second assessment on 4 May 2009 by

which the excess amount of the taxes estimated was decreased to Syrian Pounds 35,514,097, Syrian Pounds

64,657,118 and Syrian Pounds 38,580,130 for the years 2002, 2003 and 2004, respectively. An amount of Syrian

Pounds 38,525,159 representing the interest embedded in the previous amounts will be deducted if the Company

paid the imposed tax before 31 October 2009. On 4 October 2009, the Company paid a refundable amount of Syrian

Pounds 100,226,186 and filed a new petition to reject the second assessment, however the Finance Department has

not yet issued its final decision. Accordingly, the excess amount of income tax the Company may bear cannot be

reliably estimated as of the issuance date of these interim condensed financial statements.

- On 26 May 2011, the Company received a temporary assessment for the amount of accrued income tax for 2005

with an increase of Syrian Pounds 315,509,720. The Company rejected the amount on 23 June 2011. On 8 July

2012, the Company received and paid a second assessment of the year 2005 with an excess amount of Syrian

Pounds 182,769,762. The Company paid this amount and filed an objection to the tax authorities on 2 August

2012, the result of which has not been announced as of 30 September 2017. Accordingly, the excess amount of

income tax that the Company may bear cannot be reliably estimated.

- On 25 March 2012, the Company received assessments for 2006 and 2007 with excess demands of Syrian Pounds

196,220,554 and Syrian Pounds 154,448,301, respectively. The Company challenged this assessment on 23 April

2012. On 3 October 2012, the Company received a second assessment of the years 2006 and 2007 with the same

excess demands as the first assessments of Syrian Pounds 196,220,554 and Syrian Pounds 154,448,301,

respectively. The Company paid these amounts and filed two objections to the tax authorities on 24 October 2012,

the result of which has not been announced as at the issuance date of these interim condensed financial statements.

Accordingly, the excess amount of income tax that the Company may bear cannot be reliably estimated.

MTN Syria


30

16 COMMITMENTS AND CONTINGENT LIABILITIES (continued)

- On 18 August 2013, the Company received the first assessment of the year 2008 with an excess amount of Syrian

Pounds 168,288,495. The Company filed an objection to the tax authorities on 17 September 2013. On 22

September 2014, the Company received a second assessment of the year 2008 with an excess demand of Syrian

Pounds 168,288,495 similar to the first assessment. The Company paid this amount and filed an objection on the

second assessment on 21 October 2014, the result of which has not been announced as at the issuance date of these

interim condensed financial statements. Accordingly, the excess amount of income tax that the Company may bear

cannot be reliably estimated.

- On 5 November 2014, the Company received the first assessment of the year 2009 with an excess demand of

Syrian Pounds 190,066,920. The Company filed an objection to the tax authorities on 2 December 2014. On 1

October 2015 the Company received a second assessment of the year 2009 for Syrian Pounds 162,349,221. The

Company paid this amount and filed an objection on 25 November 2015, the result of which has not been

announced as at the issuance date of these interim condensed financial statements. Accordingly, the excess amount

of income tax that the Company may bear cannot be reliably estimated.

- On 29 December 2015, the Company received a temporary assessment for the years 2010 and 2011 with excess

demands of Syrian Pounds 143,830,082 and Syrian Pounds 250,750,434, respectively. The Company filed an

objection to the tax authorities on 14 January 2016. On 7 June 2016, the Company requested to initiate an

experienced committee to study the objection submitted to the tax authorities related to the taxes of the years 2010

and 2011. On 11 September 2016 the Company received a second assessment of the years 2010 and 2011 for

Syrian Pounds 141,740,219 and Syrian Pounds 248,672,262, respectively. The Company paid this amount and

filed an objection on second assessment, the result of which has not been announced as at the issuance date of

these interim condensed financial statements. Accordingly, the excess amount of income tax that the Company

may bear cannot be reliably estimated as of 30 June 2018.

