Exhibit
  15.2

















BAHRAIN TELECOMMUNICATIONS

COMPANY B.S.C.

SPECIAL PURPOSE CONSOLIDATED

FINANCIAL STATEMENTS

UNAUDITED

31 DECEMBER 2003





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|SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  | 
|------------------------------------------------------------------------------------ |  | 



|CONTENTS                                                  |  | Page
|--------------------------------------------------------- |  | ----
|                                                          |  |     
|                                                          |  |     
|Special Purpose Consolidated financial statements         |  |     
|Consolidated balance sheet                                |  |     
|Consolidated income statement                             |  |     
|Consolidated statement of cash flows                      |  |     
|Consolidated statement of changes in shareholders equity |  |     
|Notes to the consolidated financial statements            |  |     



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|Bahrain Telecommunications Company B.S.C.        |  | 1     
|------------------------------------------------ |  | ------
|                                                 |  |       
|CONSOLIDATED BALANCE SHEETas at 31 December 2003 |  | BD000



|                                                   |  | Note |    | 2003 |  |         | 2002 | 
|-------------------------------------------------- |  | ---- | -- | ---- |  | ------- | ---- | 
|NET ASSETS EMPLOYED                                |  |      |    |      |  |         |      | 
|Property, plant and equipment                      |  |      | 3  |      |  | 166,709 |      | 
|Intangible assets                                  |  |      | 4  |      |  | 1,251   |      | 
|Investments                                        |  |      | 5  |      |  | 20,770  |      | 
|Staff housing loans                                |  |      | 6  |      |  | 339     |      | 
|                                                   |  |      |    |      |  | 189,069 |      | 
|CURRENT ASSETS                                     |  |      |    |      |  |         |      | 
|Inventories                                        |  |      |    |      |  | 739     |      | 
|Accounts receivable and prepayments                |  |      | 7  |      |  | 32,438  |      | 
|Amounts due from telecommunications operators      |  |      |    |      |  | 2,575   |      | 
|Cash and cash equivalents                          |  |      |    |      |  | 120,674 |      | 
|                                                   |  |      |    |      |  |         |      | 
|                                                   |  |      |    |      |  | 156,426 |      | 
|CURRENT LIABILITIES                                |  |      |    |      |  |         |      | 
|Accounts payable and accruals                      |  |      | 8  |      |  | 51,221  |      | 
|Amounts due to telecommunications operators        |  |      |    |      |  | 4,972   |      | 
|Bank loan                                          |  |      |    |      |  |        |      | 
|                                                   |  |      |    |      |  |         |      | 
|                                                   |  |      |    |      |  | 56,193  |      | 
|                                                   |  |      |    |      |  |         |      | 
|NET CURRENT ASSETS                                 |  |      |    |      |  | 100,233 |      | 
|                                                   |  |      |    |      |  |         |      | 
|NET ASSETS                                         |  |      |    |      |  | 289,302 |      | 
|                                                   |  |      |    |      |  |         |      | 
|MINORITY INTEREST                                  |  |      |    |      |  | 5,617   |      | 
|                                                   |  |      |    |      |  |         |      | 
|SHAREHOLDERS EQUITY                               |  |      |    |      |  |         |      | 
|                                                   |  |      |    |      |  |         |      | 
|Share capital                                      |  |      | 9  |      |  | 100,000 |      | 
|Statutory reserve                                  |  |      | 10 |      |  | 37,490  |      | 
|General reserve                                    |  |      | 11 |      |  | 15,000  |      | 
|Proposed appropriations                            |  |      | 12 |      |  | 52,367  |      | 
|Retained earnings                                  |  |      |    |      |  | 78,667  |      | 
|Foreign currency translation reserve               |  |      |    |      |  | 161     |      | 
|                                                   |  |      |    |      |  |         |      | 
|                                                   |  |      |    |      |  | 283,685 |      | 
|                                                   |  |      |    |      |  |         |      | 
|SHAREHOLDERS
        EQUITY AND MINORITY INTEREST |  |      |    |      |  | 289,302 |      | 

The accompanying notes 1 to 23 form an integral part of these special purpose consolidated financial statements.





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|Bahrain Telecommunications Company B.S.C.                        |  | 2     
|---------------------------------------------------------------- |  | ------
|                                                                 |  |       
|CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2003 |  | BD000



|                                |  | Note |  | 2003    |   |  | 2002    |  
|------------------------------- |  | ---- |  | ------- | - |  | ------- | -
|                                |  |      |  |         |   |  |         |  
|Gross revenue                   |  | 13   |  | 192,122 |   |  | 185,798 |  
|                                |  |      |  |         |   |  |         |  
|                                |  |      |  | 192,122 |   |  | 185,798 |  
|                                |  |      |  |         |   |  |         |  
|Operating expenses              |  |      |  |         |   |  |         |  
|General and administrative      |  | 14   |  | 108,665 |   |  | 102,907 |  
|Other operating expenses        |  | 15   |  | 23,181  |   |  | 26,183  |  
|                                |  |      |  |         |   |  |         |  
|                                |  |      |  | 131,846 |   |  | 129,090 |  
|                                |  |      |  |         |   |  |         |  
|Profit from operations          |  |      |  | 60,276  |   |  | 56,708  |  
|Non-operating income            |  | 16   |  | 1,166   |   |  | 2,557   |  
|                                |  |      |  |         |   |  |         |  
|Profit before minority interest |  |      |  | 61,442  |   |  | 59,265  |  
|Minority interest               |  |      |  | (780    | ) |  | (1,242  | )
|                                |  |      |  |         |   |  |         |  
|Net profit for the year         |  |      |  | 60,662  |   |  | 58,023  |  
|                                |  |      |  |         |   |  |         |  
|Earnings per share              |  |      |  |         |   |  |         |  
|Basic earnings per share        |  | 17   |  | 61 fils |   |  | 58 fils |  

The accompanying notes 1 to 23 form an integral part of these special purpose consolidated financial statements.





