Quarterly Report • Nov 30, 2018
Quarterly Report
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| 9M18 Highlights |
4 |
|---|---|
| Governing Bodies | 7 |
| Management Report |
8 |
| Business Review | 8 |
| Consolidated Financial Review | 13 |
| Consolidated Financial Statements |
19 |
| 9M18 Highlights | 9M17 | 9M18 | 9M18 / 9M17 | |
|---|---|---|---|---|
| Financial Highlights | ||||
| Operating Revenues | 1,159.7 | 1,167.3 | 0.7% | |
| Telco Revenues | 1,103.0 | 1,116.1 | 1.2% | |
| EBITDA | 448.8 | 461.7 | 2.9% | |
| EBITDA Margin | 38.7% | 39.6% | 0.9pp | |
| Telco | 411.2 | 429.0 | 4.3% | |
| EBITDA Margin | 37.3% | 38.4% | 1.2pp | |
| Net Income Before Associates & Non-Controlling Interests | 90.5 | 126.9 | 40.2% | |
| Operating Cash Flow | 162.7 | 180.5 | 10.9% | |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
136.0 | 180.1 | 32.5% | |
| Operational Highlights (EoP) | ||||
| Homes Passed | 4,055.7 | 4,257.5 | 5.0% | |
| Total RGUs | 9,365.8 | 9,569.9 | 2.2% | |
| Mobile | 4,643.8 | 4,770.0 | 2.7% | |
| Pay TV Fixed Access | 1,287.8 | 1,312.5 | 1.9% | |
| Fixed Voice | 1,752.9 | 1,772.1 | 1.1% | |
| Broadband | 1,320.6 | 1,375.2 | 4.1% | |
| Convergent RGUs | 3,631.5 | 3,842.7 | 5.8% | |
| Convergent Customers | 718.5 | 759.9 | 5.8% | |
| Convergent Customers as % of Fixed Access Customers | 47.3% | 49.9% | 2.6pp |
Profitability growth driving operating FCF and supportive of shareholder returns.
Technological and operating transformation on track, laying the foundations for long term value creation.
1.2% Revenue growth in 9M18, 1.5% if adjusted for regulation, namely MTR cuts1
Network investment projects on track positioning NOS with the most advanced and consumer relevant technology
• Total FCF before Dividends in 9M18 grew by 32.5% yoy to 180.1 million euros.
Increased net RGU growth led by additional network coverage and lower churn levels
1 In 3Q18 Mobile Termination Rates (MTRs) were cut by 44% to 0.42 eurocents from the 0.75 eurocents rate that had been in place since 2H17
• Mobile subscriber net adds posted the usual seasonal peak at 42 thousand in 3Q18 taking total subscribers to 4.770 million, 2.7% higher yoy. In 9M18 mobile net adds were 97.1 thousand.
As at the date of this report, 8 November 2018 composition:
| Board of Directors | |
|---|---|
| Chairman of the Board of Directors | Jorge de Brito Pereira |
| Chairman of the Executive Committee | Miguel Almeida |
| Members of the Executive Committee | José Pedro Pereira da Costa, Vice-Presidente, CFO |
| Ana Paula Marques | |
| Manuel Ramalho Eanes | |
| Jorge Graça | |
| Luis Nascimento | |
| Members | Ángelo Paupério |
| António Domingues | |
| António Lobo Xavier | |
| Catarina Tavira Van-Dúnem | |
| Cláudia Azevedo | |
| João Torres Dolores | |
| Joaquim de Oliveira | |
| Lorena Fernandes | |
| Mário Leite da Silva | |
| Fiscal Board | |
| Chairman of the Fiscal Board | Paulo Cardoso Correia da Mota Pinto |
| Members | Eugènio Ferreira |
| Patrícia Teixeira Lopes | |
| Alternate | Luís Filipe da Silva Ferreira |
| Officials of the General Meeting of Shareholders | |
| Chairman | Pedro Canastra de Azevedo Maia |
| Secretary | Tiago Antunes da Cunha Ferreira de Lemos |
| Statutory Auditor | |
| In Office | ERNST & YOUNG AUDIT & ASSOCIADOS, SROC, S.A., (ROC number 178 and registered at CMVM with the number 9011, represented by Sandra e Sousa Amorim (ROC number 1213); |
| Alternate | Paulo Jorge Luis da Silva (ROC n.º 1334) |
Total RGUs grew by 2.2% yoy to 9.570 million with an acceleration in net adds in 3Q18 to 70.3 thousand compared with 42.0 and 45.9 thousand in 1Q18 and 2Q18 respectively. Total RGU net adds in 9M18 amounted to 158.2 thousand.
Fixed pay TV net adds posted 20.3 thousand net adds in 9M18, with a marked recovery to 10.6 thousand in 3Q18, the highest level of net adds since 1Q17, reflecting the anticipated commercial acceleration from new household coverage combined with a continued improvement in churn levels. In 3Q18, fixed network coverage increased by a further 98 thousand households bringing year to date expansion to 176 thousand, and with total coverage reaching 4.257 8 thousand households are already in FttH and the remaining HFC households are 100% upgraded to Docsis 3.1, therefore providing Gigabit capabilities across the entire footprint. Fixed broadband and voice RGUs, with net adds of 42.1 thousand and 13.8 thousand in 9M18, also recorded an improvement in 3Q18 led by the growth in pay TV subscriptions which are the basis for upselling other additional services in the residential market. Regarding the DTH customer base, with the additional NGN coverage from all operators in the market, the number of services continues to post a downward trajectory with customers migrating to greater bandwidth fixed access technologies, as is to be expected given the more sophisticated offers provided.
Mobile subscriptions in 9M18 posted net adds of 97.1 thousand and taking the total customer base to 4.770 million. The majority of new customers are subscribing as post paid accounts, 57% of the total base, and many of which within convergent bundles.
During 9M18, the number of customers subscribing to convergent offers increased by 5.8% yoy to 759.9 thousand, 49.9% of the fixed subscriber base. Offers for the consumer market are available for all pockets and demand profiles with offers ranging from an entry level, content light, 100 Mbps triple play offer 1Gbps, 177 channel quad play offer including 1 SIM card with 10 GB of mobile data for upgrade in the first months of the year, thus giving customers 1Gbps download speeds across the entire footprint, be it over FttH or HFC.
Residential ARPU declined marginally by 0.5% yoy to 44.2 euros. However adjusting for regulation, including the 44% decline in Mobile Termination Rates (MTRs) in 3Q18, ARPU in 9M18 would have declined by 0.2% yoy to 44.0 euros.
In the large business segment we remain focused on protecting our revenue in existing accounts whilst driving upsell of additional data and IT service management solution. The skills and experience we have acquired in our own operations, together with the significant increase in data centre capacity, are being levered to provide more sophisticated next generation cloud management platforms to facilitate provisioning and self-service solutions for the enterprise market. The small business segments remains challenging in terms of revenue progression however efforts are being made to optimize and simplify our business operations to guarantee increased efficiency and customer service levels.
We are well ahead with our mobile investment to single RAN architecture with 75% of the upgrade to be completed by the end of the year and the remainder during early 2019. We are deploying the latest available mobile technology and the upgrade will position us with the best network capabilities in Portugal, significantly increasing capacity, flexibility and quality of service whilst also leaving us as ready as technologically possible for a smooth transition to 5G when required.
As mentioned above, we are deploying additional FttH to greenfield locations within the context of our dark fibre swap agreement with Vodafone. During 9M18, fixed network coverage increased by 176 thousand households bringing total fixed coverage to 4.257 million households of which over 20% are already FttH, aligned with our long term plan to reach 70% FttH coverage by end 2022.
Visible progress is being made within our operational transformation programme with initiatives from the first wave (out of three in total) already moving to implementation stage such as STB recovery procedures and robot deployment throughout the organization. The coming months will see a number of wave #1 projects streams leaving the drawing board to move to live implementation and starting to impact operational efficiency and service levels during the course of 2019. Organizational fitness, customer satisfaction and operating efficiency are core goals of the programme which is set to run until the end of 2022, with an acceleration in ramp-up of the value captured once all 60 projects are live across the company from 2020 onwards.
| Operating Indicators ('000) | 9M18 | 9M18 / 9M17 | ||
|---|---|---|---|---|
| Telco (1) | ||||
| Aggregate Indicators | ||||
| Homes Passed (2) | 4,055.7 | 4,257.5 | 5.0% | |
| Total RGUs | 9,365.8 | 9,569.9 | 2.2% | |
| Mobile | 4,643.8 | 4,770.0 | 2.7% | |
| Pre-Paid | 2,070.5 | 2,051.1 | (0.9%) | |
| Post-Paid | 2,573.3 | 2,718.9 | 5.7% | |
| Pay TV Fixed Access (3) | 1,287.8 | 1,312.5 | 1.9% | |
| Pay TV DTH | 327.9 | 309.2 | (5.7%) | |
| Fixed Voice | 1,752.9 | 1,772.1 | 1.1% | |
| Broadband | 1,320.6 | 1,375.2 | 4.1% | |
| Others and Data | 32.8 | 31.0 | (5.3%) | |
| 3,4&5P Subscribers (Fixed Access) | 1,108.5 | 1,147.3 | 3.5% | |
| % 3,4&5P (Fixed Access) | 86.1% | 87.4% | 1.3pp | |
| Convergent RGUs | 3,631.5 | 3,842.7 | 5.8% | |
| Convergent Customers | 718.5 | 759.9 | 5.8% | |
| Fixed Convergent Customers as % of Fixed Access Customers | 47.3% | 49.9% | 2.6pp | |
| % Convergent Customers | 44.5% | 46.9% | 2.4pp | |
| Net Adds | ||||
| Homes Passed | 291.7 | 176.2 | (39.6%) | |
| Total RGUs | 289.1 | 158.2 | (45.3%) | |
| Mobile | 188.1 | 97.1 | (48.4%) | |
| Pre-Paid | (0.8) | (28.6) | 3515.2% | |
| Post-Paid | 188.9 | 125.7 | (33.5%) | |
| Pay TV Fixed Access | 22.2 | 20.3 | (8.8%) | |
| Pay TV DTH | (7.1) | (15.2) | 114.3% | |
| Fixed Voice | 28.2 | 13.8 | (50.9%) | |
| Broadband | 56.0 | 42.1 | (24.9%) | |
| Others and Data | 1.6 | 0.1 | (92.4%) | |
| 3,4&5P Subscribers (Fixed Access) | 46.6 | 35.2 | (24.4%) | |
| Convergent RGUs | 244.3 | 192.2 | (21.3%) | |
| Convergent Customers | 38.3 | 38.5 | 0.4% |
(1) Portuguese Operations. (2) Includes DST from 3Q17.
| Operating Indicators ('000) | 9M18 | 9M18 / 9M17 | ||
|---|---|---|---|---|
| Telco (1) | ||||
| Indicators per Segment | ||||
| Consumer | ||||
| Total RGUs | 7,906.1 | 8,071.6 | 2.1% | |
| Pay TV Fixed Access | 1,189.5 | 1,209.8 | 1.7% | |
| Pay TV DTH | 300.2 | 283.2 | (5.7%) | |
| Broadband | 1,194.6 | 1,243.3 | 4.1% | |
| Fixed Voice | 1,410.5 | 1,425.3 | 1.0% | |
| Mobile | 3,811.3 | 3,910.0 | 2.6% | |
| ARPU / Unique Subscriber With Fixed Access (Euros) | 44.5 | 44.2 | (0.5%) | |
| Net Adds | ||||
| Total RGUs | 247.2 | 118.6 | (52.0%) | |
| Pay TV Fixed Access | 17.5 | 16.2 | (7.6%) | |
| Pay TV DTH | (6.2) | (14.5) | 134.6% | |
| Broadband | 51.1 | 37.0 | (27.6%) | |
| Fixed Voice | 17.2 | 11.5 | (33.1%) | |
| Mobile | 167.6 | 68.4 | (59.2%) | |
| Business | ||||
| Total RGUs | 1,459.7 | 1,498.3 | 2.6% | |
| Pay TV | 126.1 | 128.6 | 2.0% | |
| Broadband | 158.7 | 162.8 | 2.6% | |
| Fixed Voice | 342.4 | 346.8 | 1.3% | |
| Mobile | 832.5 | 860.0 | 3.3% | |
| ARPU per RGU (Euros) | 15.4 | 14.9 | (3.3%) | |
| Net Adds | ||||
| Total RGUs | 41.9 | 39.6 | (5.3%) | |
| Pay TV | 3.8 | 3.4 | (11.1%) | |
| Broadband | 6.5 | 5.2 | (19.7%) | |
| Fixed Voice | 11.0 | 2.3 | (78.8%) | |
| Mobile | 20.6 | 28.7 | 39.7% |
Our cinema and audiovis 9M18 reflected the wordwide decline in cinema spectators, despite a clear improvement in 3Q18 in comparison with the previous
| Operating Indicators ('000) | 9M17 | 9M18 | 9M18 / 9M17 |
|---|---|---|---|
| Cinema (1) | |||
| Revenue per Ticket (Euros) | 4.7 | 4.9 | 3.6% |
| Tickets Sold - NOS | 7,251.7 | 6,346.9 | (12.5%) |
| Tickets Sold - Total Portuguese Market (2) | 11,985.4 | 10,502.2 | (12.4%) |
| Screens (units) | 215 | 212 | (1.4%) |
(1) Portuguese Operations (2) Source: ICA - Portuguese Institute For Cinema and Audiovisuals
In 9M 12.5% to 6.347 million tickets, reflecting the negative performance of the market as a whole due to fewer blockbuster box office hits during the quarter in comparison with 9M17. After an exceptionally strong 2017, performance for 9M18 has returned to levels similar to 2016. Average revenue per ticket improved by 3.6% yoy to 4.9 euros in 9M18. The most successful films exhibited in 9M18 Fifty Shades Freed Hotel Transylvania 3: Summer Vacation .
gross box-office revenues decreased by 9.3% in 9M18, compared with a 9.1% yoy decline for the market as a whole. NOS continues to maintain its leading market position, with a market share of 62.1% in terms of gross revenues in 9M18.
In the Audiovisuals arena, NOS distributed 8 of the top 10 cinema box-office hits in 9M18, Mamma Mia! Here We Go Again Mission: Impossible Fallout Jurassic World: Fallen Kingdom , therefore maintaining its leadership position in Cinema Distribution in 9M18.
The following Consolidated Financial Statements have been subject to limited review.
| Profit and Loss Statement | 9M17 | 9M18 | 9M18 / 9M17 |
|---|---|---|---|
| (Millions of Euros) | |||
| Operating Revenues | 1,159.7 | 1,167.3 | 0.7% |
| Telco | 1,103.0 | 1,116.1 | 1.2% |
| Consumer Revenues | 724.4 | 727.8 | 0.5% |
| Business and Wholesale Revenues | 325.3 | 332.3 | 2.2% |
| Others and Eliminations | 53.3 | 56.0 | 5.0% |
| Audiovisuals & Cinema (1) | 90.8 | 81.7 | (10.0%) |
| Others and Eliminations | (34.1) | (30.5) | (10.5%) |
| Operating Costs Excluding D&A | (710.9) | (705.6) | (0.7%) |
| Direct Costs | (388.0) | (397.8) | 2.5% |
| Commercial & Customer Related Costs | (95.2) | (89.5) | (6.0%) |
| Operating and Structure Costs | (227.7) | (218.2) | (4.2%) |
| EBITDA (2) | 448.8 | 461.7 | 2.9% |
| EBITDA Margin | 38.7% | 39.6% | 0.9pp |
| Telco | 411.2 | 429.0 | 4.3% |
| EBITDA Margin | 37.3% | 38.4% | 1.2pp |
| Cinema Exhibition and Audiovisuals | 37.6 | 32.7 | (13.0%) |
| EBITDA Margin | 41.4% | 40.0% | (1.4pp) |
| Depreciation and Amortization | (308.1) | (297.1) | (3.6%) |
| (Other Expenses) / Income | (11.7) | 4.1 | n.a. |
| Operating Profit (EBIT) (3) | 129.0 | 168.7 | 30.8% |
| Share of results of associates and joint ventures | 15.0 | (4.5) | n.a. |
| (Financial Expenses) / Income | (18.3) | (19.4) | 6.1% |
| Income Before Income Taxes | 125.7 | 144.9 | 15.3% |
| Income Taxes | (20.2) | (22.5) | 11.0% |
| Net Income Before Associates & Non-Controlling Interests | 90.5 | 126.9 | 40.2% |
| Income From Continued Operations | 105.5 | 122.4 | 16.1% |
| o.w. Attributable to Non-Controlling Interests | (0.3) | 0.6 | n.a. |
| Net Income | 105.1 | 123.0 | 17.0% |
(1) Includes cinema operations in M ozambique. (2) EBITDA = Operating Profit + Depreciation and Amortization + Integration Costs + Net Losses/Gains on Disposal of Assets + Other Non-Recurrent Losses/Gains
(3) EBIT = Income Before Financials and Income Taxes.
In 3Q18 Mobile Termination Rates (MTRs) were cut by 44% to 0.42 eurocents from the 0.75 eurocents rate that had been in place since 2H17. Revenue trends are therefore not directly comparable. Adjusting for the regulatory effect, core telco revenues grew by 1.5%. Unadjusted growth in telco revenues was 1.2%, reaching 1,116.1 million euros in 9M18.
Consolidated revenues increased by 0.7% to 1,167.3 million euros (adjusted growth of 1.0%), reflecting a combination of the aforementioned increase in telco revenues and less negative trends in audiovisuals and cinema revenues throughout 9M18, which fell by 3.1% in 3Q, compared with negative 17.7% in 2Q and 9.0% in 1Q. The aforementioned impact of the MTR cuts in 3Q18 affects like for like comparision in revenues per segment. In 9M18, adjusted revenues in the Consumer and the Business and Wholesale segments grew by 0.8% and 2.5% respectively, supported by previously discussed solid operating trends and a less aggressive market environment.
The yoy decline in Audiovisuals and Cinema Revenues of 3.1% in 3Q18 is a marked improvement from negative 17.7% in 2Q18 and is in line with general market trends, bringing the decline rate of 9M18 to 10.0% to 81.7 million euros. The number of blockbuster movies exhibited and distributed and the volume of tickets sold was significantly better quarter on quarter in 3Q18, albeit still marginally weaker than the same period last year. Yoy comparisions in this division are still impacted by the renegotiation of the value of content contracts to Angola at the end of 2017 due to the challenging macroeconomic environment as explained in previous earnings reports. The value of the contract revision was partially offset by a similar reduction in the cost of the content distributed.
Total OPEX fell 0.7% in 9M18 to 705.6 million euros. Excluding direct costs, OPEX fell by 4.7% yoy to 307.7 million euros demonstrating primarily continued cost discipline and general operating efficiency. Direct costs also benefitted from the aforementioned MTR cut to 0.42 eurocents. As NOS is a net payer of termination rates to other operators, given relative market shares in mobile, reductions in MTRs drive in a marginally greater reduction in costs than revenues. Adjusted for MTRs, Direct costs grew by 3.4% in 9M18 due to increased operating activity driving greater traffic related costs. Service costs associated with large corporate accounts were reclassified to Direct Costs from Operating and Structure Costs as they are directly related to the operating activity of this business segment. Both cost aggregates were restated from the beginning of 2017 onwards enabling like-for-like comparability between periods.
As discussed in the operating review, work is underway within the context of our long term transformational project targeting opportunities to become a more agile and efficient operation, aiming to simplify and digitalize processes wherever possible, as a means of increasing customer satisfaction and ultimately reduce costs. The main addressable aggregates are commercial and other operating and structure costs, in addition to some potential opportunities for savings in customer related investments. The programme is still at an early stage of development and such financial impacts are relatively small the value captured from transformation initiatives will build up primarily from 2020 onwards, as the majority of projects move to implementation phase.
Core Telco EBITDA increased 4.3% yoy to 429.0 million euros, driving a 1.2 pp increase in margin to 38.4% in 9M18 and driving an increase in consolidated EBITDA to 461.7 million euros. The anticipated slowdown in telco revenue growth is successfully being compensated by improved operating efficiency, a trend that is set to continue with the acceleration of the transformation programme. The yoy decline in Audiovisuals and Cinema EBITDA reduced to negative 13.0% in 9M18 from negative 14.9% in 1H18, as a result of the sequential improvement in sector trends. Cinema and Audiovisuals EBITDA in 9M18 amounted to 32.7 millon euros representing a 40% margin as a percentage of revenues.
Depreciation and Amortization was down by 3.6% yoy at 297.1 million euros, explained primarily by the lower yoy impact from impairment of existing mobile network equipment within the context of the major mobile upgrade project being deployed.
Consolidated Net income grew 17.0% to 123.0 million euros led by the growth in EBIT. Total Net financial expenses grew to 19.4 million euros compared with 18.3 million euros in 9M17, despite lower average cost of debt, impacted by charges from financing related commissions, essentially due to upfront one-off costs associated with the early repayment of existing credit facilities following the public bond issue in April. Share of Results of Associates and Joint Ventures in 9M18 was lower yoy at negative 4.5 million euros, given the weaker currency environment in Angola when compared with 2017.
| CAPEX (Millions of Euros) (1) | 9M17 | 9M18 | 9M18 / 9M17 |
|---|---|---|---|
| Telco | 239.1 | 259.5 | 8.5% |
| % of Telco Revenues | 21.7% | 23.3% | 1.6pp |
| o.w. Technical CAPEX | 125.5 | 150.8 | 20.2% |
| % of Telco Revenues | 11.4% | 13.5% | 2.1pp |
| Baseline Telco | 90.5 | 92.6 | 2.3% |
| Network Expansion / Substitution and Integration Projects and Others |
35.0 | 58.2 | 66.5% |
| o.w. Customer Related CAPEX | 113.6 | 108.7 | (4.3%) |
| % of Telco Revenues | 10.3% | 9.7% | (0.6pp) |
| Audiovisuals and Cinema Exhibition | 24.1 | 20.9 | (13.3%) |
| Total Group CAPEX | 263.2 | 280.4 | 6.5% |
(1) CAPEX = Increase in Tangible and Intangible Fixed Assets
As guided, the major transformation investments in the network discussed above are reflected in the increase in technical CAPEX, up by 20.2% yoy to 150.8 million euros, representing 13.5% of telco revenues in 9M18. Of total technical CAPEX in 9M18 of 150.8 million euros, 58.2 million euros were allocated to network expansion and substitution investment.
Customer related CAPEX within the telco business decreased to 108.7 million euros in 9M18 (9.7% of revenues), due to lower commercial activity as expected, despite the boost in 3Q18 led by additional activity primarily in new coverage areas, as is to be expected with the ramp up in expansion during the latter half of the year. This increased commercial activity is visible in the pick up in fixed access subscriber growth in 3Q18, discussed in the operating review.
Total CAPEX was 280.4 million euros in 9M18, 24.0% as a proportion of revenues, impacted primarily by the telco investments discussed above.
| Cash Flow (Millions of Euros) | 9M17 | 9M18 | 9M18 / 9M17 |
|---|---|---|---|
| EBITDA | 448.8 | 461.7 | 2.9% |
| Total CAPEX | (263.2) | (280.4) | 6.5% |
| EBITDA - Total CAPEX | 185.6 | 181.3 | (2.3%) |
| % of Revenues | 16.0% | 15.5% | (0.5pp) |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(23.0) | (0.8) | (96.3%) |
| Operating Cash Flow | 162.7 | 180.5 | 10.9% |
| Long Term Contracts | (11.3) | (10.7) | (4.8%) |
| Interest Paid | (17.9) | (12.3) | (31.3%) |
| Income Taxes Paid | (9.7) | 3.9 | n.a. |
| Disposals | 25.9 | 0.8 | (96.8%) |
| Other Cash Movements (1) | (13.7) | 18.0 | n.a. |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
136.0 | 180.1 | 32.5% |
| Acquisition of Own Shares | 0.0 | (3.1) | n.a. |
| Dividends | (102.6) | (153.9) | 50.0% |
| Free Cash Flow | 33.3 | 23.1 | (30.7%) |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
(0.9) | (2.2) | 152.9% |
| Change in Net Financial Debt | (32.5) | (20.9) | (35.5%) |
FCF before dividends recorded a significant increase yoy to 180.1 million euros in 9M18 compared with 136.0 million euros in 9M17, explained in part by a non-recurrent inflow in 3Q18, related with receival of a legal settlement, in favour of NOS, regarding a pending regulatory dispute over operator termination rate charges which had already been accounted for in the income statement in 1Q18. Although EBITDA grew by 2.9% yoy in 9M18, it did not compensate the significant increase in CAPEX leading to a small decline in EBITDA-CAPEX to 181.3 million euros. Working capital and non cash item adjustments in EBITDA-CAPEX were only marginally negative due primarily to the positive contribution of trade balances payments with ZAP during 3Q18 and outstanding operator balances related with the aforementioned pending legal dispute. As such, Operating Cash Flow increased by 10.9% to 180.5 million euros. Of the remaining cash items, interest paid was 31.3% lower compared with 9M17, explained mostly by the continued decline in average cost of debt. The non-recurrent positive cash inflow by interest received from the outstanding legal settlement.
| Balance Sheet (Millions of Euros) | 9M17 | 2017 | 9M18 | 9M18/ 9M17 |
|---|---|---|---|---|
| Non-current Assets | 2,448.6 | 2,449.3 | 2,404.9 | (1.8%) |
| Current Assets | 542.5 | 561.2 | 538.3 | (0.8)% |
| Total Assets | 2,991.1 | 3,010.5 | 2,943.2 | (1.6)% |
| Total Shareholders' Equity | 1,087.0 | 1,111.5 | 1,068.3 | (1.7)% |
| Non-current Liabilities | 1,156.3 | 1,146.1 | 1,112.6 | (3.8)% |
| Current Liabilities | 747.9 | 753.0 | 762.4 | 1.9% |
| Total Liabilities | 1,904.2 | 1,899.1 | 1,875.0 | (1.5)% |
| Total Liabilities and Shareholders' Equity | 2,991.1 | 3,010.5 | 2,943.2 | (1.6)% |
At the end of 9M18, Net Financial Debt stood at 1,064.5 million euros. Total financial debt was 1,067.0 million euros, which was offset with a cash and short-term investment position on the balance sheet of 2.5 million euros. At the end of 9M18, NOS also had 255 million euros of unissued commercial paper programmes. In 9M18, the all-Net Financial Debt amounted to 1.9%.
Net Financial Debt / EBITDA (last 4 quarters) now stands at 1.8x, still representing a solid and conservative capital structure in the range of 2x Net Financial Debt / EBITDA, which we 9M18 was 3.2 years.
