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UNIVERSITY OF BAHRAIN

DEPARTMENT OF ACCOUNTING
FIRST SEMESTER 2015/2016

Analyzing
Batelco
ACCOUNTING THOERY (ACC 416) ASSIGNMENT

Done by (SEC 04)


Shameem Ebrahim Meethale
Zahra Khadhair Mearaj
Naveed Karim Baksh
Ahmed Ali
Fatima Mahmood Ali Murad

12/27/2015

20126301
20124996
20124656
20124986
20123171

ACC 416

ACC 416

Table of Contents
Historical Background ......................................................................................... 3
Major Developments in 2014 .............................................................................. 4
Auditors .............................................................................................................. 4
Financial Summary.............................................................................................. 5
Social Responsibility ........................................................................................... 7
Legitimacy of Batelco .......................................................................................... 9
Conclusion ........................................................................................................ 10
References ........................................................................................................ 11
Appendix .......................................................................................................... 12

ACC 416

Historical Background
Batelco which refers to Bahrain Telecommunication Company was established in
1981 as a Bahraini Public Joint Stock Company and has an authorized share capital
of BD200 million. The company is headquartered in Hamala and is listed on the
Bahrain bourse.
Batelco's major shareholders include Government of Bahrain entities
(Mumtalakat Holding Company, Amber Holding Company and Social Insurance
Organisation), various financial and commercial organizations, private Bahraini,
Gulf Cooperation Council countries (GCC) and international investors. The Batelco
Group has evolved to become a major communications company with direct and
indirect investments across 14 geographies. Batelco employs approximately 1,300
people in the Kingdom of Bahrain, of which over 90% are Bahraini nationals.
Batelco Inet is the brand name for Batelcos ISP services, which started in 1995
making it among the first service providers that offered the internet service not
only in the Kingdom but in the region. With over 17 years of experience in the ISP
business, Batelco has made several investments in upgrading its internet
backbone to introduce the highest access speed available to its customers every
time a new technological development was introduced.
Batelco has a lot of product and services for both individual customers and
business, such as mobile service, fixed line services, broadband services and other
services. Batelco offers a wide variety of packages and contracts to its customers,
who can choose according to what suits their need and budget, such as smart
phone contracts, smart watches and computer , tablets , cameras , CCTVs, Smart
TV's and also has a lot of different brands for mobiles and computers such as
Apple, Sony, Samsung, Dell, HTC, LG, etc.

ACC 416

Major Development in 2014


In 2014, Batelco has expanded its operations and became a major international
player while operating in 14 countries covering Middle East, Jersey, Guernsey and
the Isle of Man and also in the Maldives and Diego Garcia. The groups gross
profits increased by 5% and net profits by 13% since 2013. Inclusion of
consolidated reporting and cost reduction programmes resulted in the increase.
Subscriber base reported an increase of 6% mainly due to increase in the number
of mobile and broadband customers across the group while the number of fixed
line customers remained steady with a marginal increase of 1%, which is due to
the shift of customers to wireless devices. Around 58% of revenues and 55% of
EBITDA were reported from markets which are outside Bahrain.
They were named the Customer Service Provider of the Year for the region at
CommsMEA Awards in Dubai in December 2014. Batelco also won the Best
Contact Centre Award at the Customer Experience Management (CEM) in
Telecoms: Middle East Summit Awards due to increased customer satisfaction
levels. Also, the eEconomy Award at the Bahrain International eGovernment
Forum and the ICT Company of the Year Award at MEET ICT 2014 were also
bagged by the company.
More than 2 million Bahraini Dinars were committed to support sports,
education, health, charitable organisations etc.

Auditor
It is the duty of audit committee to appoint the external auditors and review their
relationship with the company. Batelco has been audited by KPMG Fakhro for the
past 17 years, since 1993. Batelcos audit committee has not considered it
necessary to change their auditors after reviewing their independence and
effectiveness. Auditors have provided an unqualified audit opinion i.e. the
company has presented all their financial statements fairly and appropriately in
accordance with International Financial Reporting Standards (IFRS). The board
had approved the reappointment of KPMG as their auditors for the financial year
ending on 31st December 2015.