- On 29 October 2017, the Company received the temporary assessment for the years 2012 and 2013, with an excess

demands of Syrian pounds 118,442,651 and Syrian pounds 271,787,778 respectively. The Company filed an

objection to the tax authorities on 27 November 2017. On 24 April 2018 the Company received the second

assessment for the income tax for the years 2012 and 2013 that amounted Syrian Pounds 96,105,364 and Syrian

Pounds 258,170,893 respectively. On 30 April 2018 the Company paid these differences taking advantage of the

early payment discount of 4% if paid before the end of April 2018.

On 21 May 2018 the Company paid the withholding tax on the interest of shareholders accounts for the years 2012

and 2013 that amounted to Syrian Pounds 12,148,419 and Syrian Pounds 20,344,727 respectively as per the second

assessment.

On 23 May 2018 the Company filed an objection to the review committee regarding the second assessment for the

years 2012 and 2013. The objection isn’t assessed by the review committee as on issuance date of these interim

condensed financial statements.

- The Company’s tax returns remain subject to review by the tax authorities for the fiscal years 2014 and thereafter.

The outcome of such review cannot be determined at this stage.

- On 1 March 2007, and in accordance with the Minister of Finance decision No. 628, an inspection of compliance

with legislative decree no. 44 for 2005 related to stamp duties was conducted by the related authorities. As a result,

the Company received claim no. 6870 on 4 June 2007 with an amount of Syrian Pounds 242,108,220 against stamp

duties and the related penalties. On 2 July 2007, the Company paid an amount of Syrian Pounds 19,754,367 and

filed a petition to reject the remaining amount. On 28 December 2015, the Company received an additional claim

no. 3058 with an amount of Syrian Pounds 1,763,033,262 against stamp duties and the related penalties after re-

examining the former assessment. The Company filed another petition on 5 January 2016. The Company is still

waiting for the final claim, the result of which has not been announced as at the issuance date of these interim

condensed financial statements.

MTN Syria


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17 CAPITAL COMMITMENTS

As of 30 June 2018, the Company had capital commitments of Syrian Pounds 18,510,221,238 which includes: Syrian

Pounds 1,471,304,846 related to information system development, Syrian Pounds 16,930,221,530 related to acquisition

of network equipment and Syrian Pounds 108,694,862 related to other capital commitments (there were no capital

commitments as at 31 December 2017).

18 OPERATING SEGMENT INFORMATION

For management purposes, the Company is organized into business sectors based on their services and has five

reportable segments as follows:

- Prepaid services Prepaid airtime, SMS, roaming and other services

- Postpaid services Postpaid services, SMS, roaming and other services

- 3G services Third generation wireless mobile internet services

- Roaming Visitors roaming

- Other Other items

Management monitors the operating results of its business units separately for the purpose of making decisions on

resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss

which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the

interim condensed financial statements. The Company’s financing (including finance costs and finance revenues) is

managed at the corporate level and such costs and revenues not allocated to operating segments.

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

parties.

Segment assets include all operating assets used by a segment and consist primarily of property and equipment,

intangibles, inventories, accounts receivable, due from STC, due from SYTRA, other current assets and cash and bank

balances. Whilst the majority of the assets can be directly attributed to individual business segments, the carrying

amounts of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis.

Segment liabilities include all operating liabilities and consist primarily of accounts payable and accrued expenses.

Basically, all of the sales and profit of the Company are earned in the Syrian Arab Republic from the above business

segments.

MTN Syria


32

18 OPERATING SEGMENT INFORMATION (continued)

Total Other services Visitor Roaming 3G Postpaid services Prepaid Services

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 six-month period ended 30

June (unaudited)

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

Syrian Pounds

37,013,382,944 36,433,004,826 121,786,542 166,727,344 487,964,180 402,200,441 5,336,127,973 6,802,304,666 6,966,375,979 7,164,788,912 24,101,128,270 21,896,983,463 Gross revenues

(11,345,685,240) (7,699,592,001) - - (152,175,511) (85,896,195) (1,689,209,397) (1,469,645,191) (2,191,649,835) (1,534,259,552) (7,312,650,497) (4,609,791,063)

Syrian Government/STC

Share of revenues

(15,430,321,474) (18,034,916,186) (50,253,581) (82,174,369) (203,133,360) (198,990,728) (2,243,922,697) (3,375,290,424) (2,900,014,828) (3,544,815,993) (10,032,997,008) (10,833,644,672) Operating expenses