Taking into account the loans issued at a fixed rate, the interest rate hedging operations in place, and the negative interest rate environment, as at 30 September 2018, the proportion
| Net Financial Debt (Millions of Euros) (1) | 9M17 | 2017 | 9M18 | 9M18/ 9M17 |
|---|---|---|---|---|
| Short Term | 193.3 | 197.3 | 178.4 | (7.7%) |
| Bank and Other Loans | 177.5 | 183.6 | 164.2 | (7.5%) |
| Financial Leases | 15.8 | 13.7 | 14.2 | (10.2%) |
| Medium and Long Term | 888.5 | 891.2 | 888.6 | 0.0% |
| Bank and Other Loans | 869.9 | 870.3 | 875.7 | 0.7% |
| Financial Leases | 18.7 | 20.8 | 12.9 | (30.9%) |
| Total Debt | 1,081.8 | 1,088.5 | 1,067.0 | (1.4%) |
| Cash and Short Term Investments | 2.0 | 3.0 | 2.5 | 24.9% |
| Net Financial Debt | 1,079.8 | 1,085.5 | 1,064.5 | (1.4%) |
| Net Financial Gearing (2) | 49.8% | 49.4% | 49.9% | 0.1pp |
| Net Financial Debt / EBITDA | 1.9x | 1.9x | 1.8x | n.a. |
(1) Net Financial Debt = Borrowings – Long Term Contracts + Cash and Short Term Investments (2) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).
By the end of 9M18, NOS held, within the scope of its Employee Share Plan and the Regulation on Short and Medium Term Variable Remuneration, aimed at NOS employees, 2,073,859 own shares.
September 2018:
| Description | Number of Shares |
|---|---|
| Initial Balance | 2,040,234 |
| Acquisition | 650,000 |
| Share Incentive Scheme and Other Remuneration - Distribution | 616,375 |
| Final Balance | 2,073,859 |
(Amounts stated in thousands of euros)
| NOTES | 30-09-2017 REPORTED |
31-12-2017 REPORTED |
30-09-2017 RESTATED |
31-12-2017 RESTATED |
30-09-2018 | |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| NON - CURRENT ASSETS | ||||||
| Tangible assets | 7 | 1,130,908 | 1,137,209 | 1,039,171 | 1,043,939 | 1,053,840 |
| Investment property | 662 | 661 | 662 | 661 | 659 | |
| Intangible assets | 8 | 1,142,355 | 1,141,104 | 1,256,133 | 1,253,398 | 1,225,431 |
| Investments in jointly controlled companies and associated companies | 9 | 23,020 | 37,130 | 23,020 | 37,130 | 21,111 |
| Accounts receivable - other | 1 0 | 6,417 | 6,185 | 6,417 | 6,185 | 5,239 |
| Tax receivable | 1 1 | 1,029 | 149 | 1,029 | 149 | 149 |
| Available-for-sale financial assets | 77 | 180 | 77 | 180 | 236 | |
| Deferred income tax assets Derivative financial instruments |
1 2 1 7 |
114,045 | 99,538 | 122,096 | 107,700 | 98,204 65 |
| TOTAL NON - CURRENT ASSETS | - 2,418,513 |
- 2,422,156 |
- 2,448,604 |
- 2,449,343 |
2,404,934 | |
| CURRENT ASSETS: | ||||||
| Inventories | 1 3 | 34,315 | 32,044 | 34,315 | 32,044 | 33,663 |
| Accounts receivable - trade | 1 4 | 397,184 | 406,904 | 442,400 | 454,328 | 447,171 |
| Accounts receivable - other | 1 0 | 11,537 | 10,366 | 11,537 | 10,366 | 4,498 |
| Tax receivable | 1 1 | 1,035 | 14,945 | 1,035 | 14,945 | 1,230 |
| Prepaid expenses | 1 5 | 80,452 | 77,657 | 51,236 | 46,527 | 49,205 |
| Derivative financial instruments | 1 7 | 7 | 1 9 | 7 | 1 9 | 61 |
| Cash and cash equivalents | 1 8 | 1,988 | 2,977 | 1,989 | 2,977 | 2,484 |
| TOTAL CURRENT ASSETS | 526,518 | 544,911 | 542,518 | 561,206 | 538,312 | |
| TOTAL ASSETS | 2,945,031 | 2,967,067 | 2,991,122 | 3,010,549 | 2,943,245 | |
| SHAREHOLDER'S EQUITY | ||||||
| Share capital | 19.1 19.2 |
5,152 854,219 |
5,152 854,219 |
5,152 854,219 |
5,152 854,219 |
5,152 854,219 |
| Capital issued premium Own shares |
19.3 | (12,681) | (12,681) | (12,681) | (12,681) | (12,159) |
| Legal reserve | 19.4 | 1,030 | 1,030 | 1,030 | 1,030 | 1,030 |
| Other reserves and accumulated earnings | 19.4 | 97,662 | 105,489 | 126,016 | 133,843 | 89,798 |
| Net Income | 105,466 | 124,094 | 105,130 | 122,083 | 123,001 | |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,050,848 | 1,077,301 | 1,078,865 | 1,103,644 | 1,061,040 | |
| Non-controlling interests | 20 | 9,331 | 9,067 | 8,105 | 7,822 | 7,219 |
| TOTAL EQUITY | 1,060,178 | 1,086,368 | 1,086,970 | 1,111,467 | 1,068,259 | |
| LIABILITIES | ||||||
| NON - CURRENT LIABILITIES | ||||||
| Borrowings | 21 | 954,649 | 954,658 | 954,649 | 954,658 | 944,518 |
| Provisions | 22 | 136,479 | 133,262 | 136,479 | 133,262 | 137,743 |
| Accounts payable | 26 1 1 |
21,092 1,293 |
17,615 | 21,092 1,293 |
17,615 | 11,583 |
| Tax payable Accrued expenses |
23 | 9,042 | - 8,767 |
9,042 | - 8,767 |
- 6,372 |
| Deferred income | 24 | 3,847 | 3,773 | 3,847 | 3,773 | 5,662 |
| Derivative financial instruments | 1 7 | 2,809 | 2,462 | 2,809 | 2,462 | 1,585 |
| Deferred income tax liabilities | 1 2 | 7,960 | 7,140 | 27,076 | 25,523 | 5,166 |
| TOTAL NON - CURRENT LIABILITIES | 1,137,171 | 1,127,678 | 1,156,288 | 1,146,060 | 1,112,628 | |
| CURRENT LIABILITIES: | ||||||
| Borrowings | 21 | 205,805 | 210,136 | 205,805 | 210,136 | 190,636 |
| Accounts payable - trade | 25 | 222,152 | 224,864 | 222,152 | 224,864 | 253,106 |
| Accounts payable - other | 26 | 46,691 | 58,155 | 46,690 | 58,155 | 41,898 |
| Tax payable | 1 1 | 34,040 | 19,222 | 34,040 | 19,222 | 53,289 |
| Accrued expenses | 23 | 212,253 | 213,564 | 212,253 | 213,564 | 192,315 |
| Deferred income | 24 | 26,731 | 27,047 | 26,914 | 27,047 | 31,114 |
| Derivative financial instruments TOTAL CURRENT LIABILITIES |
1 7 | 1 0 747,682 |
33 753,021 |
1 0 747,864 |
33 753,021 |
- 762,358 |
| TOTAL LIABILITIES | 1,884,853 | 1,880,699 | 1,904,152 | 1,899,082 | 1,874,986 | |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,945,031 | 2,967,067 | 2,991,122 | 3,010,549 | 2,943,245 | |
| As a recurring practice, only the annual accounts are audited, and the quarterly results are not audited separately. The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as at 30 September 2018. |
||||||
| The Chief Accountant | The Board of Directors |
(Amounts stated in thousands of euros)
| 3º QUARTER 17 | 9M 17 | 3º QUARTER 17 | 9M 17 | ||||
|---|---|---|---|---|---|---|---|
| NOTES | REPORTED | REPORTED | RESTATED | RESTATED | 3º QUARTER 18 | 9M 18 | |
| REVENUES: | |||||||
| Services rendered | 370,055 | 1,102,601 | 365,330 | 1,086,429 | 367,829 | 1,086,922 | |
| Sales | 20,192 | 50,062 | 23,706 | 61,203 | 21,789 | 61,300 | |
| Other operating revenues | 2,850 | 9,804 | 3,047 | 12,059 | 5,378 | 19,061 | |
| 27 | 393,097 | 1,162,467 | 392,084 | 1,159,691 | 394,996 | 1,167,283 | |
| COSTS, LOSSES AND GAINS: | |||||||
| Wages and salaries | 28 | 23,199 | 66,087 | 23,199 | 66,087 | 21,187 | 60,206 |
| Direct costs | 29 | 120,842 | 363,603 | 120,509 | 362,747 | 120,569 | 371,646 |
| Costs of products sold | 30 | 14,758 | 36,224 | 17,309 | 44,881 | 17,018 | 44,615 |
| Marketing and advertising | 8,230 | 22,774 | 8,230 | 22,774 | 7,426 | 21,629 | |
| Support services | 31 | 21,901 | 68,356 | 21,788 | 68,004 | 20,935 | 62,662 |
| Supplies and external services | 31 | 44,095 | 130,482 | 41,251 | 123,013 | 40,368 | 115,481 |
| Other operating losses / (gains) | 129 | 483 | 129 | 483 | 158 | 584 | |
| Taxes | 8,677 | 24,336 | 8,677 | 24,336 | 8,656 | 25,359 | |
| Provisions and adjustments | 32 | 50 | (1,435) | 50 | (1,435) | 2,464 | 3,380 |
| Depreciation, amortisation and impairment losses | 7, 8 and 34 | 103,675 | 310,413 | 104,416 | 308,089 | 95,189 | 297,111 |
| Reestructuring costs | 2,178 | 6,018 | 2,178 | 6,018 | 3,423 | 8,574 | |
| Losses / (gains) on sale of assets, net | (69) | 1 | (69) | 1 | (192) | (286) | |
| Other losses / (gains) non recurrent net | 35 | 1,740 | 5,694 | 1,740 | 5,694 | 282 | (12,393) |
| 349,405 | 1,033,036 | 349,406 | 1,030,691 | 337,484 | 998,568 | ||
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 43,692 | 129,431 | 42,678 | 129,000 | 57,513 | 168,715 | |
| Net losses / (gains) of affiliated companies | 9 and 33 | (6,012) | (14,983) | (6,012) | (14,983) | (1,276) | 4,451 |
| Financial costs | 36 | 4,817 | 15,786 | 4,817 | 15,786 | 4,103 | 12,663 |
| Net foreign exchange losses / (gains) | 1 5 | 122 | 1 5 | 122 | (79) | 38 | |
| Net other financial expenses / (income) | 36 | 1,637 | 2,391 | 1,638 | 2,392 | 1,194 | 6,709 |
| 457 | 3,316 | 457 | 3,316 | 3,942 | 23,861 | ||
| INCOME BEFORE TAXES | 43,236 | 126,116 | 42,222 | 125,685 | 53,572 | 144,854 | |
| Income taxes | 1 2 | 9,707 | 20,365 | 9,415 | 20,230 | 9,590 | 22,451 |
| NET CONSOLIDATED INCOME | 33,529 | 105,751 | 32,807 | 105,455 | 43,982 | 122,403 | |
| ATTRIBUTABLE TO: | |||||||
| NOS Group Shareholders | 33,639 | 105,466 | 32,893 | 105,130 | 44,110 | 123,001 | |
| Non-controlling interests | 20 | (110) | 285 | (87) | 325 | (128) | (598) |
| EARNINGS PER SHARES | |||||||
| Basic - euros | 37 | 0.07 | 0.21 | 0.06 | 0.20 | 0.09 | 0.24 |
| Diluted - euros | 37 | 0.07 | 0.21 | 0.06 | 0.20 | 0.09 | 0.24 |
As a recurring practice, only the annual accounts are audited, and the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of income by nature for the nine months ended on 30 September 2018.
(Amounts stated in thousands of euros)
| NOTES | 3º QUARTER 17 REPORTED |
9M 17 REPORTED |
3º QUARTER 17 RESTATED |
9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|---|---|---|
| NET CONSOLIDATED INCOME | 33,529 | 105,751 | 32,807 | 105,455 | 88,888 | 122,403 | |
| OTHER INCOME | |||||||
| ITENS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT: | |||||||
| Accounting for equity method | 9 | 33 | (16) | 33 | (16) | (3,748) | (10,971) |
| Fair value of interest rate swap | 1 7 | (64) | 1,303 | (64) | 1,303 | 696 | 868 |
| Deferred income tax - interest rate swap | 1 7 | 1 5 | (293) | 1 5 | (293) | (156) | (195) |
| Fair value of equity swaps | 1 7 | (70) | 20 | (70) | 20 | 335 | (26) |
| Deferred income tax - equity swap | 1 7 | 1 5 | (5) | 1 5 | (5) | (75) | 6 |
| Deferred income tax - exchange rate forward | 1 7 | (4) | (4) | (4) | (4) | - | - |
| Currency translation differences and others | 4 | (31) | 4 | (31) | (469) | (1,214) | |
| INCOME RECOGNISED DIRECTLY IN EQUITY | (71) | 974 | (71) | 974 | (3,417) | (11,532) | |
| TOTAL COMPREHENSIVE INCOME | 33,458 | 106,725 | 32,736 | 106,429 | 85,471 | 110,871 | |
| ATTRIBUTABLE TO: | |||||||
| NOS Group Shareholders | 33,568 | 106,440 | 32,823 | 106,104 | 85,806 | 111,469 | |
| Non-controlling interests | (110) | 285 | (87) | 325 | (335) | (598) | |
| 33,458 | 106,725 | 32,736 | 106,429 | 85,471 | 110,871 |
As a recurring practice, only the annual accounts are audited, and the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the nine months ended on 30 September 2018.
(Amounts stated in thousands of euros)
| ATTRIBUTABLE TO NOS GROUP SHAREHOLDERS | ||||||||
|---|---|---|---|---|---|---|---|---|
| NOTES | SHARE CAPITAL |
CAPITAL ISSUED PREMIUM |
OWN SHARES DISCOUNTS AND PREMIUMS |
LEGAL RESERVE |
OTHER RESERVES AND ACCUMULATE D EARNINGS |
NET INCOME |
NON - CONTROLLING INTERESTS |
TOTAL |
| BALANCE AS AT 1 JANUARY 2017 (REPORTED) | 5,152 | 854,219 | (18,756) | 1,030 | 112,031 | 90,381 | 9,041 | 1,053,099 |
| Effect of change in accounting policies (Note 2.1) | - | - | - | - | 26,464 | 1,971 | (1,266) | 27,169 |
| BALANCE AS AT 1 JANUARY 2017 (RESTATED) | 5,152 | 854,219 | (18,756) | 1,030 | 138,495 | 92,352 | 7,775 1,080,267 | |
| Result appropriation | ||||||||
| Transfers to reserves | - | - | - | - | 92,352 | (92,352) | - | - |
| Dividends paid | - | - | - | - | (102,617) | - | - | (102,617) |
| Distribution of own shares - share incentive scheme | - | - | 5,790 | - | (5,453) | - | - | 337 |
| Distribuition of own shares - other remunerations | - | - | 285 | - | (79) | - | - | 206 |
| Share Plan - costs incurred in the period and others | - | - | - | - | 2,257 | - | 5 | 2,262 |
| Comprehensive Income | - | - | - | - | 974 | 105,130 | 325 | 106,429 |
| Others | - | - | - | - | 87 | - | - | 87 |
| BALANCE AS AT 30 SEPTEMBER 2017 (RESTATED) | 5,152 | 854,219 | (12,681) | 1,030 | 126,016 | 105,130 | 8,105 1,086,970 | |
| BALANCE AS AT 1 JANUARY 2018 (REPORTED) | 5,152 | 854,219 | (12,681) | 1,030 | 105,489 | 124,094 | 9,067 1,086,368 | |
| Effect of change in accounting policies (Note 2.1) | - | - | - | - | 28,353 | (2,011) | (1,245) | 25,099 |
| BALANCE AS AT 1 JANUARY 2018 (RESTATED) | 5,152 | 854,219 | (12,681) | 1,030 | 133,843 | 122,083 | 7,822 | 1,111,467 |
| Result appropriation | ||||||||
| Transfers to reserves | - | - | - | - | 122,083 | (122,083) | - | - |
| Dividends paid | - | - | - | - | (153,923) | - | - | (153,923) |
| Aquisition of own shares 19.3 |
- | - | (3,096) | - | - | - | - | (3,096) |
| Distribution of own shares - share incentive scheme 19.3 |
- | - | 3,515 | - | (3,515) | - | - | - |
| Distribuition of own shares - other remunerations 19.3 |
- | - | 103 | - | (20) | - | - | 83 |
| Share Plan - costs incurred in the period and others 41 |
- | - | - | - | 2,862 | - | (5) | 2,857 |
| Comprehensive Income | - | - | - | - | (11,532) | 123,001 | (598) | 110,871 |
| BALANCE AS AT 30 SEPTEMBER 2018 | 5,152 | 854,219 | (12,159) | 1,030 | 89,798 | 123,001 | 7,219 1,068,259 |
As a recurring practice, only the annual accounts are audited, and the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity for the nine months ended on 30 September 2018.
(Amounts stated in thousands of euros)
| NOTES | 9M 17 | 9M 17 | 9M 18 | |
|---|---|---|---|---|
| REPORTED | RESTATED | |||
| OPERATING ACTIVITIES | ||||
| Collections from clients | 1,330,415 | 1,330,415 | 1,390,804 | |
| Payments to suppliers | (732,441) | (732,909) | (739,150) | |
| Payments to employees | (85,914) | (85,914) | (80,657) | |
| Receipts / (Payments) relating to income taxes | (9,765) | (9,765) | 3,856 | |
| Other cash receipts / (payments) related with operating activities | (78,793) | (78,793) | (33,235) | |
| CASH FLOW FROM OPERATING ACTIVITIES (1) | 423,501 | 423,034 | 541,618 | |
| INVESTING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Tangible assets | 2,620 | 2,620 | 1,134 | |
| Intangible assets | 39 | 39 | 1 1 | |
| Available-for-sale financial assets | 1 6 | 29,776 | 29,776 | - |
| Interest and related income | 4,009 | 4,009 | 3,239 | |
| 36,443 | 36,443 | 4,384 | ||
| PAYMENTS RESULTING FROM | ||||
| Tangible assets | (167,245) | (133,934) | (203,054) | |
| Intangible assets | (124,501) | (157,345) | (138,328) | |
| (291,747) | (291,279) | (341,407) | ||
| CASH FLOW FROM INVESTING ACTIVITIES (2) | (255,304) | (254,837) | (337,023) | |
| FINANCING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Borrowings | 188,000 | 188,000 | 377,099 | |
| 188,000 | 188,000 | 377,099 | ||
| PAYMENTS RESULTING FROM | ||||
| Borrowings | (207,027) | (207,027) | (378,333) | |
| Lease rentals (principal) | (21,337) | (21,337) | (16,028) | |
| Interest and related expenses | (23,426) | (23,426) | (19,215) | |
| Dividends | 19.4 | (102,617) | (102,617) | (153,924) |
| Aquisition of own shares | 19.3 | - | - | (3,096) |
| (354,407) | (354,407) | (570,596) | ||
| CASH FLOW FROM FINANCING ACTIVITIES (3) | (166,407) | (166,407) | (193,497) | |
| Change in cash and cash equivalents (4)=(1)+(2)+(3) | 1,790 | 1,790 | 11,098 | |
| Effect of exchange differences | 1 7 | 1 7 | 6 | |
| Cash and cash equivalents at the beginning of the year | (13,877) | (13,877) | (38,775) | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | (12,070) | (12,070) | (27,671) | |
| Cash and cash equivalents | 1 8 | 1,988 | 1,988 | 2,484 |
| Bank overdrafts | 21 | (14,058) | (14,058) | (30,155) |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | (12,070) | (12,070) | (27,671) |
As a recurring practice, only the annual accounts are audited, and the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of cash flows for the nine months ended on 30 September 2018.
(Amounts stated in thousands of euros, unless otherwise stated)
Serviços de ters registered at Rua Actor António Silva, nº9, Campo Grande, was established by Portugal Telecom, SGPS, S.A. ("Portugal Telecom") on 15 July 1999 for the purpose of implementing its multimedia business strategy.
During the 2007 financial year, Portugal Telecom proceeded with the spin-off of ZON through the attribution of its participation in the company to their shareholders, which become fully independent from Portugal Telecom.
During the 2013 financial year, ZON and Optimus, SGPS, S.A. ("Optimus SGPS") have merged through the incorporation of Optimus SGPS into ZON. Thereafter, the Company adopted the designation of ZON OPTIMUS, SGPS, S.A..
The businesses operated by NOS and its associated companies, form the "NOS Group" or "Group", which includes cable and satellite television services, voice and Internet access services, video production and sale, advertising on Pay TV channels, cinema exhibition and distribution, the production of channels for Pay TV, management of datacentres and consulting services in IT.
structure of the Group as at 30 September 2018 is shown in Note 19.
and its subsidiaries, NOS Açores and NOS Madeira. These companies carry out: a) cable and satellite television distribution; b) the operation of the latest generation mobile communication network, GSM/UMTS/LTE; c) the operation of electronic communications services, including data and multimedia communication services in general; d) IP voice services ("VOIP" - Voice over IP); e) Mobile or indirectly related to the above mentioned activities and services. The business of NOS SA, NOS Açores and NOS Madeira is regulated by Law no. 5/2004 (Electronic Communications Law), which establishes the legal regime governing electronic communications networks and services.
NOSPUB and NOS Lusomundo TV operate in the television and content production business, and currently produce films and series channels, which are distributed, among other operators, by NOS SA and its subsidiaries. NOSPUB also manages the advertising space on Pay TV channels and in the cinemas of NOS Cinemas.
NOS Audiovisuais and NOS Cinemas, together with their associated companies, operate in the audiovisual sector, which includes video production and sale, cinema exhibition and distribution, and the acquisition/negotiation of Pay TV and VOD (video-on-demand) rights.
NOS Sistemas is a company dedicated to datacentre management and consulting services in IT.
NOS Inovação main activities are conducting and stimulating scientific activities of R&D (it owns all the intellectual property developed within the NOS Group, intending to guarantee the return of the initial investment through the commercialization of patents and concessions regarding commercial operation, as a result of the creation of new products and services), the demonstration, disclosure, technology and training transfers in the services and information management domains as well as fixed and mobile solutions of the latest generation of TV, internet, voice and data solutions.
These Notes to the Financial Statements follow the order in which the items are shown in the consolidated financial statements.
The consolidated financial statements for the nine months ended on 30 September 2018 are presented in euros and were approved by the Board of Directors and their issue authorised on 8 November 2018.
The Board of Directors believes that these financial statements give a true and fair view of the
The principal accounting policies adopted in the preparation of the financial statements are described below. These policies were consistently applied to all the financial years presented, unless otherwise stated.
The consolidated financial statements of NOS were prepared in accordance with the International Financial Reporting an Union, in force as at 1 January 2018.
These consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34"). Consequently, these financial statements do not include all the information required by IFRS and should therefore be read in conjunction with the consolidated financial statements for the year ended on 31 December 2017.
The consolidated financial statements are presented in euros as this is the main currency of the Group's operations. The financial statements of subsidiaries located abroad were converted into euros in accordance with the accounting policies described in Note 2.3.19.
The consolidated financial statements were prepared on a going concern basis from the ledgers and accounting records of the companies included in the consolidation (Annex A)), using the historical cost convention, adjusted when necessary for the valuation of financial assets and liabilities (including derivatives) at their fair value (Note 2.3.22).
In preparing the consolidated financial statements in accordance with IFRS, the Board used estimates, assumptions, and critical judgments with impact on the value of assets and liabilities and the recognition of income and costs in each reporting period. Although these estimates were based on the best information available at the date of preparation of the consolidated financial statements, current and future results may differ from these estimates. The areas involving a higher element of judgment and estimates are described in Note 3.
In the preparation and presentation of the consolidated financial statements, the NOS Group declares that it complies explicitly and without reservation with IAS/IFRS reporting standards and related SIC/IFRIC interpretations as approved by the European Union.
The standards and interpretations that became effective as of 1 January 2018 are as follows:
These changes had no material impact on the Group's consolidated financial statements, except IFRS 15.
IFRS 15 was issued in May 2014 and amended in September 2015 and April 2016 with mandatory application for the financial years beginning on or from 1 January 2018, with earlier application permitted. This standard establishes the principles that are to be applied for the recognition of the revenues and costs associated with the contracts with customers, based on a five-step model that will allow allocating the revenue to the performance obligations. According to IFRS 15, the revenue is recognised by a value that reflects the compensation that a company expects to have the right by exchanging a transfer of goods or services to a customer.
The new standard replace all the previous requests for the recognition of the revenue prescribed in the IFRS and can be applied retrospectively, with regard to periods that began on or after 1 January 2018 by adopting one of the following methods:
NOS Group adopted the new standard on the effective date requested (1 January 2018), using the full retrospective method.
According to IFRS 15, at the inception of each contract, the entity should assess the goods or services that have been promised and identify as a performance obligation each promise of transfer to the customer of any good or service (or bundle of goods or services) that are distinct. The promises in contracts with clients might be explicit or implicit, as long as those promises create a valid expectation for the customer that the entity will transfer a good or service to the customer, based on published policies, specific declarations, or current commercial practices of the entity.
Subsequently, the entity must distribute the transaction price to each performance obligation that is identified in the contract, based on the autonomous sales price, so that the allocation performed represents the amount of consideration that the entity expects to receive in exchange of the transfer of the promised goods and services to the customer.
IFRS 15 also provides additional disclosures, both on performance obligations of the entity and determination of transaction based-price, and on assets and liabilities that its application will originate, implying a relevant increase of the disclosures on financial statements.
The business segments in which NOS group operates are essentially telecommunications, advertising, cinema distribution and exhibition, and audiovisuals.
The main impacts of the application of IFRS 15 occurred in the telecommunications segment, in which equipment and services are sold both by separated contracts and by packs of goods and services.
The sale of mobile phones is normally associated with telecommunications packs that include several services: television, internet, data, and equipment and are usually sold with significant discounts. According to the previous policy, the revenue was recognised in accordance with the value of the pack associated with each service. Therefore, the revenue that was associated with the equipment sale was recognised by the price paid by the customers and when the equipment is delivered (when all the risks and advantages inherent in the possession of the goods are transferred to the buyer). There were also situations in which equipments are provided to the customers under a free-lease agreement (rent-free).
According to IFRS 15, and delivery of this equipment being a performance obligation, a part of the revenue from the contracts with customers is now allocated for complying with this obligation. It implies a higher revenue, at the initial moment of the contract, allocated to the sale of equipment, and a lower revenue during all the period of the contract of services provision. In other words, there is a transfer of services revenues to equipment revenues and an amendment of the period of the revenue recognition. With the application of IFRS 15, the revenue was anticipated and restated on 1 January 2017, that originated the establishment of an asset.
Over time, it is expected that this asset remains at stable levels, since the impact of the new contracts will compensate with the impact of those that end. However, some short-term of volatility is estimated and results from the launch of new products.