ACC 416

Financial Summary
Total asset is defined as the final amount of all gross investments, cash and
equivalents, receivables and other assets as in the balance sheet of the company.
As we see below in the table, Batelcos total assets increased in the year 2013 by
352,796 and decreased again in 2014 by (83,387).
Net Profit or net income is the companys total earnings. It measures the
profitability of the company. The net profit or net income for Batelco has been
decreasing over the 5 years.
Return on assets measures how efficiently a company can manage its assets to
produce profits during a period or in other words, how profitable a companys
assets are. As we see in the case of Batelco for every BHD they invested in assets
during the year produced 13.18% of net income during 2010. ROA has declined
due to declining profits over the years.
Return on equity is the ability of the company to utilize shareholders
investments to generate profits. It indicates how much the shareholders earn for
their investment. The lower the ROE, the lower will be the portion of net income
shareholders will earn. Below we see that the ROE is decreasing in the years 20122013 and increased by 1.19% in the year 2014.
Earnings per share is the ratio that measures the amount of net income earned
per share of stock outstanding. For the year 2010, Batelcos EPS was BHD 0.060
this means or indicates that when Batelco distributed every BHD of income to its
shareholders, each share received BHD 0.060. The EPS has declined over the years
due to declining net income.
Debt equity ratio is a ratio that compares a companys total debt to total equity.
The D/E ratio indicates how much debt a company is using to finance its assets.
The D/E ratio has increased over the period indicating that company has been
using more debts to finance their assets instead of equity.

ACC 416

Financial Status of Batelco for the last 5 years


RATIOS

2010

2011

2012

2013

2014

A. TOTAL ASSET

658,471

659,307

689,368

1,042,164

958,777

B. NET PROFITS

90,633

83,855

65,343

51,454

57,388

C. RETURN ON
ASSETS (%)

13.18

12.14

8.75

4.18

5.15

D. RETURN ON
EQUITY (%)

17.18

15.82

11.73

8.08

9.27

E. EARNINGS PER
SHARE (BD)

0.060

0.056

0.038

0.028

0.030

F. DEBT EQUITY
RATIO

0.274

0.271

0.3252

0.757

0.6558

ACC 416

Social Responsibilities
The commitment Batelco has to Corporate Social Responsibilities continued to
make a difference throughout 2013 and 2014. Batelcos well-established CSR
programme which is designed to make a positive impact on as many lives as
possible and in 2013 and 2014 more than BD1.5million and BD2 million
respectively was paid out to benefit sports, social, health and education related
initiatives and charitable organizations.
Batelcos social and environmental involvements for the year 2013 and 2014 are
given below:

2013
February 2013
As part of its commitment to sports in Bahrain Batelco sponsored Bahrain
Golf Clubs annual Golf Tournament, which took place on Saturday 2nd
February 2013. As one of the Kingdoms leading companies, Batelco is fully
committed in fostering the advancement of sports and its participants in
local Bahraini communities.
Batelco in cooperation with Bahrain Cancer Society is organizing an open
day at Batelco Staff Centre to mark the occasion of World Cancer Day on
4th of February. The event was arranged in line with the Cancer Societys
programmes which aim to encourage members of the community to
support the needs of children with cancer and their families.
March 2013
As one of the major sponsors of education in Bahrain, sponsored the
University of Bahrain Career Day that took place at the Sakhir campus of
the University on March 11, 12 and 13. This is the 13th year that Batelco
participated in the event and the 9th year as the events main sponsor.
Batelco, as part of its commitment to sporting events, sponsored the 2013
King Hamad Horserace Championship Festival which was held on Friday
15th March in Sakhir at the Rashid Equestrian and Horse Racing Club. The
day of racing, featuring four races is one of the key events in the Kingdoms
annual horseracing calendar.

ACC 416

Batelco which is the Kingdoms leading Telecommunications Company, has


sponsored The Batelco Cross Country Championship, held on Saturday 23rd
March in Sakhir at the Military Sports Association grounds as it being part
of the corporate social responsibilities aimed at supporting sports and
athletes in the Kingdom.
Batelco also funded the Riffa Bridge project, at a cost of BD350,000 as part
of its commitment to support initiatives that benefit the community.
April 2013

Batelco, as part of its Corporate Social Responsibility programme, has


presented a cheque for BD10,000 to the Muharraq Social Welfare Centre
for the elderly. Batelco is committed to its support for all sectors of the
community and holds the elderly in high regard as they are amongst the
most vulnerable members of society.

June 2013
An agreement was signed between Tamkeen and Batelco to train 15 of
Batelco's Bahraini employees under Tamkeen's Career Progression
Programme that seeks to improve the capabilities and technical skills of
Bahrainis to make them employees of choice in the private sector.
August 2013
Batelco held a summer training program for the year 2013, which was
initiated on August 15th. The training program that provides young Bahraini
students the opportunity to gain valuable work experience as part of their
degree or diploma.

2014
January 2014

Batelco, which is Bahrain's leading integrated communications provider,


sponsored the Bahrain International Air show 2014 (BIAS 2014), which took
place at the Sakhir Airbase in the Kingdom of Bahrain from January 16 to
18, 2014.