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|Bahrain Telecommunications Company B.S.C.                               |  | 3     
|----------------------------------------------------------------------- |  | ------
|                                                                        |  |       
|CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2003 |  | BD000



|                                                           |  | 2003    |   |  | 2002    |  
|---------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                           |  |         |   |  |         |  
|Operating
        activities                               |  |         |   |  |         |  
|Cash
        receipts from customers                       |  | 163,065 |   |  | 163,120 |  
|Cash
        paid to suppliers                             |  | (39,976 | ) |  | (32,736 | )
|Cash
        paid to and on behalf of employees            |  | (37,748 | ) |  | (39,067 | )
|Cash
        received from telecommunications operators    |  | 4,093   |   |  | 2,049   |  
|                                                           |  |         |   |  |         |  
|Cash
        flows from operating activities               |  | 89,434  |   |  | 93,366  |  
|                                                           |  |         |   |  |         |  
|Investing
        activities                               |  |         |   |  |         |  
|Acquisition
        of plant and equipment                 |  | (20,188 | ) |  | (29,226 | )
|Acquisition
        of investments                         |  | (2,475  | ) |  | (5,316  | )
|Payments
        in respect of investment commitments, net |  | (1,868  | ) |  |        |  
|Interest
        and investment income received            |  | 1,618   |   |  | 2,398   |  
|Net
        cash repayments from staff housing loans       |  | 75      |   |  | 257     |  
|                                                           |  |         |   |  |         |  
|Cash
        flows from investing activities               |  | (22,838 | ) |  | (31,887 | )
|                                                           |  |         |   |  |         |  
|Financing
        activities                               |  |         |   |  |         |  
|Repayment
        of bank loan                             |  | (1,916  | ) |  | (2,002  | )
|Dividends
        paid                                     |  | (45,973 | ) |  | (40,759 | )
|                                                           |  |         |   |  |         |  
|Cash
        flows from financing activities               |  | (47,889 | ) |  | (42,761 | )
|                                                           |  |         |   |  |         |  
|                                                           |  |         |   |  |         |  
|Net
        increase in cash and cash equivalents          |  | 18,707  |   |  | 18,718  |  
|                                                           |  |         |   |  |         |  
|Cash
        and cash equivalents at 1 January             |  | 101,967 |   |  | 83,249  |  
|                                                           |  |         |   |  |         |  
|Cash
        and cash equivalents at 31 December           |  | 120,674 |   |  | 101,967 |  

The accompanying notes 1 to 23 form an integral part of these special purpose consolidated financial statements.





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|Bahrain Telecommunications Company B.S.C.                                                                    |  | 4     
|------------------------------------------------------------------------------------------------------------ |  | ------
|                                                                                                             |  |       
|CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

      for
        the year ended 31 December 2003 |  | BD000

2003



|                                                         |  |  | Sharecapital |  |  | Statutoryreserve |  |  | Generalreserve |  |  | Retainedearnings |   |  | Foreigncurrencytranslationreserve |   |  | Proposed appropriations |   |  | Total   |  
|-------------------------------------------------------- |  |  | ------------ |  |  | ---------------- |  |  | -------------- |  |  | ---------------- | - |  | --------------------------------- | - |  | ------------------------ | - |  | ------- | -
|                                                         |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |   |  |                          |   |  |         |  
|At 1 January 2003                                        |  |  | 100,000      |  |  | 30,930           |  |  | 15,000         |  |  | 70,372           |   |  | 264                               |   |  | 52,870                   |   |  | 269,436 |  
|Dividends declared (2002)                                |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |   |  | (45,000                  | ) |  | (45,000 | )
|Donations and contributions (2002)                       |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |   |  | (1,160                   | ) |  | (1,160  | )
|Directors remuneration paid (2002)                      |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |   |  | (150                     | ) |  | (150    | )
|Transfer to statutory reserve (2002)                     |  |  |             |  |  | 6,560            |  |  |               |  |  |                 |   |  |                                  |   |  | (6,560                   | ) |  |        |  
|Net profit for the year                                  |  |  |             |  |  |                 |  |  |               |  |  | 60,662           |   |  |                                  |   |  |                         |   |  | 60,662  |  
|Proposed appropriations for 2003:(note12)                |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |   |  |                          |   |  |         |  
|Dividends                                                |  |  |             |  |  |                 |  |  |               |  |  | (45,000          | ) |  |                                  |   |  | 45,000                   |   |  |        |  
|Directors remuneration                                  |  |  |             |  |  |                 |  |  |               |  |  | (125             | ) |  |                                  |   |  | 125                      |   |  |        |  
|Donations and contributions                              |  |  |             |  |  |                 |  |  |               |  |  | (1,214           | ) |  |                                  |   |  | 1,214                    |   |  |        |  
|Transfer to statutory reserve                            |  |  |             |  |  |                 |  |  |               |  |  | (6,028           | ) |  |                                  |   |  | 6,028                    |   |  |        |  
|Gains / (losses) not recognised in the income statement: |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |   |  |                          |   |  |         |  
|Foreign currency translation reserve                     |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  | (103                              | ) |  |                         |   |  | (103    | )
|                                                         |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |   |  |                          |   |  |         |  
|At 31 December 2003                                      |  |  | 100,000      |  |  | 37,490           |  |  | 15,000         |  |  | 78,667           |   |  | 161                               |   |  | 52,367                   |   |  | 283,685 |  