According to the previous policy, the Group capitalised all the commissions that are paid to third parties and other costs related to the soliciting and loyalty of contracts with clients providing that the contracts have a loyalty period and the costs are amortised during the loyalty period of the contracts (predominantly 2 years).
According to IFRS 15, the promises in contracts with customers may be explicit or implicit, so the capitalization of the costs related to soliciting of contracts is not restricted to the contracts that were signed with a loyalty period and that originate a capitalization of commissions and other costs that were previously recognised as costs.
The commissions and other costs related to the soliciting of the contracts are amortised systematically and in a consistent manner with the transfer of goods and services to customers relative to the assets. The Group determined that a customer, on average, is a NOS customer for periods of either 2 to 4 years, depending on the business segment, so the amortisation period of the commissions and costs related to contracts soliciting has been amended from 2 years to 4 and 2 years.
In addition to the adjustments that were previously described, the application of IFRS 15 implied the corresponding adjustment concerning deferred taxes.
The impacts of the adoption of IFRS 15 in the consolidated financial position statements are presented in the tables below:
| 31-12-2016 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
31-12-2016 RESTATED |
|
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS | ||||
| Tangible assets | 1,158,181 | (12,604) | (79,169) | 1,066,408 |
| Intangible assets | 1,158,779 | - | 111,993 | 1,270,772 |
| Deferred income tax assets | 117,302 | - | 8,667 | 125,969 |
| Other assets | 18,740 | - | - | 18,740 |
| TOTAL NON - CURRENT ASSETS | 2,453,002 | (12,604) | 41,491 | 2,481,889 |
| CURRENT ASSETS: | ||||
| Accounts receivable - trade | 348,926 | 47,136 | - | 396,062 |
| Prepaid expenses | 84,391 | (28,957) | - | 55,434 |
| Other assets | 96,322 | - | - | 96,322 |
| TOTAL CURRENT ASSETS | 529,639 | 18,179 | - | 547,818 |
| TOTAL ASSETS | 2,982,641 | 5,575 | 41,491 | 3,029,707 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital issued, premium and own shares | 841,645 | - | - | 841,645 |
| Other reserves and accumulated earnings | 112,031 | 5,217 | 21,246 | 138,494 |
| Net Income | 90,381 | (1,201) | 3,172 | 92,352 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,044,057 | 4,016 | 24,418 | 1,072,491 |
| Non-controlling interests | 9,041 | - | (1,266) | 7,775 |
| TOTAL EQUITY | 1,053,098 | 4,016 | 23,152 | 1,080,266 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES | ||||
| Deferred income tax liabilities | 10,206 | 1,559 | 18,339 | 30,104 |
| Other liabilities | 1,158,490 | - | - | 1,158,490 |
| TOTAL NON - CURRENT LIABILITIES | 1,168,696 | 1,559 | 18,339 | 1,188,594 |
| TOTAL CURRENT LIABILITIES | 760,847 | - | - | 760,847 |
| TOTAL LIABILITIES | 1,929,543 | 1,559 | 18,339 | 1,949,441 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,982,641 | 5,575 | 41,491 | 3,029,707 |
| 30-09-2017 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
30-09-2017 RESTATED |
|
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS | ||||
| Tangible assets | 1,130,908 | (10,701) | (81,036) | 1,039,171 |
| Intangible assets | 1,142,355 | - | 113,778 | 1,256,133 |
| Deferred income tax assets | 114,045 | 51 | 8,000 | 122,096 |
| Other assets | 31,205 | - | - | 31,205 |
| TOTAL NON - CURRENT ASSETS | 2,418,513 | (10,650) | 40,741 | 2,448,604 |
| CURRENT ASSETS: | ||||
| Accounts receivable - trade | 397,184 | 45,216 | - | 442,400 |
| Prepaid expenses | 80,452 | (29,216) | - | 51,236 |
| Other assets | 48,882 | - | - | 48,882 |
| TOTAL CURRENT ASSETS | 526,518 | 16,000 | - | 542,518 |
| TOTAL ASSETS | 2,945,031 | 5,350 | 40,741 | 2,991,122 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital issued, premium and own shares | 847,720 | - | - | 847,720 |
| Other reserves and accumulated earnings | 97,662 | 4,017 | 24,337 | 126,016 |
| Net Income | 105,466 | (331) | (5) | 105,130 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,050,848 | 3,685 | 24,332 | 1,078,865 |
| Non-controlling interests | 9,331 | - | (1,226) | 8,105 |
| TOTAL EQUITY | 1,060,178 | 3,685 | 23,107 | 1,086,970 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES | ||||
| Deferred income tax liabilities | 7,960 | 1,481 | 17,635 | 27,076 |
| Other liabilities | 1,129,211 | - | - | 1,129,211 |
| TOTAL NON - CURRENT LIABILITIES | 1,137,171 | 1,481 | 17,635 | 1,156,288 |
| TOTAL CURRENT LIABILITIES | 747,682 | 183 | - | 747,864 |
| TOTAL LIABILITIES | 1,884,853 | 1,664 | 17,635 | 1,904,152 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,945,031 | 5,350 | 40,741 | 2,991,122 |
| 31-12-2017 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
31-12-2017 RESTATED |
|
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS | ||||
| Tangible assets | 1,137,209 | (10,322) | (82,948) | 1,043,939 |
| Intangible assets | 1,141,104 | - | 112,294 | 1,253,398 |
| Deferred income tax assets | 99,538 | - | 8,162 | 107,700 |
| Other assets | 44,305 | - | - | 44,305 |
| TOTAL NON - CURRENT ASSETS | 2,422,156 | (10,322) | 37,509 | 2,449,343 |
| CURRENT ASSETS: | ||||
| Accounts receivable - trade | 406,904 | 47,424 | - | 454,328 |
| Prepaid expenses | 77,657 | (31,130) | - | 46,527 |
| Other assets | 60,350 | - | - | 60,350 |
| TOTAL CURRENT ASSETS | 544,911 | 16,295 | - | 561,206 |
| TOTAL ASSETS | 2,967,067 | 5,973 | 37,509 | 3,010,549 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital issued, premium and own shares | 847,718 | - | - | 847,718 |
| Other reserves and accumulated earnings | 105,489 | 4,017 | 24,337 | 133,843 |
| Net Income | 124,094 | 306 | (2,317) | 122,083 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,077,301 | 4,323 | 22,020 | 1,103,644 |
| Non-controlling interests | 9,067 | - | (1,245) | 7,822 |
| TOTAL EQUITY | 1,086,368 | 4,323 | 20,776 | 1,111,467 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES | ||||
| Deferred income tax liabilities | 7,140 | 1,650 | 16,733 | 25,523 |
| Other liabilities | 1,120,538 | - | - | 1,120,538 |
| TOTAL NON - CURRENT LIABILITIES | 1,127,678 | 1,650 | 16,733 | 1,146,060 |
| TOTAL CURRENT LIABILITIES | 753,021 | - | - | 753,021 |
| TOTAL LIABILITIES | 1,880,699 | 1,650 | 16,733 | 1,899,082 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,967,067 | 5,973 | 37,509 | 3,010,549 |
The impacts of adopting IFRS 15 in the Consolidated Statement of Income by nature are presented in the table below:
The nine months ended on 30 September 2017
| 9M 17 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
9M 17 RESTATED |
|
|---|---|---|---|---|
| REVENUES: | ||||
| Services rendered | 1,102,601 | (16,172) | - | 1,086,429 |
| Sales | 50,062 | 11,553 | (412) | 61,203 |
| Other operating revenues | 9,804 | 2,255 | - | 12,059 |
| 1,162,467 | (2,364) | (412) | 1,159,691 | |
| COSTS, LOSSES AND GAINS: | ||||
| Direct costs | 363,603 | - | (856) | 362,747 |
| Costs of products sold | 36,224 | 7,652 | 1,005 | 44,881 |
| Support services | 68,356 | - | (352) | 68,004 |
| Supplies and external services | 130,482 | - | (7,469) | 123,013 |
| Depreciation, amortisation and impairment losses | 310,413 | (9,557) | 7,233 | 308,089 |
| Other costs, losses and gains | 123,958 | - | - | 123,958 |
| 1,033,036 | (1,905) | (440) | 1,030,691 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 129,431 | (459) | 2 8 | 129,000 |
| Financial results | 3,316 | - | - | 3,316 |
| INCOME BEFORE TAXES | 126,116 | (459) | 2 8 | 125,685 |
| Income taxes | 20,365 | (128) | (7) | 20,230 |
| NET CONSOLIDATED INCOME | 105,751 | (331) | 35 | 105,455 |
| ATTRIBUTABLE TO: | ||||
| NOS Group Shareholders | 105,466 | (331) | (5) | 105,130 |
| Non-controlling interests | 285 | - | 40 | 325 |
| EARNINGS PER SHARES | ||||
| Basic - euros | 0.21 | - | - | 0.20 |
| Diluted - euros | 0.21 | - | - | 0.20 |
The impacts of the adoption of IFRS 15 in the consolidated statements of comprehensive income were null and in the consolidated statement of cash flows were immaterial.
At the date of approval of these financial statements, the standards and interpretations endorsed by the European Union, with mandatory application in future financial years are the following:
The following standards, interpretations, amendments, and revisions, with mandatory application in future financial years have not yet been endorsed by the European Union, at the date of approval of these financial statements:
• er 1 January 2021. The general objective of IFRS 17 is to provide a more serviceable and consistent accounting model for insurance contracts between entities that issue them globally.
The Group has been evaluating the impact of these amendments. It will apply this standard once it becomes effective or when earlier application is permitted.
Additionally, in the third quarter of 2018, the Group changed the presentation caption of costs This change had no impact in the consolidated statement of financial position, of changes in 2017, with 4,614 thousand euros being the amount reclassified as at 30 September 2018.
Controlled companies were consolidated by the full consolidation method. Control is deemed to exist when the Group is exposed or has rights, because of their involvement, to a variable return of the entity's activities, and has capacity to affect this return through the power over the entity.
Namely, when the Company directly or indirectly holds a majority of the voting rights at a General Meeting of Shareholders or has the power to determine the financial and operating policies. In situations where the Company has, in substance, control of other entities created for a specific purpose, although it does not directly hold equity in them, such entities are consolidated by the full consolidation method. The entities in these situations are listed in Annex A).
separately in the consolidated statement of financial position and in the consolidated statement, -controlli
The identifiable acquired assets and the liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date, irrespective of the existence of non-controlled interes identifiable acquired assets and liabilities is stated in Goodwill. When the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the income statement in the period in which the acquisition occurs.
The interests of minority shareholders are initially recognised as their proportion of the fair value of the identifiable assets and liabilities.
On the acquisition of additional equity shares in companies already controlled by the Group, the difference between the share of capital acquired and the corresponding acquisition value is recognised directly in equity.
When an increase in position in the capital of an associated company results in the acquisition of control, with the latter being included in the consolidated financial statements by the full consolidation method, the share of the fair values assigned to the assets and liabilities, corresponding to the percentages previously held, is stated in the income statement.
The directly attributable transaction costs are recognised immediately in profit or loss.
The results of companies acquired or sold during the year are included in the income statements as from the date of obtaining control or until the date of their disposal, respectively.
Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction shows evidence of impairment of the transferred asset.
When necessary, adjustments are made to the financial statements of controlled companies in order to align their accounting policies with those of the Group.
The classification of investments as jointly controlled companies is determined based on the existence of shareholder agreements, which show and regulate the joint control. Financial investments of jointly controlled companies (Annex C)) are stated by the equity method. Under this method, financial investments are adjusted periodically by an amount corresponding to the share in t before financial results and taxes. Direct changes in the postacquisition equity of jointly controlled companies are recognised as the value of the shareholding as a contra entry in reserves, in equity.
Additionally, financial investments may also be adjusted for recognition of impairment losses.
Any excess of acquisition cost over the fair value of identifiable net assets and liabilities (goodwill) is recorded as part of the financial investment of jointly controlled companies and subject to
impairment testing when there are indicators of loss of value. When the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the income statement in the period in which the acquisition occurs.
Losses in jointly controlled companies, which exceed the investment made in them, are not recognised, except when the Group has entered into undertakings with that company.
Dividends received from these companies are recorded as a reduction in the value of the financial investments.
An associated company is a company in which the Group exercises significant influence through participation in decisions about its financial and operating policies, but in which does not have control or joint control.
Any excess of the acquisition cost of a financial investment over the fair value of the identifiable net assets is recorded as goodwill and is added to the value of the financial investment and its recovery is reviewed annually or whenever there are indications of possible loss of value. When the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the statement of comprehensive income in the period in which the acquisition occurs.
Financial investments in the majority of associated companies (Annex B)) are stated by the equity method. Under this method, financial investments are adjusted periodically by an amount corresponding to the share in the net profits of associated companies, as a contra e -acquisition equity of associated companies are recognised as the value of the shareholding as a contra entry in reserves, in equity. Additionally, financial investments may also be adjusted for recognition of impairment losses.
Losses in associated companies, which exceed the investment made in them, are not recognised, except when the Group has entered into undertakings with that associated company.
Dividends received from these companies are recorded as a reduction in the value of the financial investments.
Balances and transactions as well as unrealised gains between Group companies, and between them and the parent company, are eliminated in the consolidation.
The part of unrealised gains arising from transactions with associated companies or jointly controlled companies attributable to the Group is eliminated in the consolidation. Unrealised losses are similarly eliminated except when they show evidence of impairment of the transferred asset.
As stipulated in IFRS 8, the Group presents operating segments based on internally produced management information.
Operating segments are reported consistently with the internal management information model provided to the chief operating decision maker of the Group, who is responsible for allocating resources to the segment and for assessing its performance, and for taking strategic decisions.
Realisable assets and liabilities due in less than one year from the date of the statement of financial position are classified as current in assets and liabilities, respectively.
In accordance with IAS 1, "Integration costs", "Losses / (gains) on disposal of assets" and "Other nonrecurring costs / (gains)" are material items related to the restructuration of the activity (indemnities and other expenses), litigation, disposal of items of tangible fixed assets, among others, which, by their nature and amount, are reported separately from the usual cost and income lines, in order to better reflect the financial information of the Group's regular operations.
Tangible assets are stated at acquisition cost, less accumulated depreciation and impairment losses, when applicable. Acquisition cost includes, in addition to the purchase price of the asset: (i) costs directly attributable to the purchase; and (ii) the estimated costs of decommissioning and removal of the assets and restoration of the site, which in Group applies to the cinema operation business, telecommunication towers and offices (Notes 2.3.12 and 7).
Estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence are recognised by a deduction, from the corresponding asset as a contra entry in profit and loss. The costs of current maintenance and repairs are recognised as a cost when they are incurred. Significant costs incurred on renovations or improvements to the asset are capitalised and depreciated over the corresponding estimated payback period when it is probable that there will be future economic benefits associated with the asset and when these can be measured reliably.
Non-current assets (or discontinued operations), are classified as held for sale if their value is realisable through a sale transaction rather than through their continued use.
This situation is deemed to arise only when: (i) the sale is highly probable and the asset is available for immediate sale in its present condition; (ii) the Group has given an undertaking to sell; and (iii) it is expected that the sale will be realised within 12 months. In this case, non-current assets are valued at the lesser of their book value or their fair value less the sale costs.
such assets ceases and they are classified as non-current assets held for sale. Gains and losses on disposals of tangible assets, corresponding to the difference between the sale price and the net
Tangible assets are depreciated from the time they are completed or ready to be used. These assets, less their residual value, are depreciated by the straight-line method, in twelfths, from the month in which they become available for use, according to the useful life of the assets defined as their estimated utility.
The depreciation rates used correspond to the following estimated useful lives:
| 2017 | 2018 | ||
|---|---|---|---|
| (YEARS) | (YEARS) | ||
| Buildings and other constructions | 2 - 50 | 2 - 50 | |
| Technical equipment: | |||
| Network Installations and equipment | 7 - 40 | 7 - 40 | |
| Terminal equipment | 2 - 8 | 2 - 8 | |
| Other technical equipment | 1 - 16 | 1 - 16 | |
| Transportation equipment | 3 - 4 2 - 10 |
3 - 4 2 - 10 |
|
| Administrative equipment Other tangible assets |
4 - 8 | 4 - 8 | |
| Intangible assets | |||
| Intangible assets are stated at acquisition cost, less accumulated amortisation and impairment losses, when applicable. Intangible assets are recognised only when they generate future economic benefits for the Group and when they can be measured reliably. |
|||
| Intangible assets consist mainly of goodwill and utilisation rights of satellite and distribution network capacity, customer portfolios, costs incurred i software licenses, content utilisation rights and other contractual rights. |
|||
| Goodwill | |||
| Goodwill represents the excess of acquisition cost over the net fair value of the assets, liabilities, and contingent liabilities of a subsidiary, jointly controlled company or associated company at the acquisition date, in accordance with IFRS 3. |
|||
| controlled company or in the case in which the excess of cost has been originated by a merger, and an associated company. |
|||
| Goodwill is not amortised and is subject to impairment tests at least once a year, on a specified date, financial position which may result in a possible loss of value. Any impairment loss is recorded immediately in th reversal. |
|||
| For the purposes of impairment tests, goodwill is attributed to the cash-generating units to which it is related (Note 8), which may correspond to the business segments in which the Group operates, or a lower level. |
|||
| Internally generated intangible assets | |||
| Internally generated intangible assets, including expenditure on research, are expensed when they are incurred. Research and development costs are only recognised as assets when the technical capability to complete the intangible asset is demonstrated and when it is available for use or sale. |
|||
| Industrial property and other rights | |||
| Assets classified under this item relate to the rights and licenses acquired under contract by the Group to third parties and used in realising the Group's activities, and include: |
|||
| • | Satellite capacity utilisation rights; | ||
| • | Distribution network utilisation rights; |
Satellite capacity utilisation rights;
Telecom licenses;
The content exploration rights are recorded in the consolidated statement of financial position, as intangible assets, when the following conditions are fulfilled: (i) there is control over the content, (ii) the Company has the right to choose the way to explore the content, and (iii) it is available for exhibition.
The conclusion of contracts relating to sports contents, which are not immediately available, originates rights that are initially classified as contractual commitments.
In the specific case of broadcasting rights of sports competitions, these are recognised as assets when the necessary conditions to organise each sports competition are present, which occurs in the homologation date of the participating teams in the competition that is being held in the sports season to be initiated, by the organizing entity, taking into consideration that it is from that date that the conditions for the recognition of an asset are present, namely, the unequivocal attainment of the exploration rights of the games of the stated season. In this situation, the stated rights are recognised in the income statement linear method, by twelfths, starting from the beginning of the month in which they are available for use.
Resulting from agreements concluded for the cession of the exclusive rights to exploit sports content, and as it is permitted by IAS 1, since 2017, NOS presents the net assets and liabilities of the values ceded to other operators, considering that this compensation best reflects the substance of the transactions.
Group companies periodically carry out an impairment assessment of intangible assets in-progress. This impairment assessment is also carried out whenever events or changes in circumstances indicate that the amount at which the asset is recorded may not be recoverable. When such indications exist, the Group calculates the recoverable value of the asset in order to determine the existence and extent of the impairment loss.
These assets are amortised by the straight-line method, in twelfths, from the beginning of the month in which they become available for use.
The amortisation rates used correspond to the following estimated useful lives:
| 2017 | 2018 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Period of the | Period of the | |
| Rights of using capacities | contract | contract |
| Telecom licences | 30 to 33 | 30 to 33 |
| Software licences | 1 to 8 | 1 to 8 |
| Customer portfolios | 5 to 6 | 5 to 6 |
| Costs of obtaining and to fulfil a contract with a customer | 2 to 4 | 2 to 4 |
| Period of the | Period of the | |
| Content utilization rights | contract | contract |
| Other | 1 to 8 | 1 to 8 |
Group companies periodically carry out an impairment assessment of non-current assets. This impairment assessment is also carried out whenever events or changes in circumstances indicate that the amount at which the asset is recorded may not be recoverable. When such indications exist, the Group calculates the recoverable value of the asset in order to determine the existence and extent of the impairment loss.
The recoverable value is estimated for each asset individually or, if that is not possible, assets are grouped at the lowest levels for which there are identifiable cash flows to the cash-generating unit -generating unit, except for the assets allocated to the cinema exhibition business, which are grouped into regional cash-generating units.
The recoverable amount is calculated as the higher of the net sale price and the current use value. The net sale price is the amount that would be obtained from the sale of the asset in a transaction between independent and knowledgeable entities, less the costs directly attributable to the sale. The current use value is the current value of the estimated future cash flows resulting from continued use of the asset or of the cash-generating unit. When the amount at which the asset is recorded exceeds its recoverable value, it is recognised as an impairment loss.
The reversal of impairment losses recognised in previous years is recorded when there are indications that these losses no longer exist or have decreased. The reversal of impairment losses is recognised in the statement of comprehensive income in the year in which it occurs. However, an impairment loss can only be reversed up to the amount that would be recognised (net of amortisation or depreciation) if no impairment loss had been recorded in previous years.
Financial assets are recognised in the statement of financial position of the Group on the trade or contract date, which is the date on which the Group undertakes to purchase or sell the asset.
At the initial time, with the exception of commercial accounts receivable, financial assets are recognised at fair value plus directly attributable transaction costs, except for assets at fair value through income in which transaction costs are immediately recognised in income. Trade accounts receivable, at the initial time, are recognised at their transaction price, as defined in IFRS 15.
flows expire; (ii) the Group has substantially transferred all the risks and benefits associated with their ownership; or (iii) although it retains part but not substantially all of the risks and benefits associated with their ownership, the Group has transferred control of the assets.
The financial assets and liabilities are offset and shown as a net value when, and only when, the Group has the right to offset the recognised amounts and intends to settle for the net value.
The Group classifies its financial assets into the following categories: financial assets at fair value through profit or loss, financial assets measured at amortised cost, financial assets at fair value through other comprehensive income. Its classification depends on the entity's business model to manage the financial assets and the contractual characteristics in terms of the cash flows of the financial asset.
This category includes financial derivatives and equity instruments that the Group has not classified as financial assets through other comprehensive income at the time of initial recognition. This category also includes all financial instruments whose contractual cash flows are not exclusively capital and interest.
Gains and losses resulting from changes in the fair value of assets measured at fair value through
Financial assets measured at fair value through other comprehensive income are those that are part of a business model whose objective is achieved through the collection of contractual cash flows and the sale of financial assets, being that these contractual cash flows are only capital and interest reimbursement on the capital in debt.
Financial assets measured at amortised cost are those that are included in a business model whose purpose is to hold financial assets in order to receive the contractual cashflows, being that these contractual cash flows are only capital reimbursement and interest payments on the capital in debt.
deposits, term deposits and other investments with maturities of less than three months which may be immediately realisable and with a negligible risk of change of value.
Financial liabilities and equity instruments are classified according to their contractual substance irrespective of their legal form. Equity instruments are contracts that show a residual interest in the ompanies are recorded at the amount received, net of the costs incurred in their issue. Financial liabilities are recognised only when extinguished, i.e. when the obligation is settled, cancelled, or extinguished.
In accordance with IFRS 9, financial liabilities are classified as subsequently measured at amortised cost, except for:
a) Financial liabilities at fair value through profit or loss. These liabilities, including derivatives that are liabilities, should subsequently be measured at fair value;
Financial liabilities of the Group include: borrowings, accounts payable and derivative financial instruments.
At each date of the financial position statement, the Group analyses and recognises expected losses on its debt securities, loans and accounts receivable. The expected loss results from the difference between all contractual cash flows that are due to an entity in accordance with the contract and all the cash flows that the entity expects to receive, discounted at the original effective interest rate.
The objective of this impairment policy is to recognise expected credit losses over the respective duration of financial instruments that have undergone significant increases in credit risk since initial recognition, assessed on an individual or collective basis, taking into account all reasonable and sustainable information, including prospects. If, at the reporting date, the credit risk associated with a financial instrument has not increased significantly since the initial recognition, the Group measures the provision for losses relating to that financial instrument by an amount equivalent to the expected credit losses within a period of 12 months.
The Group did not find any impact on its balance sheet or equity, as a result of the application of the impairment requirements of IFRS 9, since the impairments found and recognised by the Group already include an estimate of expected losses.
The Group has a policy of contracting derivative financial instruments with the objective of hedging the financial risks to which it is exposed, resulting from variations in exchange rates and interest rates. The Group does not contract derivative financial instruments for speculative purposes, and the use of this type of financial instruments complies with the internal policies determined by the Board.
In relation to financial derivative instruments which, although contracted in order to provide hedging not meet all the requirements of IFRS 9 Financial instruments: in terms of their classification as hedge accounting or which have not been specifically assigned to a hedge relationship, the related changes in fair value are stated in the income statement for the period in which they occur.
Derivative financial instruments are recognised on the respective trade date at their fair value. Subsequently, the fair value of the derivative financial instruments is revalued on a regular basis, and the gains or losses resulting from this revaluation are recorded directly in profit and loss for the period, except in the case of hedge derivatives. Recognition of the changes in fair value of hedge derivatives depends on the nature of the risk hedged and the type of hedge used.
The possibility of designating a (derivative or non-derivative) financial instrument as a hedging instrument meets the requirements of IFRS 9 - Financial instruments.
Derivative financial instruments used for hedging purposes can be classified as hedges for accounting purposes when they cumulatively meet the following conditions:
Whenever expectations of changes in exchange rates and interest rates so warrant, the Group aims to anticipate any adverse impact through the use of derivatives. Operations that qualify as cash flow hedging instruments are stated in the statement of financial position at their fair value and, when they are considered effective hedges, the changes in the fair value of the instruments are initially stated as a contra entry in equity and subsequently reclassified as financial costs.
When hedge transactions are ineffective, they are stated directly in profit and loss. Accordingly, in net terms the cash flows associated with the hedged operations are accrued at the rate applying to the contracted hedge operation.
When a hedge instrument expires or it is sold, or when the hedge ceases to fulfil the criteria required for hedge accounting, the accumulated variations in the fair value of the derivative in reserves are shown in profit and loss when the operation hedged also affects profit and loss.
Inventories, which mainly include mobile phones, customer terminal equipment, DVDs, and content broadcasting rights, are valued at the lower of their cost or net realisable value.
The acquisition cost includes the invoice price, freight, and insurance costs, using the weighted average cost as the method of costing goods sold.
Inventories are adjusted for technological obsolescence, as well as for the difference between the purchase cost and the net realisable value, whichever is the lower, and this reduction is recognised directly in the income statement.
The net realisable value corresponds to the normal sale price less restocking costs and selling costs.
The differences between the cost and the corresponding net realisable value of inventories, when this is less than the cost, are recorded as operatin
Inventories in transit, since they are not available for consumption or sale, are separated out from other inventories and are valued at their specific acquisition cost.
The signing of contracts related with sports content originates rights that are initially classified as contractual commitments.