ACC 416

Bahrain operator Batelco and Tamkeen sponsored an internship


programme to train 70 Bahraini university graduates with degrees in ICT
and electrical and electronic engineering over a five-year period at Batelco.
As part of its commitment to sports in Bahrain Batelco sponsored Bahrain
Golf Clubs annual Batelco Golf Tournament, which took place on the 22nd
February 2014. As one of the leading companies of Bahrain, Batelco is fully
committed into fostering the development of sports and its participants in
the local community.
SEPT 2014

As being one of its commitments to education Batelco supported a new


initiative to inspire youth and help them in aspiring their careers. Along
with this, Batelcos Youth Marketing Team has launched a new
empowerment programme, a Global Leader Programme, along with the
cooperation of AIESEC. Batelco and AIESEC have recently signed a
partnership deal which jointly empowers talented young people in the local
community.

Legitimacy of Batelco
The above activities and responsibilities performed by Batelco are constructive,
perfectly ethical and are in line with the societys norms and expectations. In fact,
they are perceived as appropriate and desirable by the society as they encourage
Bahrains progress on many grounds, especially by the Bahraini youth. This can be
seen by the amount of people and organizations participating in Batelcos
activities, and the activities of other organizations that are sponsored by Batelco.
Batelcos main focus is on the young citizens and social issues; however it still
holds the environmental issues within huge esteems. As one of the biggest firms
in Bahrain, they are considered pioneers when it comes to addressing social
challenges facing the society, from health awareness programs to internship ones.
These activities will in turn reflect positively on Batelcos image and they will be
perceived as being legitimate by the Bahraini community. Activities like
collaboration with Tamkeen for internship programs, or cooperating with Bahrain
Cancer Society were all part of the legitimation process performed by Batelco in
order to be legitimate, which they are.
9

ACC 416

Conclusion
We can see from the performances and participation of Batelco that its members
of Board of Directors and the senior management are having high morale, they
are honest and ethical in performing their duties and responsibilities given to
them. They try to maintain and preserve the confidentiality of the companys
affairs which includes the affairs the company have with it customers and other
stakeholders. The company members and the senior management are in sync
with the emotions of the society and helping them in whatever way possible in
overcoming some of the challenges the society faces. The members of the
company do this by keeping in mind the policies, rules and regulations set aside
by the company.

10

ACC 416

References
Batelco Group http://www.batelcogroup.com/en.aspx
Bahrain Bourse
http://bahrainbourse.com.bh/bhb/Market.asp?page=market&sec=Equities&syb=BATELCO

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ACC 416

Appendix
As at 31 December

CONSOLIDATE STATEMENTS OF FINANCIAL POSITION


2010
2011

Assets
Non-current assets
Property and equipment
Goodwill
Intangible assets
Investment in associates
Deffered tax assets
Employee benefit assets
Available-for-sale investments
Total non- current assets
Current assets
Inventories
Investment classified as held-for-sale
Available-for-sale investments
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share Capital
Statutory reserve
General reserve
Foreign currency translations reerve
Investments fair value reserve
Actuarial reserve
Retained earnings
Total equity attributable to equuity holders of parent company
Non-controlling interes
Total equity
Non-current liabilities
Deferred tax liability
Loans and borrowings
Trade and other payables
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Total current liabilities
Total liabilities
Total equity and liabilities

12

2012
BD'000

2013

2014

191,474
125,129
28,404
130,124
1,271

185,019
124,682
24,308
78,580
2,018

185,865
124,377
50,880
77,417
2,298

267,150
175,323
162,162
76,043
3,172

28,403
504,805

16,703
431,310

31,640
472,477

35,439
719,289

255,159
173,881
141,812
75,793
3,733
189
35,466
686,033

2,015

1,869
46,473

2,630

4,592

4,296

64,834
86,817
153,666
658,471

71,762
107,893
227,997
659,307

3,770
115,569
94,922
216,891
689,368

119,697
198,586
322,875
1,042,164

118,263
150,185
272,744
958,777

144,000
76,428
15,000
1,376
8,210

144,000
76,719
30,000
787
(3,397)

144,000
76,847
39,444
361
(2,403)

259,977
504,991
11,824
516,815

257,731
505,840
12,851
518,691

256,099
514,348
5,833
520,181

158,400
77,684
46,412
11,185
1,396
(1,423)
245,759
539,413
53,732
593,145

166,320
83,160
46,464
3,056
(589)
(2,293)
235,950
532,068
46,990
579,058

4,732

4,193

3,063
7,795

2,555
6,748

3,634
14,388
2,029
20,051

25,875
239,574
7,251
272,700

22,577
176,523
4,698
203,798

133,861

133,868
133,868
140,616
659,307

173,352
2,967
176,319
449,019
1,042,164

175,921

133,861
141,656
658,471

145,051
4,085
149,136
169,187
689,368

175,921
379,719
958,777

ACC 416

for the year ended on 31st December

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


2010

2011

2012
BD'000
326,972 304,710

2013

2014

370,561

389,656

REVENUE

340,252

EXPENSES
Network operating expenses
Staff costs
Depreciation and amortisation
Other operating expenses
Total Expenses

