Earnings Release • May 30, 2018
Earnings Release
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1T18 4 Highlights
Corporate 5 Bodies
Management 6 Report
Consolidated 16 Financial Statements
| 1Q18 Highlights | 1Q17 | 1Q18 | 1Q18 / 1Q17 |
|---|---|---|---|
| Financial Highlights | |||
| Operating Revenues | 380.3 | 383.0 | 0.7% |
| Telco Revenues | 362.3 | 365.7 | 0.9% |
| EBITDA | 142.4 | 146.7 | 3.0% |
| EBITDA Margin | 37.4% | 38.3% | 0.9pp |
| Net Income Before Associates & Non-Controlling Interests | 27.4 | 39.8 | 45.4% |
| EBITDA - Total CAPEX | 56.0 | 59.1 | 5.5% |
| Total Free Cash-Flow Before Disposals, Dividends, Financial Investments and Own Shares Acquisition |
33.5 | 37.8 | 12.6% |
| Operational Highlights (EoP) | |||
| Homes Passed | 3,772.3 | 4,100.8 | 8.7% |
| Total RGUs | 9,155.2 | 9,454.4 | 3.3% |
| Mobile | 4,487.1 | 4,703.5 | 4.8% |
| Pay TV Fixed Access | 1,276.2 | 1,295.0 | 1.5% |
| Fixed Voice | 1,738.0 | 1,761.4 | 1.3% |
| Broadband | 1,289.5 | 1,343.7 | 4.2% |
| Convergent RGUs | 3,509.0 | 3,732.4 | 6.4% |
| Convergent Customers | 697.8 | 739.6 | 6.0% |
| Convergent Customers as % of Fixed Access Customers | 46.5% | 48.7% | 2.2pp |
Solid business performance driving increased operating profitability and FCF growth, supportive of attractive shareholder remuneration.
As at the date of this report, 10 May 2018
| 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 | Eugénio 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) |
RGUs grew by 3.3% yoy to 9.454 million in 1Q18, reflecting a combination of 4.8% growth in mobile subscribers to 4.703 million, of 4.2% in fixed broadband subs, 1.3% in fixed voice and 1.5% in Fixed Pay TV subs. FttH rollout in 1Q18 was relatively small and is only set to start having a more visible impact towards the second half of the year.
Convergence is still the core driver of growth with almost half of our customers subscribing to fixed and mobile convergent bundles in 1Q18. Convergent customers increased 6% yoy to 739.6 thousand, almost 49% of the fixed subscriber base, an additional 2.2 percentage points over last year.
We continue to see strong take-up in mobile services with 30.6 thousand net adds, close to the levels of 1Q17. This increase combined strong growth of 52.6 thousand in contract services and a decline in pre-paid cards of 22.1 thousand reflecting the seasonally weaker start to the year for pre-paid services. The proportion of our customers taking contract services continues to post material growth reaching 56.3% in 1Q18, up from 54.7% last year. Our total share of mobile subscribers continues to expand reaching 24.8% according to the latest available market data.
Fixed access Pay TV subscribers grew by 2.8 thousand in 1Q18 to 1.295 million reflecting a solid performance given the lack of relevant network expansion in the quarter which has been a driver of net growth in past years. Churn in the fixed customer base has returned to more normalized levels after the market wide remedies imposed in June 2017 by the regulator around price increase communication procedures. Within the total pay TV base of 1.615 million subscribers, those served by satellite declined to 319.6 thousand due primarily to fixed NGN rollout becoming available in more new geographies and subsequent migration from satellite to superior fixed access platforms.
Residential ARPU was 44.3 euros in 1Q18, sequentially higher than in 4Q17. The marginal decline in comparison with 1Q17 is explained by the fact that we did not implement an across the board price increase in 2018, leading to a more challenging yoy comparison.
In B2B we remain focused on protecting our revenue base and expanding the perimeter of services we provide with particular emphasis on IT and data service management. The conclusion of our new data centre investment at the end of 2017 has significantly increased available capacity and bolstered our next generation cloud management platforms to facilitate provisioning and self-service solutions. We position ourselves as a partner for transformation for the companies we address, providing reliable and responsive telecom solutions and complementing them with value added services, which go beyond the realm of traditional telecommunications. To identify a few examples of technological and service innovation: we have gained significant traction in areas related with IT security operations management, remotely managing critical areas of IT security for core accounts and increasing the degree of involvement with our customers; we are pursuing a number of innovative IoT solutions, in particular the landmark smart electricity metering project; esses and for specific sectors. In the smaller business segment we have simplified our range of products and services whilst pursuing a more segmented approach, leveraging the experience gained from addressing larger corporate accounts, focusing on market relevant innovation and development to help our customers optimize their communication and IT functions and exploit amongst others, the clear opportunities for virtualization that will drive improved service levels and efficiency.
Our core technological investment projects underway are progressing well. We have completed the upgrade of our HFC network to Docsis 3.1 enabling provision of 1Gbps download speeds across the entire footprint. In mobile, the investment we are doing is designed primarily to increase capacity, network flexibility and efficiency, and to deliver the best possible quality of service. We are rearranging our network to a single RAN architecture replacing existing radio equipment with the most modern technology to support a smooth 5G evolution as and when required. In fixed, we have taken first steps to rollout further greenfield locations and started the dark fibre network swap with Vodafone as agreed in September 2017 however the pace of household exchange is only set to pick up during the latter half of the year.
We are dedicating significant time and management resources to a company wide long term transformation programme which, over the next 3-5 years is set to deliver significant improvements in organizational agility, customer satisfaction and ultimately operating efficiency and profitability. Simplification, digitalization and automation are central enablers of many of the projects identified, the ultimate goal being end to end improvement in customer experience and organizational efficiency. After an extensive evaluation and planning process which identified a total of approximately 60 project streams, we started work on close to 20, some of which have already started to be implemented. An example of a project that has already gone live is the full digitalization of our retail outlets, 185 in total, with all in store processes becoming completely paperless, making them more secure, faster and effective. Resorting to new systems and mobile devices, the in-store digitalization project covers areas ranging from document validation, archive virtualization and digital signatures and communication and has already produced material improvements in customer satisfaction and service levels.
| Operating Indicators ('000) | 1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 1Q18 / 4Q17 | |
|---|---|---|---|---|---|
| Telco (1) | |||||
| Aggregate Indicators | |||||
| Homes Passed (2) | 3,772.3 | 4,084.2 | 4,100.8 | 8.7% | 0.4% |
| Total RGUs | 9,155.2 | 9,411.7 | 9,454.4 | 3.3% | 0.5% |
| Mobile | 4,487.1 | 4,672.9 | 4,703.5 | 4.8% | 0.7% |
| Pre-Paid | 2,034.2 | 2,079.7 | 2,057.6 | 1.1% | (1.1%) |
| Post-Paid | 2,452.8 | 2,593.2 | 2,645.9 | 7.9% | 2.0% |
| Pay TV Fixed Access (3) | 1,276.2 | 1,292.2 | 1,295.0 | 1.5% | 0.2% |
| Pay TV DTH | 332.3 | 324.4 | 319.6 | (3.8%) | (1.5%) |
| Fixed Voice | 1,738.0 | 1,758.2 | 1,761.4 | 1.3% | 0.2% |
| Broadband | 1,289.5 | 1,333.1 | 1,343.7 | 4.2% | 0.8% |
| Others and Data | 32.2 | 30.9 | 31.1 | (3.2%) | 0.9% |
| 3,4&5P Subscribers (Fixed Access) | 1,083.3 | 1,112.1 | 1,120.4 | 3.4% | 0.7% |
| % 3,4&5P (Fixed Access) | 84.9% | 86.1% | 86.5% | 1.6pp | 0.5pp |
| Convergent RGUs | 3,509.0 | 3,650.6 | 3,732.4 | 6.4% | 2.2% |
| Convergent Customers | 697.8 | 721.4 | 739.6 | 6.0% | 2.5% |
| Fixed Convergent Customers as % of Fixed Access Customers 46.5% | 47.4% | 48.7% | 2.2pp | 1.3pp | |
| % Convergent Customers | 43.4% | 44.6% | 45.8% | 2.4pp | 1.2pp |
| Net Adds | |||||
| Homes Passed | 8.3 | 18.2 | 16.6 | 99.1% | (9.0%) |
| Total RGUs | 78.4 | 46.0 | 42.7 | (45.5%) | (7.2%) |
| Mobile | 31.4 | 29.2 | 30.6 | (2.6%) | 4.5% |
| Pre-Paid | (37.0) | 9.2 | (22.1) | (40.4%) | n.a. |
| Post-Paid | 68.4 | 20.0 | 52.6 | (23.1%) | 163.0% |
| Pay TV Fixed Access | 10.6 | 4.4 | 2.8 | (73.1%) | (34.8%) |
| Pay TV DTH | (2.7) | (3.5) | (4.7) | 73.3% | 34.6% |
| Fixed Voice | 13.3 | 5.3 | 3.2 | (76.2%) | (40.9%) |
| Broadband | 24.9 | 12.5 | 10.6 | (57.3%) | (14.7%) |
| Others and Data | 1.0 | (1.9) | 0.3 | (73.9%) | n.a. |
| 3,4&5P Subscribers (Fixed Access) | 21.4 | 3.6 | 8.3 | (61.4%) | 127.0% |
| Convergent RGUs | 121.8 | 19.1 | 81.8 | (32.8%) | n.a. |
| Convergent Customers | 17.6 | 2.9 | 18.1 | 3.0% | n.a. |
(1) Portuguese Operations. (2) Includes DST from 3Q17.