The content broadcasting rights are recorded in the consolidated statement of financial position, as Inventories, in the event of the nonexistence of full right over the way of exploration of the asset, by the respective value of cost or net realisable value, whenever it is lower, when programmatic content has been received and is available for exhibition or use, according to contractual conditions,
without any production or change, given that the necessary conditions for the organization of each sports competition are present, which occurs in the homologation date of the participating teams in the competition that is being held in the sports season to be initiated, by the organizing entity. The systematic basis given the pattern of economic benefits obtained through their commercial exploration.
Due to the agreement between the three national operators of reciprocal availability, for several them, (Note 38), NOS considered the recognition of the costs, excluding those divided by the remaining operators, on a systematic basis, given the pattern of economic benefits obtained through their commercial exploration.
Subsidies are recognised at their fair value when there is a reasonable assurance that they will be received and Group companies will meet the requirements for their award.
Operating subsidies, mainly for employee training, are recognised in the statement of comprehensive income by deduction from the corresponding costs incurred.
Investment subsidies are recognised in the statement of financial position as deferred income.
If the subsidy is considered as deferred income, it is recognised as income on a systematic and rational basis during the useful life of the asset.
Provisions are recognised when: (i) there is a present obligation arising from past events and it is likely that in settling that obligation, the expenditure of internal resources will be necessary; and (ii) the amount or value of such obligation can be reasonably estimated. When one of the above conditions is not met, the Group discloses the events as a contingent liability unless the likelihood of an outflow of funds resulting from this contingency is remote, in which case they are not disclosed.
Provisions for legal procedures taking place against the Group are made in accordance with the risk assessments carried out by the Group and by their legal advisers, based on success rates.
Provisions for restructuring are only recognised when the Group has a detailed, formal plan, which identify the main features of the restructuring programme, and after these facts have been reported to the entities involved.
Provisions for dismantling costs, removal of assets and restoration of the site are recognised when the assets are installed, in line with the best estimates available at that date. The amount of the provisioned liability reflects the effects of the passage of time and the corresponding financial indexing is recognised in results as a financial cost.
Obligations that result from onerous contracts are registered and measured as provisions. There is an onerous contract when the Company is an integral part of the provisions of an agreement contract, which entail costs that cannot be avoided and exceed the economic benefits derived from the agreement.
Provisions for potential future operating losses are not covered.
Contingent liabilities are not recognised in the financial statements, unless the exception provided under IFRS 3 business combination, and are disclosed whenever there is a good chance to shed resources including economic benefits. Contingent assets are not recognised in the financial statements, being disclosed when there is a likelihood of a future influx of financial resources.
Provisions are reviewed and brought up to date at the date of the statement of financial position to reflect the best estimate at that time of the obligation concerned.
Leasing contracts are classified as: (i) finance leases, if substantially all the risks and benefits incident to ownership of the corresponding assets concerned have been transferred; or (ii) operating leases, if not all risks and rewards incident to ownership of those assets have been substantially transferred.
The classification of leases as finance or operating leases is made based on substance rather than contractual form.
The assets acquired under finance leases, the corresponding liabilities are recorded using the financial method, and the assets, related accumulated depreciation, and pending debts are recorded in accordance with the contractual finance plan. In addition, the interest included in the rentals and the depreciation of the tangible and intangible assets are recognised in the income statement for the period to which they relate.
In the case of operating leases, the rentals due are recognised as costs in the income statement over the period of the leasing contract.
NOS is covered by the special tax regime for groups of companies, which covers all the companies in which it directly or indirectly owns at least 75% of the share capital and which simultaneously are resident in Portugal and subject to Corporate Income Tax (IRC).
The remaining subsidiaries not covered by the special tax regime for groups of companies are taxed individually based on their respective taxable incomes and the applicable tax rates.
Income tax is stated in accordance with the IAS 12 criteria. In calculating the cost relating to income tax for the period, in addition to current tax, allowance is also made for the effect of deferred tax calculated in accordance with the liability method, taking into account the temporary differences resulting from the difference between the tax basis of assets and liabilities and their values as stated in the consolidated financial statements, and the tax losses carried forward at the date of the statement of financial position. The deferred income tax assets and liabilities were calculated based on the tax legislation currently in force or of legislation already published for future application.
As stipulated in the above standard, deferred income tax assets are recognised only when there is reasonable assurance that these may be used to reduce future taxable profit, or when there are deferred income tax liabilities whose reversal is expected to occur in the same period in which the deferred income tax assets are reversed. At the end of each period an assessment is made of deferred income tax assets, and these are adjusted in line with the likelihood of their future use.
The amount of tax to be included, either in current tax or in deferred tax resulting from transactions or events recognised in equity accounts, is recorded directly under those items and does not affect the results for the period.
In a business combination, the deferred tax benefits acquired are recognised as follows:
a) The deferred tax benefits acquired recognised in the measurement period of one year after the date of merger and that result from new information about facts and circumstances that existed at the date of acquisition are recorded against the goodwill-carrying amount related to the acquisition. If the goodwill-carrying amount is null, any remaining deferred tax benefits are recognised in the income statement.
The benefits granted to employees under share purchase or share option incentive plans are recorded in accordance with the requirements of IFRS 2 Share-based payments.
In accordance with IFRS 2, since it is not possible to reliably estimate the fair value of the services received from employees, their value is measured by reference to the fair value of equity instruments in accordance with their share price at the grant date.
The cost is recognised, linearly over the period in which the service is provided by employees, under
The accumulated cost recognised at the date of each statement of financial position up to the vesting reflects the best estimate of the number of own shares that will be vested, weighted by the tire elapse between the grant and the vesting. The impact on the income statement each year corresponds to the accumulated cost valuation between the beginning and the end of the year.
In turn, benefits granted based on shares but paid in cash lead to the recognition of a liability valued at fair value at the date of the statement of financial position.
Portuguese commercial legislation requires that at least 5% of annual net profit must be appropriated to a legal reserve until it represents at least 20% of the share capital. This reserve is not distributable, except in case of liquidation, but can be used to absorb losses, after having exhausted all other reserves and to increase share capital.
Issue of shares corresponds to premiums from the issuance or capital increases. According to Portuguese law, share premiums follow the treatment given to the "Legal reserve", that is, the values are not distributable, except in case of liquidation, but can be used to absorb losses after having exhausted all other reserves and to increase share capital.
According to IFRS 2 - "Share-based payments", the responsibility with the medium-term incentive plans settled by delivery of own shares is recorded as credit under "Reservations for mid-term incentive plans" and such reserve is not likely to be distributed or used to absorb losses.
Hedging reserve reflects the changes in fair value of derivative financial instruments as cash flow hedges that are considered effective, and they are not likely to be distributed or be used to absorb losses.
regime as the legal reserve. Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IFRS. In addition, the increases resulting from the application of fair value through equity
components, including its application through the net profit can only be distributed when the elements that originated them are sold, exercised liquidated or when the end their use, in the case of tangible assets or intangible assets.
The own shares are recorded at acquisition cost as a deduction from equity. Gains or losses on the sale of own shares are recorded under "Other reserves".
This item includes the results available for distribution to shareholders and earnings per fair value in financial instruments increases, financial investments and investment properties, which, in accordance with paragraph 2 of article 32 of the CSC, will only be available for distribution when the elements or rights that originated them are sold, exercised, terminated, or settled.
The main types of revenue of NOS subsidiaries are as follows:
i) Revenues of Telecommunications Services:
Cable television, fixed broadband and fixed voice: The revenues from services provided using the fibre optic cable network result from: (a) basic channel subscription packages that can be sold in a bundle with fixed broadband/fixed voice services; (b) premium channel subscription packages and S-VOD; (c) terminal equipment rental; (d) consumption of content (VOD); (e) traffic and voice termination; (f) service activation; (g) sale of equipment; and (h) other additional services (ex: firewall, antivirus).
Satellite television: Revenues from the satellite television service mainly result from: (a) basic and premium channel subscription packages; (b) equipment rental; (c) consumption of content (VOD); (d) service activation; and (e) sale of equipment.
Mobile broadband and voice services: Revenues from mobile broadband Internet access services and mobile voice services result mainly from monthly subscriptions and/or usage of the Internet and voice service, as well as the traffic associated with the type chosen by the client.
The Group's revenue is based on the five-step model established by IFRS 15:
1) Identification of the contract with the customer;
Thus, at the beginning of each contract, the NOS Group evaluates the promised goods or services and identifies, as a performance obligation, every promise of transfer to the customer of any distinct good or service (or package of goods or services). These promises in customer contracts may be express or implied, provided such promises create a valid expectation in the client that the entity will transfer a good or service to the customer, based on the entity's published policies, specific statements or usual business practices.
The NOS Group has internally defined that a performance obligation corresponds to the promise of delivery of a good or service that can be used in an isolated/separated way by the customer and on which there is a clear perception of this good or service by the customer among the available in each contract.
The main performance obligations are summarized as Sales of Mobile Phones, Telephones, Hotspots, DVD's, Movie Tickets and Other Equipment and the Services Rendered of Mobile Internet Services, Fixed Internet, Mobile Phone, Landline Phone, Television, Consulting, Cloud/ IT Services, distribution of audio-visual rights among others.
The provision of Set-top-boxes, routers, modems and other terminal equipment at the customers' home and respective installation and activation services were considered by the group as not corresponding to a performance obligation, since they are necessary actions to fulfil the promised performance obligation.
In determining and allocating the transaction price of each performance obligation, NOS used standalone prices of the promised products and services at the time of entering into the agreement with the customer to distribute the amount expected to be received under the contract.
The recognition of revenue occurs at the time of performance of each performance obligation.
Revenue from selling equipment are included when the buyer takes on the risks and advantages of taking possession of goods and the value of the benefits are reasonably quantified.
Revenue from telecom services subscriptions (TV, internet, mobile and fixed voice services bundle subscription, individually or as a bundle) is recognised linearly over the subscription period.
Revenue from equipment rental is recognised linearly over the rental agreement, except in the case of instalment sales, which are accounted as credit sales.
The Group attributes to its customers, loyalty points that might be exchanged, over a limited period, for discounts in equipment purchase. These points represent a deferred income, until the date when the points are definitely converted into benefits, as its utilization implies an additional retention. The fair value of the liability is calculated based on an estimated utilisation point rate and an average cost per point, taking into consideration the available points at the date of each report.
Revenue related with traffic, roaming, data usage, audiovisual content, and others is recognised when the service is rendered. The Group also offers various personalised solutions, particularly to its corporate customers in telecom management, access, voice, and data transmission services. These personalised solutions are also recognised when the service is rendered.
Unless demanded or allowed by IFRS, the compensation of revenues and costs is not performed, namely, when it reflects the nature of the transaction or other event.
The compensation of revenues and costs is performed in the following situations:
Discounts granted to customers related with loyalty programmes are allocated to the entire retention contract to which the customer is committed to. Therefore, the discount is recognised as the goods and services made available to the customer.
Amounts that have not been invoiced for are included based on estimates. The differences between the estimated amounts and the actual amounts, which are normally immaterial, are recorded in the next financial year.
Until 31 December 2014, revenue from penalties, due to the inherent uncertainties, was recorded only at the moment it was received, and the amount was disclosed as a contingent asset (Note 40). From 1 January 2015, Revenue from penalties is recognised based on an estimated collectability rate, taking into account the Group's collection history. Revenue from penalties is recognised under "Other revenues".
Interest revenue is recognised using the effective interest method, only when they generate future economic benefits for the Group and when they can be measured reliably.
revenues and costs are recognised in accordance with the accruals principle, under which they are recognised as they are generated or incurred, regardless of when they are received or paid.
The costs and revenues related to the current period and whose expenses and income will only income that have already occurred that relate to future periods, which will be recognised in each of those periods, for the corresponding amount.
The costs related to the current period and whose expenses will only occur in that future periods are it is possible to estimate with certainty the related these aspects, the value is classified as Provisions (Note 2.3.12).
Transactions in foreign currencies are converted into the functional currency at the exchange rate on the transactions dates. On each accounting date, outstanding balances (monetary items) are
updated by applying the exchange rate prevailing on that date. The exchange rate differences in this update are recognised in the income statement for the year in which they were calculated in the item "Losses / (gains) on exchange variations". Exchange rate variations generated on monetary items, which constitute enlargement of the investment denominated in the functional currency of the Group or of the subsidiary in question, are recognised in equity. Exchange rate differences on non- quity.
The financial statements of subsidiaries denominated in foreign currencies are converted at the following exchange rates:
Exchange differences arising from the conversion into euros of the financial statements of subsidiaries denominated in f
In the last quarter of 2017, the Angolan economy was considered a hyperinflationary economy according to IAS 29 - Financial Reporting in Hyperinflationary Economies.
This standard requires that the financial statements prepared in the currency of a hyperinflationary must be expressed in terms of the current measurement unit at the financial statements preparation date.
In summary, the general aspects that have to be considered for the restatement of the individual financial statements are the following ones:
The monetary assets and liabilities are not amended because they are already updated to the current unit at the financial statements date;
The non-monetary assets and liabilities (that are still not expressed in terms of the current unit at the financial statements) are restated by the application of an index;
The effect of the inflation on the net monetary position of the subsidiaries companies is reflected in the income statement as a loss in the net monetary position.
Additionally, according to IAS 21, the restatement of the consolidated financial statements is prohibited when the parent company does not operate in a hyperinflationary economy.
The conversion coefficient that was used for the restatement of the individual financial statements of the subsidiaries in Angola was the Consumer Price Index (CPI), issued by the National Bank of Angola.
| Basis 100 CPI |
|||
|---|---|---|---|
| (Basis 100 Year 2010) | |||
| dec/10 | Year 2010 | 100.0 | 100.0 |
| dec/11 | Year 2010 | 111.4 | 111.4 |
| dec/12 | Year 2011 | 109.0 | 121.4 |
| dec/13 | Year 2014 | 93.0 | 130.8 |
| dec/14 | Year 2014 | 100.0 | 140.5 |
| dec/15 | Year 2014 | 114.3 | 160.6 |
| dec/16 | Year 2014 | 162.2 | 227.9 |
| dec/17 | Year 2014 | 204.8 | 295.1 |
| mar/18 | Year 2014 | 212.9 | 299.1 |
| jun/18 | Year 2014 | 220.4 | 309.8 |
| set/18 | Year 2014 | 228.5 | 321.2 |
At 31 December 2017 and 30 September 2018, assets and liabilities expressed in foreign currencies were converted into euros using the following exchange rates of such currencies against the euro, as published by the Bank of Portugal:
| 31-12-2017 | 30-09-2018 | |
|---|---|---|
| US Dollar | 1.1993 | 1.1576 |
| Angolan Kwanza | 185.4000 | 343.5710 |
| British Pound | 0.8872 | 0.8873 |
| Mozambican Metical | 70.5700 | 70.5300 |
| Canadian Dollar | 1.5039 | 1.5064 |
| Swiss Franc | 1.1702 | 1.1316 |
| Real | 3.9729 | 4.6535 |
In the nine months ended at 30 September 2017 and 2018, the income statements of subsidiaries expressed in foreign currencies were converted to euros at the average exchange rates of the currencies of their countries of origin against the euro, which are as follows:
| 9M 17 | 9M 18 | |
|---|---|---|
| US Dollar | 1.1778 | 1.1942 |
| Angolan Kwanza | 184.7887 | 287.6098 |
| Mozambican Metical | 71.6700 | 71.9100 |
Financial charges related to borrowings are recognised as costs in accordance with the accruals principle, except in the case of loans incurred (whether these are generic or specific) for the acquisition, construction or production of an asset that takes a substantial period of time (over one year) to be ready for use, which are capitalised in the acquisition cost of that asset.
Investment property mainly includes buildings held to generate rents rather than for use in the production or supply of goods or services, or for administrative purposes, or for sale in the ordinary course of business. These are measured initially at cost.
Subsequently, the Group uses the cost model for the valuation of investment property since use of the fair value model would not result in material differences.
An investment property is eliminated from the statement of financial position on disposal or when the investment property is taken permanently out of use and no financial benefit is expected from its disposal.
The Group measures part of the financial assets, such as financial assets available for sale, and some of its non-financial assets, such as investment properties, at fair value on the date of the financial statements.
The fair value measurement assumes that the asset or liability is exchanged in an orderly transaction among market participants to sell the asset or transfer the liability at the measurement date under current market conditions. The fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability may occur:
On the main market of the assets and liabilities, or
In the absence of a primary market, it is assumed that the transaction occurs in the most advantageous market. This is what maximises the amount that would be received for selling asset or minimises the amount that would be paid to transfer the liability, after considering transaction costs and transport costs.
Since different entities and businesses within a single entity can have access to different markets, the main or most advantageous market for the same asset or liability can vary from one entity to another, or even between businesses within the same entity, but it is assumed that they are accessible to the Group.
The fair value measurement uses assumptions that asset or liability, assuming that market participants would use the asset to maximise its value.
The Group uses valuation techniques appropriate to the circumstances whenever there is information to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or of which disclosure is mandatory, are rated on a fair value hierarchy, which ranks data in three levels to be used in the measurement at fair value, and detailed below:
Level 1 Listed and unadjusted market prices, in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 - valuation tech observable;
Level 3 - valuation techniques using inputs not based on observable market data, based on unobservable inputs.
The fair value measurement is classified in the same fair value hierarchy level at the lowest level of input, which is significant to the measurement as a whole.
Financial assets and liabilities are offset and presented at the net amount when, and only when, the Group has the right to offset the recognised amounts and intends to settle for the net amount.
Personnel expenses are recognised when the service is rendered by employees independently of their date of payment. Here are some specificities:
a) Termination of employment. The benefits for termination of employment are due for payment when there is cessation of employment before the normal retirement date or when an
employee voluntarily accepts to leave in exchange of these benefits. The Group recognises these benefits when it can be shown to be committed to a termination of current employees according to a detailed formal plan for termination and there is no realistic possibility of withdrawal or these benefits are granted to encourage voluntary redundancy. When the benefits of cessation of employment are due more than 12 months after the balance sheet date, they are updated to their present value.
c) Labour Compensation Fund (FCT) and the Labour Compensation Guarantee Fund (FGCT). Based on the publication of Law No. 70/2013 and subsequent regulation by Order No. 294-A / 2013, entered into force on 1 October the Labour Compensation Fund schemes (FCT) and the Guarantee Fund Compensation of Labor (FGCT). In this context, companies that hire a new employee are required to deduct a percentage of the respective salary for these two new funds (0.925% to 0.075% and the FCT for FGCT), in order to ensure, in the future, the partial payment the compensation for dismissal. Considering the characteristics of each Fund, the following is considered:
The monthly deliveries to FGCT, made by the employer are recognised as expense in the period to which they relate.
The monthly deliveries to FCT, made by the employer are recognised as a financial asset, in the caption "Other non- of the entity, measured at fair value with changes recognised in the respective results.
The statement of cash flows is prepared in accordance with the direct method. The Group classifies which the risk of change in value is negligible. For purposes of the statement of cash flows, the balance of cash and cash equivalents also include bank overdrafts included in the statement of financial position under "Borrowings".
The statement of cash flows is divided into operating, investing, and financing activities.
Operating activities include cash received from customers and payments to suppliers, staff and others related to operating activities. Under "Other cash receipts / (payments) related with operating activity" includes the amount received in 2016 and 2017 and subsequent payments related to assignments without recourse, coordinated by the Banco Comercial Português and Caixa Geral de Depósitos, and these operations do not involve any change in the accounting treatment of the underlying receivables or in the relationship with their clients.
The cash flows included in investing activities include acquisitions and disposals of investments in subsidiaries and cash received and payments arising from the purchase and sale of tangible and intangible assets, amongst others.
Financing activities include cash received and payments relating to borrowings, the payment of interest and similar costs, finance leases, the purchase and sale of own shares and the payment of dividends.
Events occurring after the date of the statement of financial position, which provide additional information about conditions that existed at that date, are taken into account in the preparation of financial statements for the year.
Events occurring after the date of the statement of financial position, which provide information on conditions that occur after that date, are disclosed in the notes to the financial statements, when they are materially relevant.
The judgments and estimates that affect the statement of financial position and the reported results. These estimates are based on the best information and knowledge about past and/or present events and on the operations that the Company considers it may implement in the future. However, at the date of completion of such operations, their results may differ from these estimates.
Changes to these estimates that occur after the date of approval of the consolidated financial statements will be corrected in the income statement in a prospective manner, in accordance with IAS 8 - "Accounting Policies, Changes in Accounting Estimates and Errors".
The estimates and assumptions that imply a greater risk of giving rise to a material adjustment in assets and liabilities are described below:
To determine the entities to be included in the consolidation perimeter, the Group assesses the extent to which it is exposed, or has rights, to variability in return from its involvement with that entity and can take possession of them through the power it holds over this entity.
The decision that an entity must be consolidated by the Group requires the use of judgment, estimates, and assumptions to determine the extent to which the Group is exposed to return variability and the ability to take possession of them through its power.
Other assumptions and estimates could lead to the Group's consolidation perimeter being different, with direct impact on the consolidated financial statements.
The determination of a possible impairment loss can be triggered by the occurrence of various events, such as the availability of future financing, the cost of capital or other market, economic and legal changes or changes with an adverse effect on the technological environment, many of which
The identification and assessment of impairment indicators, the estimation of future cash flows, and the calculation of the recoverable value of assets involve a high degree of judgment by the Board.
Goodwill is annually subjected to impairment tests or whenever there are indications of a possible loss of value in accordance with the criteria described in Note 8. The recoverable values of the cashgenerating units to which goodwill is allocated are determined based on the calculation of current use values. These calculations require the use of estimates by management.
The life of an asset is the period during which the Company expects that an asset will be available for use and this should be reviewed at least at the end of each financial year.
The determination of the useful lives of assets, the amortisation/depreciation method to be applied, and the estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence is crucial in determining the amount of amortisation/depreciation to be recognised in the consolidated income statement each period.
businesses concerned, and taking account of the practices adopted by companies in the sectors in which the Group operates.
The capitalised costs with the audiovisual content distribution rights acquired for commercialisation in the various windows of exhibition are amortised over the period of exploration of the respective contracts. Additionally, these assets are subject to impairment tests whenever there are indications of changes in the pattern generation of future revenue underlying each contract.
With the adoption of IFRS 15, the useful lives of subscriber and acquisition costs were reviewed (Note 2.1).
The Group periodically reviews any obligations arising from past events, which should be recognised or disclosed. The subjectivity involved in determining the probability and amount of internal resources required to meet obligations may give rise to significant adjustments, either due to changes in the assumptions made, or due to the future recognition of provisions previously disclosed as contingent liabilities.
Deferred income tax assets are recognised only when there is strong assurance that there will be future taxable income available to use the temporary differences or when there are deferred tax liabilities whose reversal is expected in the same period in which the deferred tax assets are reversed. The assessment of deferred income tax assets is undertaken by management at the end of each period taking account of the expected future performance of the Group.
The credit risk on the balances of accounts receivable is assessed at each reporting date, taking assessment made by management and the estimated collection risks at the date of the statement of financial position, which may differ from the effective risk incurred.
When the fair value of an asset or liabilities is calculated, on an active market, the respective market price is used. Whe assets and liabilities, valuation techniques generally accepted in the market, based on market assumptions, are used.
The Group applies evaluation techniques for unlisted financial instruments, such as derivatives, financial instruments at fair value and instruments measured at amortised cost. The most frequently used valorisation models are models of discounted cash flows and option models, which incorporate, for example, interest rate and market volatility curves.
For certain types of more complex derivatives, more advanced valuation models are used containing assumptions and data that are not directly observable in the market, for which the Group uses internal estimates and assumptions.
During the nine months ended on 30 September 2017 and 2018, errors, estimates and changes in material accounting policies relating to prior years were not recognised, in addition to the application of IFRS 15 (Note 2.1).
Changes in the consolidation perimeter, during the nine months ended on 30 September 2017 were:
The changes in the consolidation perimeter, during the nine months ended on 30 September 2018, were:
1) on 1 June 2018, the company Canal 20 T.V., SA was liquidated and dissolved. It did not generate any impact on the consolidated financial statements.