2002



|                                                                 |  |  | Sharecapital |  |  | Statutoryreserve |  |  | Generalreserve |  |  | Retainedearnings |   |  | Foreigncurrencytranslationreserve |  |  | Proposed
        appropriations |   |  | Total   |  
|---------------------------------------------------------------- |  |  | ------------ |  |  | ---------------- |  |  | -------------- |  |  | ---------------- | - |  | --------------------------------- |  |  | -------------------------------- | - |  | ------- | -
|                                                                 |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |  |  |                                  |   |  |         |  
|At
        1 January 2002                                        |  |  | 100,000      |  |  | 25,412           |  |  | 15,000         |  |  | 65,219           |   |  | 43                                |  |  | 46,704                           |   |  | 252,378 |  
|Dividend
        declared (2001)                                 |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |  |  | (40,000                          | ) |  | (40,000 | )
|Donations
        and contributions (2001)                       |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |  |  | (1,086                           | ) |  | (1,086  | )
|Directors
        remuneration paid (2001)                      |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  |                                  |  |  | (100                             | ) |  | (100    | )
|Transfer
        to statutory reserve (2001)                     |  |  |             |  |  | 5,518            |  |  |               |  |  |                 |   |  |                                  |  |  | (5,518                           | ) |  |        |  
|Net
        profit for the year                                  |  |  |             |  |  |                 |  |  |               |  |  | 58,023           |   |  |                                  |  |  |                                 |   |  | 58,023  |  
|Proposed
        appropriations for 2002:(note12)                |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |  |  |                                  |   |  |         |  
|Dividend                                                         |  |  |             |  |  |                 |  |  |               |  |  | (45,000          | ) |  |                                  |  |  | 45,000                           |   |  |        |  
|Directors
        remuneration                                  |  |  |             |  |  |                 |  |  |               |  |  | (150             | ) |  |                                  |  |  | 150                              |   |  |        |  
|Donations
        and contributions                              |  |  |             |  |  |                 |  |  |               |  |  | (1,160           | ) |  |                                  |  |  | 1,160                            |   |  |        |  
|Transfer
        to statutory reserve                            |  |  |             |  |  |                 |  |  |               |  |  | (6,560           | ) |  |                                  |  |  | 6,560                            |   |  |        |  
|Gains
        / (losses) not recognised in the income statement: |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |  |  |                                  |   |  |         |  
|Foreign
        currency translation reserve                     |  |  |             |  |  |                 |  |  |               |  |  |                 |   |  | 221                               |  |  |                                 |   |  | 221     |  
|                                                                 |  |  |              |  |  |                  |  |  |                |  |  |                  |   |  |                                   |  |  |                                  |   |  |         |  
|At
        31 December 2002                                      |  |  | 100,000      |  |  | 30,930           |  |  | 15,000         |  |  | 70,372           |   |  | 264                               |  |  | 52,870                           |   |  | 269,436 |  

The
  accompanying notes 1 to 23 form an integral part of these special purpose consolidated
  financial statements





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|Bahrain Telecommunications Company B.S.C.                                                         |  | 5
|------------------------------------------------------------------------------------------------- |  | -
|                                                                                                  |  |  
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |  



|1. | BACKGROUND AND ACTIVITIES
|-- | -------------------------

Bahrain Telecommunications Company B.S.C. (the Company) is a public shareholding company registered in the Kingdom of Bahrain in the year 1981 and is engaged in the provision of public telecommunications and associated products and services. The special purpose consolidated financial statements of the Company for the year ended 31 December 2003 comprise the financial statements of the Company and its subsidiaries (together referred to as the Group) and the Groups interests in jointly controlled companies.

|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

|a. | Statement of compliance
|-- | -----------------------

The special purpose consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards promulgated by the International Accounting Standards Board (IASB) and the requirements of the Bahrain Commercial Companies Law 2001.

|b. | Basis of preparation
|-- | --------------------

The special purpose consolidated financial statements have been prepared under the historical cost basis The accounting policies have been consistently applied and are consistent with those used in the previous year. The special purpose consolidated financial statements have been prepared in thousands of Bahraini dinars.