(3) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| Operating Indicators ('000) | 1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 1Q18 / 4Q17 | |
|---|---|---|---|---|---|
| Telco (1) | |||||
| Indicators per Segment | |||||
| Consumer | |||||
| Total RGUs | 7,724.7 | 7,953.1 | 7,968.7 | 3.2% | 0.2% |
| Pay TV Fixed Access | 1,180.1 | 1,193.6 | 1,195.2 | 1.3% | 0.1% |
| Pay TV DTH | 303.5 | 297.7 | 293.3 | (3.4%) | (1.5%) |
| Broadband | 1,167.1 | 1,206.3 | 1,215.9 | 4.2% | 0.8% |
| Fixed Voice | 1,402.0 | 1,413.8 | 1,414.6 | 0.9% | 0.1% |
| Mobile | 3,671.8 | 3,841.6 | 3,849.7 | 4.8% | 0.2% |
| ARPU / Unique Subscriber With Fixed Access (Euros) | 44.5 | 44.0 | 44.3 | (0.5%) | 0.7% |
| Net Adds | |||||
| Total RGUs | 65.8 | 47.0 | 15.6 | (76.2%) | (66.7%) |
| Pay TV Fixed Access | 8.1 | 4.2 | 1.6 | (80.6%) | (62.3%) |
| Pay TV DTH | (2.8) | (2.5) | (4.4) | 56.9% | 77.6% |
| Broadband | 23.6 | 11.7 | 9.6 | (59.5%) | (18.3%) |
| Fixed Voice | 8.8 | 3.3 | 0.9 | (90.2%) | (73.8%) |
| Mobile | 28.1 | 30.4 | 8.1 | (71.2%) | (73.4%) |
| Business | |||||
| Total RGUs | 1,430.5 | 1,458.6 | 1,485.7 | 3.9% | 1.9% |
| Pay TV | 124.8 | 125.2 | 126.2 | 1.1% | 0.8% |
| Broadband | 154.6 | 157.6 | 159.0 | 2.8% | 0.9% |
| Fixed Voice | 335.9 | 344.5 | 346.8 | 3.2% | 0.7% |
| Mobile | 815.2 | 831.3 | 853.7 | 4.7% | 2.7% |
| ARPU per RGU (Euros) | 15.8 | 15.1 | 14.7 | (6.9%) | (2.7%) |
| Net Adds | |||||
| Total RGUs | 12.6 | (1.1) | 27.1 | 114.1% | n.a. |
| Pay TV | 2.5 | (0.9) | 0.9 | (62.3%) | n.a. |
| Broadband | 2.3 | (1.1) | 1.3 | (42.0%) | n.a. |
| Fixed Voice | 4.5 | 2.1 | 2.3 | (48.9%) | 11.7% |
| Mobile | 3.3 | (1.2) | 22.5 | n.a. | n.a. |
Central to our brand positioning as the leading entertainment and communications provider in Portugal, our cinema and audiovisuals division continued to post a solid operating performance in 1Q18, albeit reflecting the worldwide decline in cinema spectators.
| Operating Indicators ('000) | 1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 1Q18 / 4Q17 | |
|---|---|---|---|---|---|
| Cinema (1) | |||||
| Revenue per Ticket (Euros) | 4.8 | 4.9 | 4.9 | 1.5% | (0.3%) |
| Tickets Sold | 2,296.4 | 2,198.9 | 2,183.5 | (4.9%) | (0.7%) |
| Screens (units) | 215 | 219 | 219 | 1.9% | 0.0% |
| (1) Portuguese Operations |
performance of the market as a whole which declined by 5.6%[1], due to fewer blockbuster box office hits during the quarter. Average revenue per ticket improved by 1.5% yoy to 4.9 euros in 1Q18. The most successful films -office revenues decreased by 3.6% in 1Q18, which compares with a 3.8% yoy decline for the market as a whole. NOS continues to maintain its leading market position, with a market share of 60.6% in terms of gross revenues in 1Q18. In the Audiovisuals arena, NOS distributed 5 of the top 10 cinema boxe maintaining its leadership position in Cinema Distribution with a 60.9% market share of gross revenues in 1Q18.
[1] Source: ICA – Portuguese Institute For Cinema and Audiovisuals
The following Consolidated Financial Statements have been subject to limited review.
costs related to contracts. Restated values for the corresponding periods in 2017 are presented in this report and are the basis for all comparisions made. A new reporting model has been adopted, impacting revenue and OPEX segmentation.
| Profit and Loss Statement (Millions of Euros) |
1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 | 1Q18 / 4Q17 |
|---|---|---|---|---|---|
| Operating Revenues | 380.3 | 398.9 | 383.0 | 0.7% | (4.0%) |
| Telco | 362.3 | 381.1 | 365.7 | 0.9% | (4.0%) |
| Consumer Revenues | 239.0 | 241.9 | 240.1 | 0.5% | (0.7%) |
| Business and Wholesale Revenues | 102.6 | 118.2 | 109.0 | 6.2% | (7.7%) |
| Others and Eliminations | 20.7 | 21.0 | 16.6 | (20.0%) | (21.3%) |
| Audiovisuals & Cinema (1) | 29.8 | 29.7 | 27.2 | (9.0%) | (8.5%) |
| Others and Eliminations | (11.8) | (11.8) | (9.8) | (16.6%) | (17.0%) |
| Operating Costs Excluding D&A | (237.9) | (272.4) | (236.3) | (0.7%) | (13.3%) |
| Direct Costs | (121.4) | (145.2) | (125.8) | 3.6% | (13.3%) |
| Commercial & Customer Related Costs | (31.6) | (37.3) | (29.2) | (7.7%) | (21.8%) |
| Operating and Structure Costs | (84.9) | (89.9) | (81.3) | (4.3%) | (9.6%) |
| EBITDA (2) | 142.4 | 126.6 | 146.7 | 3.0% | 15.9% |
| EBITDA Margin | 37.4% | 31.7% | 38.3% | 0.9pp | 6.6pp |
| Telco | 130.0 | 115.2 | 135.7 | 4.4% | 17.8% |
| EBITDA Margin | 35.9% | 30.2% | 37.1% | 1.2pp | 6.9pp |
| Cinema Exhibition and Audiovisuals | 12.4 | 11.4 | 11.0 | (11.0%) | (3.6%) |
| EBITDA Margin | 41.5% | 38.5% | 40.6% | (0.9pp) | 2.1pp |
| Depreciation and Amortization | (100.2) | (111.8) | (107.1) | 6.9% | (4.2%) |
| (Other Expenses) / Income | (3.4) | (4.0) | 12.1 | n.a. | n.a. |
| Operating Profit (EBIT) (3) | 38.8 | 10.8 | 51.8 | 33.3% | n.a. |
| Share of results of associates and joint ventures | 5.3 | 7.9 | (6.3) | n.a. | n.a. |
| (Financial Expenses) / Income | (6.6) | (5.7) | (6.2) | (5.5%) | 9.6% |
| Income Before Income Taxes | 37.6 | 13.0 | 39.2 | 4.3% | 200.4% |
| Income Taxes | (4.8) | 3.7 | (5.7) | 17.7% | n.a. |
| Net Income Before Associates & Non-Controlling Interests | 27.4 | 8.8 | 39.8 | 45.4% | n.a. |
| Income From Continued Operations | 32.7 | 16.8 | 33.5 | 2.3% | 99.8% |
| o.w. Attributable to Non-Controlling Interests | 0.0 | 0.2 | 0.3 | n.a. | 49.8% |
| Net Income | 32.8 | 17.0 | 33.8 | 3.0% | 99.2% |
(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.
Consolidated Revenues grew by 0.7% yoy to 383 million euros reflecting a deceleration yoy due to the already anticipated slowdown in RGU growth and the tougher yoy comparison due to the fact that we did not implement a price increase at the start of 2018, contrary to the previous year.
The effects mentioned above were reflected in particular in the residential and small business segment. Consumer revenues grew by 0.5% yoy to 240.1 million euros in 1Q18, with flat yoy residential revenues being offset by stronger growth in stand alone mobile revenues, reflecting primarily the higher average subscriber base, particularly in the youth segment with our WTF tariff plans, and a more supportive price environment for personal mobile services.
Business and Wholesale revenues grew 6.2%, to 109 million euros led by another quarter of strong yoy growth in the wholesale and large corporate businesses. As mentioned above, small and mid sized business revenues were also negatively impacted by the challenging price comparision with the previous year and additional pressure from backbook re-pricing in the aftermath of the regulatory impact last summer.