The business segments are as follows:
| 31-12-2017 RESTATED | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tangible assets | 1,031,859 | 12,080 | - | 1,043,939 |
| Intangible assets | 1,156,966 | 96,432 | - | 1,253,398 |
| Investments in jointly controlled companies and associated companies | 114,631 | 15,639 | (93,140) | 37,130 |
| Accounts receivable - other | 51,054 | 24,520 | (69,389) | 6,185 |
| Deferred income tax assets | 95,744 | 11,956 | - | 107,700 |
| Other non-current assets | 312 | 678 | - | 990 |
| TOTAL NON - CURRENT ASSETS | 2,450,567 | 161,305 | (162,529) | 2,449,343 |
| CURRENT ASSETS: | ||||
| Inventories | 31,217 | 827 | - | 32,044 |
| Account receivables | 449,366 | 76,166 | (60,838) | 464,694 |
| Prepaid expenses | 44,655 | 2,154 | (282) | 46,527 |
| Other current assets | 14,480 | 484 | - | 14,964 |
| Cash and cash equivalents | 1,211 | 1,766 | - | 2,977 |
| TOTAL CURRENT ASSETS | 540,929 | 81,397 | (61,120) | 561,206 |
| TOTAL ASSETS | 2,991,496 | 242,702 | (223,649) | 3,010,549 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5,152 | 32,749 | (32,749) | 5,152 |
| Capital issued premium | 854,219 | - | - | 854,219 |
| Own shares | (12,681) | - | - | (12,681) |
| Legal reserve | 1,030 | 1,087 | (1,087) | 1,030 |
| Other reserves and accumulated earnings | 86,341 | 56,833 | (9,331) | 133,843 |
| Net income | 144,351 | 27,250 | (49,518) | 122,083 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,078,410 | 117,919 | (92,685) | 1,103,644 |
| Non-controlling interests | 7,822 | - | - | 7,822 |
| TOTAL EQUITY | 1,086,233 | 117,919 | (92,685) | 1,111,467 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 975,853 | 48,194 | (69,389) | 954,658 |
| Provisions | 126,775 | 6,487 | - | 133,262 |
| Accrued expenses | 8,767 | - | - | 8,767 |
| Other non-current liabilities | 23,850 | - | - | 23,850 |
| Deferred income tax liabilities | 25,053 | 470 | - | 25,523 |
| TOTAL NON - CURRENT LIABILITIES | 1,160,298 | 55,151 | (69,389) | 1,146,060 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 226,145 | 22,410 | (38,419) | 210,136 |
| Accounts payable | 283,402 | 17,815 | (18,198) | 283,019 |
| Tax payable | 15,288 | 3,934 | - | 19,222 |
| Accrued expenses | 193,935 | 24,306 | (4,677) | 213,564 |
| Other current liabilities | 26,194 | 1,167 | (281) | 27,080 |
| TOTAL CURRENT LIABILITIES | 744,965 | 69,632 | (61,575) | 753,021 |
| TOTAL LIABILITIES | 1,905,263 | 124,783 | (130,964) | 1,899,082 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,991,496 | 242,702 | (223,649) | 3,010,549 |
| TELCO AUDIOVISUALS ELIMINATIONS |
GROUP |
|---|---|
| ASSETS | |
| NON - CURRENT ASSETS: | |
| Tangible assets 1,042,458 11,382 - |
1,053,840 |
| Intangible assets 1,131,975 93,456 - |
1,225,431 |
| (87,389) Investments in jointly controlled companies and associated companies 92,670 15,830 |
21,111 |
| (69,388) Accounts receivable - other 50,107 24,520 |
5,239 |
| Deferred income tax assets 85,802 12,402 - |
98,204 |
| Other non-current assets 422 687 - |
1,109 |
| TOTAL NON - CURRENT ASSETS (156,777) 2,403,434 158,277 |
2,404,934 |
| CURRENT ASSETS: | |
| Inventories 32,961 702 - |
33,663 |
| (33,470) Account receivables 430,966 54,173 |
451,669 |
| (325) Prepaid expenses 47,940 1,590 |
49,205 |
| (28,956) Other current assets 402 29,845 |
1,291 |
| Cash and cash equivalents 1,122 1,362 - |
2,484 |
| (3,950) TOTAL CURRENT ASSETS 484,033 58,229 |
538,312 |
| (160,728) TOTAL ASSETS 2,887,467 216,506 |
2,943,245 |
| SHAREHOLDER'S EQUITY | |
| (32,749) Share capital 5,152 32,749 |
5,152 |
| Capital issued premium 854,219 - - |
854,219 |
| (12,159) Own shares - - |
(12,159) |
| (1,887) Legal reserve 1,030 1,887 |
1,030 |
| (31,813) Other reserves and accumulated earnings 61,307 60,304 |
89,798 |
| (20,486) Net income 133,221 10,266 |
123,001 |
| (86,935) EQUITY BEFORE NON - CONTROLLING INTERESTS 1,042,770 105,206 |
1,061,041 |
| Non-controlling interests 7,219 - - |
7,219 |
| TOTAL EQUITY 1,049,988 (86,935) 105,206 |
1,068,259 |
| LIABILITIES | |
| NON - CURRENT LIABILITIES: | |
| (69,388) Borrowings 965,827 48,079 |
944,518 |
| Provisions 130,991 6,752 - |
137,743 |
| Accrued expenses 6,372 - - |
6,372 |
| Other non-current liabilities 18,830 - - |
18,830 |
| Deferred income tax liabilities 4,704 462 - |
5,166 |
| (69,388) TOTAL NON - CURRENT LIABILITIES 1,126,723 55,293 |
1,112,628 |
| CURRENT LIABILITIES: | |
| (19,811) Borrowings 198,693 11,754 |
190,636 |
| (10,527) Accounts payable 287,035 18,496 |
295,004 |
| Tax payable 21,181 2,263 29,845 |
53,289 |
| (3,590) Accrued expenses 176,984 18,921 |
192,315 |
| (322) Other current liabilities 26,863 4,573 |
31,114 |
| (4,405) TOTAL CURRENT LIABILITIES 710,756 56,007 |
762,358 |
| TOTAL LIABILITIES (73,793) 1,837,479 111,300 |
1,874,986 |
| (160,728) TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY 2,887,467 216,506 |
2,943,245 |
The results by segment and investments in tangible and intangible assets for the three and nine months ended on 30 September 2017 and 2018 are shown below:
| 9M 17 RESTATED | ||||||||
|---|---|---|---|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |||||
| 3ºQUARTER 17 | 9M 17 RESTATED |
3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 17 | 9M 17 RESTATED |
|
| REVENUES: | ||||||||
| Services rendered | 351,426 | 1,044,198 | 25,810 | 78,773 | (11,906) | (36,542) | 365,330 | 1,086,429 |
| Sales | 18,812 | 47,782 | 4,948 | 13,613 | (54) | (192) | 23,706 | 61,203 |
| Other operating revenues | 3,200 | 12,307 | 131 | 637 | (284) | (885) | 3,047 | 12,059 |
| 373,439 | 1,104,287 | 30,889 | 93,023 | (12,244) | (37,619) | 392,084 | 1,159,691 | |
| COSTS, LOSSES AND GAINS: | ||||||||
| Wages and salaries | 20,537 | 58,464 | 2,662 | 7,623 | - | - | 23,199 | 66,087 |
| Direct costs | 123,145 | 369,007 | 7,024 | 23,646 | (9,660) | (29,906) | 120,509 | 362,747 |
| Costs of products sold | 17,263 | 44,714 | 48 | 178 | (2) | (11) | 17,309 | 44,881 |
| Marketing and advertising | 8,336 | 22,708 | 1,741 | 5,655 | (1,847) | (5,589) | 8,230 | 22,774 |
| Support services | 21,689 | 67,620 | 502 | 1,571 | (403) | (1,187) | 21,788 | 68,004 |
| Supplies and external services | 35,991 | 107,979 | 5,591 | 15,960 | (331) | (926) | 41,251 | 123,013 |
| Other operating losses / (gains) | 115 | 445 | 1 4 | 38 | - | - | 129 | 483 |
| Taxes | 8,644 | 23,963 | 33 | 373 | - | - | 8,677 | 24,336 |
| Provisions and adjustments | 9 0 | (861) | (41) | (575) | 1 | 1 | 50 | (1,435) |
| 235,809 | 694,039 | 17,574 | 54,469 | (12,242) | (37,618) | 241,141 | 710,890 | |
| EBITDA | 137,631 | 410,248 | 13,315 | 38,554 | (3) | (1) | 150,943 | 448,801 |
| Depreciation, amortisation and impairment losses | 96,264 | 281,273 | 8,151 | 26,815 | 1 | 1 | 104,416 | 308,089 |
| Other losses / (gains), net | 3,841 | 11,494 | 8 | 220 | - | (1) | 3,849 | 11,713 |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 37,525 | 117,482 | 5,156 | 11,519 | (3) | (1) | 42,678 | 129,000 |
| Net losses / (gains) of affiliated companies | (5,871) | (14,329) | (141) | (654) | - | - | (6,012) | (14,983) |
| Financial costs | 4,765 | 15,460 | 51 | 325 | 1 | 1 | 4,817 | 15,786 |
| Net foreign exchange losses / (gains) | 6 | 117 | 9 | 5 | - | - | 1 5 | 122 |
| Net losses / (gains) on financial assets | - | (25,113) | - | (15,629) | - | 40,742 | - | - |
| Net other financial expenses / (income) | 1,626 | 2,359 | 1 3 | 34 | (1) | (1) | 1,638 | 2,392 |
| 525 | (21,507) | (68) | (15,919) | - | 40,742 | 457 | 3,316 | |
| INCOME BEFORE TAXES | 37,001 | 138,989 | 5,224 | 27,439 | (3) | (40,743) | 42,222 | 125,685 |
| Income taxes | 8,143 | 17,772 | 1,272 | 2,458 | - | - | 9,415 | 20,230 |
| NET INCOME | 28,857 | 121,217 | 3,953 | 24,981 | (3) | (40,743) | 32,807 | 105,455 |
| CAPEX | 84,713 | 239,092 | 6,576 | 24,079 | - | - | 91,289 | 263,171 |
| EBITDA - CAPEX | 52,917 | 171,156 | 6,739 | 14,475 | (2) | (1) | 59,654 | 185,630 |
EBITDA = Operational Result + Depreciation, amortisation and impairment losses + Restructuring costs + Losses / (gains) on
sale of assets + Other losses / (gains) non recurrent
CAPEX = Increases in tangible and intangible assets
| 9M 18 | ||||||||
|---|---|---|---|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |||||
| 3ºQUARTER 18 | 9M 18 | 3ºQUARTER 18 | 9M 18 | 3ºQUARTER 18 | 9M 18 | 3ºQUARTER 18 | 9M 18 | |
| REVENUES: | ||||||||
| Services rendered | 353,842 | 1,048,878 | 24,869 | 70,833 | (10,882) | (32,789) | 367,829 | 1,086,922 |
| Sales | 17,294 | 49,053 | 4,546 | 12,373 | (51) | (126) | 21,789 | 61,300 |
| Other operating revenues | 5,503 | 19,370 | 321 | 954 | (446) | (1,263) | 5,378 | 19,061 |
| 376,639 | 1,117,301 | 29,736 | 84,160 | (11,379) | (34,178) | 394,996 | 1,167,283 | |
| COSTS, LOSSES AND GAINS: | ||||||||
| Wages and salaries | 18,510 | 52,481 | 2,677 | 7,725 | - | - | 21,187 | 60,206 |
| Direct costs | 122,045 | 378,562 | 7,151 | 19,183 | (8,627) | (26,099) | 120,569 | 371,646 |
| Costs of products sold | 16,998 | 44,468 | 30 | 178 | (10) | (31) | 17,018 | 44,615 |
| Marketing and advertising | 7,591 | 21,894 | 1,702 | 5,367 | (1,867) | (5,632) | 7,426 | 21,629 |
| Support services | 20,839 | 62,285 | 575 | 1,726 | (479) | (1,349) | 20,935 | 62,662 |
| Supplies and external services | 35,289 | 100,725 | 5,475 | 15,823 | (396) | (1,067) | 40,368 | 115,481 |
| Other operating losses / (gains) | 147 | 511 | 1 1 | 73 | - | - | 158 | 584 |
| Taxes | 8,615 | 25,255 | 41 | 104 | - | - | 8,656 | 25,359 |
| Provisions and adjustments | 2,285 | 3,363 | 179 | 1 7 | - | - | 2,464 | 3,380 |
| 232,317 | 689,544 | 17,841 | 50,196 | (11,378) | (34,178) | 238,780 | 705,562 | |
| EBITDA | 144,321 | 427,757 | 11,895 | 33,964 | - | - | 156,216 | 461,721 |
| Depreciation, amortisation and impairment losses | 87,328 | 272,555 | 7,861 | 24,556 | - | - | 95,189 | 297,111 |
| Other losses / (gains), net | 3,502 | (4,470) | 1 1 | 365 | - | - | 3,513 | (4,105) |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 53,491 | 159,672 | 4,023 | 9,043 | - | - | 57,514 | 168,715 |
| Net losses / (gains) of affiliated companies | (1,280) | 4,642 | 4 | (191) | - | - | (1,276) | 4,451 |
| Financial costs | 3,965 | 11,979 | 138 | 684 | - | - | 4,103 | 12,663 |
| Net foreign exchange losses / (gains) | (64) | (10) | (15) | 48 | - | - | (79) | 38 |
| Net losses / (gains) on financial assets | (1) | (17,136) | - | (3,351) | - | 20,487 | (1) | - |
| Net other financial expenses / (income) | 1,244 | 6,769 | (50) | (60) | - | - | 1,194 | 6,709 |
| 3,865 | 6,244 | 77 | (2,870) | - | 20,487 | 3,942 | 23,861 | |
| INCOME BEFORE TAXES | 49,627 | 153,428 | 3,945 | 11,913 | - | (20,487) | 53,572 | 144,854 |
| Income taxes | 8,582 | 20,805 | 1,008 | 1,646 | - | - | 9,590 | 22,451 |
| NET INCOME | 41,045 | 132,623 | 2,937 | 10,267 | - | (20,487) | 43,982 | 122,403 |
| CAPEX | 93,318 | 259,500 | 7,723 | 20,884 | - | - | 101,041 | 280,384 |
| EBITDA - CAPEX | 51,003 | 168,257 | 4,172 | 13,080 | - | - | 55,175 | 181,337 |
EBITDA = Operational Result + Depreciation, amortisation and impairment losses + Restructuring costs + Losses / (gains) on sale of assets + Other losses / (gains) non recurrent
CAPEX = Increases in tangible and intangible assets
Transactions between segments are performed on market terms and conditions in a comparable way to transactions performed with third parties.
The accounting policies set out in IFRS 9 for financial instruments were applied to the following items:
| 31-12-2017 RESTATED | |||||||
|---|---|---|---|---|---|---|---|
| FINANCIAL ASSETS |
DERIVATIVES | FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | ||
| ASSETS | |||||||
| Available-for-sale financial assets | 180 | - | - | 180 | - | 180 | |
| Derivative financial instruments (Note 17) | - | 1 9 | - | 1 9 | - | 1 9 | |
| Accounts receivable - trade (Note 14) | 454,328 | - | - | 454,328 | - | 454,328 | |
| Accounts receivable - other (Note 10) | 9,559 | - | - | 9,559 | 6,992 | 16,551 | |
| Cash and cash equivalents (Note 18) | 2,977 | - | - | 2,977 | - | 2,977 | |
| TOTAL FINANCIAL ASSETS | 467,044 | 1 9 | - | 467,063 | 6,992 | 474,055 | |
| LIABILITIES | |||||||
| Borrowings (Note 21) | - | - | 1,164,794 | 1,164,794 | - | 1,164,794 | |
| Derivative financial instruments (Note 17) | - | 2,495 | - | 2,495 | - | 2,495 | |
| Accounts payable - trade (Note 25) | - | - | 224,864 | 224,864 | - | 224,864 | |
| Accounts payable - other (Note 26) | - | - | 75,591 | 75,591 | 179 | 75,770 | |
| Accrued expenses (Note 23) | - | - | 222,331 | 222,331 | - | 222,331 | |
| TOTAL FINANCIAL LIABILITIES | - | 2,495 | 1,687,580 | 1,690,075 | 179 | 1,690,254 | |
| FINANCIAL ASSETS |
DERIVATIVES | 30-09-2018 FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | ||
| ASSETS | |||||||
| Available-for-sale financial assets | 236 | - | - | 236 | - | 236 | |
| Derivative financial instruments (Note 17) | - | 126 | - | 126 | - | 126 | |
| Accounts receivable - trade (Note 14) | 447,171 | - | - | 447,171 | - | 447,171 | |
| Accounts receivable - other (Note 10) | 8,178 | - | - | 8,178 | 1,559 | 9,737 | |
| Cash and cash equivalents (Note 18) | 2,484 | - | - | 2,484 | - | 2,484 | |
| TOTAL FINANCIAL ASSETS | 458,069 | 126 | - | 458,195 | 1,559 | 459,754 | |
| LIABILITIES | |||||||
| Borrowings (Note 21) | - | - | 1,135,154 | 1,135,154 | - | 1,135,154 | |
| Derivative financial instruments (Note 17) | - | 1,585 | - | 1,585 | - | 1,585 | |
| Accounts payable - trade (Note 25) | - | - | 253,106 | 253,106 | - | 253,106 | |
| Accounts payable - other (Note 26) | - | - | 53,255 | 53,255 | 226 | 53,481 | |
| Accrued expenses (Note 23) TOTAL FINANCIAL LIABILITIES |
- | - 1,585 |
198,687 1,640,202 |
198,687 1,641,787 |
- 226 |
198,687 1,642,013 |
|
| Considering its nature, the balances of the amounts to be paid and received to/from state and other included in the scope of IFRS 7. |
- | t | |||||
| The Board of Directors believes that the fair value of the breakdown of financial instruments recorded at amortised cost or registered at the present value of the payments does not differ significantly from their book value. This decision is based in the contractual terms of each financial instrument. |
|||||||
| economical and judicial risks, which are described in the Management Report. |
| 30-09-2018 | ||||||||
|---|---|---|---|---|---|---|---|---|
| FINANCIAL ASSETS |
DERIVATIVES | FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |||
| ASSETS | ||||||||
| Available-for-sale financial assets | 236 | - | - | 236 | - | 236 | ||
| Derivative financial instruments (Note 17) | - | 126 | - | 126 | - | 126 | ||
| Accounts receivable - trade (Note 14) | 447,171 | - | - | 447,171 | - | 447,171 | ||
| Accounts receivable - other (Note 10) | 8,178 | - | - | 8,178 | 1,559 | 9,737 | ||
| Cash and cash equivalents (Note 18) | 2,484 | - | - | 2,484 | - | 2,484 | ||
| TOTAL FINANCIAL ASSETS | 458,069 | 126 | - | 458,195 | 1,559 | 459,754 | ||
| LIABILITIES | ||||||||
| Borrowings (Note 21) | - | - | 1,135,154 | 1,135,154 | - | 1,135,154 | ||
| Derivative financial instruments (Note 17) | - | 1,585 | - | 1,585 | - | 1,585 | ||
| Accounts payable - trade (Note 25) | - | - | 253,106 | 253,106 | - | 253,106 | ||
| Accounts payable - other (Note 26) | - | - | 53,255 | 53,255 | 226 | 53,481 | ||
| Accrued expenses (Note 23) | - | - | 198,687 | 198,687 | - | 198,687 | ||
| TOTAL FINANCIAL LIABILITIES | - | 1,585 | 1,640,202 | 1,641,787 | 226 | 1,642,013 |
During the nine months ended on 30 September 2017 and 2018, the movements in this item were as follows:
| 31-12-2016 RESTATED |
INCREASES | DISPOSALS AND WRITE-OFFS |
TRANSFERS AND OTHERS |
30-09-2017 RESTATED |
|
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| Lands | 919 | - | - | - | 919 |
| Buildings and other constructions | 368,233 | 849 | (616) | 10,515 | 378,981 |
| Basic equipment | 2,278,654 | 38,339 | (19,518) | 61,894 | 2,359,369 |
| Transportation equipment | 8,673 | 447 | 250 | (671) | 8,699 |
| Tools and dies | 1,341 | - | - | 1 | 1,342 |
| Administrative equipment | 186,138 | 2,602 | (1,331) | 1,498 | 188,907 |
| Other tangible assets | 41,088 | 221 | - | 426 | 41,735 |
| Tangible assets in-progress | 29,527 | 86,377 | (351) | (79,806) | 35,747 |
| 2,914,573 | 128,835 | (21,566) | (6,143) | 3,015,699 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | |||||
| Lands | 37 | - | - | - | 37 |
| Buildings and other constructions | 198,353 | 8,125 | (688) | 777 | 206,567 |
| Basic equipment | 1,431,287 | 136,438 | (19,244) | (2,453) | 1,546,028 |
| Transportation equipment | 3,061 | 1,248 | (131) | 1 | 4,179 |
| Tools and dies | 1,250 | 24 | - | - | 1,274 |
| Administrative equipment | 174,039 | 2,971 | (1,201) | 1,758 | 177,567 |
| Other tangible assets | 40,138 | 6 | - | 732 | 40,876 |
| 1,848,165 | 148,812 | (21,264) | 815 | 1,976,528 | |
| 1,066,408 | (19,977) | (302) | (6,958) | 1,039,171 |
| 31-12-2017 RESTATED |
INCREASES | DISPOSALS AND WRITE-OFFS |
TRANSFERS AND OTHERS |
30-09-2018 | |
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| Land | 955 | - | (117) | - | 838 |
| Buildings and other constructions | 378,899 | 2,078 | (2,323) | (72) | 378,582 |
| Basic equipment | 2,297,064 | 36,023 | (28,814) | 106,187 | 2,410,460 |
| Transportation equipment | 8,299 | - | (32) | - | 8,267 |
| Tools and dies | 1,347 | - | (3) | 33 | 1,377 |
| Administrative equipment | 186,850 | 2,014 | (1,588) | 1,259 | 188,535 |
| Other tangible assets | 41,928 | 190 | (65) | 340 | 42,393 |
| Tangible assets in-progress | 60,072 | 119,135 | - | (116,194) | 63,013 |
| 2,975,415 | 159,440 | (32,942) | (8,448) | 3,093,465 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | |||||
| Land | 37 | - | - | (37) | - |
| Buildings and other constructions | 208,016 | 8,336 | (2,088) | (3,714) | 210,550 |
| Basic equipment | 1,502,361 | 129,760 | (28,686) | (957) | 1,602,478 |
| Transportation equipment | 3,914 | 1,370 | (32) | - | 5,252 |
| Tools and dies | 1,282 | 27 | (4) | - | 1,305 |
| Administrative equipment | 174,763 | 4,112 | (1,488) | 957 | 178,344 |
| Other tangible assets | 41,104 | 9 4 | (63) | 561 | 41,696 |
| 1,931,477 | 143,699 | (32,361) | (3,190) | 2,039,625 | |
| 1,043,939 | 15,740 | (581) | (5,258) | 1,053,840 |
At 30 September 2018, the tangible assets net value is composed mainly by basic equipment, namely:
lease contracts at 30 September 2017 and 2018, amounted to 207.3 million euros and 187.8 million
euros, and their net book value as of those dates amounted to 95.3 million euros and 74.5 million euros, respectively.
Tangible and intangible assets include interests and other financial expenses incurred directly related to the construction of certain tangible or intangible assets in progress. At 30 September 2018, total net value of these costs amounted to 14.5 million euros (30 September 2017: 15.0 million euros). The amount of interest capitalised in the quarter ended on 30 September 2018 amounted to 1.0 million euros (30 September 2017: 0.7 million euros).
During the nine months ended on 30 September 2017 and 2018, the movements in this item were as follows:
| 31-12-2016 | DISPOSALS AND | TRANSFERS AND | 30-09-2017 | ||
|---|---|---|---|---|---|
| RESTATED | INCREASES | WRITE-OFFS | OTHERS | RESTATED | |
| ACQUISITION COST | |||||
| Industrial property and other rights | 1,475,963 | 10,749 | (46) | 60,002 | 1,546,668 |
| Costs of obtaining and to fulfil a contract with a customer | 429,258 | 75,412 | - | - | 504,670 |
| Goodwill | 641,599 | - | - | (199) | 641,400 |
| Intangible assets in-progress | 34,355 | 48,175 | - | (49,583) | 32,947 |
| 2,581,175 | 134,336 | (46) | 10,220 | 2,725,685 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | - | - | |||
| Industrial property and other rights | 1,052,548 | 81,034 | (14) | 102 | 1,133,670 |
| Costs of obtaining and to fulfil a contract with a customer | 253,076 | 78,241 | - | - | 331,317 |
| Other intangible assets | 4,779 | - | - | (213) | 4,566 |
| 1,310,403 | 159,275 | (14) | (111) | 1,469,553 | |
| 1,270,772 | (24,939) | (32) | 10,332 | 1,256,133 |
assets" (Note 7).
| 31-12-2017 RESTATED |
INCREASES | DISPOSALS AND WRITE-OFFS |
TRANSFERS AND OTHERS |
30-09-2018 | |
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| Industrial property and other rights | 1,563,282 | 2,847 | (14) | 44,932 | 1,611,047 |
| Costs of obtaining and to fulfil a contract with a customer | 528,439 | 70,384 | (109,001) | - | 489,822 |
| Goodwill | 641,400 | - | - | - | 641,400 |
| Intangible assets in-progress | 43,533 | 47,713 | - | (41,239) | 50,007 |
| 2,776,654 | 120,944 | (109,015) | 3,693 | 2,792,276 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | |||||
| Industrial property and other rights | 1,161,048 | 75,139 | (2) | 782 | 1,236,967 |
| Costs of obtaining and to fulfil a contract with a customer | 357,642 | 78,271 | (109,001) | - | 326,912 |
| Intangible assets in-progress | 4,566 | - | - | (1,600) | 2,966 |
| 1,523,256 | 153,410 | (109,003) | (818) | 1,566,845 | |
| 1,253,398 | (32,466) | (12) | 4,511 | 1,225,431 |
At 30 September 2018, the item "Industrial property and other rights" includes mainly:
(1) A net amount of 120.8 million euros (30 September 2017: 129 million euros) mainly related to the investment, net of amortisation, made in the development of the UMTS network by NOS SA, including: (i) 38.2 million euros (30 September 2017: 40.8 million euros) related to the license, (ii) 12.8 million euros (30 September 2017: 13.6 million euros) related to the agreement signed in 2002 between Oni Way and the other three mobile telecommunication operators with activity in Portugal, (iii) 3.9 million euros (30 September 2017: 4.2 million euros) related to the three mobile telecommunication operators in Portugal; (iv) 55.9 million euros (30 September
6.6 million euros (30 September 2017: 7.1 million euros) corresponding to the valuation of the license in the fair value allocation process resulting from the merger;
Increases in the nine months ended on 30 September 2018 correspond mainly to customer acquisition costs, in the amount of 44.9 million euros, movies and series usage rights, for an amount of 19 million euros and software acquisition and development, for an amount of 21.7 million euros.
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
| 31-12-2017 | |||
|---|---|---|---|
| RESTATED | 30-09-2018 | ||
| Telco | 564,799 | 564,799 | |
| Audiovisuals | 76,601 | 76,601 | |
| 641,400 | 641,400 |
In 2017, impairment tests were performed based on assessments in accordance with the discounted cash flow method, which corroborate the recoverability of the book value of the Goodwill. The amounts in these assessments are based on the historical performances and growth forecast of the businesses and their markets, incorporated in medium to long-term plans approved by the Board.
These estimates are based on the following assumptions:
| TELCO | AUDIOVISUALS SEGMENT | |||
|---|---|---|---|---|
| SEGMENT | NOS | NOS | ||
| AUDIOVISUALS | CINEMAS | |||
| Discount rate (before taxes) | 7.4% | 7.4% | 7.4% | |
| Assessment period | 5 years | 5 years | 5 years | |
| EBITDA* Growth | 3.6% | -0.6% | 2.4% | |
| Perpetuity growth rate | 1.4% | 1.4% | 1.4% |
* EBITDA = Operational result + Depreciation and amortisation (CAGR average 5 years)
In the Telco segment, the assumptions used are based on past performance, evolution of the number of customers, expected development of regulated tariffs, current market conditions, and expectations of future development.
The number of years specified in the impairment tests depends on the degree of maturity of the various businesses and markets, and were determined based on the most appropriate criterion for the valuation of each cash-generating unit.
Sensitivity analyses were performed on variations in discount rates of approximately 10%, from which no impairments resulted.
Sensitivity analyses were also performed for a perpetuity growth rate of 0%, from which no impairments also resulted.