-109,362 -113,462 -116,766 -139,498 -139,119


-49,785 -50,930 -59,451 -55,390 -55,738
-39,704 -37,985 -36,373 -57,892 -67,029
-34,942 -36,558 -26,710 -55,021 -50,056
-233,793 -238,935 -239,300 -307,801 -311,942

Results from operating activities


Finance and other income
Finance and other expenses
Impairment on available-for-sale investments
Share of profit associates (net)
Profit before taxation
Income tax expense
Profit for the year
Other comprehensive income
Other comprehensive income to be reclassifiedto profit or loss in subsequent periods:
Foreign currency translation differences
Investment fair value changes
Net fair value changes transferred to profit or loss on impairment
Net other comprehensive income to be reclassified to profit or loss in subsequent periods
Other comprehensive income not to be reclassified to profit or loss in subsequent periods:
Remeasurement of defined benefit liability including related tax
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods
Other comprehensive income, net of tax
Total comprhensive income for the year
Profit for the year attributable to:
Equity holders of the Company
Non-controlling interest
Total comrehensive income for the year attributable to:
Equity holders of the Company
Non-controlling interest
Basic earnings per share (fils)

13

106,459
1,293
-346

88,037
3,257
-262

65,410
2,563
-647

62,760
4,462
-16,781

77,714
9,126
-10,308
-16,791
3,818
63,559
-6,171
57,388

-13,199
94,207
-3,574
90,633

-3,124
87,908
-4,053
83,855

1,599
68,925
-3,582
65,343

5,957
56,398
-4,944
51,454

1,406
-1,247

-503
-11,607

-570
994

10,829
3,799

159

-12,110

424

14,628

-7,156
-18,776
16,791
-9,141

-870
-870
-10,011
47,377

90,792

71,745

65,767

-1,423
-1,423
13,205
64,659

86,733
3,860
90,593

80,014
3,841
83,855

60,340
5,003
65,343

43,605
7,849
51,454

49,347
8,041
57,388

86,734
4,058
90,792
60.3

67,818
3,927
71,745
55.6

60,908
4,859
65,767
38.1

56,805
7,854
64,659
27.5

39,348
8,029
47,377
29.7

ACC 416

for the year ended on 31st December

CONSOLIDATED STATEMENT OF CASH FLOWS


2010
2011

OPERATING ACTIVITIES
Cash receipts from customers
Net cash paid to suppliers
Cash paid to and on behalf of employees
Payments to charities
Net cash from operating activities
INVESTING ACTIVITIES
Acquisition of property, equipment and intangibles
Payments in respect of rights share issue
Acquisition of businesses, net of cash acquired
Advance to investee company
Receipts from associate
Purchase of available-for-sale bonds
(Purchase)/sale of other investments
Interest and investment income received
Net cash used in investing activities
FINANCING ACTIVITIES
Dividend paid
Interest paid
Acquisition of non-controlling interest
Borrowings (net)
Payments to charities
Net cash used in nancing activities
(Decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December

2012
BD'000

2013

2014

338,901
(144,753)
(69,966)
(1,246)
122,936

351,318
(157,665)
(58,127)
(1,121)
134,405

(43,646)

(35,596)

316,625
(129,879)
(48,855)

300,118
(128,765)
(48,362)

280,334
(122,807)
(53,031)

137,891

122,991

104,496

(28,846)

(31,554)

(63,783)
(17,713)

(166,249)

(1,096)

6,094

(2,781)
1,930

2,781
2,762

7,332

4,943
1,604
(16,205)

4,238
1,069
(27,098)

2,245
(73,708)

3,237
5,148
(194,178)

4,068
(18,845)
(51,361)
3,179
(99,651)

(73,270)
(50)

(69,117)

(59,874)
(657)

(39,605)
(9,227)

(36,569)
(1,591)
(111,480)

222,977

(2,117)
(71,234)

18,482
(1,667)
(43,716)

(42,071)
(10,185)
(14,958)
(66,878)

174,145

(134,092)

10,206
70,230
80,436

24,659
80,436
105,095

(12,928)
105,095
92,167

102,903
92,167
195,070

(99,338)
195,070
95,732

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