Audiovisuals and Cinema revenues declined by 9% yoy to 27.2 million euros, a decline explained primarily by the weaker operating environment as discussed above impacting both cinema revenues and audiovisuals distribution. In addition, audiovisuals revenues reflect the renegotiation of the value of content contracts to Angola at the end of 2017 driven by the still challenging macroeconomic environment. The value of the contract revision was partially offset by a similar reduction in the cost of the content distributed.
To better understand the main cost aggregates and assess the long term opportunity for OPEX efficiencies, we directly related to subscription and traffic growth, the main components being interconnection, programming, customers and directly support our commercial activity, namely advertising, store rentals, commercial outsourcing, costs related with call centres and customer care, billing and some installation related service work underway within the context of our long term transformational project is 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.
| EBITDA and Operating Costs (YoY Change) |
1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 | 1Q18 |
|---|---|---|---|---|---|---|
| EBITDA | 2.9% | 5.5% | 4.5% | 4.1% | 4.3% | 3.0% |
| Operating Costs Excluding D&A | 2.5% | 3.3% | 2.3% | 1.6% | 2.4% | (0.7%) |
| Direct Costs | 2.1% | 12.8% | 1.4% | 6.8% | 5.7% | 3.6% |
| Commercial & Customer Related Costs | (2.7%) | 10.4% | (7.4%) | 0.9% | (0.1%) | (7.7%) |
| Operating and Structure Costs | 5.3% | (13.7%) | 8.3% | (5.5%) | (1.7%) | (4.3%) |
Consolidated EBITDA increased by 3% to 146.7 million euros in 1Q18, representing a 0.9 percentage point uptick in margin to 38.3%. Core Telco EBITDA grew by 4.4% to 135.7 million euros, driving a more significant 1.2 percentage point increase in EBITDA margin in 1Q18 to 37.1%. The audiovisuals and cinema EBITDA fell to 11 million euros led by the weaker topline performance as explained above, which was not entirely compensated by an equivalent adjustment in operating costs.
Total operating costs fell by 0.7% in 1Q18 to 236.3 million euros, reflecting a combination of increased direct costs which was more than offset by a reduction in other cost lines demonstrating increased efficiency and operating leverage.
Direct cost growth of 3.6% to 125.8 million euros was primarily driven by increased levels of traffic related costs and marginally higher programming costs yoy. Commercial and Customer related costs fell by 7.7% yoy to 29.2 million euros reflecting primarily the slower commercial activity in comparison with last year. Operating and Structure Costs also posted a yoy decline of 4.3% led by a combination of general savings and efficiencies.
Depreciation and Amortization increased by 6.9% yoy to 107.1 million euros. The major mobile investment project initiated in 2017 to modernize the network has led to significant impairments of existing equipment.
As a result of the increase in EBITDA and a non-recurrent positive contribution from a legal settlement in favour of NOS regarding a pending regulatory dispute over operator termination rate charges, EBIT increased by 33.3% to 51.8 million euros, 13.5% as a proportion of revenues.
Net Income before associates and non-controlling interests grew by 45.4% to 39.8 million euros, benefitting from the aforementioned increase in EBIT. Net financial expenses were marginally lower yoy at 6.2 million euros reflecting lower interest charges led by the continued improvement in average cost of debt as dicussed ahead in the section on capital structure and a one-off correction in lease charges in 1Q17 impacting the yoy comparison. Share of results of associates contributed negatively to results in 1Q18 explained almost entirely by the impact of a 30% currency devaluation in Angola, in January 2018. The increase in tax provision in 1Q18 was led by the higher level of Earnings before Tax and Associates and a higher effective tax rate due to a timing differential when recognizing deferred taxes.
| CAPEX (Millions of Euros) (1) | 1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 1Q18 / 4Q17 | |
|---|---|---|---|---|---|
| Telco | 77.0 | 104.6 | 80.8 | 5.0% | (22.8%) |
| o.w. Technical CAPEX | 36.0 | 68.6 | 48.6 | 35.1% | (29.2%) |
| % of Telco Revenues | 9.9% | 18.0% | 13.3% | 3.4pp | (4.7pp) |
| Baseline Telco | 26.8 | 32.5 | 30.4 | 13.1% | (6.5%) |
| Network Expansion / Substitution and Integration Projects and Others |
9.1 | 36.1 | 18.2 | 99.9% | (49.5%) |
| o.w. Customer Related CAPEX | 41.0 | 36.0 | 32.2 | (21.5%) | (10.6%) |
| % of Telco Revenues | 11.3% | 9.5% | 8.8% | (2.5pp) | (0.6pp) |
| Audiovisuals and Cinema Exhibition | 9.4 | 9.4 | 6.8 | (27.4%) | (27.4%) |
| Total Group CAPEX | 86.4 | 114.0 | 87.7 | 1.4% | (23.1%) |
| % of Total Group Revenues (1) CAPEX = Increase in Tangible and Intangible Fixed Assets |
22.7% | 28.6% | 22.9% | 0.2pp | (5.7pp) |
Total CAPEX amounted to 87.7 million euros in 1Q18, representing 22.9% of sales, in line with 1Q17.
Telco CAPEX increased 5% to 80.8 million euros (22% of telco sales) reflecting a combination of significant growth in technical CAPEX partially offset by a large decline in customer related CAPEX. As guided, the various investment projects underway to develop both our mobile and fixed networks is leading to a peak in technical ed in the increase in network expansion, substitution and integration projects which almost doubled to 18.2 million euros (Docsis 3.1 upgrade, single RAN upgrade and initial investment in FttH expansion). Helping to mitigate the increase in technical CAPEX, Customer related CAPEX declined by 21.5% to 32.2 million euros, down to 8.8% of telco sales, as was to be expected with slower commercial activity driving less investment in customer acquisition. On the Cinema and Audiovisuals front, the decline in CAPEX is explained primarily by the weaker operating environment in 1Q18 and the aforementioned renegotiation of content contracts, resulting in less investment in movie rights.
FCF before dividends and disposals (adjusting for the sale of the Optimus network to Vodafone in 1Q17) increased by 12.6% to 37.8 million euros, reflecting consistent improvement in operating profitability and financial discipline, supportive of attractive and sustainable shareholder remuneration. As a percentage of revenues, EBITDA-CAPEX grew 0.7pp yoy to 15.4%, 59.1 million euros. Other cash items recorded interesting savings yoy, namely with cash restructuring payments almost halved at 2.7 million euros and a 20.2% decline in interest payments. The positive cash tax recorded in 1Q18 was due to a one-off recovery of withholding tax payments.
| Cash Flow (Millions of Euros) | 1Q17 | 4Q17 | 1Q18 | 1Q18 / 1Q17 1Q18 / 4Q17 | |
|---|---|---|---|---|---|
| EBITDA | 142.4 | 126.6 | 146.7 | 3.0% | 15.9% |
| Total CAPEX | (86.4) | (114.0) | (87.7) | 1.4% | (23.1%) |
| EBITDA - Total CAPEX | 56.0 | 12.5 | 59.1 | 5.5% | n.a. |
| % of Revenues | 14.7% | 3.1% | 15.4% | 0.7pp | 12.3pp |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(7.2) | (0.3) | (13.8) | 92.0% | n.a. |
| Operating Cash Flow | 48.8 | 12.3 | 45.3 | (7.2%) | 269.7% |
| Long Term Contracts | (2.9) | (3.6) | (2.8) | (5.6%) | (23.3%) |
| Cash Restructuring Payments | (5.3) | (2.0) | (2.7) | (48.7%) | 34.6% |
| Interest Paid | (6.7) | (3.1) | (5.3) | (20.2%) | 74.9% |
| Income Taxes Paid | (0.3) | (7.6) | 3.3 | n.a. | n.a. |
| Disposals | 24.6 | 1.0 | 0.2 | (99.3%) | (83.3%) |
| Other Cash Movements | (0.0) | 0.5 | (0.0) | n.a. | n.a. |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
58.2 | (2.6) | 38.0 | (34.7%) | n.a. |
| Acquisition of Own Shares | 0.0 | 0.0 | (3.1) | n.a. | n.a. |
| Dividends | 0.0 | 0.0 | 0.0 | n.a. | n.a. |
| Free Cash Flow | 58.2 | (2.6) | 34.9 | (40.1%) | n.a. |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
0.8 | (3.1) | 0.2 | (69.7%) | n.a. |
| Change in Net Financial Debt | (59.0) | 5.7 | (35.1) | (40.5%) | n.a. |
| Balance Sheet (Millions of Euros) | 1Q17 | 2017 | 1Q18 | 1Q18/ 1Q17 |
|---|---|---|---|---|
| Non-current Assets | 2,470.8 | 2,449.3 | 2,401.7 | (2.8%) |
| Current Assets | 500.0 | 561.2 | 587.8 | 17.6% |
| Total Assets | 2,970.8 | 3,010.5 | 2,989.5 | 0.6% |
| Total Shareholders' Equity | 1,115.0 | 1,111.5 | 1,135.0 | 1.8% |
| Non-current Liabilities | 1,183.3 | 1,146.1 | 1,176.9 | (0.5)% |
| Current Liabilities | 672.5 | 753.0 | 677.6 | 0.8% |
| Total Liabilities | 1,855.9 | 1,899.1 | 1,854.5 | (0.1)% |
| Total Liabilities and Shareholders' Equity | 2,970.8 | 3,010.5 | 2,989.5 | 0.6% |
At the end of 1Q18, Net Financial Debt stood at 1,050.4 million euros.