At 30 September 2018, it was understood that the assumptions made in the impairment tests carried out in 2017 did not have material variations, and therefore there are no indications of any impairment.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| INVESTMENTS - EQUITY METHOD | ||
| Sport TV | 4,693 | 6,154 |
| Dreamia | 3,658 | 3,841 |
| Finstar | 28,389 | 10,442 |
| Mstar | (425) | 196 |
| Upstar | 279 | 370 |
| Canal 20 TV, S.A. | 1 2 | - |
| Big Picture 2 Films | 100 | 108 |
| 36,706 | 21,111 | |
| ASSETS | 37,130 | 21,111 |
| LIABILITIES (NOTE 22) | (425) | - |
months ended on 30 September 2017 and 2018 were as follows:
| 9M 17 | ||
|---|---|---|
| RESTATED | 9M 18 | |
| AS AT JANUARY 1 | 7,063 | 36,706 |
| Gains / (losses) of exercise (Note 33) | 13,746 | (4,623) |
| Gains with the entrance of new shareholders (Note 33) i) | 1,237 | - |
| Changes in equity ii) | (16) | (10,971) |
| AS AT SEPTEMBER 30 | 22,030 | 21,111 |
i) Gains generated by the entrance of new shareholder MEO in the share capital of Sport TV (Note 4).
ii) Amounts related to changes in equity of the companies registered by the equity method of consolidation are mainly related to foreign exchange impacts of the investment in currencies The Group's interest in the results and assets and liabilities of the jointly controlled companies and associated companies in the periods ended on 31 December 2017 and 30 September 2018, is as follows:
| 31-12-2017 RESTATED | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
||
| Sport TV* | 146,300 | 127,529 | 18,771 | 185,213 | 4,947 | 25.00% | 1,237 | ||
| Dreamia | 15,028 | 7,712 | 7,316 | 2,772 | 756 | 50.00% | 378 | ||
| Finstar | 329,006 | 234,373 | 94,633 | 302,683 | 66,305 | 30.00% | 19,892 | ||
| Mstar | 7,704 | 9,122 | (1,418) | 20,652 | 1,467 | 30.00% | 440 | ||
| Upstar | 210,915 | 209,986 | 929 | 105,690 | 466 | 30.00% | 140 | ||
| Canal 20 TV, S.A. | 25 | 1 | 24 | - | (2) | 50.00% | (1) | ||
| East Star** | - | - | - | - | - | 30.00% | (36) | ||
| Big Picture 2 Films | 3,745 | 3,244 | 501 | 10,411 | 101 | 20.00% | 20 | ||
| 712,723 | 591,967 | 120,756 | 627,421 | 74,040 | 22,070 |
* The equity is adjusted, against liabilities, totalling 10.2 million euros resulting from supplementary payments rendered by other two shareholders which are above the held percentage.
** Company dissolved on December 27, 2017.
| 30-09-2018 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
||
| Sport TV* | 205,934 | 181,318 | 24,616 | 141,083 | 5,845 | 25.00% | 1,461 | ||
| Dreamia | 15,787 | 8,106 | 7,681 | 2,161 | 365 | 50.00% | 183 | ||
| Finstar | 245,181 | 210,376 | 34,805 | 240,708 | (23,215) | 30.00% | (6,965) | ||
| Mstar | 7,843 | 7,189 | 654 | 16,324 | 2,033 | 30.00% | 610 | ||
| Upstar | 199,458 | 198,225 | 1,233 | 56,355 | 305 | 30.00% | 9 2 | ||
| Canal 20 TV, S.A. ** | - | - | - | - | - | 50.00% | (12) | ||
| Big Picture 2 Films | 3,668 | 3,128 | 540 | 6,663 | 39 | 20.00% | 8 | ||
| 677,871 | 608,342 | 69,529 | 463,294 | (14,628) | (4,623) |
* The equity is adjusted, against liabilities, totalling 10.2 million euros resulting from supplementary payments rendered by other two shareholders which are above the held percentage.
** Company dissolved on September 1, 2018.
Consolidated adjustments are reflected in the indicators presented in the tables above.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| RESTATED | 31-12-2017 | 30-09-2018 | ||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Accounts receivables | 7,284 | 7,013 | 6,067 | |
| Advances of suppliers | 3,752 | - | - | |
| Unbilled revenues | 2 | - | - | |
| 11,038 | 7,013 | 4,814 | 6,067 | |
| Impairment of other receivable | (672) | (828) | (316) | (828) |
| 10,366 | 6,185 | 4,498 | 5,239 |
The summary of movements in impairment of other accounts receivable is as follows:
| 9M 17 | ||
|---|---|---|
| RESTATED | 9M 18 | |
| AS AT JANUARY 1 | 1,676 | 1,500 |
| Increases (Note 32) | (7) | 162 |
| Utilizations / Others | (119) | (518) |
| AS AT SEPTEMBER 30 | 1,550 | 1,144 |
At 31 December 2017 and 30 September 2018, these items were composed as follows:
| 31-12-2017 RESTATED |
30-09-2018 | |||
|---|---|---|---|---|
| RECEIVABLE | PAYABLE | PAYABLE | ||
| NON CURRENT | ||||
| Debt regularization | 149 | - | 149 | - |
| 149 - |
149 | - | ||
| CURRENT | ||||
| Value-added tax | 943 | 13,739 | 810 | 19,490 |
| Income taxes (i) | 13,583 | 1,293 | - | 29,845 |
| Personnel income tax witholdings | - | 2,140 | - | 1,961 |
| Social Security contributions | - | 1,878 | - | 1,848 |
| Others | 419 | 172 | 420 | 145 |
| 14,945 | 19,222 | 1,230 | 53,289 | |
| 15,094 | 19,222 | 1,379 | 53,289 |
(i) At 31 December 2017 and 30 September 2018, this item includes the amount of 1.3 million euros tangible assets and investment property in 2016.
At 31 December 2017 and 30 September 2018, the amounts of IRC (Corporate Income Tax) receivable and payable were composed as follows:
| 31-12-2017 RESTATED |
30-09-2018 |
|---|---|
| (12,504) Estimated current tax on income |
(44,156) |
| Payments on account 19,680 |
12,929 |
| Withholding income taxes 4,383 |
697 |
| Others 731 |
685 |
| 12,290 | (29,845) |
NOS and its associated companies are subject to IRC - Corporate Income Tax - at the rate of 21% on taxable amount (taxable profit less eventual tax losses subject to deduction), plus IRC surcharge at the maximum rate of 1.5% on taxable profit, giving an aggregate rate of approximately 22.5%.
Additionally, following the introduction of austerity measures approved by Law 66-B/2012 of 31 December, and respective addendum published by Law 2/2014 of 16 January, this rate was raised by
In the calculation of taxable income, amounts, which are not fiscally allowable, are added to or subtracted from the book results. These differences between accounting income and taxable income may be of a temporary or permanent nature.
NOS is taxed in accordance with the Special Regime for Taxation of Corporate Groups, which covers the companies in which it directly or indirectly holds at least 75% of their share capital and which fulfil the requirements of Article 69 of the IRC Code.
The companies covered by the Special Regime for Taxation of Corporate Groups in 2018 are:
Under current legislation, tax declarations are subject to review and correction by tax authorities for a period of four years, except when tax losses have occurred or tax benefits have been obtained, whose term, in these cases, matches the deadline to use them. It should be noted that in the event of inspections, appeals, or disputes in progress, these periods might be extended or suspended.
The Board of Directors of NOS, based on information from its tax advisers, believes that these and any other revisions and corrections to these tax declarations, as well as other contingencies of a fiscal nature, will not have a significant effect on the consolidated financial statements as at 30 September 2018.
NOS and its associated companies have reported deferred tax relating to temporary differences between the taxable basis and the book amounts of assets and liabilities, and tax losses carried forward at the date of the statement of financial position.
The movements in deferred tax assets and liabilities for the periods ended on 31 December 2017 and 30 September 2018 were as follows:
| 31-12-2016 | DEFERRED TAXES OF THE PERIOD |
30-09-2017 | ||
|---|---|---|---|---|
| RESTATED | INCOME (NOTE B) |
EQUITY | RESTATED | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7,380 | (205) | - | 7,175 |
| Inventories | 2,482 | (175) | - | 2,307 |
| Other provision and adjustments | 84,371 | (1,864) | - | 82,507 |
| Intragroup gains | 23,034 | (1,091) | - | 21,943 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
7,801 | (271) | - | 7,530 |
| Derivatives | 901 | 26 | (293) | 634 |
| 125,969 | (3,580) | (293) | 122,096 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
7,879 | (2,229) | - | 5,650 |
| Derivatives | 1 0 | (12) | 4 | 2 |
| Assets recognised under application of IFRS 15 (Note 2) | 19,898 | (782) | - | 19,116 |
| Others | 2,317 | (9) | - | 2,308 |
| 30,104 | (3,032) | 4 | 27,076 | |
| NET DEFERRED TAX | 95,865 | (548) | (297) | 95,020 |
| 31-12-2017 | DEFERRED TAXES OF THE PERIOD |
|||
| RESTATED | INCOME (NOTE B) |
EQUITY | 30-09-2018 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 4,981 | (1,692) | - | 3,289 |
| Inventories | 2,340 | (295) | - | 2,045 |
| Other provision and adjustments | 71.500 | (8,684) | - | 62,816 |
|---|---|---|---|---|
| Intragroup gains | 20,926 | 2,101 | - | 23,027 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
7,396 | (707) | - | 6,689 |
| Derivatives | 557 | (30) | (189) | 338 |
| 107,700 | (9,307) | (189) | 98,204 | |
| DEFERRED INCOME TAX LIABILITIES | ||||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
4,851 | (1,951) | - | 2,900 |
| Derivatives | - | 9 | - | 9 |
| Assets recognised under application of IFRS 15 (Note 2) | 18,383 | (18,383) | - | - |
| Others | 2,289 | (32) | - | 2,257 |
| 25,523 | (20,357) | - | 5,166 | |
| NET DEFERRED TAX | 82,177 | 11,050 | (189) | 93,038 |
At 30 September 2018, the deferred tax assets related to the other provisions and adjustments are mainly due: i) Impairments and acceleration of amortisations beyond the acceptable fiscally and other adjustments in fixed tangible assets and intangible assets, amounted to 48.2 million euros (31 December 2017: 50.3 million euros; and ii) Other provisions amounted to 14.7 million euros (31 December 2017: 13.0 million euros).
At 30 September 2018, the deferred tax liability is related to the revaluation of assets relates mainly Optimus Group companies.
At 30 September 2018, deferred tax assets were not recognised for an amount of 2.2 million euros, corresponding mainly to tax incentives.
Deferred tax assets were recognised when it is probable that taxable profits will occur in future that may be used to absorb tax losses or deductible tax differences. This assessment was based on the
At 30 September 2018, the tax rate used to calculate the deferred tax assets relating to tax losses carried forward was 21% (2017: 21%). In the case of temporary differences, the rate used was 22.5% (2017: 22.5%) increased to a maximum of 5.13% (2017: 5.13%) of state surcharge when the taxation of temporary differences in the estimated period of application of the state surcharge was perceived as likely. Tax benefits, related to deductions from taxable income, are considered 100%, and in some cases, their full acceptance is conditional upon the approval of the authorities that grants such tax benefits.
Under the terms of Article 88 of the IRC Code, the Company is subject to autonomous taxation on a series of charges at the rates set out in that Article.
Additionally, under the terms of current legislation in Portugal, tax losses generated from 2012 to 2013 and from 2014 to 2016 may be carried forward for a period of five years and twelve years, respectively, after their occurrence and may be deducted from taxable profits generated during that period, up to a limit of 75% of the taxable profit, in 2012 and 2013, and 70% of taxable profit from 2014 to 2016. For tax losses generated in taxation periods that begin on or after 1 January 2017, the carryover is over a five-year period up to the limit of 70% of the taxable profit.
In the nine months ended on 30 September 2017 and 2018, the reconciliation between the nominal and effective rates of tax was as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Income before taxes | 42,222 | 125,685 | 53,572 | 144,854 |
| Statutory tax rate | 22.5% | 22.5% | 22.5% | 22.5% |
| ESTIMATED TAX | 9,500 | 28,279 | 12,054 | 32,592 |
| Permanent differences i) | (1,706) | (3,565) | (584) | 163 |
| Differences in tax rate of group companies | (434) | (3,193) | (440) | (1,227) |
| Record of deferred taxes | (2) | (830) | (63) | (3,862) |
| Tax benefits ii) | - | (5,098) | - | (11,398) |
| State surcharge | 1,838 | 5,268 | 2,915 | 9,487 |
| Autonomous taxation | 193 | 597 | 172 | 574 |
| Provisions (Note 22) | (7) | (1,181) | (4,727) | (4,776) |
| Others | 33 | (47) | 263 | 898 |
| INCOME TAXES | 9,415 | 20,230 | 9,590 | 22,451 |
| Effective Income tax rate | 22.3% | 16.1% | 17.9% | 15.5% |
| Income tax | 10,559 | 19,682 | 9,394 | 33,501 |
| Deferred tax | (1,144) | 548 | 196 | (11,050) |
| 9,415 | 20,230 | 9,590 | 22,451 |
i) At 30 September 2017 and 2018, the permanent differences were composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Equity method (Note 33) | (6,012) | (14,983) | (1,276) | 4,451 |
| Others | (1,570) | (863) | (1,322) | (3,727) |
| (7,582) | (15,846) | (2,598) | 724 | |
| 22.5% | 22.5% | 22.5% | 22.5% | |
| (1,706) | (3,565) | (584) | 163 |
ii) This item corresponds to the amount of deferred taxes and the use of tax benefits for which there was no record of deferred taxes: SIFIDE (Business Research and Development Tax Incentives System), a tax benefit introduced by Law 40/2005 of 3 August and RFAI (Investment Tax Incentive Regime) introduced by Law 10/2009 of 10 March. During the nine months ended on 30 September 2018, following the different dates to submission and approval of applications, tax incentives related to RFAI and SIFIDE of the years of 2016 and 2017 were recognised. Whilst in the nine months ended on 30 September of 2017, only RFAI of the year of 2016 and SIFIDE of 2015 were recognised. Under the terms of the IRC (Corporate Income Tax) Code, the tax paid may not be less than 90% of the amount, which would result if the Company did not benefit from tax benefits. Therefore, this amount corresponds to that difference, given that the amount is recorded in the controlling company under the Special Taxation Regime for Groups of Companies, and the tax benefits are recorded in the controlled companies.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| INVENTORIES | ||
| Telco | 39,261 | 40,119 |
| Audiovisuals | 1,744 | 1,311 |
| 41,005 | 41,430 | |
| IMPAIRMENT OF INVENTORIES | ||
| Telco | (8,044) | (7,158) |
| Audiovisuals | (917) | (609) |
| (8,961) | (7,767) | |
| 32,044 | 33,663 |
The movements occurred in impairment adjustments were as follows:
| 9M 17 | ||
|---|---|---|
| RESTATED | 9M 18 | |
| AS AT JANUARY 1 | 9,523 | 8,961 |
| Increase and decrease - Cost of products sold (Note 30) | (253) | (59) |
| Utilizations / Others | (533) | (1,135) |
| AS AT SEPTEMBER 30 | 8,737 | 7,767 |
At 31 December 2017 and 30 September 2018, this item was as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Trade receivables | 351,400 | 336,577 |
| Doubtful accounts for trade receivables | 139,484 | 117,182 |
| Unbilled revenues i) | 55,504 | 54,137 |
| Contract assets ii) | 47,424 | 56,457 |
| 593,812 | 564,353 | |
| Impairment of trade receivable | (139,484) | (117,182) |
| 454,328 | 447,171 |
i) The amounts to be invoiced correspond mainly to the value of contractual obligations already met or partially met and whose invoicing will occur subsequently.
ii) The amount of assets related to contract with costumers was introduced in the light of the adoption of IFRS 15 and consists on the early recognition of revenues resulting from the allocation of contract discounts for bundle offers to different performance obligations.
The movements occurred in impairment adjustments were as follows:
| 9M 17 | |
|---|---|
| RESTATED | 9M 18 |
| AS AT JANUARY 1 157,753 |
139,484 |
| Increases and decreases (Note 32) 1,752 |
4,467 |
| Penalties - i) 10,794 |
10,995 |
| (19,406) Utilizations / Others |
(37,764) |
| AS AT SEPTEMBER 30 150,893 |
117,182 |
i) Penalties correspond to the estimated amount of uncollectible invoiced penalties recognised in the period, deducted from revenue, as described in Note 40.6.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Programming costs | 13,884 | 13,481 |
| Costs of litigation procedure activity | 16,990 | 11,587 |
| Rentals | 3,141 | 3,258 |
| Taxes | 173 | 4,903 |
| Advertising | 1,213 | 1,083 |
| Others | 11,126 | 14,893 |
| 46,527 | 49,205 |
During the first quarter of 2017, a contract was signed for the purchase and sale of the assets of the FTTH network of NOS Comunicações SA, located in the metropolitan areas of Lisbon and Porto,
following the announcement of the non-opposition decision of the Competition Authority to the operation of merger between ZON and Optimus of 26 August 2013.
At the date of the statement of the financial position there were foreign currency forwards open for 4.248 thousand euros (31 December 2017: 3,141 thousand euros), the fair value is the positive amount of 40 thousand euros (2017: loss of about 33 thousand euros).
At 30 September 2018, NOS had contracted two interest rate swaps totalling 250 million euros (31 December 2017: 250 million euros) whose swap maturities expire in 2019. The fair value of interest rate swaps, in the negative amount of 1.6 million euros (31 December 2017: negative amount of 2.5
At 30 September 2018, NOS had contracted four own shares derivatives, in the amount of 2.641 thousand euros (31 December 2017: 2.318 thousand euros), maturing in March 2019, 2020 and 2021, in order to cover the delivery of share plans liquidated in cash.
| 31-12-2017 RESTATED |
|||||
|---|---|---|---|---|---|
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Interest rate swaps | 250,000 | - - |
2,453 - |
||
| Equity Swaps | 2,318 | 1 9 | - | 9 - |
|
| Exchange rate forward | 3,141 | - - |
- - |
||
| 255,459 | 1 9 | - | 2,462 - |
||
| 30-09-2018 | |||||
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Interest rate swaps | 250,000 | - - |
1,585 - |
||
| Equity swaps | 2,641 | 21 | 65 | - - |
|
| Exchange rate forward | 4,248 | 40 | - | - - |
256,889 61 65 - 1,585
Movements during the nine months ended ended on 30 September 2017 and 2018 were as follows:
| 31-12-2016 | RESULT | EQUITY | 30-09-2017 | |
|---|---|---|---|---|
| RESTATED | RESTATED | |||
| Fair value interest rate swaps | (4,027) | - | 1,303 | (2,724) |
| Fair value exchange rate forward | 37 | (30) | - | 7 |
| Fair value equity swaps | 23 | (138) | 20 | (95) |
| DERIVATIVES | (3,967) | (168) | 1,323 | (2,812) |
| Deferred income tax liabilities | (10) | 1 2 | (4) | (2) |
| Deferred income tax assets | 901 | 26 | (293) | 634 |
| DEFERRED INCOME TAX | 890 | 38 | (297) | 632 |
| (3,077) | (130) | 1,026 | (2,180) |
| 31-12-2017 RESTATED |
RESULT | EQUITY | 30-09-2018 | |
|---|---|---|---|---|
| Fair value interest rate swaps | (2,453) | - | 868 | (1,585) |
| Fair value exchange rate forward | (33) | 73 | - | 40 |
| Fair value equity swaps | 1 0 | 102 | (26) | 86 |
| DERIVATIVES | (2,476) | 175 | 842 | (1,459) |
| Deferred income tax liabilities | - | (9) | - | (9) |
| Deferred income tax assets | 557 | (30) | (189) | 338 |
| DEFERRED INCOME TAX | 557 | (39) | (189) | 329 |
| (1,919) | 136 | 653 | (1,130) |
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Cash | 2,002 | 1,329 |
| Other deposits i) | 579 | 679 |
| Deposits | 396 | 476 |
| 2,977 | 2,484 |
i) At 31 December 2017 and 30 September 2018, term deposits have short-term maturities and bear interest at normal market rates.
At 31 December 2017 and 30 September 2018, the share capital of NOS was 5,151,613.80 euros, represented by 515,161,380 shares registered book-entry shares, with a nominal value of 1 euro cent per share.
The main shareholders as of 31 December 2017 and 30 September 2018 are:
| 31-12-2017 RESTATED |
30-09-2018 | |||
|---|---|---|---|---|
| NUMBER OF | % SHARE | NUMBER OF | % SHARE | |
| SHARES | CAPITAL | SHARES | CAPITAL | |
| ZOPT, SGPS, SA (1) | 268,644,537 | 52.15% | 268,644,537 | 52.15% |
| Blackrock, Inc | 11,562,497 | 2.24% | 11,562,497 | 2.24% |
| MFS Investment Management | 11,049,477 | 2.14% | 11,049,477 | 2.14% |
| Norges Bank | 10,891,068 | 2.11% | 10,891,068 | 2.11% |
| Banco BPI, SA | 14,275,509 | 2.77% | - | - |
| TOTAL | 316,423,088 | 61.42% | 302,147,579 | 58.65% |
(1) In accordance with subparagraphs 1.b) and 1.c) of Article 20 and Article 21 of the Portuguese Securities Code, a qualified shareholding of 52.15% of the share capital and voting rights of company, calculated in accordance with Article 20 of the Securities Code, is attributable to ZOPT SGPS S.A., Sonaecom SGPS S.A. and the following entities:
Efanor Investimentos, SGPS, S.A, with effects after 29 November 2017, has no longer a control shareholder, in accordance and for the effects of Articles 20 and 21 of the Securities Code.
On 27 August 2013, and following the completion of the merger between ZON and Optimus SGPS, the Company's share capital was increased by 856,404,278 euros, corresponding to the total number of issued shares (206,064,552 shares), based on the closing market price of 27 August 2013. The capital increase is detailed as follows:
Additionally, the premium for issue of shares was deducted for an amount of 125 thousand euros related to costs with the respective capital increase.
The capital issued premium is subject to the same rules as for legal reserves and can only be used:
Company law regarding own shares requires the establishment of a non-distributable reserve of an amount equal to the purchase price of such shares, which becomes frozen until the shares are disposed of or distributed. In addition, the applicable accounting rules determine that gains or losses on the disposal of own shares are stated in reserves.
At 30 September 2018 there were 2,073,859 own shares, representing 0.403% of share capital (31 December 2017: 2,040,234 own shares, representing 0.390% of the share capital)
Movements in the three and nine months ended on 30 September 2017 and 2018 were as follows:
| QUANTITY | VALUE | |
|---|---|---|
| BALANCE AS AT 1 JANUARY 2017 | 3,017,603 | 18,756 |
| Distribution of own shares - share incentive scheme | (931,471) | (5,790) |
| Distribution of own shares - other remunerations | (45,898) | (285) |
| BALANCE AS AT 30 SEPTEMBER 2017 | 2,040,234 | 12,681 |
| BALANCE AS AT 1 JANUARY 2018 | 2,040,234 | 12,681 |
| Acquisition of own shares | 650,000 | 3,096 |
| Distribution of own shares - share incentive scheme | (598,725) | (3,515) |
| Distribution of own shares - other remunerations | (17,650) | (103) |
| BALANCE AS AT 30 SEPTEMBER 2018 | 2,073,859 | 12,159 |
net profit must be used to build up the legal reserve until it corresponds to 20% of the share capital. This reserve cannot be distributed except in the event of liquidation of the company, but it may be used to absorb losses after all other reserves have been exhausted, or for incorporation in the share capital.
Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IAS / IFRS. Thus, on 30 September 2018, NOS had reserves, which by their nature are considered distributable for an amount of approximately 1.4 million euros, not including the net income.
The movements of the non-controlling interests occurred during the nine months ended on 30 September 2017 and 2018 and the results attributable to non-controlling interests for the year are as follows:
| 31-12-2016 RESTATED |
ATTRIBUTABLE PROFITS |
OTHERS | 30-09-2017 RESTATED |
|
|---|---|---|---|---|
| NOS Madeira | 5,544 | 485 | 4 | 6,033 |
| NOS Açores | 2,174 | (160) | 1 | 2,015 |
| Lusomundo SII | 23 | - | - | 23 |
| Lusomundo Imobiliária 2 | 34 | - | - | 34 |
| 7,775 | 325 | 5 | 8,105 | |
| 31-12-2017 RESTATED |
ATTRIBUTABLE PROFITS |
OTHERS | 30-09-2018 | |
| NOS Madeira | 5,898 | (328) | (3) | 5,567 |
| NOS Açores | 1,924 | (270) | (2) | 1,652 |
| 7,822 | (598) | (5) | 7,219 |
At 31 December 2017 and 30 September 2018, the composition of borrowings was as follows:
| 31-12-2017 RESTATED |
30-09-2018 | |||
|---|---|---|---|---|
| CURRENT | NON-CURRENT | CURRENT | NON-CURRENT | |
| LOANS - NOMINAL VALUE | 182,987 | 873,333 | 163,488 | 880,000 |
| Debenture loan | - | 585,000 | 50,000 | 610,000 |
| Commercial paper | 122,901 | 215,000 | 215,000 | |
| Foreign loans | 18,333 | 73,333 | 55,000 | |
| Bank overdrafts | 41,753 | - | 30,155 | - |
| LOANS - ACCRUALS AND DEFERRALS | 582 | (2,992) | 741 | (4,276) |
| LOANS - AMORTISED COST | 183,569 | 870,341 | 164,229 | 875,724 |
| FINANCIAL LEASES | 26,567 | 84,317 | 26,407 | 68,794 |
| Long Term Contracts | 12,858 | 63,475 | 12,242 | 55,893 |
| Other | 13,709 | 20,842 | 14,165 | 12,901 |
| 210,136 | 954,658 | 190,636 | 944,518 |
During the period ended on 30 September 2018, the average cost of debt of the used lines was approximately 1.7% (2017: 2.0%).
At 31 December 2017 and 30 September 2018, NOS has the following bonds issued, totalling 585 million euros and 660 million euros, respectively, and with maturity after one year:
i) A bond loan in the amount 100 million euros organised by BPI bank in May 2014 and maturing in November 2019. The loan bears interest at variable rates, indexed to Euribor and paid semiannually.
At 30 September 2018, an amount of 590 thousand euros, corresponding to interest and commissions, was added -
At 30 September 2018, the Company has borrowings of 280 million euros in the form of commercial paper, of which 15 million euros was issued under non-underwritten programs. The total amount contracted, under underwriting securities, is of 520 million euros, corresponding to eleven programmes, with four banks, 445 million euros of which bear interest at market rates and 75 million euros are issued in fixed rate. Commercial paper programmes with maturities over one year totalling 265 million euros are classified as non-current, since the Company has the ability to renew underwritten by the organiser. As such, this amount, although having a current maturity, it was classified as non-current for presentation purposes in the financial position statement.
At 30 September 2018 an amount of 99 thousand euros, corresponding to interest and - accruals and
In November 2013, NOS signed a Finance Contract with the European Investment Bank for an amount of 110 million euros to support the development of the mobile broadband network in Portugal. In September 2014, the total amount of funds was used. This contract matures in a maximum period of 8 years from the use of the funds, with partial amortisations of 18,3 million euros per year as of September 2017.
On 14 December 2017, NOS concluded a mutual contract with Millennium BCP for an amount of 50 million euros that bears interest at a variable rate indexed to Euribor that is due on 14 March 2018.
At 30 September 2018, an amount of 4.126 thousand euros was deducted from this amount, corresponding to the benefit associated with the fact that the loan with BEI is at a subsidised rate.
All bank borrowings contracted (with the exception of BEI loan of 73.3 million euros, bond loan in the amount 50 million euros, refunded in June 2018, public issuance of bonds of 300 million euros,
issued in fixed rate, and finance leases) are negotiated at variable short-term interest rates and their book value is therefore broadly similar to their fair value.