10,237,376,230 10,698,496,639 71,532,961 84,552,975 132,655,309 117,313,518 1,402,995,879 1,957,369,051 1,874,711,316 2,085,713,367 6,755,480,765 6,453,547,728 Gross operating profit

(6,513,479,717)

(6,269,282,754)

(21,431,550)

(28,689,944)

(85,870,151)

(69,209,452)

(939,032,279)

(1,170,520,289)

(1,225,917,358)

(1,232,895,496)

(4,241,228,379)

(3,767,967,573)

Administrative, marketing and

selling expenses

(931,203,988) (1,521,349,531) (3,063,976) (6,962,110) (12,276,484) (16,794,867) (134,249,378) (284,046,925) (175,264,096) (299,183,345) (606,350,054) (914,362,284) Depreciation and amortization

(6,665,480) (2,361,851) (21,932) (10,808) (87,873) (26,074) (960,946) (440,975) (1,254,526) (464,473) (4,340,203) (1,419,521) Bank charges

(10,123,829) (23,425,968) - - - - - - (10,123,829) (23,425,968) - - Allowance for doubtful debts

(76,899,074) (245,519,019) (253,024) (1,123,560) (1,013,795) (2,710,396) (11,086,349) (45,840,171) (14,473,357) (48,282,923) (50,072,549) (147,561,969) Other (expenses) gains - net

242,669,674 169,476,989 242,669,674 169,476,989 - - - - - - - - Interest income

(242,669,674) (168,976,470) (242,669,674) (168,976,470) - - - - - - - - Finance costs

(896,719,056)

(1,536,249,528)

(2,950,509)

(7,030,296)

(11,821,853)

(16,959,354)

(129,277,771)

(286,828,863)

(168,773,605)

(302,113,527)

(583,895,318)

(923,317,488)

Realized loss on foreign

exchange

573,489,411

2,011,620,610

1,886,974

9,205,723

7,560,570

22,207,191

82,678,552

375,584,071

107,937,793

395,598,362

373,425,522

1,209,025,263

Unrealized gain on foreign

exchange

(265,654,469) (206,556,014) 31,973,558 21,327,838 (3,645,625) (2,473,361) (32,196,076) (37,341,965) (48,967,253) (42,213,878) (212,819,073) (145,854,648) Income tax expense

2,110,120,028 2,905,873,103 77,672,502 71,770,337 25,500,098 31,347,205 238,871,632 507,933,934 337,875,085 532,732,119 1,430,200,711 1,762,089,508 Net profit for the period

31 December 2017 30 June 2018 31 December 2017 30 June 2018 31 December 2017 30 June 2018 31 December 2017 30 June 2018 31 December 2017 30 June 2018 31 December 2017 30 June 2018

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

Syrian Pounds

(Audited)

Syrian Pounds

(Unaudited)

145,629,566,619 137,276,685,668 638,732,520 731,308,415 2,696,755,415 1,621,461,235 20,488,358,102 25,218,867,800 28,697,190,943 28,480,294,121 93,108,529,639 81,224,754,097 Total assets

137,215,270,097 131,861,855,844 450,923,135 573,552,047 2,585,102,217 1,954,869,784 19,495,783,380 24,316,344,884 26,436,083,559 26,522,734,061 88,247,377,806 78,494,355,068 Total liabilities

35,626,682,823 3,470,255,020 121,922,223 15,880,832 529,197,797 38,309,717 5,087,332,903 647,921,631 6,704,106,486 682,448,368 23,184,123,414 2,085,694,472 Capital expenditure

MTN Syria


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19 SHARE-BASED PAYMENT PLAN

Share Appreciation Rights

Senior management including executive management of the Company are granted share appreciation rights (SARs),

which can only be settled in cash, under a scheme initiated and managed by the ultimate parent “MTN Group Limited”.

The scheme is designed to retain and recognise the contributions of executive directors and eligible staff and to provide

additional incentives to contribute to the Company’s continuing growth.