Total financial debt was 1,052.7 million euros, which was offset with a cash and short-term investment position on the balance sheet of 2.3 million euros. At the end of 1Q18, NOS also had 245 million euros of unissued commercial paper programmes. The allwhich compares with 2.1% in 1Q17 and 1.9% in 4Q17.
Net Financial Gearing was 48.1% at the end of 1Q18 and Net Financial Debt / EBITDA (last 4 quarters) now
Taking into account the loans issued at a fixed rate, the interest rate hedging operations in place, and the a fixed rate is approximately 80%.
In March 2018, we received our first long term corporate credit rating and were assigned investment grade rating by Standard & Poor´s Global Ratings (BBB-) and FitchRatings (BBB) with a Stable Outlook from both agencies.
| Net Financial Debt (Millions of Euros) (1) | 1Q17 | 2017 | 1Q18 | 1Q18 / 1Q17 |
|---|---|---|---|---|
| Short Term | 156.3 | 197.3 | 113.3 | (27.5%) |
| Bank and Other Loans | 139.0 | 183.6 | 99.3 | (28.6%) |
| Financial Leases | 17.3 | 13.7 | 14.0 | (18.7%) |
| Medium and Long Term | 898.9 | 891.2 | 939.4 | 4.5% |
| Bank and Other Loans | 872.2 | 870.3 | 920.8 | 5.6% |
| Financial Leases | 26.6 | 20.8 | 18.6 | (30.1%) |
| Total Debt | 1,055.1 | 1,088.5 | 1,052.7 | (0.2%) |
| Cash and Short Term Investments | 1.8 | 3.0 | 2.3 | 29.4% |
| Net Financial Debt | 1,053.3 | 1,085.5 | 1,050.4 | (0.3%) |
| Net Financial Gearing (2) | 48.6% | 49.4% | 48.1% | (0.5pp) |
| Net Financial Debt / EBITDA | 1.9x | 1.9x | 1.8x | n.a. |
(2) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).
Leveraging our investment grade credit rating assignment, in April 2018 we launched an inaugural public bond issue for 300 million euros, further executing on our funding strategy to diversify sources of funds, extend average debt maturity and continue to reduce the average cost of debt. The purpose of this bond issue is to refinance existing debt and for other general corporate purposes.
The bond is listed on the regulated Luxembourg Stock Exchange and has a 5 year maturity at an annual fixed coupon rate of 1.125%, corresponding to a 5-year mid swap rate, plus a 0.75% spread, with settlement on 2 May 2018. Demand for this new issue was high reaching close to 1,200 million euros with participation from a significant number of high quality investors, reflecting our strong credit profile.
Also in April 2018, we announced the early redemption, at par value, of the 175 million euros floating rate notes due September 2020, which took place on 4 May 2018 with payment of principal of 175 million euros and interest payment of 449,409.72 euros.
| NOTES | 31-03-2017 REPORTED |
31-12-2017 REPORTED |
31-03-2017 RESTATED |
31-12-2017 RESTATED |
31-03-2018 | |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| NON - CURRENT ASSETS | ||||||
| Tangible assets | 7 | 1,146,893 | 1,137,209 | 1,055,854 | 1,043,939 | 1,039,819 |
| Investment property | 663 | 661 | 663 | 661 | 661 | |
| Intangible assets | 8 | 1,153,564 | 1,141,104 | 1,267,077 | 1,253,398 | 1,237,934 |
| Investments in jointly controlled companies and associated companies | 9 | 13,130 | 37,130 | 13,130 | 37,130 | 23,340 |
| Accounts receivable - other | 10 | 6,524 | 6,185 | 6,524 | 6,185 | 5,548 |
| Tax receivable | 11 | 1,029 | 149 | 1,029 | 149 | 149 |
| Available-for-sale financial assets | 77 | 180 | 77 | 180 | 191 | |
| Deferred income tax assets | 12 | 118,135 | 99,538 | 126,453 | 107,700 | 94,065 |
| TOTAL NON - CURRENT ASSETS | 2,440,015 | 2,422,156 | 2,470,807 | 2,449,343 | 2,401,707 | |
| CURRENT ASSETS: | ||||||
| Inventories | 13 | 41,316 | 32,044 | 41,316 | 32,044 | 31,327 |
| Accounts receivable - trade | 14 | 334,128 | 406,904 | 381,923 | 454,328 | 491,971 |
| Accounts receivable - other | 10 | 17,027 | 10,366 | 17,027 | 10,366 | 11,123 |
| Tax receivable | 11 | 893 | 14,945 | 893 | 14,945 | 1,223 |
| Prepaid expenses | 15 | 87,144 | 77,657 | 57,037 | 46,527 | 49,841 |
| Derivative financial instruments | 17 | 5 | 19 | 5 | 19 | 24 |
| Cash and cash equivalents | 18 | 1,801 | 2,977 | 1,801 | 2,977 | 2,330 |
| TOTAL CURRENT ASSETS | 482,315 | 544,911 | 500,003 | 561,206 | 587,840 | |
| TOTAL ASSETS | 2,922,330 | 2,967,067 | 2,970,810 | 3,010,549 | 2,989,547 | |
| SHAREHOLDER'S EQUITY | ||||||
| Share capital | 19.1 | 5,152 | 5,152 | 5,152 | 5,152 | 5,152 |
| Capital issued premium | 19.2 | 854,219 | 854,219 | 854,219 | 854,219 | 854,219 |
| Own shares | 19.3 | (14,431) | (12,681) | (14,431) | (12,681) | (12,263) |
| Legal reserve | 19.4 | 1,030 | 1,030 | 1,030 | 1,030 | 1,030 |
| Other reserves and accumulated earnings | 19.4 | 200,107 | 105,489 | 228,461 | 133,843 | 245,545 |
| Net Income | 31,435 | 124,094 | 32,782 | 122,083 | 33,778 | |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,077,512 | 1,077,301 | 1,107,213 | 1,103,644 | 1,127,461 | |
| Non-controlling interests | 20 | 9,007 | 9,067 | 7,744 | 7,822 | 7,551 |
| TOTAL EQUITY | 1,086,519 | 1,086,368 | 1,114,957 | 1,111,467 | 1,135,011 | |
| LIABILITIES | ||||||
| NON - CURRENT LIABILITIES | ||||||
| Borrowings | 21 | 968,032 | 954,658 | 968,032 | 954,658 | 1,000,395 |
| Provisions | 22 | 149,623 | 133,262 | 149,623 | 133,262 | 141,572 |
| Accounts payable | 26 | 18,735 | 17,615 | 18,735 | 17,615 | 14,145 |
| Tax payable | 11 | 1,298 | - | 1,298 | - | - |
| Accrued expenses | 23 | 9,078 | 8,767 | 9,078 | 8,767 | 8,231 |
| Deferred income | 24 | 3,996 | 3,773 | 3,996 | 3,773 | 3,703 |
| Derivative financial instruments | 17 | 3,072 | 2,462 | 3,072 | 2,462 | 2,505 |
| Deferred income tax liabilities | 12 | 9,464 | 7,140 | 29,505 | 25,523 | 6,380 |
| TOTAL NON - CURRENT LIABILITIES | 1,163,297 | 1,127,678 | 1,183,338 | 1,146,060 | 1,176,932 | |
| CURRENT LIABILITIES: | ||||||
| Borrowings | 21 | 167,356 | 210,136 | 167,356 | 210,136 | 126,739 |
| Accounts payable - trade | 25 | 208,906 | 224,864 | 208,906 | 224,864 | 228,649 |
| Accounts payable - other | 26 | 50,419 | 58,155 | 50,419 | 58,155 | 41,213 |
| Tax payable | 11 | 33,975 | 19,222 | 33,975 | 19,222 | 29,400 |
| Accrued expenses | 23 | 181,300 | 213,564 | 181,300 | 213,564 | 222,862 |
| Deferred income | 24 | 30,243 | 27,047 | 30,243 | 27,047 | 28,669 |
| Derivative financial instruments | 17 | 315 | 33 | 315 | 33 | 73 |
| TOTAL CURRENT LIABILITIES | 672,514 | 753,021 | 672,514 | 753,021 | 677,604 | |
| TOTAL LIABILITIES | 1,835,811 | 1,880,699 | 1,855,853 | 1,899,082 | 1,854,536 | |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,922,330 | 2,967,067 | 2,970,810 | 3,010,549 | 2,989,547 | |
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 31 March 2018.