On 31 December 2017 and 30 September 2018 , the long-term contracts are mainly related to contracts signed by NOS SA for the acquisition of exclusive satellite use, to the contracts signed by NOS SA and NOS Technology related to the purchase of rights to use the distribution network and the contract signed by NOS Cinemas regarding the acquisition of digital equipment.
The medium and long-term agreements under which the group has the right to use a specific asset are recorded as finance leases in accordance with IAS 17 - "Determining whether an arrangement contains a lease".
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Until 1 year | 26,567 | 26,407 |
| Between 1 and 5 years | 56,525 | 47,033 |
| Over 5 years | 27,793 | 21,761 |
| 110,884 | 95,201 |
| 31-12-2017 | 30-09-2018 |
|---|---|
| RESTATED | |
| Until 1 year 31,255 |
30,767 |
| Between 1 and 5 years 66,436 |
55,048 |
| Over 5 years 30,208 |
23,024 |
| 127,899 | 108,839 |
| Future financial costs (lease) (17,015) |
(13,638) |
| PRESENT VALUE OF FINANCE LEASE LIABILITIES 110,884 |
95,201 |
The maturities of the loans obtained are as follows:
| 31-12-2017 RESTATED |
30-09-2018 | |||||
|---|---|---|---|---|---|---|
| UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | |
| Debenture loan | 1,431 | 523,130 | 59,970 | 53,013 | 547,577 | 60,000 |
| Commercial paper | 122,637 | 177,500 | 37,500 | 64,901 | 165,000 | 50,000 |
| Foreign loans | 17,748 | 72,241 | - | 16,160 | 53,147 | - |
| Bank overdrafts | 41,753 | - | - | 30,155 | - | - |
| Financial leases | 26,567 | 56,525 | 27,793 | 26,407 | 47,033 | 21,761 |
| 210,136 | 829,396 | 125,262 | 190,636 | 812,757 | 131,761 |
At 31 December 2017 and 30 September 2018, the provisions were as follows:
| 31-12-2017 | 30-09-2018 |
|---|---|
| RESTATED | |
| Litigation and other - i) 52,261 |
53,760 |
| Financial investments - ii) 425 |
- |
| 31,651 Dismantling and removal of assets - iii) |
34,133 |
| 32,490 Contingent liabilities - iv) |
32,490 |
| Contingencies - other - v) 16,435 |
17,360 |
| 133,262 | 137,743 |
i) The amount under the item "Litigation and other" corresponds to provisions to cover the legal and tax claims of which stand out:
iii) The amount under the item "Dismantling and removal of assets "refers to the estimated future costs discounted to the present value, related with the termination of the use of the space where there are telecommunication towers and cinemas;
iv) The amount in the item "Contingent liabilities" refers to several provisions recorded for present but not likely obligations, related to the merger by incorporation of Optimus SGPS, namely:
In 2015, ANACOM deliberated to approve the final results of the audit to CLSU presented by MEO relative to the period from 2012 to 2013, in the amount of 26 million euros and 20 million euros, respectively, and as the others, it was contested by NOS. In December 2016, the notices of settlement were issued relating to NOS, SA, NOS Madeira and NOS Açores, corresponding to that period, totalling 13.6 million euros that were contested by NOS and for which guarantees have been already presented by NOS SGPS in order to avoid the promotion of the respective proceedings of tax execution. The guarantees were also accepted by ANACOM.
In 2016, ANACOM approved the results of the audit to the CLSU presented by MEO related with the period between January and September 2014, for an amount of 7.7 million euros that was contested by NOS, in standard terms.
It is the opinion of the Board of Directors of NOS that these extraordinary contributions to Universal Service (not designated through a tender procedure) flagrantly violate the Directive of Universal Service. Moreover, considering the existing legal framework since NOS began its activity, the request of payment of the extraordinary contribution violates the principle of the protection of confidence, recognised on a legal and constitutional level in Portuguese domestic law. For these reasons, NOS will continue judicially challenge either the approval of audit results of the net cost of universal service related to the precompetitive period, and the liquidation of each extraordinary contribution, once the Board of Directors is convinced it will be successful in all challenges, both future and already undertaken;
| 31-12-2016 RESTATED |
INCREASES | DECREASES | OTHERS | 30-09-2017 RESTATED |
|
|---|---|---|---|---|---|
| Litigation and other | 57,697 | 6,566 | (11,522) | (2,588) | 50,153 |
| Financial investments | 825 | - | (210) | - | 615 |
| Dismantling and removal of assets | 29,694 | 582 | (358) | 1,512 | 31,430 |
| Contingent liabilities | 33,486 | - | (996) | - | 32,490 |
| Contingencies - other | 24,585 | 1,457 | (168) | (4,083) | 21,791 |
| 146,287 | 8,605 | (13,254) | (5,159) | 136,479 |
During the nine months ended on 30 September 2017, movements in provisions were as follows:
During the nine months ended on 30 September 2017, increases mainly refer to increases of provisions to tax proceedings plus interest and charges, resulting from unfavourable decision of lawsuit relating to the year 2007. Nevertheless, an appeal against this decision was filled by the company.
During the nine months ended 30 September 2017, the reductions are related predominantly to the increase of provisions for legal proceedings as a result of favourable decisions and agreements reached, namely the process of misconduct interposed by ANACOM.
In addition, the movements recorded in "Other" in the amount of 4.1 million euros refer mainly to the use of provisions created for employee compensation amounting to 2.4 million euros and to the reclassification of cost estimates in which it is not possible to estimate with great reliability the moment of implementation of the expenditure in the amount of 1.6 million euros.
During the nine months ended on 30 September 2018, movements in provisions, were as follows:
| 31-12-2017 RESTATED |
INCREASES | DECREASES | OTHERS | 30-09-2018 | |
|---|---|---|---|---|---|
| Litigation and other | 52,261 | 9,013 | (7,514) | - | 53,760 |
| Financial investments | 425 | - | (425) | - | - |
| Dismantling and removal of assets | 31,651 | 340 | (37) | 2,179 | 34,133 |
| Contingent liabilities | 32,490 | - | - | - | 32,490 |
| Contingencies - other | 16,435 | 1,710 | (464) | (321) | 17,360 |
| 133,262 | 11,063 | (8,440) | 1,858 | 137,743 |
During the nine months ended on 30 September 2018, the increases refer mainly to provisions for legal claims plus interests and charges and the reductions refer to the reassessment of various tax and legal contingencies.
The net movements for the nine months ended on 30 September 2017 and 2018 reflected in the income statement under Provisions were as follows:
| 9M 17 | |
|---|---|
| RESTATED | 9M 18 |
| Provisions and adjustments (Note 32) (3,191) |
(1,288) |
| Financial investments (Note 9) (210) |
(425) |
| Other losses / (gains) non-recurrent (Note 35) 1,409 |
8,429 |
| Interests - dismantling 225 |
303 |
| (1,701) Other interests |
380 |
| Income tax (Note 12) (1,181) |
(4,776) |
| (4,649) INCREASES AND DECREASES IN PROVISIONS |
2,623 |
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| NON-CURRENT | ||
| Contractual obligations i) | 8,139 | 5,853 |
| Others | 628 | 519 |
| 8,767 | 6,372 | |
| CURRENT | ||
| Invoices to be issued by operators ii) | 64,136 | 48,248 |
| Investments in tangible and intangible assets | 37,532 | 26,879 |
| Vacation pay and bonuses | 26,504 | 24,098 |
| Programming services | 7,946 | 16,429 |
| Professional services | 14,628 | 12,467 |
| Advertising | 17,298 | 12,287 |
| Content and film rights | 16,892 | 11,867 |
| ANACOM taxes and Cinema Law iii) | 111 | 7,866 |
| Costs of litigation procedure activity | 5,078 | 7,277 |
| Comissions | 5,122 | 6,487 |
| Energy and water | 3,474 | 5,049 |
| Maintenance and repair | 2,304 | 2,076 |
| Rentals | 1,570 | 1,475 |
| Other accrued expenses | 10,970 | 9,809 |
| 213,564 | 192,315 |
i) Under the fair value allocation process of to the assets and liabilities of the Optimus group, contractual obligations were identified relating to long-term contracts whose prices are different from market prices. This amount relates to the medium and long-term portion of the fair value adjustment of these contracts.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 RESTATED |
30-09-2018 | |||
|---|---|---|---|---|
| CURRENT | NON-CURRENT | CURRENT | NON-CURRENT | |
| Advanced billing i) | 26,415 | - | 30,697 | - |
| Investment subsidy ii) | 632 | 3,773 | 417 | 5,662 |
| 27,047 | 3,773 | 31,114 | 5,662 |
i) This item relates mainly to the billing of Pay TV services regarding the following month to the repor recharges of mobile phones and purchase of telecommunications minutes as of yet unused.
ii) Deferred income related to the implicit subsidy when the BEI loans were obtained at interest rates below market value (Note 21). During the second quarter of 2018, the calculation of the implicit subsidy was updated following the revision of the initial contractual conditions.
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Suppliers current account | 222,840 | 248,864 |
| Invoices in reception and conference | 2,024 | 4,242 |
| 224,864 | 253,106 |
At 31 December 2017 and 30 September 2018, this item was composed as follows:
| 31-12-2017 RESTATED |
30-09-2018 | |
|---|---|---|
| NON-CURRENT | ||
| Assignment of receivables without recourse i) | 17,615 | 11,583 |
| 17,615 | 11,583 | |
| CURRENT | ||
| Fixed assets suppliers | 40,753 | 28,723 |
| Assignment of receivables without recourse i) | 15,493 | 11,309 |
| Advances from customers | 179 | 226 |
| Others | 1,730 | 1,640 |
| 58,155 | 41,898 | |
| 75,770 | 53,481 |
i) NOS Comunicações, SA materialised a credit assignment transaction, that was coordinated by Banco Comercial Português and Caixa Geral de Depósitos, which it ceded future credits to be generated by a portfolio of Corporate customers. In the period of nine months ended on 30 September 2018, the balance amounts to 22.9 million euros. This does not imply any change in the accounting treatment of the receivables or in the relationship with their customers.
Consolidated operating revenues, for the three and nine months ended on 30 September 2017 and 2018, were as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| SERVICES RENDERED: | ||||
| Telco i) | 346,638 | 1,028,047 | 350,313 | 1,038,259 |
| Audiovisuals and cinema exhibition ii) | 18,692 | 58,382 | 17,516 | 48,663 |
| 365,330 | 1,086,429 | 367,829 | 1,086,922 | |
| SALES: | ||||
| Telco iii) | 18,812 | 47,771 | 17,284 | 49,022 |
| Audiovisuals and cinema exhibition iv) | 4,894 | 13,432 | 4,505 | 12,278 |
| 23,706 | 61,203 | 21,789 | 61,300 | |
| OTHER OPERATING REVENUES: | ||||
| Telco | 2,916 | 11,459 | 5,106 | 18,176 |
| Audiovisuals and cinema exhibition | 131 | 600 | 272 | 885 |
| 3,047 | 12,059 | 5,378 | 19,061 | |
| 392,084 | 1,159,691 | 394,996 | 1,167,283 |
These operating revenues are shown net of inter-company eliminations.
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Remuneration | 17,711 | 50,270 | 16,327 | 46,422 |
| Social taxes | 4,235 | 12,630 | 4,233 | 12,520 |
| Social benefits | 515 | 1,471 | 480 | 1,435 |
| Other | 738 | 1,716 | 147 | (171) |
| 23,199 | 66,087 | 21,187 | 60,206 |
In the three and nine months ended on 30 September 2017 and 2018, the average number of employees of the companies included in the consolidation was 2,498 and 2,493, respectively. At 30 September 2018, the number of employees of the companies included in the consolidation was 2,430 employees.
The costs of compensations paid to employees, since they are non-recurring costs, are recorded in
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Exhibition costs | 50,423 | 154,329 | 52,579 | 153,936 |
| Traffic costs | 52,142 | 154,391 | 49,553 | 160,894 |
| Capacity costs | 11,395 | 34,919 | 9,766 | 32,725 |
| Costs related to corporate customers services | 1,967 | 4,614 | 4,636 | 11,016 |
| Shared advertising revenues | 3,557 | 11,128 | 3,197 | 10,361 |
| Others | 1,025 | 3,366 | 838 | 2,714 |
| 120,509 | 362,747 | 120,569 | 371,646 |
In the third quarter of 2018, the Group changed the presentation caption of costs related to services costs directly related to the operational activity of this business segment. This change had no impact flows. The consolidated statements were restated from 1 January 2017, ascending the amount reclassified as at 30 September 2018 to 4,614 thousand euros.
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Costs of products sold | 17,818 | 45,134 | 16,840 | 44,674 |
| Increases / (decreases) in inventories impairments (Note 13) | (509) | (253) | 178 | (59) |
| 17,309 | 44,881 | 17,018 | 44,615 |
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| SUPPORT SERVICES: | ||||
| Call centers and customer support | 7,721 | 23,812 | 7,256 | 22,876 |
| Information systems | 4,041 | 12,821 | 3,757 | 11,167 |
| Administrative support and others | 10,026 | 31,371 | 9,922 | 28,619 |
| 21,788 | 68,004 | 20,935 | 62,662 | |
| SUPPLIES AND EXTERNAL SERVICES: | ||||
| Maintenance and repair | 11,313 | 34,282 | 11,531 | 33,485 |
| Rentals | 10,941 | 32,596 | 10,838 | 29,039 |
| Electricity | 5,777 | 16,448 | 5,721 | 16,711 |
| Installation and removal of terminal equipment | 1,576 | 4,418 | 1,288 | 3,269 |
| Professional services | 3,370 | 9,597 | 3,039 | 8,958 |
| Communications | 2,016 | 5,663 | 1,740 | 5,427 |
| Other supplies and external services | 6,258 | 20,009 | 6,211 | 18,592 |
| 41,251 | 123,013 | 40,368 | 115,481 |
In the three and nine months ended on 30 September 2017 and 2018, these items were composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Provisions (Note 22) | 257 | (3,191) | (66) | (1,288) |
| Impairment of account receivables - trade (Note 14) | (198) | 1,752 | 2,509 | 4,467 |
| Impairment of account receivables - others (Note 10) | (10) | (7) | 1 6 | 162 |
| Others | 1 | 1 1 | 5 | 39 |
| 50 | (1,435) | 2,464 | 3,380 |
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 9M 17 RESTATED |
9M 18 |
|---|---|
| EQUITY METHOD (NOTE 9) | |
| (2,836) Sport TV |
(1,461) |
| (630) Dreamia |
(183) |
| (11,272) Finstar |
6,965 |
| (250) Mstar |
(610) |
| (18) Upstar |
(92) |
| Others 23 |
4 |
| (14,983) | 4,623 |
| OTHERS - |
(172) |
| (14,983) | 4,451 |
During the nine months ended on 30 September 2018, the Kwanza recorded an exceptional devaluation against the Euro of approximately 46%, which generated the recognition of exchange losses in Finstar, losses that impact this item in approximately, 12 million euros.
In the three and nine months ended on 30 September 2017 and 2018, this item was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| TANGIBLE ASSETS | ||||
| Buildings and other constructions | 2,315 | 8,125 | 2,753 | 8,336 |
| Basic equipment | 47,785 | 136,438 | 41,050 | 129,760 |
| Transportation equipment | 377 | 1,248 | 473 | 1,370 |
| Tools and dies | 8 | 24 | 1 0 | 27 |
| Administrative equipment | 1,441 | 2,971 | 1,260 | 4,112 |
| Other tangible assets | 2 | 6 | 5 | 9 4 |
| 51,928 | 148,812 | 45,551 | 143,699 | |
| INTANGIBLE ASSETS | ||||
| Industrial property and other rights | 26,272 | 81,034 | 23,685 | 75,139 |
| Costs of obtaining and to fulfil a contract with a customer | 26,215 | 78,241 | 25,952 | 78,271 |
| 52,487 | 159,275 | 49,637 | 153,410 | |
| INVESTIMENT PROPERTY | ||||
| Investment property | 1 | 2 | 1 | 2 |
| 1 | 2 | 1 | 2 | |
| 104,416 | 308,089 | 95,189 | 297,111 |
During the nine months ended on 30 September 2018, following the modernisation project of the NOS mobile network, impairment losses were recognised on the current assets for an approximate amount of 30 million euros.
In the three and nine months ended on 30 September 2017 and 2018, the other non-recurring costs / (gains) was composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| GAINS: | ||||
| Default interests - offsetting of credits i) | - | - | - | (27,318) |
| - | - | - | (27,318) | |
| COSTS: | ||||
| Provisions and costs with lawsuits | - | - | - | 12,529 |
| Others | 3,911 | 5,694 | 282 | 2,396 |
| 3,911 | 5,694 | 282 | 14,925 | |
| TOTAL | 3,911 | 5,694 | 282 | (12,393) |
i) Following the dispute between the subsidiary NOS SA and MEO - Serviços de Comunicações e Multimédia, SA (formerly TMN - Telecomunicações Móveis Nacionais, SA), relating to the lack of definition of interconnection prices for 2001, and subsequent assignment from TMN to MEO and unilateral compensation by MEO of interconnection related credits, NOS filed an action against it, in which it required that (i) the compensation be declared ineffective and (ii) the payment of the debt, plus interest. After all appeals and claims in court, promoted by MEO, were dismissed, including by the Constitutional Court, NOS received and recognised an income of interests on these loans amounting to 27.3 million euros. This amount was received at 3 July 2018.
In the three and nine months ended on 30 September 2017 and 2018, financing costs and other financial expenses / (income) were composed as follows:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| FINANCING COSTS: | ||||
| INTEREST EXPENSE: | ||||
| Borrowings | 3,979 | 12,115 | 3,248 | 9,985 |
| Finance leases | 1,295 | 4,180 | 1,155 | 3,405 |
| Derivatives | 431 | 1,793 | 410 | 1,217 |
| Others | 350 | 1,685 | 269 | 1,160 |
| 6,056 | 19,773 | 5,082 | 15,767 | |
| INTEREST EARNED | (1,239) | (3,987) | (979) | (3,104) |
| 4,817 | 15,786 | 4,103 | 12,663 | |
| NET OTHER FINANCIAL EXPENSES / (INCOME): | ||||
| Comissions and guarantees | 1,268 | 3,721 | 971 | 4,212 |
| Others | 370 | (1,329) | 223 | 2,497 |
| 1,638 | 2,392 | 1,194 | 6,709 |
Interest earned mainly corresponds to default interests charged to customers.
In the second quarter of 2017, in the sequence of agreements achieved regarding litigation, provisions for default interest were reversed in Other under Net financial expenses / (income) (Note 22).
Earnings per share for the three and nine months ended on 30 September 2017 and 2018 were calculated as follow:
| 3º QUARTER 17 | 9M 17 RESTATED |
3º QUARTER 18 | 9M 18 | |
|---|---|---|---|---|
| Consolidated net income attributable to shareholders | 32,893 | 105,130 | 44,110 | 123,001 |
| Number of ordinary shares outstanding during the period (weighted average) | 513,116,080 | 512,848,192 | 513,081,276 | 513,090,643 |
| Basic earnings per share - euros | 0.06 | 0.20 | 0.09 | 0.24 |
| Diluted earnings per share - euros | 0.06 | 0.20 | 0.09 | 0.24 |
In the above periods, there were no diluting effects on net earnings per share, so the diluted earnings per share are equal to the basic earnings per share.
At 31 December 2017 and 30 September 2018, the Group had furnished sureties, guarantees, and comfort letters in favour of third parties corresponding to the following situations:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 30-09-2018 | |
| Financial instituitions i) | 91,843 | - |
| Tax authorities ii) | 13,112 | 12,819 |
| Others iii) | 11,479 | 10,691 |
| 116,434 | 23,510 |
In connection with the finance obtained by Upstar from Banco Comercial Português, totalling 10 million euros, NOS signed a promissory note, proportional to the participation held, of 30% of the loan.
During the first semester of 2015, 2016, 2017 and 2018, and following the settlement notes to CLSU 2007-2009, 2010-2011, 2012-2013 and 2014, respectively, NOS constituted guarantees in favour of the Universal Service Compensation Fund in the amount of 23.6 million euros, 16.7 million euros and 17.5 million euros and 3.0 million euros, respectively, in order to prevent the introduction of tax enforcement proceedings in order to enforce recovery of the amounts paid.
On 30 September 2016, NOS constituted guarantees on behalf of Sport TV, to the Football Association League Limited for an amount of 29.1 million euros, which, at 30 September 2018, amounted to 5.3 million euros. The guarantee ends on the last quarter of 2018.
NOS provided a guarantee to Warner Brothers, under the contract renewal of cinema distribution for national territory and African Portuguese speaking countries.
In addition to the guarantees required by the tax authorities, sureties were set up for the current fiscal processes, which NOS was a surety for NOS SA for an amount of 15.3 million euros.
The rentals due on operating leases have the following maturities:
| 31-12-2017 RESTATED | 30-09-2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| AUTOMATIC RENEWAL |
UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
AUTOMATIC RENEWAL |
UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
|
| Stores, movie theatre and other buildings | 1,037 | 22,041 | 50,033 | 17,647 | 1,353 | 20,711 | 54,516 | 16,592 |
| Telecommunication towers and rooftops | 2,068 | 22,407 | 60,211 | 19,048 | 1,950 | 22,923 | 63,180 | 21,868 |
| Equipments | - | 8,922 | 18,229 | - | - | 7,019 | 15,396 | - |
| Vehicles | - | 2,253 | 2,577 | - | - | 1,868 | 2,165 | - |
| 3,105 | 55,623 | 131,050 | 36,695 | 3,303 | 52,521 | 135,257 | 38,460 |
Of the loans obtained (excluding finance leases), in addition to being subject to the Group complying with its operating, legal and fiscal obligations, 100% are subject to cross-default, Pari Passu and Negative Pledge clauses and 76% to ownership clauses.
In addition, approximately 27% of the total loans obtained require that the consolidated net financial debt does not exceed 3 times consolidated EBITDA, approximately 4% of the total loans obtained require that the consolidated net financial debt does not exceed 3.5 times consolidated EBITDA, approximately 6% of the total loans obtained require that the consolidated net financial debt does
not exceed 4 times consolidated EBITDA and approximately 4% require that the consolidated net financial debt does not exceed 5 times consolidated EBITDA.
EBITDA = Operational Result + Depreciation, amortisation and impairment losses + Restructuring costs + Losses / (gains) on sale of assets + Other losses / (gains) non recurrent
In December 2015, NOS signed a contract with Sport Lisboa e Benfica - Futebol SAD and Benfica TV, of Benfica TV Channel. The contract began in 2016/2017 sports season, had an initial duration of three years, and might be renewed by decision of either party up to a total of 10 sports seasons, with the overall financial consideration reaching the amount of 400 million euros, divided into progressive annual amounts.
Also in December 2015, NOS signed a contract with Sporting Clube de Portugal - Futebol SAD and Sporting and Communication Platforms, S.A. for the assignment of the following rights:
The contract will last 10 years, concerning the rights indicated in 1) and 2) above, starting in July 2018, 12 years in the case of the rights stated in 3) starting in July 2017 and 12 and a half seasons in the case of the rights mentioned in 4) beginning in January 2016, with the overall financial consideration amounting to 446 million euros, divided into progressive annual amounts.
Also in December 2015, NOS SA has signed contracts regarding the television rights of home senior team football games with the following sports clubs:
The contracts will begin in the 2019/2020 sports season and last up to 7 seasons, with the exception of the contract with Sporting Clube de Braga - Futebol, SAD which lasts 9 seasons.
During the year of 2016, NOS SA has signed contracts regarding the television rights of home senior team football games with the following sports clubs:
2) Clube Futebol União da Madeira, Futebol, SAD
3) Grupo Desportivo de Chaves Futebol, SAD
The contracts will begin in the 2019/2020 sports season and last up to 3 seasons.
In May 2016, NOS and Vodafone have agreed on reciprocal availability, for several sports seasons, of sports content (national and international) owned by the companies, in order to assure to both companies, directly by the assigning party or indirectly through the transfer to third party content distribution channels or models, the availability of broadcasting rights of the sports clubs home football games, as well as the broadcasting and distribution rights of sports and sports clubs channels, whose rights are owned by each of the companies in each moment. The agreement came nel and these football games are broadcast.
Considering that the contract signed allowed for the possibility of extending the agreement to the other operators, in July 2016 MEO and Cabovisão joined the agreement, ending the lack of access to every relevant sports content, regardless of which operator they use.
Following the agreement signed with the remaining operators, as a counterpart of the reciprocal provision of rights, the global costs are shared according with retailer telecommunications revenues and Pay TV market shares.
| Seasons | 2018/19 | following |
|---|---|---|
| Estimated cash-flows with the contract signed by NOS with the sports entities* | ||
| NOS estimated cash-flows for the contracts signed by NOS (net amounts charged to the operators) and for the contracts signed by the remaining operators |
The estimated cash flows are estimated as follows:
* Includes games and channels, broadcasting rights, advertising, and others.
NOS and Vodafone Portugal celebrated on 29 September 2017 an agreement of infrastructure development and sharing with a nationwide scope. This partnership allows the two Operators providing their commercial offers under a shared network at the beginning of 2018.
The agreement covers the reciprocal sharing of dark fibre in approximately 2.6 million of homes in which each of the entities shares with the other one an equivalent investment value, in other words, they share similar goods. It is assumed that both companies retain full autonomy, independence, and confidentiality concerning the design of the commercial offers, the management of the
did not originate any impact on the consolidated financial statements (according to IAS 16, this exchange of similar non-monetary assets will be presented on a net basis).
The partnership was also widened to the sharing of the mobile infrastructure and the minimum share of 200 mobile towers was agreed.
Transactions and balances between NOS and companies of the NOS Group were eliminated in the consolidation process and are not subject to disclosure in this note.
