MAROC_TELECOM_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT

Consolidated financial statements at 31 December 2015, 2016 and 2017

1.3.18 Net financing costs Net financing costs include interest payable on loans (calculated using the effective-interest method) and interest on investments. Investment income is recognized in the statement of earnings when acquired. 1.3.19 Tax expenses Tax expense includes income tax payable and deferred tax expense (or income). Tax is expensed unless it applies to items recorded directly to equity. 1.4 CONTRACTUAL COMMITMENTS AND CONTINGENT ASSETS AND LIABILITIES Once a year, Maroc Telecom and its subsidiaries prepare detailed reports on all contractual obligations, commercial and financial commitments, and contingent obligations for which they are jointly and severally liable. These detailed reports are updated regularly by the relevant departments and reviewed by Group senior management. The assessment of off-balance-sheet commitments relating to suppliers of fixed assets is bears on the following: – for master service agreements and associated amended agreements valued at more than MAD 25 million, the calculation corresponds to difference between minimum commitments and commitments actually fulfilled; – for all other contracts, it corresponds to the difference between firm orders and orders actually fulfilled. Commitments arising from real-estate leases are estimated on the basis of one month’s rental expense, because virtually all termination clauses require one month’s notice. 1.5 SEGMENT DATA A segment is a distinguishable component of the Group that is engaged in providing a product or service in a specific economic environment (geographical segment), or in providing products or related services (business segment) that are subject to risks and rewards different from those of other business segments. In order to benchmark the performance indicators used for internal reporting, as required by IFRS 8, Maroc Telecom has opted to report key financial and operating indicators by geographical area. This reporting has been achieved through the creation of a new international segment – separate from the Morocco segment – that combines the 10 existing subsidiaries in Mauritania, Burkina Faso, Gabon, Mali, Ivory coast, Benin, Togo, Niger and Central African Republic. 1.6 NET CASH POSITION This corresponds to cash and cash equivalents minus borrowings, cash equivalents and cash earmarked for borrowings repayable in more than 3 months’ time.

Revenues from telephone subscriptions are recognized on a straight- line basis over the subscription contract period. Revenues from incoming and outgoing call traffic are recognized when the service is provided. For prepaid services, revenues are recognized as calls are made. Revenues from Fixed-line, Internet, and Mobile activities comprise: – the yield of conventional subscription as well as postpaid package amounts; – the yield of prepaid national and international outgoing calls excluding postpaid and Fixed-line rates, as and when consumed; – prepaid and postpaid incoming national and international communications revenue; – revenue generated by ADSL and Mobile internet offers (prepaid and postpaid); – revenue generated by non-resident Mobile customers inMorocco using the Maroc Telecom network (Roamers); – revenue generated by the data transmission provided to the professional market and Internet service providers as well as other telecom operators; – revenue resulting from the sale of advertising inserts in the printed and electronic directories which are taken into account in the result when they are published. Revenue from the sale of terminals, net of rebates granted to customers and commissioning fees, is recognized when activating the line. Value Added Services (VAS) revenue consists of: – sales of services developed by Maroc Telecom which are presented in gross; – sales of services to customers managed by Maroc Telecom on behalf of content providers (mainly special numbers), are systematically presented net of related charges. When sales are made via a third-party distributor supplied by the Group and involve a discount from the retail price, revenues are recorded as gross revenues and commissions granted are recognized as operating expenses. Awards granted by Maroc Telecom and its subsidiary companies to their customers in connection with customer loyalty programs, in the form of free or discounted goods or services are recorded in accordance with IFRIC 13 and IAS 18. The IFRIC 13 interpretation is based on the principle of measuring customer-loyalty award credits at fair value (defined as the excess price over the sales incentive that would be granted to any new customer) and that would result (should any such excess price exist) in deferred recognition of the portion of the revenue associated with the subscription in the amount of such excess price. 1.3.16 Cost of purchases Cost of purchases comprises the purchase of Mobile and Fixed-line handsets and interconnection costs. 1.3.17 Other operating income and expenses This item comprises mainly commissions to distributors, network- maintenance expenses, advertising and marketing costs, and restructuring charges.

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MAROC TELECOM ____ 2017 Registration Document