(Amounts stated in thousands of euros)
| 3M 17 | 3M 17 | |||
|---|---|---|---|---|
| NOTES | REPORTED | RESTATED | 3M 18 | |
| REVENUES: | ||||
| Services rendered | 362,250 | 356,370 | 355,611 | |
| Sales | 14,833 | 18,876 | 20,104 | |
| Other operating revenues | 3,916 | 5,090 | 7,288 | |
| 27 | 380,999 | 380,336 | 383,002 | |
| COSTS, LOSSES AND GAINS: | ||||
| Wages and salaries | 28 | 22,190 | 22,190 | 19,978 |
| Direct costs | 29 | 113,818 | 113,764 | 118,687 |
| Costs of products sold | 30 | 10,870 | 14,231 | 13,496 |
| Marketing and advertising | 6,439 | 6,439 | 6,275 | |
| Support services | 31 | 23,527 | 23,411 | 22,456 |
| Supplies and external services | 31 | 44,813 | 42,160 | 42,704 |
| Other operating losses / (gains) | 170 | 170 | 156 | |
| Taxes | 7,786 | 7,786 | 8,374 | |
| Provisions and adjustments | 32 | 7,785 | 7,785 | 4,142 |
| Depreciation, amortisation and impairment losses | 7, 8 and 34 | 103,288 | 100,215 | 107,101 |
| Reestructuring costs | 1,608 | 1,608 | 1,315 | |
| Losses / (gains) on sale of assets, net | (41) | (41) | (45) | |
| Other losses / (gains) non recurrent net | 35 | 1,783 | 1,783 | (13,390) |
| 344,037 | 341,501 | 331,249 | ||
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 36,962 | 38,835 | 51,754 | |
| Net losses / (gains) of affiliated companies | 9 and 33 | (5,349) | (5,349) | 6,314 |
| Financial costs | 36 | 4,911 | 4,911 | 4,665 |
| Net foreign exchange losses / (gains) | 3 | 3 | 187 | |
| Net other financial expenses / (income) | 36 | 1,695 | 1,695 | 1,392 |
| 1,260 | 1,260 | 12,558 | ||
| INCOME BEFORE TAXES | 35,702 | 37,575 | 39,196 | |
| Income taxes | 12 | 4,303 | 4,826 | 5,681 |
| NET CONSOLIDATED INCOME | 31,399 | 32,749 | 33,515 | |
| ATTRIBUTABLE TO: | ||||
| NOS Group Shareholders | 31,435 | 32,782 | 33,778 | |
| Non-controlling interests | 20 | (36) | (33) | (263) |
| EARNINGS PER SHARES | ||||
| Basic - euros | 37 | 0.06 | 0.06 | 0.07 |
| Diluted - euros | 37 | 0.06 | 0.06 | 0.07 |
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 quarter ended on 31 March 2018.
(Amounts stated in thousands of euros)
| NOTES | 3M 17 REPORTED |
3M 17 RESTATED |
3M 18 | |
|---|---|---|---|---|
| NET CONSOLIDATED INCOME | 31,399 | 32,749 | 33,515 | |
| OTHER INCOME | ||||
| ITENS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT: | ||||
| Accounting for equity method | 9 | (44) | (44) | (7,223) |
| Fair value of interest rate swap | 17 | 760 | 760 | 172 |
| Deferred income tax - interest rate swap | 17 | (171) | (171) | (39) |
| Fair value of equity swaps | 17 | (33) | (33) | (361) |
| Deferred income tax - equity swap | 17 | 8 | 8 | 81 |
| Currency translation differences and others | (15) | (15) | (745) | |
| INCOME RECOGNISED DIRECTLY IN EQUITY | 505 | 505 | (8,115) | |
| TOTAL COMPREHENSIVE INCOME | 31,904 | 33,254 | 25,400 | |
| ATTRIBUTABLE TO: | ||||
| NOS Group Shareholders | 31,940 | 33,287 | 25,663 | |
| Non-controlling interests | (36) | (33) | (263) | |
| 31,904 | 33,254 | 25,400 |
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 quarter ended on 31 March 2018.
The Chief Accountant The Board of Directors
for the quarters ended on 31 March 2017 and 2018
(Amounts stated in thousands of euros)
| ATTRIBUTABLE TO NOS GROUP SHAREHOLDERS | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| NOTES | SHARE CAPITAL |
CAPITAL ISSUED PREMIUM |
OWN SHARES |
LEGAL RESERVE |
OTHER RESERVES AND ACCUMULATED 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 | - | - | - | - | 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) | - | - | |
| Distribution of own shares - share incentive scheme | - | - | 4,107 | - | (3,792) | - | - | 316 | |
| Distribuition of own shares - other remunerations | - | - | 218 | - | (42) | - | - | 177 | |
| Share Plan - costs incurred in the period and others | - | - | - | - | 855 | - | 2 | 857 | |
| Comprehensive Income | - | - | - | - | 505 | 32,782 | (33) | 33,254 | |
| Others | - | - | - | - | 88 | - | - | 88 | |
| BALANCE AS AT 31 MARCH 2017 (RESTATED) | 5,152 | 854,219 | (14,431) | 1,030 | 228,461 | 32,782 | 7,744 | 1,114,957 | |
| BALANCE AS AT 1 JANUARY 2017 (REPORTED) | 5,152 | 854,219 | (12,681) | 1,030 | 105,489 | 124,094 | 9,067 1,086,368 | ||
| Effect of change in accounting policies | - | - | - | - | 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) | - | - | |
| Aquisition of own shares | 19.3 | - | - | (3,096) | - | - | - | - | (3,096) |
| Distribution of own shares - share incentive scheme | 19.3 | - | - | 3,411 | - | (3,411) | - | - | - |
| Distribuition of own shares - other remunerations | 19.3 | - | - | 103 | - | (20) | - | - | 83 |
| Share Plan - costs incurred in the period and others | 41 | - | - | - | - | 1,165 | - | (8) | 1,157 |
| Comprehensive Income | - | - | - | - | (8,115) | 33,778 | (263) | 25,400 | |
| BALANCE AS AT 31 MARCH 2018 | 5,152 | 854,219 | (12,263) | 1,030 | 245,545 | 33,778 | 7,551 | 1,135,011 |
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 quarter ended on 31 March 2018.
The Chief Accountant The Board of Directors
(Amounts stated in thousands of euros)
| NOTES | 3M 17 | 3M 17 | 3M 18 | |
|---|---|---|---|---|
| REPORTED | RESTATED | |||
| OPERATING ACTIVITIES | ||||
| Collections from clients | 474,347 | 474,347 | 434,399 | |
| Payments to suppliers | (275,429) | (276,294) | (236,013) | |
| Payments to employees | (28,947) | (28,947) | (24,646) | |
| Receipts / (Payments) relating to income taxes | (278) | (278) | 3,337 | |
| Other cash receipts / (payments) related with operating activities | (18,746) | (18,746) | (11,369) | |
| CASH FLOW FROM OPERATING ACTIVITIES (1) | 150,947 | 150,082 | 165,708 | |
| INVESTING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Tangible assets | 726 | 726 | 148 | |
| Intangible assets | - | - | 10 | |
| Available-for-sale financial assets | 16 | 29,776 | 29,776 | - |
| Interest and related income | 1,607 | 1,607 | 1,218 | |
| 32,109 | 32,109 | 1,377 | ||
| PAYMENTS RESULTING FROM | ||||
| Tangible assets | (64,886) | (53,357) | (76,020) | |
| Intangible assets | (46,558) | (57,222) | (43,614) | |
| (111,444) | (110,579) | (119,634) | ||
| CASH FLOW FROM INVESTING ACTIVITIES (2) | (79,335) | (78,470) | (118,258) | |
| FINANCING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Borrowings | 25,000 | 25,000 | 37,099 | |
| 25,000 | 25,000 | 37,099 | ||
| PAYMENTS RESULTING FROM | ||||
| Borrowings | (80,995) | (80,995) | (50,000) | |
| Lease rentals (principal) | (6,451) | (6,451) | (4,018) | |
| Interest and related expenses | (9,827) | (9,827) | (7,309) | |
| Aquisition of own shares | 19.3 | - | - | (3,096) |
| (97,273) | (97,273) | (64,424) | ||
| CASH FLOW FROM FINANCING ACTIVITIES (3) | (72,273) | (72,273) | (27,325) | |
| Change in cash and cash equivalents (4)=(1)+(2)+(3) | (661) | (661) | 20,125 | |
| Effect of exchange differences | 16 | 16 | (45) | |
| 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 | (14,522) | (14,522) | (18,696) | |
| Cash and cash equivalents | 18 | 1,801 | 1,801 | 2,330 |
| Bank overdrafts | 21 | (16,323) | (16,323) | (21,026) |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | (14,522) | (14,522) | (18,696) |
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 quarter ended on 31 March 2018.
(Amounts stated in thousands of euros, unless otherwise stated)
Serviços de Telecomunicações e Multimédia, dquarters 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.