The financial information for 2003 and 2002 and presented in these special purpose consolidated financial statements is unaudited and has been prepared for comparative information purposes only.

|c. | Basis of consolidation
|-- | ----------------------

| | i) | Subsidiaries
| | -- | ------------

Subsidiaries are those enterprises controlled by the Company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the special purpose consolidated financial statements from the date that control commences until the date that control effectively ceases.

| | ii) | Jointly controlled companies
| | --- | ----------------------------

Jointly controlled companies are those enterprises over whose the financial and operating policies the Group has joint control, established by contractual agreement. The special purpose consolidated financial statements include the Groups proportionate share of the enterprises assets, liabilities, revenue and expenses with items of a similar nature on a line-by-line basis. The financial statements of the jointly controlled companies are included in the special purpose consolidated financial statements from the date that control commences until the date that effectively ceases.

| | ii) | Transactions eliminated on consolidation
| | --- | ----------------------------------------

Intra-group balances and transactions, and any unrealised gains and losses arising form intra-group transactions, are eliminated in preparing the special purpose consolidated financial statements. Unrealised gains arising from transactions with the jointly controlled company are eliminated to the extent of the Groups interest in the enterprise.

|d. | Intangible assets
|-- | -----------------

Intangible assets comprising goodwill and deferred Internet operating license fees are stated at cost less accumulated amortization and impairment losses as follows:

| |  | Goodwill, being the difference between the acquisition cost and the fair values of net identifiable assets acquired, is amortised on a straight-line basis over the estimated useful life of five years.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Internet operating license fees paid are amortised on a straight-line basis over the estimated useful life of 7 years.
| | - | ----------------------------------------------------------------------------------------------------------------------



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 6
|------------------------------------------------------------------------------------------------- |  | -
|                                                                                                  |  |  
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |  



|2 | Significant accounting policies (continued)
|- | -------------------------------------------

|e. | Property, plant and equipment
|-- | -----------------------------

Items of property, plant and equipment are stated at historical cost less accumulated depreciation and impairment. The cost of self-constructed property, plant and equipment includes the cost of materials and direct labour.

| | Subsequent expenditure
| | ----------------------

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalised and the carrying amount of the components is recognised as an expense as incurred. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the income statement as an expense as incurred.

| | Depreciation
| | ------------

Freehold land, projects in progress and inventories held for capital projects are not depreciated. The cost of other property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of as follows:



|Freehold
        buildings                                       |  | 20
        years      | 
|---------------------------------------------------------------- |  | --------------------- | 
|Plant
        and equipment                                      |  | 2
        to 20 years | 
|Motor
        vehicles, furniture, fittings and office equipment |  | 1
        to 3 years  | 

Depreciation is charged to the income statement. Assets are depreciated from the date of acquisition, or in respect of internally constructed assets, from the time an asset is completed and brought into service.

|f. | Investments
|-- | -----------

|(i) | Classification
|--- | --------------

Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that the Group has the intent and ability to hold to maturity. These include certain debt securities and investments in managed funds.

Available-for-sale investments are financial assets that are not held for trading purposes or held-to-maturity. These comprise unquoted equity investments.

|(ii) | Recognition
|---- | -----------

Available-for-sale investments are recognised/derecognised by the Group on the date it commits to purchase/sell the investments. Held-to-maturity Investments are recognised/derecognised on the day they are transferred to/by the Group.

|(iii) | Measurement
|----- | -----------

Held-to-maturity investments are carried at cost less impairment allowances.

Available-for-sale
  unquoted equity investments are stated at cost, including transaction costs,
  less impairment allowances as there are no active markets or other appropriate
  methods from which to derive reliable fair values for these investments.



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 7
|------------------------------------------------------------------------------------------------- |  | -
|                                                                                                  |  |  
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |  



|2 | Significant accounting policies (continued)
|- | -------------------------------------------

|g. | Inventories
|-- | -----------

Inventories are stated at the lower of cost and net realisable value after making due provision for any obsolete or slow-moving items. Cost is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Those items of inventory that are held for the expansion of the telecommunications network are shown under property, plant and equipment.

|h. | Impairment
|-- | ----------

The carrying amounts of the Groups assets other than inventories (refer accounting policy g) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

|i. | Accounts receivable
|-- | -------------------

Accounts receivable are stated at cost less impairment.

|j. | Employees end of service benefits
|-- | ---------------------------------

Provision is made for amounts payable as employees end of service benefits as per the respective countries labour laws on the basis of the employees accumulated periods of service at the balance sheet date.

|k. | Gross revenue
|-- | -------------

Gross revenue represents the value of services provided and equipment sold or rented. It includes the revenue received and receivable from revenue sharing arrangements entered into with national and international telecommunication operators in respect of traffic exchanged.

|l. | Foreign currency transactions
|-- | -----------------------------

Foreign currency transactions are translated at the foreign exchange rate prevailing at the time of the transaction. Monetary assets and liabilities in foreign currencies at the balance sheet date are translated into Bahraini Dinars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the date of the transaction.

|m. | Borrowing costs
|-- | ---------------

Interest costs incurred in connection with interest bearing loans are expensed as incurred.

|n. | Financial statements of foreign operations
|-- | ------------------------------------------

The
  Groups foreign operations are not considered an integral part of the Companys
  operations and, accordingly, the assets and liabilities of the foreign operations
  including goodwill arising on acquisition, are translated into Bahraini Dinars
  at the exchange rates prevailing at the balance sheet date. The revenue and
  expenses of foreign operations are translated into Bahraini dinars at average
  rates prevailing during the year. Exchange differences arising on translation
  are recognised as a component of shareholders equity.