The balances at 31 December 2017 and 30 September 2018 and transactions in the nine months ended on 30 September 2017 and 2018 between NOS Group and its associated companies, joint ventures and other related parties are as follows:
| ACCOUNTS | ACCOUNTS | ACCRUED | DEFERRED | PREPAID | |
|---|---|---|---|---|---|
| RECEIVABLES | PAYABLE | EXPENSES | INCOME | EXPENSES | |
| SHAREHOLDERS | |||||
| BPI | 1,519 | 41 | 47 | - | - |
| ASSOCIATED COMPANIES | |||||
| Big Picture 2 Films | 60 | 123 | 628 | - | - |
| Sport TV | 1,418 | 4,795 | 3,680 | - | 13,568 |
| JOINTLY CONTROLLED COMPANIES | |||||
| Dreamia Holding BV | 2,693 | - | - | - | - |
| Dreamia SA | 1,801 | 1,470 | 211 | - | - |
| Finstar | 10,411 | - | - | - | - |
| Mstar | 1 | - | - | - | - |
| Upstar | 34,025 | 58 | - | 1 2 | - |
| ZAP Cinemas | 373 | - | - | - | - |
| ZAP Media | 3,744 | - | - | - | - |
| OTHER RELATED PARTIES | |||||
| Centro Colombo | 25 | 21 | - | - | 126 |
| Digitmarket | 117 | 85 | - | 2 | 170 |
| Efacec Engenharia | 35 | 237 | - | - | - |
| Itrust - Cyber Security and Intellig. , S.A. | 7 | 292 | - | - | 117 |
| Maiashopping | 8 | 50 | - | - | 51 |
| Modelo Continente Hipermercados | 976 | 1 0 | 54 | - | 2 |
| MDS - Corretor de Seguros | 74 | - | (0) | - | 238 |
| Norteshopping | 43 | 23 | - | - | 126 |
| Saphety Level - Trusted Services | 25 | 82 | - | - | - |
| SC-Consultadoria | 162 | - | - | - | - |
| Sonae Indústria PCDM | 114 | - | - | - | - |
| Sierra Portugal | 475 | 1 8 | 0 | - | 28 |
| Sonae Center II | 627 | - | - | - | - |
| Sonaecom | 86 | - | 365 | - | - |
| UNITEL | 4,564 | 3,187 | 1,607 | - | - |
| Vasco da Gama | 8 | 49 | - | - | 79 |
| We Do Consulting-Sist. de Informação | 9 3 | 2,880 | - | - | 151 |
| Worten - Equipamento para o Lar | 1,988 | 2 | 285 | - | - |
| Other related parties | 867 | 222 | (2) | - | 187 |
| 66,340 | 13,646 | 6,876 | 1 4 | 14,844 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS | MARKETING AND ADVERTISING |
SUPPORT SERVICES |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | |||||||||
| Banco BPI | 3,802 | - | 314 | - | - | 4 | - | (295) | - |
| ASSOCIATED COMPANIES | |||||||||
| Big Picture 2 Films | 33 | - | 3,965 | - | - | 46 | - | - | - |
| Sport TV | 167 | - | 57,773 | - | - | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||||||
| Dreamia Holding BV | 118 | - | - | - | - | - | - | 97 | - |
| Dreamia SA | 1,641 | (3) | (39) | 25 | (1) | (9) | - | - | - |
| Finstar | 670 | - | - | - | - | - | - | - | - |
| Mstar | 25 | - | - | - | - | - | - | - | - |
| Upstar | 11,841 | - | (216) | 1 7 | - | - | - | - | - |
| ZAP Cinemas | 7 | - | - | - | - | - | - | - | - |
| ZAP Media | 227 | - | - | - | - | - | - | - | - |
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping | 1 2 | - | - | (3) | - | 499 | - | - | - |
| Centro Colombo | 4 | - | - | 3 | - | 364 | - | - | - |
| Continente Hipermercados | 209 | - | - | - | - | 4 | - | - | 1 1 |
| Digitmarket | 143 | - | 20 | 1 | 161 | 161 | - | - | 4,761 |
| Efacec Energia | 6 9 | - | - | - | - | 36 | - | - | 1 7 |
| Maxmat | 136 | - | - | - | - | - | - | - | - |
| Modelo continente hpermercados | 3,889 | - | 6 | 112 | - | (58) | - | - | - |
| MDS - Corretor de Seguros | 377 | - | - | - | - | 129 | - | - | - |
| Itrust - Cyber Security and Intellig | 1 4 | - | (246) | - | 57 | 166 | - | - | 152 |
| Modalfa | 130 | - | - | - | - | - | - | - | - |
| Norteshopping | 5 | - | - | 5 | - | 476 | - | - | - |
| Pharmacontinente | 124 | - | - | - | - | - | - | - | - |
| Publico | 116 | - | - | 27 | - | - | - | - | - |
| Saphety Level - Trusted Services | 77 | - | - | - | 227 | 1 | - | - | 1 9 |
| SC-Consultadoria | 1,046 | - | - | - | - | - | - | - | - |
| Sonae Indústria PCDM | 331 | - | - | - | - | - | - | - | - |
| Sistavac | 114 | - | - | - | - | 22 | - | - | 245 |
| Sierra Portugal | 2,576 | - | - | 217 | - | 1,695 | - | - | - |
| Solinca HF | 182 | - | - | - | - | - | - | - | - |
| Sonae Center II | 2,054 | - | - | - | - | - | - | - | - |
| Sonaecom | 25 | - | - | - | - | 1 7 | 97 | - | - |
| Spinvpi | - | - | - | - | - | 174 | - | - | - |
| SDSR | 218 | - | - | - | - | - | - | - | - |
| UNITEL | 1,864 | - | 1,298 | - | - | - | - | - | - |
| Vasco da Gama | 1 1 | - | - | - | - | 555 | - | - | - |
| We Do Consulting-Sist. de Informação | 330 | - | - | - | 2,130 | 2 | - | - | 3,023 |
| Worten - Equipamento para o Lar | 4,146 | - | - | 76 | - | 468 | - | - | - |
| Outras partes relacionadas | 1,285 | - | - | 36 | 1 3 | 258 | - | - | 30 |
| 38,018 | (3) | 62,875 | 516 | 2,587 | 5,011 | 9 7 | (198) | 8,257 |
| ACCOUNTS | ACCOUNTS | ACCRUED | DEFERRED | PREPAID | |
|---|---|---|---|---|---|
| RECEIVABLES | PAYABLE | EXPENSES | INCOME | EXPENSES | |
| ASSOCIATED COMPANIES | |||||
| Big Picture 2 Films | 8 | 184 | 158 | - | - |
| Sport TV | 3,291 | 760 | 6,054 | 4,621 | 8,479 |
| JOINTLY CONTROLLED COMPANIES | |||||
| Dreamia Holding BV | 2,807 | - | - | - | - |
| Dreamia SA | 2,834 | 2,428 | 375 | - | - |
| Finstar | 9,733 | - | - | - | - |
| Mstar | 1 | - | - | - | - |
| Upstar | 28,385 | 59 | - | 939 | - |
| ZAP Cinemas | 383 | - | - | - | - |
| ZAP Media | 3,943 | - | - | - | - |
| OTHER RELATED PARTIES | |||||
| Centro Colombo | 4 | 4 | 4 | - | 129 |
| Centro Vasco da Gama | 1 4 | 28 | - | - | 78 |
| Digitmarket | 31 | 54 | - | - | 241 |
| Efacec Engenharia | 34 | 9 6 | - | - | - |
| Itrust - Cyber Security and Intellig. , S.A. | 6 | 324 | - | - | 139 |
| Modelo Continente Hipermercados | 833 | 45 | 2 | - | 2 |
| Norteshopping | 6 | 22 | - | - | 112 |
| Saphety Level - Trusted Services | 26 | 109 | - | - | 2 |
| SC-Consultadoria,SA | 256 | - | - | - | - |
| Sonae Arauco Portugal, S.A. | 157 | - | - | - | - |
| Sierra Portugal | 598 | 1 8 | 1 7 | - | 1 2 |
| Sonae Center II | 679 | 43 | - | - | - |
| Sonaecom | 78 | - | 427 | - | - |
| UNITEL | 4,984 | 3,805 | 1,344 | - | - |
| We Do Consulting-Sist. de Informação | 227 | 1,874 | - | - | 82 |
| Worten - Equipamento para o Lar | 1,288 | 9 1 | 363 | - | - |
| Outras partes relacionadas | 925 | 42 | (1) | - | 191 |
| 61,532 | 9,986 | 8,743 | 5,560 | 9,466 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS |
MARKETING AND ADVERTISING |
SUPPORT SERVICES |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| ASSOCIATED COMPANIES | |||||||||
| Big Picture 2 Films | 24 | - | 3,426 | (2) | - | 39 | - | - | - |
| Sport TV | 1,542 | - | 55,760 | - | - | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES | |||||||||
| Dreamia Holding BV | 1 3 | - | - | - | - | - | - | 100 | - |
| Dreamia SA | 2,635 | 4 | (12) | 45 | - | (32) | - | 0 | - |
| Finstar | 652 | - | - | - | - | - | - | - | - |
| MSTAR | 25 | - | - | - | - | - | - | - | - |
| Upstar | 7,934 | - | (153) | 1 | - | - | - | - | - |
| ZAP Cinemas | 1 0 | - | - | - | - | - | - | - | - |
| ZAP Media | 199 | ||||||||
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping | 1 2 | - | - | 6 | - | 611 | - | - | - |
| Centro Colombo | 1 8 | - | - | 8 | - | 1,347 | - | 0 | - |
| Centro Vasco da Gama | 1 4 | - | - | 4 | - | 705 | - | - | - |
| Continente Hipermercados, S.A. | 219 | 0 | - | - | - | 6 7 | - | - | - |
| CYBER SECURI AND INTELLIGEN,SA | - | - | - | - | - | - | - | - | 434 |
| Digitmarket | 233 | - | 56 | 2 | 295 | 134 | 0 | - | 5,040 |
| EFACEC Engenharia e Sistemas | 94 | - | - | - | - | 34 | - | - | 371 |
| Gaiashopping | 27 | - | - | 4 | - | 307 | - | - | - |
| Itrust - Cyber Security and Intellig | 22 | - | 100 | - | 194 | 76 | - | - | - |
| Maiashopping | 1 3 | - | - | 2 | - | 236 | - | 0 | - |
| Modalfa-Comércio e Serviços,SA | 115 | - | - | - | - | - | - | - | - |
| Modelo Continente Hipermercados | 2,935 | - | (0) | 2 | - | (6) | - | - | - |
| MDS Corretor de Seguros, SA | 395 | - | - | - | - | - | - | - | - |
| Norteshopping | 1 6 | - | - | 7 | - | 1,078 | - | - | - |
| PHARMACONTINENTE - Saúde e Higiene, S.A. | 119 | - | - | - | - | - | - | - | - |
| Público-Comunicação Social,SA | 110 | - | (1) | 1 4 | - | 0 | - | - | - |
| RACE-Refrig. & Air Condit.Engineering,SA | 110 | - | - | - | - | 1 | - | - | - |
| Rio Sul - Centro Comercial, SA | 7 | - | - | 7 | - | 91 | - | - | - |
| Saphety Level - Trusted Services | 75 | - | 55 | - | 191 | 1 | - | - | - |
| SC-Consultadoria,SA | 956 | - | - | - | - | - | - | - | - |
| SDSR - Sports Division SR, S.A. | 197 | - | - | - | - | - | - | - | - |
| SFS - Serviços de Gestão e Marketing | - | - | 1 | 263 | - | - | - | - | - |
| Sonae Arauco Portugal, S.A. | 823 | - | - | - | - | - | - | - | - |
| Sierra Portugal | 2,468 | - | - | 37 | (0) | 135 | - | - | - |
| Solinca HF | 275 | - | - | - | - | - | - | - | - |
| Sonae Center II | 2,609 | 45 | - | - | - | 1 | - | - | - |
| Spinveste - Promoção Imobiliária, SA | - | - | - | - | - | 174 | - | - | - |
| Troiaverde-Expl.Hoteleira Imob.,SA | 102 | - | - | - | - | - | - | - | - |
| UNITEL S.a.r.l. | 1,820 | - | 1,286 | - | - | - | - | - | - |
| We Do Consulting-Sist. de Informação | 341 | - | - | 1 3 | 1,982 | 0 | - | - | 2,563 |
| Worten - Equipamento para o Lar | 2,629 | - | - | 484 | - | 698 | 0 | 0 | - |
| Outras partes relacionadas | 1,508 31,296 |
- 49 |
1 3 60,531 |
26 923 |
1 8 2,680 |
389 6,083 |
6 2 62 |
100 | 44 8,452 |
The Company regularly performs transactions and signs contracts with several parties within the NOS Group. Such transactions were performed on normal market terms for similar transactions, as part of the contracting companies' current activity.
The Company also regularly performs transactions and enters into financial contracts with various credit institutions, which hold qualifying shareholdings in the Company. However, these are performed on normal market terms for similar transactions, as part of the contracting companies' current activity.
the heading "Other related parties" the balances and transactions with entities whose amounts are less than 100 thousand euros.
• decisions in respect of the payment of the Annual Fee of Activity (for 2009, 2010, 2011, 2012, 2013, 2014, 2015,2016 and 2017) as Electronic Communications Services Networks Supplier, and furthermore the refund of the amounts that meanwhile were paid within the scope of the mentioned acts of settlement was requested. The settlements for the year 2017 were impugned in the first semester of 2018.
The settlement amounts are, respectively, as follows:
electronic communications revenues. NOS SA, NOS Açores and NOS Madeira claim, namely: i) addition to defects of unconstitutionality and illegality, related to the inclusion in the cost accounting of ANACOM of the provisions made by the latter, due to judicial proceedings against the latter (including these appeals of the activity rate) and ii) that only revenues from the electronic communications business per se, subject to regulation by ANACOM, should be considered for the purposes of the application of the percentage and the calculation of the fee payable, and that revenues from television content should be excluded.
Four sentences on the matter were given, i.e. in December 2012, in September 2017, in April 2018 and in May 2018, respectively, within the scope of the contestation of the annual rate of 2009, 2010 (NOS Comunicações) and 2012 (Ex-ZON and also Ex-Optimus). The first judgment ruled in favour of the respective contestation, only based on lack of prior hearing, but ordered ANACOM to pay interest. ANACOM submitted an appeal concerning that decision, but the Court of Appeal declined it by decision in July 2013. The three remain decisions judge also, in turn, ruled in favour of the respective contestations, but, this time for fundamental reasons, annulled the contested act by unlawfulness with the legal consequences, namely imposing the refund of the tax that was paid but still not refunded to NOS and ordering ANACOM to pay compensatory interest. This decisions were the subject of an appeal from ANACOM to the Tribunal Central Administrativo Sul (Central Administrative Court South), where it are pending.
The remaining proceedings are awaiting trial and/or decision.
• During the first quarter of 2017, NOS was notified by ANACOM of the initiation of an infraction process related to communications of prices update at the end of 2016. On this date, it is impossible to determine what the scope of the infraction proceedings is to be.
During the course of the 2003 to 2018 financial years, some companies of the NOS Group were the subject of tax inspections for the 2001 to 2014 financial years. Following these inspections, NOS SGPS, as the controlling company of the Tax Group, and companies not covered by Tax Group, were notified of the corrections made to the Group's tax losses, to VAT and stamp tax and to make the payments related to the corrections made to the above exercises. The total amount of the notifications unpaid is about 19 million euros, added interest, and charges. Note that the Group considered that the corrections were unfounded, and contested the amounts mentioned. The Group provided the bank guarantees demanded by the tax authorities in connection with these proceedings, as stated in Note 38.
At end of year 2013 and taking advantage of the extraordinary settlement scheme of tax debts, the Group settled 7.7 million euros.
As belief of the Board of Directors of the Group, supported by our lawyers and tax advisors, the risk of loss of these proceedings is not likely and the outcome thereof will not affect materially the consolidated position.
to the NOS in July 2015, as mentioned above. NOS contested the action during the month of October.
• In 2011, NOS SA brought an action in Lisbon Judicial Court against MEO, claiming payment of 22.4 million euros, for damages suffered by NOS SA, arising from violations of the Portability Regulation by MEO, in particular, the large number of unjustified refusals of portability requests by MEO in the period between February 2008 and February 2011. The court declared the compulsory performance of expert evidence of technical nature. At the same time, it was requested by NOS and accepted by the Court an economic and financial expert analysis, which has already started. The related expert report has already been made available to the Court and parties. The period of clarifications to experts responsible for this second expert analysis of the issues each party has raised, with regard to the analysis report, is underway.
It is the understanding of the Board of Directors, supported by lawyers who monitor the process, that there is, in substance, a good chance of NOS SA winning the action, because MEO has already been convicted for the same offense, by ANACOM. Nevertheless, it is impossible to determine the outcome of the action.
In March 2018, the NOS was notified of a lawsuit brought by DECO against NOS, MEO and NOWO, in which a declaration of nullity of the obligation to pay the price increases imposed on customers at the end of 2016 is requested. In April and May 2018, the operators, including NOS, lodged a defence and are awaiting further developments in the process. The Board of Directors is convinced that the arguments used by the author are not justified, which is why it is believed that the outcome of the proceeding should not result in significant impacts for the Group's financial statements.
At 30 September 2018, accounts receivable and accounts payable include 23,577,768 euros and 29,913,608 euros, respectively, resulting from a dispute between the subsidiary NOS SA and, essentially, the operator MEO Serviços de Comunicação e Multimédia, S.A. (previously named TMN Telecomunicações Móveis Nacionais, S.A.), in relation to the non-definition of interconnection tariffs of 2001. In what concerns to that dispute, the result were totally favourable to NOS S.A., having already become final.
The general conditions that affect the agreement and termination of this contract between NOS and its clients, establish that if the products and services provided by the client can no longer be used prior to the end of the binding period, the client is obliged to pay damages immediately.
Until December 31st, 2014, the revenue from penalties, in the face of the inherent uncertainties, was only recognised at the time of receipt, and on September 30, 2018, the amounts receivable by NOS SA, NOS Madeira and NOS Açores from these invoiced compensations amounted to 62.303 thousand euros. During the period ended on 30 September 2018, receipts in the amount of 756 thousand euros of the amounts outstanding as of 31 December 2014 were recognised as revenues.
From 1 January 2015, revenue from penalties is recognised taking into account an estimated collectability rate taking into account the Group's collection history. The penalties invoiced are recorded as accounts receivable and the uncollectible calculated values of these amounts are recorded as impairment by deducting the revenue recognised at the time of invoicing (Note 14).
On 23 April 2014, the General Meeting approved the Regulation on Short and Medium-Term Variable Remuneration, which establishes the terms of the Share Incentive Scheme ("NOS Plan"). This plan aimed at more senior employees with the vesting taking place three years being awarded, assuming that the employee is still with the company during that period.
At 30 September 2018, the unvested plans are:
| NUMBER OF | |
|---|---|
| SHARES | |
| NOS PLAN | |
| Plan 2015 | 878 |
| Plan 2016 | 733,306 |
| Plan 2017 | 842,022 |
| Plan 2018 | 850,454 |
During the nine months ended on 30 September 2018, the movements that occurred in the plans are detailed as follows:
| STANDARD PLAN | NOS PLAN | |
|---|---|---|
| BALANCE AS AT 31 DECEMBER 2017: | 60,378 | 2,235,860 |
| MOVEMENTS IN THE PERIOD: | ||
| Awarded | - | 856,941 |
| Vested | (58,519) | (540,206) |
| Cancelled / elapsed / corrected (1) | (1,859) | (125,935) |
| BALANCE AS AT 30 SEPTEMBER 2018 | - | 2,426,660 |
(1) Refers mainly to correction made for dividends paid, exit of employees not entitled to the vesting of shares and other adjustments resulting from the way the shares are vested.
The share plans costs are recognised over the year between the awarding and vesting date of those shares. The responsibility is calculated taking into consideration the share price at award date of each plan, for plans settled in shares, or at the closing date, for plans settled in cash. As at 30 September 2018, the outstanding responsibility related to these plans is 5,526 thousand euros and is recorded in Reserves, for an amount of 4,507 thousand euros, for plans liquidated in shares and in Accrued expenses, for an amount of 1,019 thousand euros, for plans liquidated in cash.
The costs recognised in previous years and in the period, and its liabilities are as follows:
| ACCRUED EXPENSES |
RESERVES | TOTAL | |
|---|---|---|---|
| Costs recognised in previous years related to plans as at 31 December 2017 | 1,226 | 5,252 | 6,478 |
| Costs of plans vested in the period | (500) | (3,602) | (4,102) |
| Costs incured in the period and others | 293 | 2,857 | 3,150 |
| TOTAL COST OF THE PLANS | 1,019 | 4,507 | 5,526 |
As of the date of approval of this document, there have been no other relevant subsequent events that merit disclosure in the present report.
| COMPANY HEADQUARTERS ACTIVITY EFFECTIVE DIRECT EFFECTIVE HOLDER 31-12-2017 30-09-2018 30-09-2018 NOS, SGPS, S.A. (Holding) Lisbon Management of investments - - - - Empracine - Empresa Promotora de Lusomundo Lisbon Movies exhibition 100% 100% Atividades Cinematográficas, Lda. SII Lusomundo - Sociedade de investimentos Lisbon Management of Real Estate NOS 100% 100% imobiliários SGPS, SA Lusomundo Lusomundo Imobiliária 2, S.A. Lisbon Management of Real Estate 100% 100% SII Lusomundo Moçambique, Lda. Maputo Movies exhibition and commercialization of other public events NOS Cinemas 100% 100% Rendering of consulting services in the area of information NOS Sistemas, S.A. ('NOS Sistemas') Lisbon NOS SA 100% 100% systems Rendering of consulting services in the area of information NOS Sistemas España, S.L. Madrid NOS SA 100% 100% systems Distribution of television by cable and satellite and operation of NOS Açores Comunicações, S.A. Ponta Delgada NOS SA 84% 84% telecommunications services in the Azores area Management of social participations in other companies as an NOS Audiovisuais, SGPS, S.A. Lisbon NOS 100% 100% indirect form of economic activity NOS Communications S.à r.l Luxembourg Management of investments NOS 100% 100% Implementation, operation, exploitation and offer of networks and rendering services of electronic comunications and related NOS Comunicações, S.A. Lisbon NOS 100% 100% resources; offer and commercialisation of products and equipments of electronic communications Achievement and promotion of scientific activities and research and development as well as the demonstration, dissemination, technology transfer and formation in the fields of services and 100% 100% NOS Inovação, S.A. Matosinhos NOS information systems and fixed solutions and last generation mobile, television, internet, voice and data, and licensing and engineering services and consultancy Management of social participations in other companies as an NOS Internacional, SGPS, S.A. Lisbon NOS 100% 100% indirect form of economic activity Import, distribution, commercialization and production of NOS Lusomundo Audiovisuais, S.A. Lisbon NOS 100% 100% audiovisual products NOS Lusomundo Cinemas , S.A. Lisbon Movies exhibition and commercialization of other public events NOS 100% 100% Movies distribution, editing, distribution, commercialization and NOS NOS Lusomundo TV, Lda. Lisbon 100% 100% production of audiovisual products Audiovisuais Distribution of television by cable and satellite and operation of NOS Madeira Comunicações, S.A. Funchal NOS SA 78% 78% telecommunications services in the Madeira area NOSPUB, Publicidade e Conteúdos, S.A. Lisbon Comercialization of cable tv contents NOS SA 100% 100% Design, construction, management and exploitation of electronic communications networks and their equipment and Construção e Gestão de Redes de Matosinhos NOS 100% 100% infrastructure, management of technologic assets and Comunicações, S.A. ('Artis') rendering of related services Implementation, installation and exploitation of towers and Lisbon NOS 100% 100% other sites for the instalment of telecommunications equipment Purchase, sale, renting and operation of property and Lisbon NOS 100% 100% ('Per-Mar') commercial establishments Realisation of urbanisation and building construction, planning, Sontária - Empreendimentos Imobiliários, urban management, studies, construction and property Lisbon NOS 100% 100% S.A. ('Sontária') management, buy and sale of properties and resale of purchased for that purpose Teliz Holding B.V. Amsterdam Management of group financing activities NOS 100% 100% |
PERCENTAGE OF OWNERSHIP | ||||
|---|---|---|---|---|---|
| SHARE | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 84% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 78% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% | |||||
| 100% |
| PERCENTAGE OF OWNERSHIP | ||||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE HOLDER |
EFFECTIVE | DIRECT | EFFECTIVE |
| 31-12-2017 | 30-09-2018 | 30-09-2018 | ||||
| Big Picture 2 Films, S.A. | Oeiras | Import, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
20.00% | 20.00% | 20.00% |
| Big Picture Films, S.L. | Madrid | Distribution and commercialization of movies | Big Picture 2 Films, S.A. |
20.00% | 100.00% | 20.00% |
| Canal 20 TV, S.A. (a) | Madrid | Production and distribution of TV products rights | NOS | 50.00% | _ | _ |
| Sport TV Portugal, S.A. | Lisbon | Conception, production, realization and commercialization of sports programs for telebroadcasting, purchase and resale of the rights to broadcast sports programs for television and provision of publicity services |
NOS | 25.00% | 25.00% | 25.00% |
a) Company liquidated and dissolved during the year 2018.
| PERCENTAGE OF OWNERSHIP | |||||||
|---|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE | |
| HOLDER | 31-12-2017 | 30-09-2018 | 30-09-2018 | ||||
| Dreamia Holding B.V. | Amsterdam | Management of investments | NOS Audiovisuais |
50.00% | 50.00% | 50.00% | |
| Dreamia - Serviços de Televisão, S.A. | Lisbon | Conception, production, realization and commercialization of audiovisual contents and provision of publicity services |
Dreamia Holding BV |
50.00% | 100.00% | 50.00% | |
| FINSTAR - Sociedade de Investimentos e Participações, S.A. |
Luanda | Distribution of television by satellite, operation of telecommunications services |
Teliz Holding B.V. |
30.00% | 30.00% | 30.00% | |
| MSTAR, SA | Maputo | Distribution of television by satellite, operation of telecommunications services |
NOS | 30.00% | 30.00% | 30.00% | |
| Upstar Comunicações S.A. | Vendas Novas | Electronic communications services provider, production, commercialization, broadcasting and distribution of audiovisual contents |
NOS | 30.00% | 30.00% | 30.00% | |
| ZAP Media S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
FINSTAR | 30.00% | 100.00% | 30.00% | |
| ZAP Cinemas, S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
FINSTAR | 30.00% | 100.00% | 30.00% | |
| ZAP Publishing, S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
ZAP Media | 30.00% | 100.00% | 30.00% |
Financial investments whose participation is less than 50% were considered as joint arrangements due to shareholder agreements that confer joint control.
| COMPANY | HEADQUARTERS | ACTIVITY | PERCENTAGE OF OWNERSHIP | |||
|---|---|---|---|---|---|---|
| SHARE HOLDER |
EFFECTIVE | DIRECT | EFFECTIVE | |||
| 31-12-2017 | 30-09-2018 | 30-09-2018 | ||||
| Turismo da Samba (Tusal), SARL (a) | Luanda | n.a. | NOS | 30.00% | 30.00% | 30.00% |
| Filmes Mundáfrica, SARL (a) | Luanda | Movies exhibition | NOS | 23.91% | 23.91% | 23.91% |
| Companhia de Pesca e Comércio de Angola (Cosal), SARL (a) |
Luanda | n.a. | NOS | 15.76% | 15.76% | 15.76% |
| Telemática, S.A. | Lisbon | Telecommunication services | NOS | 5.00% | 5.00% | 5.00% |
| Apor - Agência para a Modernização do Porto |
Oporto | Development of modernizing projects in Oporto | NOS | 3.98% | 3.98% | 3.98% |
| Lusitânia Vida - Companhia de Seguros, S.A ("Lusitânia Vida") |
Lisbon | Insurance services | NOS | 0.03% | 0.03% | 0.03% |
| Lusitânia - Companhia de Seguros, S.A ("Lusitânia Seguros") |
Lisbon | Insurance services | NOS | 0.02% | 0.02% | 0.02% |
a) The financial investments in these companies are fully provisioned.
104
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