NOS shares are listed on the Euronext Lisbon market. The shareholder 2018 is shown in Note 19.
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" provision of consultancy and similar services directly 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 quarter ended on 31 March 2018 are presented in euros and were approved by the Board of Directors and their issue authorised on 10 May 2018.
The Board of Directors believes that these financial operations, financial performance, and consolidated cash flows.
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 rce 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.
Changes in accounting policies and disclosures
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.
Commissions and other costs related to the soliciting of contracts
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 imply 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 |
| 31-03-2017 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
31-03-2017 RESTATED |
|
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS | ||||
| Tangible assets | 1,146,893 | (11,653) | (79,386) | 1,055,854 |
| Intangible assets | 1,153,564 | - | 113,513 | 1,267,077 |
| Deferred income tax assets | 118,135 | - | 8,318 | 126,453 |
| Other assets | 21,423 | - | - | 21,423 |
| TOTAL NON - CURRENT ASSETS | 2,440,015 | (11,653) | 42,445 | 2,470,807 |
| CURRENT ASSETS: | ||||
| Accounts receivable - trade | 334,128 | 47,795 | - | 381,923 |
| Prepaid expenses | 87,144 | (30,107) | - | 57,037 |
| Other assets | 61,043 | - | - | 61,043 |
| TOTAL CURRENT ASSETS | 482,315 | 17,688 | - | 500,003 |
| TOTAL ASSETS | 2,922,330 | 6,035 | 42,445 | 2,970,810 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital issued, premium and own shares | 845,970 | - | - | 845,970 |
| Other reserves and accumulated earnings | 200,107 | 4,016 | 24,338 | 228,461 |
| Net Income | 31,435 | 330 | 1,017 | 32,782 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,077,512 | 4,346 | 25,355 | 1,107,213 |
| Non-controlling interests | 9,007 | - | (1,263) | 7,744 |
| TOTAL EQUITY | 1,086,519 | 4,346 | 24,092 | 1,114,957 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES | ||||
| Deferred income tax liabilities | 9,464 | 1,688 | 18,353 | 29,505 |
| Other liabilities | 1,153,833 | - | - | 1,153,833 |
| TOTAL NON - CURRENT LIABILITIES | 1,163,297 | 1,688 | 18,353 | 1,183,338 |
| TOTAL CURRENT LIABILITIES | 672,514 | - | - | 672,514 |
| TOTAL LIABILITIES | 1,835,811 | 1,689 | 18,353 | 1,855,853 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,922,330 | 6,035 | 42,445 | 2,970,810 |
| 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.
| 3M 17 REPORTED |
Revenue (recognition according with performance obligations) |
Costs of obtaining and to fulfil a contract with a customer |
3M 17 RESTATED |
|
|---|---|---|---|---|
| REVENUES: | ||||
| Services rendered | 362,250 | (5,880) | - | 356,370 |
| Sales | 14,833 | 4,214 | (171) | 18,876 |
| Other operating revenues | 3,916 | 1,174 | - | 5,090 |
| 380,999 | (492) | (171) | 380,336 | |
| COSTS, LOSSES AND GAINS: | ||||
| Direct costs | 113,818 | - | (54) | 113,764 |
| Costs of products sold | 10,870 | 2,992 | 369 | 14,231 |
| Support services | 23,527 | - | (116) | 23,411 |
| Supplies and external services | 44,813 | - | (2,653) | 42,160 |
| Depreciation, amortisation and impairment losses | 103,288 | (3,942) | 869 | 100,215 |
| Other costs, losses and gains | 47,721 | - | - | 47,721 |
| 344,037 | (950) | (1,585) | 341,501 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 458 | 1,415 | 38,835 | |
| Financial results | 1,260 | - | - | 1,260 |
| INCOME BEFORE TAXES | 35,702 | 458 | 1,415 | 37,575 |
| Income taxes | 4,303 | 128 | 395 | 4,826 |
| NET CONSOLIDATED INCOME | 31,999 | 330 | 1,020 | 32,749 |
| ATTRIBUTABLE TO: | ||||
| NOS Group Shareholders | 31,435 | 330 | 1,017 | 32,782 |
| Non-controlling interests | (36) | - | 3 | (33) |
| EARNINGS PER SHARES | ||||
| Basic - euros | 0.06 | - | - | 0.07 |
| Diluted - euros | 0.06 | - | - | 0.07 |
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:
• 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.
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).
the consolidated statement of financial position and in the consolidated statement, respectively, under the -
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 nonacquired 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 the net profits of jointly controlled financial results and taxes. Direct changes in the post-acquisition 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 income statement. Direct changes in the post-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 between group companies
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 non-recurring 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 held for sale
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.
From the time that certain tangible assets become 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 book value, are recognised in
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 | 3 - 4 |
| Administrative equipment | 2 - 10 | 2 - 10 |
| Other tangible assets | 4 - 8 | 4 - 8 |
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 licenses, content utilisation rights and other contractual rights.
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.
investments in group com company.
Goodwill is not amortised and is subject to impairment tests at least once a year, on a specified date, and ons at the date of the statement of financial position which may result in a possible loss of value. Any impairment loss is recorded immediately in the
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.
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:
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 rom 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 to which the asset belongs. Each of t -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.
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.
Financial assets at fair value through profit and loss
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 profit or loss the income from interest and dividends.
Financial assets at fair value through other comprehensive income
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.
ts of cash, bank 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 deducting the liabilities. The equity instruments issued by Group companies 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:
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 in line 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
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 stated rights are recognised in the income obtained through their commercial exploration.
Due to the agreement between the three national operators of reciprocal availability, for several sports 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:
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 equity.
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.
Reserves for plans of medium term incentive
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.
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:
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 stand-alone 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:
(i) When the gross inflows from economic benefits do not result in equity increases to the Group, i.e., the amount charged to the customer is equal to the amount delivered to the partner. This situation is applicable to the revenue obtained by the invoicing special services operators, in these cases the amounts charged on account of the capital are not revenue; and,
(ii) developing a product or services in order for it to be commercialised. Thus, a counterpart of a contract will not be a customer if, for instance, the counterpart has hired from NOS to participate in an activity or process in which the parties in the contract share the risks and benefits instead of borative arrangements. This situation is applicable to revenues from operators affected by the reciprocal availability agreement regarding broadcasting rights of sports content.
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.
e 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 occur in future per 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 related amount, as 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 nonequity.
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 foreign currencies are included in equity under
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 | Converted 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 | 212.3 | 298.4 |
At 31 December 2017 and 31 March 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 | 31-03-2018 | |
|---|---|---|
| US Dollar | 1.1993 | 1.2321 |
| Angolan Kwanza | 185.4000 | 264.3780 |
| British Pound | 0.8872 | 0.8749 |
| Mozambican Metical | 70.5700 | 75.8500 |
| Canadian Dollar | 1.5039 | 1.5895 |
| Swiss Franc | 1.1702 | 1.1779 |
| Real | 3.9729 | 4.0938 |
In the quarters ended at 31 March 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:
| 3M 17 | 3M 18 | |
|---|---|---|
| US Dollar | 1.0648 | 1.2292 |
| Angolan Kwanza | 184.7822 | 261.3572 |
| Mozambican Metical | 73.9367 | 75.5167 |
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.
he 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 - ch are directly or indirectly 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:
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 under 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 preparation of consolidated financial statements requires 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:
Entities included in the consolidation perimeter
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.
Impairment of non-current assets, excluding goodwill
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 control.
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 cash-generating 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.
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 account of 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. When there is no active market, which is the case with som 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 quarters ended on 31 March 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 quarter ended on 31 March 2017 were:
During the quarter ended on 31 March 2018, there were no changes in the consolidation perimeter.