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 8
|------------------------------------------------------------------------------------------------- |  | -
|                                                                                                  |  |  
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |  

|2 | Significant accounting policies (continued)
|- | -------------------------------------------

|o. | Cash and cash equivalents
|-- | -------------------------

Cash and cash equivalents comprise cash on hand and balances with banks, including time deposits, which are readily convertible into cash and mature within three months.

|p. | Dividends and directors remuneration
|-- | -------------------------------------

Dividends to shareholders and directors remuneration are recognised as a liability in the period in which they are declared.

|q. | Provisions
|-- | ----------

A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

|3. | PROPERTY, PLANT AND EQUIPMENT
|-- | -----------------------------



| |                             |  | Freeholdland andbuildings |  |  | Plantandequipment |  |  | Motor vehicles,furniture,fittings & officeequipment |  |  | Projectsinprogress |  |  | Total   | 
| | --------------------------- |  | ------------------------- |  |  | ----------------- |  |  | --------------------------------------------------- |  |  | ------------------ |  |  | ------- | 
| |                             |  | BD000                    |  |  | BD000            |  |  | BD000                                              |  |  | BD000             |  |  | BD000  | 
| |                             |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | Cost                        |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | At
        1 January 2003   |  | 54,805                    |  |  | 262,062           |  |  | 43,039                                              |  |  | 19,916             |  |  | 379,822 | 
| | Additions                   |  |                          |  |  |                  |  |  |                                                    |  |  | 23,157             |  |  | 23,157  | 
| | Projects
        completed  |  | 353                       |  |  | 13,626            |  |  | 3,615                                               |  |  | (17,594)           |  |  |        | 
| | Disposals                   |  | (1)                       |  |  | (9,380)           |  |  | (367)                                               |  |  |                   |  |  | (9,748) | 
| | At
        31 December 2003 |  | 55,157                    |  |  | 266,308           |  |  | 46,287                                              |  |  | 25,479             |  |  | 393,231 | 
| |                             |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | Depreciation                |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | At
        1 January 2003   |  | 40,222                    |  |  | 139,783           |  |  | 26,449                                              |  |  |                   |  |  | 206,454 | 
| | Charge
        for the year |  | 1,526                     |  |  | 15,450            |  |  | 11,648                                              |  |  |                   |  |  | 28,624  | 
| | Disposals                   |  | (1)                       |  |  | (8,207)           |  |  | (348)                                               |  |  |                   |  |  | (8,556) | 
| | At
        31 December 2003 |  | 41,747                    |  |  | 147,026           |  |  | 37,749                                              |  |  |                   |  |  | 226,522 | 
| |                             |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | Net
        book value      |  |                           |  |  |                   |  |  |                                                     |  |  |                    |  |  |         | 
| | At
        31 December 2003 |  | 13,410                    |  |  | 119,282           |  |  | 8,538                                               |  |  | 25,479             |  |  | 166,709 | 
| | At
        31 December 2002 |  | 14,583                    |  |  | 122,279           |  |  | 16,590                                              |  |  | 19,916             |  |  | 173,368 | 

Inventories held for capital projects, included in projects in progress, total BD 739 thousand as at the balance sheet date (2002: BD 893 thousand).





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|Bahrain Telecommunications Company B.S.C.                                                         |  | 9
|------------------------------------------------------------------------------------------------- |  | -
|                                                                                                  |  |  
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |  

|4. | INTANGIBLE ASSETS
|-- | -----------------

These comprise goodwill arising on acquisition and Internet license fees paid, as follows:



| | Cost                                                 |  | 2003BD000 |  | 2002BD000
| | ---------------------------------------------------- |  | ---------- |  | ----------
| |                                                      |  |            |  |           
| | Goodwill on acquisitions, at cost                    |  | 6,380      |  |           
| | Internet license fees, at cost                       |  | 3,410      |  |           
| | Exchange gain on translation of license fees         |  | 180        |  |           
| |                                                      |  | 9,970      |  |           
| | Amortisation                                         |  |            |  |           
| | At 1 January                                         |  | 8,099      |  |           
| | Amortisation and impairment of goodwill for the year |  | 620        |  |           
| | At 31 December                                       |  | 8,719      |  |           
| | Net book value at 31 December                        |  | 1,251      |  |           

The movement in intangible assets during the year were as follows:



| |                                                      |  | 2003BD000 |  | 2002BD000
| | ---------------------------------------------------- |  | ---------- |  | ----------
| | Cost                                                 |  |            |  |           
| | At 1 January                                         |  | 9,944      |  |           
| | Additions                                            |  |           |  |           
| | Other movement                                       |  | 26         |  |           
| | At 31 December                                       |  | 9,970      |  |           
| | Amortisation                                         |  |            |  |           
| | At 1 January                                         |  | 8,099      |  |           
| | Amortisation and impairment of goodwill for the year |  | 620        |  |           
| | At 31 December                                       |  | 8,719      |  |           
| | Net Book value at 31 December                        |  | 1,251      |  |           