The rights are granted in the form of notional share options. The fair value of the SARs is measured at each reporting

date with reference to the published share prices of the parent company for the globally aligned notional share options

“GAN” and the Company’s enterprise value measured by EBITDA multiple for the locally aligned notional share options

“LAN” since MTN Syria is an unquoted entity.

These SARs vest when specified conditions are met primarily relating to the age, minimum service period and grade of

the entitled staff. The vesting periods under the schemes are as follows: 0%, 20%, 40%, 70% and 100% on the anniversary

of the first, second, third, fourth, and fifth years respectively, after the grant date. On 1 April 2014 the vesting conditions

were amended after this date to be 100% after a period of three years. The strike price is determined as the closing market

price for MTN Group Limited shares on the day prior to the date of allocation for the GAN options and the price per

share calculated using EBITDA multiple on 1 April of the preceding financial year for LAN options.

If the options or appreciation rights remain unexercised after a period of 10 years from the date of grant and 5 years for

the options granted on and after 1 April 2014, they lapse. Furthermore, rights are forfeited if the employee leaves the

Company before they vest.

The carrying amount of the liability relating to the SARs at 30 June 2018 is Syrian Pounds 1,064,340,000 (31 December

2017: Syrian Pounds 1,037,782,547) and is detailed as follows:

30 June 2018 31 December 2017

(Unaudited) (Audited)


Balance at the beginning of the period / year 1,037,782,547 776,145,000

Charge for the period / year 24,075,458 471,100,859

Exchange difference 2,481,995 (209,463,312)

Balance at the end of the period / year 1,064,340,000

1,037,782,547

There has been no modification or cancellation to the plan during the year ended 31 December 2017 or the period ended

30 June 2018.

Details of the share options (locally aligned options and globally aligned options) outstanding at period/year end are as

follows:

30 June 2018 31 December 2017

(Unaudited) (Audited)

Number of options Number of options

Number of options at the beginning of the period / year 360,800 231,170

Offered during the period / year 164,060 153,470

Forfeited during the period / year (1,130) (8,590)

Exercised during the period / year (11,390) (15,250)

Number of options at end of the period / year 512,340 360,800

As at 30 June 2018, the price of the GAN option is Syrian Pounds 3,441 (31 December 2017: Syrian Pounds 4,820) as

published in Johannesburg Stock Exchange and the fair value of the LAN option based on the EBITDA multiple, is

Syrian Pounds 4,418 (31 December 2017: Syrian Pounds 7,681). The remaining contractual life of the underlying SARs

is between 1-5 years.

MTN Syria


34

20 FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise of financial assets and financial liabilities.

The Company’s financial liabilities comprise accounts payable and balances due to related parties. The Company has

various financial assets such as accounts receivable and cash and bank deposits, which arise directly from its

operations.

The fair values of financial assets and liabilities are not materially different from their carrying values.

None of the Company’s financial assets or financial liabilities have been remeasured to fair value.

21 DIVIDENDS DECLARED

On 30 April 2018, the ordinary general assembly decided to distribute profits for 2017 amounted Syrian Pounds

5,799,580,318, where the shares count was 15,000,000 and the earning per share amounted Syrian Pound 386.64.

22 DUE TO BANKS

During the period ended 30 June 2018, the Company obtained bank facilities from local banks with no guarantees.

As at 30 June 2018 these facilities were as follows:

Facilities type Facilities balance Annual interest rate Last instalment due date

30 June 2018

SP

Bills of collection 1,590,680,018 6% 14 January 2019

Local invoices financing 1,054,265,576 12.75% 31 July 2018

2,644,945,594

These facilities are short-term and due after 180 days of obtaining.

23 COMPARATIVE FIGURES

Some of the corresponding figures for 2017 have been reclassified in order to conform to the presentation for the

current period. Such reclassifications do not affect previously reported profit or shareholders' equity.

The table below summarizes the reclassified amounts:

Statement of Financial position

Presentation as at

31 December 2017

Presentation as at

30 June 2018

Amount

Syrian Pounds

Description

Other current liabilities Accounts receivables 2,969,001,092 Doubtful debt allowance for receivables

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