The business segments are as follows:
Assets and liabilities by segment at 31 December 2017 and 31 March 2018 are shown below:
| 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 | 1,211 | 1,766 | - | 2,977 |
| Other current assets | 540,929 | 81,397 | (61,120) | 561,206 |
| 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 |
| 31-03-2018 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tangible assets | 1,028,145 | 11,674 | - | 1,039,819 |
| Intangible assets | 1,142,736 | 95,198 | - | 1,237,934 |
| Investments in jointly controlled companies and associated companies | 100,841 | 15,639 | (93,140) | 23,340 |
| Accounts receivable - other | 50,416 | 24,520 | (69,388) | 5,548 |
| Deferred income tax assets | 82,472 | 11,593 | - | 94,065 |
| Other non-current assets | 320 | 681 | - | 1,001 |
| TOTAL NON - CURRENT ASSETS | 2,404,930 | 159,305 | (162,528) | 2,401,707 |
| CURRENT ASSETS: | ||||
| Inventories | 30,430 | 897 | - | 31,327 |
| Account receivables | 482,225 | 73,682 | (52,813) | 503,094 |
| Prepaid expenses | 47,676 | 2,578 | (413) | 49,841 |
| Other current assets | 13 | 238 | 996 | 1,247 |
| Cash and cash equivalents | 996 | 1,334 | - | 2,330 |
| TOTAL CURRENT ASSETS | 561,341 | 78,729 | (52,230) | 587,840 |
| TOTAL ASSETS | 2,966,271 | 238,034 | (214,758) | 2,989,547 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5,152 | 32,749 | (32,749) | 5,152 |
| Capital issued premium | 854,219 | - | - | 854,219 |
| Own shares | (12,263) | - | - | (12,263) |
| Legal reserve | 1,030 | 1,087 | (1,087) | 1,030 |
| Other reserves and accumulated earnings | 220,408 | 83,987 | (58,850) | 245,545 |
| Net income | 31,785 | 1,992 | 1 | 33,778 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,100,331 | 119,814 | (92,686) | 1,127,459 |
| Non-controlling interests | 7,551 | - | - | 7,551 |
| TOTAL EQUITY | 1,107,883 | 119,814 | (92,686) | 1,135,011 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 1,021,628 | 48,156 | (69,389) | 1,000,395 |
| Provisions | 135,138 | 6,434 | - | 141,572 |
| Accrued expenses | 8,231 | - | - | 8,231 |
| Other non-current liabilities | 20,353 | - | - | 20,353 |
| Deferred income tax liabilities | 5,946 | 434 | - | 6,380 |
| TOTAL NON - CURRENT LIABILITIES | 1,191,297 | 55,024 | (69,389) | 1,176,932 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 144,090 | 16,636 | (33,987) | 126,739 |
| Accounts payable | 265,550 | 19,742 | (15,430) | 269,862 |
| Tax payable | 26,246 | 2,158 | 996 | 29,400 |
| Accrued expenses | 203,499 | 23,214 | (3,851) | 222,862 |
| Other current liabilities | 27,707 | 1,445 | (410) | 28,742 |
| TOTAL CURRENT LIABILITIES | 667,091 | 63,196 | (52,683) | 677,604 |
| TOTAL LIABILITIES | 1,858,388 | 118,220 | (122,072) | 1,854,536 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,966,271 | 238,034 | (214,758) | 2,989,547 |
The results by segment and investments in tangible and intangible assets for the quarters ended on 31 March 2017 and 2018 are shown below:
| 3M 17 RESTATED | |||||
|---|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | ||
| REVENUES: | |||||
| Services rendered | 342,635 | 26,137 | (12,402) | 356,370 | |
| Sales | 14,869 | 4,080 | (73) | 18,876 | |
| Other operating revenues | 5,173 | 216 | (299) | 5,090 | |
| 362,677 | 30,433 | (12,774) | 380,336 | ||
| COSTS, LOSSES AND GAINS: | |||||
| Wages and salaries | 19,780 | 2,410 | - | 22,190 | |
| Direct costs | 116,082 | 7,904 | (10,222) | 113,764 | |
| Costs of products sold | 14,184 | 56 | (9) | 14,231 | |
| Marketing and advertising | 6,470 | 1,831 | (1,862) | 6,439 | |
| Support services | 23,276 | 525 | (390) | 23,411 | |
| Supplies and external services | 37,362 | 5,089 | (291) | 42,160 | |
| Other operating losses / (gains) | 159 | 11 | - | 170 | |
| Taxes | 7,740 | 46 | - | 7,786 | |
| Provisions and adjustments | 7,796 | (11) | - | 7,785 | |
| 232,849 | 17,861 | (12,774) | 237,936 | ||
| EBITDA | 129,828 | 12,572 | - | 142,400 | |
| Depreciation, amortisation and impairment losses | 90,903 | 9,312 | - | 100,215 | |
| Other losses / (gains), net | 3,215 | 136 | - | 3,351 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 35,710 | 3,124 | - | 38,834 | |
| Net losses / (gains) of affiliated companies | (5,089) | (261) | - | (5,349) | |
| Financial costs | 4,782 | 129 | - | 4,911 | |
| Net foreign exchange losses / (gains) | 3 | - | - | 3 | |
| Net other financial expenses / (income) | 1,682 | 14 | - | 1,695 | |
| 1,378 | (118) | - | 1,260 | ||
| INCOME BEFORE TAXES | 34,333 | 3,242 | - | 37,575 | |
| Income taxes | 4,067 | 759 | - | 4,826 | |
| NET INCOME | 30,266 | 2,483 | - | 32,749 | |
| CAPEX | 76,996 | 9,425 | - | 86,421 | |
| EBITDA - CAPEX | 52,832 | 3,147 | - | 55,979 |
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
| 3M 18 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| REVENUES: | ||||
| Services rendered | 342,691 | 23,471 | (10,551) | 355,611 |
| Sales | 15,995 | 4,154 | (45) | 20,104 |
| Other operating revenues | 7,372 | 254 | (338) | 7,288 |
| 366,058 | 27,878 | (10,934) | 383,002 | |
| COSTS, LOSSES AND GAINS: | ||||
| Wages and salaries | 17,470 | 2,508 | - | 19,978 |
| Direct costs | 120,553 | 6,456 | (8,322) | 118,687 |
| Costs of products sold | 13,449 | 53 | (6) | 13,496 |
| Marketing and advertising | 6,446 | 1,719 | (1,890) | 6,275 |
| Support services | 22,282 | 612 | (438) | 22,456 |
| Supplies and external services | 37,764 | 5,218 | (278) | 42,704 |
| Other operating losses / (gains) | 145 | 11 | - | 156 |
| Taxes | 8,341 | 33 | - | 8,374 |
| Provisions and adjustments | 4,209 | (67) | - | 4,142 |
| 230,658 | 16,543 | (10,934) | 236,267 | |
| EBITDA | 135,400 | 11,335 | - | 146,735 |
| Depreciation, amortisation and impairment losses | 98,696 | 8,405 | - | 107,101 |
| Other losses / (gains), net | (12,131) | 11 | - | (12,120) |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 48,835 | 2,919 | - | 51,754 |
| Net losses / (gains) of affiliated companies | 6,314 | - | - | 6,314 |
| Financial costs | 4,367 | 298 | - | 4,665 |
| Net foreign exchange losses / (gains) | 70 | 117 | - | 187 |
| Net losses / (gains) on financial assets | - | - | - | - |
| Net other financial expenses / (income) | 1,413 | (21) | - | 1,392 |
| 12,164 | 394 | - | 12,558 | |
| INCOME BEFORE TAXES | 36,671 | 2,525 | - | 39,196 |
| Income taxes | 5,147 | 534 | - | 5,681 |
| NET INCOME | 31,524 | 1,991 | - | 33,515 |
| CAPEX | 80,812 | 6,842 | - | 87,654 |
| EBITDA - CAPEX | 54,588 | 4,493 | - | 59,081 |
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) | - | 19 | - | 19 | - | 19 |
| 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 | 19 | - | 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 |
| 31-03-2018 | ||||||
|---|---|---|---|---|---|---|
| FINANCIAL ASSETS |
DERIVATIVES | FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |
| ASSETS | ||||||
| Available-for-sale financial assets | 191 | - | - | 191 | - | 191 |
| Derivative financial instruments (Note 17) | - | 24 | - | 24 | - | 24 |
| Accounts receivable - trade (Note 14) | 491,971 | - | - | 491,971 | - | 491,971 |
| Accounts receivable - other (Note 10) | 12,122 | - | - | 12,122 | 4,550 | 16,671 |
| Cash and cash equivalents (Note 18) | 2,330 | - | - | 2,330 | - | 2,330 |
| TOTAL FINANCIAL ASSETS | 506,614 | 2 4 | - | 506,638 | 4,550 | 511,187 |
| LIABILITIES | ||||||
| Borrowings (Note 21) | - | - | 1,127,134 | 1,127,134 | - | 1,127,134 |
| Derivative financial instruments (Note 17) | - | 2,578 | - | 2,578 | - | 2,578 |
| Accounts payable - trade (Note 25) | - | - | 228,649 | 228,649 | - | 228,649 |
| Accounts payable - other (Note 26) | - | - | 55,167 | 55,167 | 191 | 55,358 |
| Accrued expenses (Note 23) | - | - | 231,093 | 231,093 | - | 231,093 |
| TOTAL FINANCIAL LIABILITIES | - | 2,578 | 1,642,043 | 1,644,621 | 191 | 1,644,812 |
Considering its nature, the balances of the amounts to be paid and received to/from state and other public e of such balances are not included in the scope of IFRS 7.
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.
and judicial risks, which are described in the Management Report.