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 10
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|5. | INVESTMENTS
|-- | -----------



| |                    |  | 2003BD000 |  | 2002BD000
| | ------------------ |  | ---------- |  | ----------
| | Held-to-maturity   |  | 16,207     |  |           
| | Available-for-sale |  | 4,563      |  |           
| |                    |  | 20,770     |  |           

|6. | STAFF HOUSING LOANS
|-- | -------------------

The Group provides loans to its Bahraini employees for the acquisition of residential properties. In the past, housing loans have been funded by the Group, and are interest free and repayable over a maximum period of fifteen years. As from 1 January 1996, the Group introduced a new staff housing loan scheme whereby loans are funded through a local commercial bank and secured by a guarantee issued by the Group. In case of loans funded through local commercial banks, the Group bears 75% of the loan interest. At 31 December 2003, the Group has guaranteed BD 3,263 thousand towards housing loans to staff (2002: BD 3,747 thousand).



| |                                                    |  | 2003BD000 |  | 2002BD000
| | -------------------------------------------------- |  | ---------- |  | ----------
| | Old staff housing loan balance as at 31stDecember: |  | 339        |  |           
| |                                                    |  |            |  |           

|7. | ACCOUNTS RECEIVABLE AND PREPAYMENTS
|-- | -----------------------------------



| |                                           |  | 2003BD000 |  | 2002BD000
| | ----------------------------------------- |  | ---------- |  | ----------
| | Customers accounts, net                  |  | 20,508     |  |           
| | Unbilled revenue                          |  | 5,772      |  |           
| | Interest and investment income receivable |  | 425        |  |           
| | Prepaid expenses and other receivables    |  | 5,733      |  |           
| |                                           |  | 32,438     |  |           

|8. | ACCOUNTS PAYABLE AND ACCRUALS
|-- | -----------------------------



| |                                    |  | 2003BD000 |  | 2002BD000
| | ---------------------------------- |  | ---------- |  | ----------
| | Trade accounts payable             |  | 9,181      |  |           
| | Accrued expenses and provisions    |  | 29,882     |  |           
| | Billings in advance                |  | 2,290      |  |           
| | Unclaimed dividends                |  | 412        |  |           
| | Retentions on projects in progress |  | 1,331      |  |           
| | Due to related parties             |  | 474        |  |           
| | Other payables                     |  | 7,651      |  |           
| |                                    |  | 51,221     |  |           



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 11
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|9. | SHARE CAPITAL
|-- | -------------



| |                                                                          |  | 2003BD000 |  |  | 2002BD000 | 
| | ------------------------------------------------------------------------ |  | ---------- |  |  | ---------- | 
| |                                                                          |  |            |  |  |            | 
| | Authorised, issued and fully paid: 1,000 million shares of 100 fils each |  | 100,000    |  |  | 100,000    | 

|10. | STATUTORY RESERVE
|--- | -----------------

The
  Bahrain Commercial Companies Law 2001 requires all companies incorporated in
  Bahrain to transfer 10% of net profit for the year to a statutory reserve, until
  such reserve reaches a minimum of 50% of the issued share capital. The reserve
  is not available for distribution, except in the circumstances stipulated in
  the Bahrain Commercial Companies Law 2001. Transfer to statutory reserve, effected
  by the subsidiary in accordance with the applicable law of the country of incorporation,
  is retained in the subsidiary concerned, and is not available for distribution
  except in circumstances stipulated by the law in the respected country of incorporation.

|11. | GENERAL RESERVE
|--- | ---------------

The general reserve is distributable only upon a resolution of the shareholders at the Annual General Meeting. No transfer has been made for the year (2002: nil).

|12. | Proposed appropriations
|--- | -----------------------

The board of directors propose the following appropriations for the approval of the shareholders at the annual general meeting:



| |                               |  | 2003BD000 |  |  | 2002BD000 | 
| | ----------------------------- |  | ---------- |  |  | ---------- | 
| |                               |  |            |  |  |            | 
| | Dividends                     |  | 45,000     |  |  | 45,000     | 
| | Donations                     |  | 1,214      |  |  | 1,160      | 
| | Directors remuneration       |  | 125        |  |  | 150        | 
| | Transfer to statutory reserve |  | 6,028      |  |  | 6,560      | 
| |                               |  |            |  |  |            | 
| |                               |  | 52,367     |  |  | 52,870     | 

|13. | GROSS REVENUE
|--- | -------------

The Groups operations are all considered to fall into one broad class of business, telecommunication and information services and hence, segmental analysis of assets and liabilities is not considered meaningful. Gross turnover can be analysed as follows:



| |                                    |  | 2003BD000 |  |  | 2002BD000 | 
| | ---------------------------------- |  | ---------- |  |  | ---------- | 
| |                                    |  |            |  |  |            | 
| | Informatics                        |  | 34,885     |  |  | 35,360     | 
| | Mobile telecommunications services |  | 82,299     |  |  | 72,362     | 
| | Fixed line telephony services      |  | 50,132     |  |  | 56,316     | 
| | Payphones                          |  | 2,116      |  |  | 2,805      | 
| | Leased circuits                    |  | 15,182     |  |  | 11,127     | 
| | Pre-paid cards                     |  | 7,534      |  |  | 8,144      | 
| | Other telecommunications services  |  | (26)       |  |  | (316)      | 
| |                                    |  |            |  |  |            | 
| |                                    |  | 192,122    |  |  | 185,798    | 



