1998 Annual Report - Financials

NOTES TO FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1998 AND 1997
(Currency: Jordanian Dinar)

...Continued

 

15. Accounts Payable

1998 1997
Telecommunication companies 9,852,041 6,348,018
Suppliers 4,065,065 4,065,189
Contractors 1,759,301 1,386,435
Deferred payphones revenues 203,107 -- 
Contractors guarantee 454,215 -- 
Due to PNA 418,426 812,601
Due to PADICO 327,728 225,106
Due to employees 634,850 -- 
Deferred checks --  172,083
  17,714,733 13,009,432

 

16. Other Current Liabilities

1998 1997
Employees savings fund * 1,168,479 341,381
Provision for employees vacations 547,820 138,548
Accrued expenses 862,303 366,332
Accrued interest 219,141 -- 
Others 229,000 -- 
  3,026,743 846,261

* The Company has established a saving fund for its employees, “the Palestine Telecommunication Company P.L.C. Employees Savings Fund”. A saving fund policies and procedures were designed in accordance with the Company’s bylaws.

The contribution to the saving fund is by the employee and employer at 6% and 12% respectively, of the basic monthly salary.

17. Long Term Loan
During 1998, PALTEL signed loans agreements with several local banks for the purpose of financing its projects. These loans are subject to annual interest of approximately LIBOR + %1 to %1.5.

In accordance with certain loan agreement, PALTEL should maintain deposit accounts as a security of JD 8,565,000 in the related banks the direct and indirect credit facilities granted to PALTEL. As of December 31, 1998, the balance of the deposit accounts was JD 8,451,292.

The principal of these loans as of December 31, 1998 amounted to JD 35,546,239. The utilized balance of the long term loans as of December 31, 1998 is as follows.

Long term loans 18,379,874
Current maturity of long term loans* (3,498,756)
  14,881,118

* This amount is classified in the due to banks account in the current liabilities.

Maturity periods for the long term loans are as follows.

Mature in 1999 3,498,756
  2000 6,014,164
  2001 5,408,661
  2002 3,458,293
    18,379,874

 

18. Provision for End of Service Benefits
Provision for employees end of service benefits is calculated in accordance with labour laws prevailing in Palestine, and the Company’s regulations.

Following is a summary of the movement on provision for end of service benefits during the year.

1998 1997
Balance, beginning of year 327,903 11,715
Additions 517,112 336,899
Payments during the year (33,606) (20,711)
Balance, end of year 811,409 327,903

 

19. Paid-in Share Capital

1998 1997
Issued share capital 45,000,000 33,750,000
Unpaid share capital (577,496) (898,191)
Paid-in share capital 44,422,504 32,851,809

 

20. Reserves

-Statutory Reserve— In accordance with the Company’s articles of association and the Companies Law, 10% of annual profit before tax should be transferred into a statutory reserve account until the reserve balance equals one half of the Company’s share capital. Further, the transfer may be continued by a Board of Directors resolution until the statutory reserve balance equals the Company’s share capital. The statutory reserve can not be appropriated to shareholders.

-Voluntary Reserve— In accordance with the Company’s articles of association and Companies Law, the Company’s general assembly, based on the board of directors recommendation, can appropriate up to 20% of the annual net profit before tax as voluntary reserve. The voluntary reserve balance should not exceed one half of the Company’s share capital. The appropriation to the voluntary reserve for 1998 and 1997 was 10% each.

-Special Reserve— Based on the board of directors’ recommendation, 20% of the Company’s net profit after tax for the year ended December 31, 1997 has been appropriated to a special reserve for future needs.

21. Operating Expenses

1998 1997
Direct
expenses		 Indirect
expenses		 Total
operating
expenses		 Total
operating
expenses
Salaries and wages 4,564,126 2,621,717 7,185,843 3,819,100
End of service benefits 291,360 211,511 502,871 336,899
Employee savings fund 355,304 191,400 546,704 229,175
Employee vacations 269,291 184,065 453,356 141,464
Depreciation 1,248,313 654,335 1,902,648 153,719
Telecommunication services 157,472 --  157,472 891,259
Professional and consultancy fees --  1,098,717 1,098,717 541,958
Maintenance 866,061 53,524 919,585 841,274
Rent-a-car 576,050 280,955 857,005 891,838
Postage 108,117 62,684 170,801 100,165
Administrative services - PADICO --  132,527 132,527 128,873
Employee and assets insurance 57,369 46,017 103,386 222,581
Travel, accommodation, transportation, and fuel 119,219 262,010 381,229 431,957
Advertising 9,096 564,692 573,788 303,744
Rent 158,662 251,517 410,179 181,288
Telephone, fax, and mobile 15,870 265,953 281,823 183,193
Utilities 650,613 47,249 697,862 343,719
Stationery and printings 22,254 175,138 197,392 104,658
Donations --  107,462 107,462 5,218
Amortization of licence, concessions and lines cost --  1,938,182 1,938,182 1,720,170
Amortization of establishment and pre-operating expenses --  69,643 69,643 69,834
Other miscellaneous expenses 118,269 860,114 978,383 163,327
  9,587,446 10,079,412 19,666,858 11,805,413

 

22. License and Concession Fees
This item represents the license and concession fees payable annually to PNA at 7% of the Company’s operating revenues as per the Agreement.

23. Bank Interest, net

1998 1997
Interest income 526,991 1,388,816
Interest expense and commissions (1,412,985) (158,903)
Net interest (expenses) revenues (885,994) 1,229,913

 

24. Foreign Currency Translation Loss
This item represents net losses resulted from translation of monetary assets and liabilities, which are denominated in foreign currencies to JD using the prevailing exchange rates at the balance sheet date. Further, it includes net losses which resulted from retranslation at year end of non-monetary transactions occurred in NIS during the year and translated to JD at the internal rates used by the Company throughout the year. The average exchange rates throughout the year was used for translation.

The main reason for this loss is the decrease in the NIS exchange rate against JD during 1998 by 14.5%. The NIS is the basic functional currency of the Company’s revenues and significant part of its expenses and purchases, where the Company’s reporting currency is JD.

25. Other Revenues, Net
Other revenues are presented net of other expenses as follows:

1998 1997
Other revenues 512,458 186,346
Other expenses (200,729) (19,234)
  311,729 167,112

 

26. Taxes and Customs

- According to the Ministry of Trade and Economy letter No. MOF 300/11, dated July 25, 1998, the Company was granted the right to benefit from the Palestinian Law for Encouragement of Investment for five years ending on December 31, 2001. In addition, according to the Palestine Law for Encouragement of Investment, PALTEL will be subject to a nominal income tax of 10% for an additional sixteen years.
- According to the license agreement between the Company and PNA to construct, manage and operate the telephone and mobile telecommunications, the Company was granted an exemption from customs on tools and telecommunications equipment required for the telecommunication infrastructure. Moreover, the Company has the right to benefit from exemptions stated in the Palestinian Law for the Encouragement of Investment.

27. Contractual Commitments
As of the financial statements date, the Company has outstanding contractual commitments resulting form purchases, services, and construction contracts. Below is a summary of these outstanding commitments which are due in the following years.

1998 1997
Fixed assets and materials purchase contracts (include letter of credit) 63,744,779 14,569,350
Construction contracts 1,402,049 2,115,758
Consulting services contracts --  516,258
  65,146,828 17,201,366

 

28. 1997 Financial Statements
Certain balances as of December 31, 1997 have been reclassified to conform with December 31, 1998 financial statements presentation.

 

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