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 12
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|14. | GENERAL AND ADMINISTRATIVE
|--- | --------------------------



| |                                           |  | 2003BD000 |  |  | 2002BD000 | 
| | ----------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                           |  |            |  |  |            | 
| | Staff cost                                |  | 38,613     |  |  | 39,516     | 
| | Depreciation                              |  | 28,624     |  |  | 26,249     | 
| | Amortisation and impairment of goodwill   |  | 620        |  |  | 4,642      | 
| | Board of Directors attendance expenses    |  | 49         |  |  | 39         | 
| | Foreign exchange loss                     |  | 168        |  |  | 363        | 
| | Other general and administrative expenses |  | 40,591     |  |  | 32,098     | 
| |                                           |  |            |  |  |            | 
| |                                           |  | 108,665    |  |  | 102,907    | 

Included in staff costs is a charge of BD 10,000 thousand (2002: 7,000 thousand) in connection with initiatives to reorganise and streamline support functions and realign certain business activities. The full amount of the costs estimated to be incurred on the basis of a plan approved by the Companys Board of Directors is BD 17,000 thousand, of which BD 7,000 thousand was provided for in 2002.

|15. | OTHER OPERATING EXPENSES
|--- | ------------------------



| |                                             |  | 2003BD000 |  |  | 2002BD000 | 
| | ------------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                             |  |            |  |  |            | 
| | Outpayments to telecommunications operators |  | 19,164     |  |  | 21,181     | 
| | Cost of equipment sales                     |  | 4,017      |  |  | 5,002      | 
| |                                             |  |            |  |  |            | 
| |                                             |  | 23,181     |  |  | 26,183     | 

|16. | NON-OPERATING INCOME
|--- | --------------------



| |                   |  | 2003BD000 |  |  | 2002BD000 | 
| | ----------------- |  | ---------- |  |  | ---------- | 
| |                   |  |            |  |  |            | 
| | Investment income |  | 24         |  |  | 1,069      | 
| | Interest income   |  | 1,142      |  |  | 1,488      | 
| |                   |  |            |  |  |            | 
| |                   |  | 1,166      |  |  | 2,577      | 

|17. | EARNINGS PER SHARE (EPS)
|--- | ------------------------



| |                                                                             |  | 2003      |  |  | 2002      | 
| | --------------------------------------------------------------------------- |  | --------- |  |  | --------- | 
| |                                                                             |  |           |  |  |           | 
| | Net profit for the year (BD000)                                            |  | 60,661    |  |  | 58,023    | 
| | Weighted average number of shares outstanding during the year in (thousand) |  | 1,000,000 |  |  | 1,000,000 | 
| |                                                                             |  |           |  |  |           | 
| | Earnings per share (fils)                                                   |  | 61        |  |  | 58        | 



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|Bahrain Telecommunications Company B.S.C.                                                         |  | 13
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|18. | COMMITMENTS
|--- | -----------

The Group has commitments at 31 December 2003 in respect of capital projects of BD 7,646 thousand (2002: BD 3,177 thousand).

In addition, the Group has the following commitments at the balance sheet date:

Operating leases



| | Non-cancellable operating lease rentals are payable as follows: |  | 2003BD000 |  | 2002BD000
| | --------------------------------------------------------------- |  | ---------- |  | ----------
| |                                                                 |  |            |  |           
| | Within one year                                                 |  | 4,633      |  |           
| | Between one to five years                                       |  | 710        |  |           
| |                                                                 |  |            |  |           
| |                                                                 |  | 5,343      |  |           

Foreign currency facilities

The Group currently has foreign currency facilities from commercial banks totalling approximately BD 41,000 thousand (2002: BD 27,000 thousand). At 31 December 2003, the Group has utilised BD NIL of the foreign currency facilities (2002: BD NIL).

|19. | EMPLOYEE BENEFITS
|--- | -----------------

The Group employed 2,033 employees as at 31 December 2003(2002: 2,418). Pension rights (and other social benefits) for the Groups employees are covered by the applicable social insurance scheme of the countries in which they are employed. The employees and employers contribute to the scheme on a fixed percentage-of-salaries basis. The Groups contributions in respect of such employees for 2003 amounted to BD 1,860 thousand (2002: 1,532 thousand).

Expatriate employees on limited-term contracts are entitled to leaving indemnities payable under the respective Labour Laws of the countries concerned, based on length of service and final remuneration. The liability, which is unfunded, is provided for on the basis of the cost had all employees left at the balance sheet date. The provision at 31 December 2003 amounts to BD 454 thousand (2002: 453 thousand) and is included under accrued expenses and provisions.

The Group has contributed a sum of BD 41 thousand (2002: BD 77 thousand) towards the pension plan funded by Cable & Wireless plc for the seconded staff employed in Bahrain.

|20. | TRANSACTIONS WITH RELATED PARTIES
|--- | ---------------------------------

The Group is an associate of Cable & Wireless plc, which owns 20% of the issued share capital of Bahrain Telecommunications Company BSC. The Group undertook the following transactions with Cable & Wireless plc at rates agreed between Cable & Wireless Plc and the Board of Directors:



| |               |  | 2003BD000 |  | 2002BD000
| | ------------- |  | ---------- |  | ----------
| |               |  |            |  |           
| | Retainer fees |  | 613        |  |           
| | Services      |  | 13         |  |           
| |               |  |            |  |           

| |  |  | 626 |  |  | 596 | 
| |  |  | --- |  |  | --- | 





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|Bahrain Telecommunications Company B.S.C.                                                         |  | 14
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|20. | Transactions with related parties (continued)
|--- | ---------------------------------------------

Balances due to related parties, included under accounts payables and accruals were as follows:



| |               |  | 2003BD000 |  | 2002BD000
| | ------------- |  | ---------- |  | ----------
| |               |  |            |  |           
| | Retainer fees |  | 456        |  |           
| | Services      |  | 70         |  |           
| |               |  |            |  |           
| |               |  | 526        |  |           

The Group also had transactions with subsidiaries and associated undertakings of Cable & Wireless plc. These transactions were undertaken in the normal course of business, at rates agreed on an arms length basis. Approximately 2% (2002: 2%) of the Groups transactions with telecommunication operators were with related undertakings.

The balances outstanding at the end of the year with respect to such transactions were as follows:



| |                                                                    |  | 2003BD000 |  | 2002BD000
| | ------------------------------------------------------------------ |  | ---------- |  | ----------
| |                                                                    |  |            |  |           
| | Amounts due to related international telecommunication operators   |  | 4,405      |  |           
| |                                                                    |  |            |  |           
| | Amounts due from related international telecommunication operators |  | 4,168      |  |           

|21. | RISK MANAGEMENT
|--- | ---------------

|a. | Credit risk
|-- | -----------

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

The Groups financial assets, which include accounts receivable from local customers and international telecommunication operators, investments, staff housing loans, bank balances and fixed deposits, do not represent a significant concentration of credit risk. Accounts receivable are widely spread among customers segmentation and geographical areas. In addition, strict credit control is maintained as both credit period and credit limits are continuously monitored. Further, appropriate level of provision is maintained. The Group manages credit risk on its investments by ensuring that investments are made only after careful credit evaluation of these investments. The fixed deposits are placed with commercial banks after careful credit evaluation of those banks. No credit risk is attached to liquid funds.

|b. | Currency risk
|-- | -------------

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The Group has substantial purchases from foreign suppliers. In addition, the Group deals with international telecommunication operators. The Groups currency risk is related to changes in exchange rates applicable to the settlements in foreign currencies.

The Group maintains an adequate level of foreign currencies to cover its expected commitment to international telecommunication operators. These amounts are placed in short-term fixed deposit accounts.





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|Bahrain Telecommunications Company B.S.C.                                                         |  | 15
|------------------------------------------------------------------------------------------------- |  | --
|                                                                                                  |  |   
|NOTES TO THE SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2003 |  |   

|21. | Risk management (continued)
|--- | ---------------------------

|c. | Interest rate risk
|-- | ------------------

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

The Group is exposed to interest rate risk on its fixed deposits. These are short term in nature and are denominated in US Dollar. The average interest rate yield from short term fixed deposits during 2003 was 1.38% (2002: 2.17%).

The
  Group also bears 75% of the interest on Bahraini staff housing loans. The total
  loans should not exceed BD 5 million at any time and the agreed interest rate
  applicable is BIBOR plus 1.5% on the loan balance. The BIBOR rate for the whole
  year is fixed on the first working day in January every year. The agreed interest
  rate for 2004 was 2.69% and that for 2003 was 2.66%.

|d. | Liquidity risk
|-- | --------------

Liquidity risk is the risk that the Group will not be able to meets its funding requirements.

The Group seeks to manage its liquidity risk by maintaining adequate balance of cash and cash equivalents.

|22. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------

Fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties on an arms length basis.

Except for available-for-sale investments, held-to-maturity investments and staff housing loans funded by the Group, which are carried at cost, the carrying values of the Groups other financial instruments approximate their fair values.

|23. | SUBSIDIARIES AND JOINTLY CONTROLLED COMPANY
|--- | -------------------------------------------

The holdings in subsidiaries and jointly controlled company as at 31 December 2003 were as follows:



|Name of company                                       |  | Country of incorporation |  | Capital        |  | Percentage of capital held                                            |  | Nature of operations                           
|----------------------------------------------------- |  | ------------------------ |  | -------------- |  | --------------------------------------------------------------------- |  | -----------------------------------------------
|Subsidiary companiesBatelco Middle East EC            |  | Bahrain                  |  | BD 8.4 million |  | 100%                                                                  |  | Holding company for investments in subsidiaries
|Quality Net WLL                                       |  | Kuwait                   |  | KD 1 million   |  | 44%,
        but Batelco exercises control under management agreement |  | Internet and related services                  
|Arabian Network Information Services WLL              |  | Bahrain                  |  | BD 0.2 million |  | 75%                                                                   |  | Internet and related services                  
|Batelco Jordan                                        |  | Jordan                   |  | JD 6.3 million |  | 80%                                                                   |  | Internet and related services                  
|Jointly controlled companyBatelco Jeraisy Company Ltd |  | Saudi Arabia             |  | SR 19 million  |  | 50%                                                                   |  | Internet and related services                  





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