During the quarters ended on 31 March 2017 and 2018, the movements in this item were as follows:
| 31-12-2016 | DISPOSALS AND | TRANSFERS AND | 31-03-2017 | ||
|---|---|---|---|---|---|
| RESTATED | INCREASES | WRITE-OFFS | OTHERS | RESTATED | |
| ACQUISITION COST | |||||
| Lands | 919 | - | - | - | 919 |
| Buildings and other constructions | 368,233 | (151) | (36) | 5,104 | 373,150 |
| Basic equipment | 2,278,654 | 15,618 | (1,524) | 6,287 | 2,299,035 |
| Transportation equipment | 8,673 | 674 | 35 | (70) | 9,312 |
| Tools and dies | 1,341 | - | - | 1 | 1,342 |
| Administrative equipment | 186,138 | 952 | (774) | 591 | 186,907 |
| Other tangible assets | 41,088 | 36 | - | 128 | 41,252 |
| Tangible assets in-progress | 29,527 | 21,202 | - | (24,263) | 26,466 |
| 2,914,573 | 38,331 | (2,299) | (12,222) | 2,938,383 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | |||||
| Lands | 37 | - | - | - | 37 |
| Buildings and other constructions | 198,353 | 2,896 | (1) | 184 | 201,432 |
| Basic equipment | 1,431,287 | 44,072 | (1,357) | (13,251) | 1,460,751 |
| Transportation equipment | 3,061 | 425 | (34) | - | 3,452 |
| Tools and dies | 1,250 | 8 | - | - | 1,258 |
| Administrative equipment | 174,039 | 166 | (643) | 1,642 | 175,204 |
| Other tangible assets | 40,138 | (81) | - | 338 | 40,395 |
| 1,848,165 | 47,486 | (2,035) | (11,087) | 1,882,529 | |
| 1,066,408 | (9,155) | (264) | (1,135) | 1,055,854 | |
| 31-12-2017 | INCREASES | DISPOSALS AND | TRANSFERS AND | 31-03-2018 | |
|---|---|---|---|---|---|
| RESTATED | WRITE-OFFS | OTHERS | |||
| ACQUISITION COST | |||||
| Land | 955 | - | - | - | 955 |
| Buildings and other constructions | 378,899 | 262 | (26) | (5,119) | 374,016 |
| Basic equipment | 2,297,064 | 11,840 | (1,104) | 27,647 | 2,335,447 |
| Transportation equipment | 8,299 | - | - | (33) | 8,266 |
| Tools and dies | 1,347 | - | - | 11 | 1,358 |
| Administrative equipment | 186,850 | 709 | (419) | 323 | 187,463 |
| Other tangible assets | 41,928 | 61 | (4) | 103 | 42,088 |
| Tangible assets in-progress | 60,072 | 37,538 | - | (25,499) | 72,111 |
| 2,975,415 | 50,410 | (1,553) | (2,568) | 3,021,704 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | |||||
| Land | 37 | - | - | - | 37 |
| Buildings and other constructions | 208,016 | 2,667 | (27) | (3,809) | 206,847 |
| Basic equipment | 1,502,361 | 50,545 | (1,084) | (361) | 1,551,461 |
| Transportation equipment | 3,914 | 449 | - | (32) | 4,331 |
| Tools and dies | 1,282 | 9 | - | (1) | 1,290 |
| Administrative equipment | 174,763 | 1,420 | (396) | 806 | 176,593 |
| Other tangible assets | 41,104 | 45 | (2) | 179 | 41,326 |
| 1,931,477 | 55,135 | (1,509) | (3,218) | 1,981,885 | |
| 1,043,939 | (4,726) | (44) | 650 | 1,039,819 | |
At 31 March 2018, the tangible assets net value is composed mainly by basic equipment, namely:
contracts at 31 March 2017 and 2018, amounted to 202.8 million euros and 196.6 million euros, and their net book value as of those dates amounted to 105 million euros and 85.9 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 31 March 2018, total net value of these costs amounted to 14.6 million euros (31 March 2017: 15.2 million euros). The amount of interest capitalised in the quarter ended on 31 March 2018 amounted to 0.3 million euros (31 December 2016: 0.3 million euros).
During the quarters ended on 31 March 2017 and 2018, the movements in this item were as follows:
| DISPOSALS AND | TRANSFERS AND | 31-03-2017 | |||
|---|---|---|---|---|---|
| RESTATED | INCREASES | WRITE-OFFS | OTHERS | RESTATED | |
| ACQUISITION COST | |||||
| Industrial property and other rights | 1,475,963 | 1,220 | (5) | 21,368 | 1,498,546 |
| Costs of obtaining and to fulfil a contract with a customer | 429,258 | 26,621 | - | - | 455,879 |
| Goodwill | 641,599 | - | - | (199) | 641,400 |
| Intangible assets in-progress | 34,355 | 20,249 | - | (20,288) | 34,316 |
| 2,581,175 | 48,090 | (5) | 881 | 2,630,141 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | |||||
| Industrial property and other rights | 1,052,548 | 26,876 | (4) | 34 | 1,079,454 |
| Costs of obtaining and to fulfil a contract with a customer | 253,076 | 25,968 | - | - | 279,044 |
| Other intangible assets | 4,779 | - | - | (213) | 4,566 |
| 1,310,403 | 52,844 | (4) | (179) | 1,363,064 | |
| 1,270,772 | (4,754) | (1) | 1,060 | 1,267,077 |
| 31-12-2017 RESTATED |
INCREASES | DISPOSALS AND WRITE-OFFS |
TRANSFERS AND OTHERS |
31-03-2018 | |
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| Industrial property and other rights | 1,563,282 | 1,968 | (10) | 16,976 | 1,582,216 |
| Costs of obtaining and to fulfil a contract with a customer | 528,439 | 22,687 | (34,424) | - | 516,702 |
| Goodwill | 641,400 | - | - | - | 641,400 |
| Intangible assets in-progress | 43,533 | 12,589 | - | (18,468) | 37,654 |
| 2,776,654 | 37,244 | (34,434) | (1,492) | 2,777,972 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | |||||
| Industrial property and other rights | 1,161,048 | 25,739 | (2) | (111) | 1,186,674 |
| Costs of obtaining and to fulfil a contract with a customer | 357,642 | 26,226 | (34,424) | - | 349,444 |
| Intangible assets in-progress | 4,566 | - | - | (647) | 3,919 |
| 1,523,256 | 51,965 | (34,426) | (758) | 1,540,037 | |
| 1,253,398 | (14,722) | (8) | (734) | 1,237,934 |
At 31 March 2018, the item "Industrial property and other rights" includes mainly:
(1) A net amount of 124.9 million euros (31 March 2017: 133.1 million euros) mainly related to the investment, net of amortisation, made in the development of the UMTS network by NOS SA, including: (i) 39.5 million euros (31 March 2017: 42.1 million euros) related to the license, (ii) 13.2 million euros (31 March 2017: 14.1 million euros) related to the agreement signed in 2002 between Oni Way and the other three mobile telecommunication operators with activity in Portugal, (iii) 4.1 million euros (31 March 2017: 4.3 million euros) related to the Share Capital o and the three mobile telecommunication operators in Portugal; (iv) 57.9 million euros (31 March 2017: (31 March 2017: 7.3 million euros) corresponding to the valuation of the license in the fair value allocation process resulting from the merger; 31-12-2016
Increases in the quarters ended on 31 March 2018 correspond mainly to customer acquisition costs, in the amount of 14.4 million euros, movies and series usage rights, for an amount of 6.3 million euros and software acquisition and development, for an amount of 6.8 million euros.
The net amount of "Transfer and others" corresponds, mainly, to the transfer of assets, to "Tangible assets" (Note 7).
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| 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:
| AUDIOVISUALS SEGMENT | ||||
|---|---|---|---|---|
| TELCO | NOS | NOS | ||
| SEGMENT | 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 31 March 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 31 March 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| INVESTMENTS - EQUITY METHOD | ||
| Sport TV | 4,693 | 4,835 |
| Dreamia | 3,658 | 3,643 |
| Finstar | 28,389 | 14,435 |
| Mstar | (425) | (283) |
| Upstar | 279 | 301 |
| Canal 20 TV, S.A. | 12 | 12 |
| Big Picture 2 Films | 100 | 114 |
| 36,706 | 23,057 | |
| ASSETS | 37,130 | 23,340 |
| LIABILITIES (NOTE 22) | (425) | (283) |
on 31 March 2017 and 2018 were as follows:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| AS AT JANUARY 1 | 7,063 | 36,706 |
| Gains / (losses) of exercise (Note 33) | 4,112 | (6,426) |
| Gains with the entrance of new shareholders (Note 34) i) | 1,237 | - |
| Changes in equity ii) | (44) | (7,223) |
| AS AT MARCH 31 | 12,368 | 23,057 |
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 other than euro and impact a hyperinflationary economy (Note 33).
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 31 March 2017, 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 one of the shareholders which are above the held percentage.
** Company dissolved on December 27, 2017.
| 31-03-2018 | |||||||
|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
| Sport TV* | 113,088 | 93,750 | 19,338 | 48,032 | 567 | 25.00% | 142 |
| Dreamia | 14,869 | 7,583 | 7,286 | 564 | (29) | 50.00% | (15) |
| Finstar | 268,433 | 220,315 | 48,118 | 302,683 | (22,344) | 30.00% | (6,703) |
| Mstar | 7,582 | 8,526 | (944) | 5,151 | 377 | 30.00% | 113 |
| Upstar | 224,506 | 223,502 | 1,004 | 21,960 | 75 | 30.00% | 23 |
| Canal 20 TV, S.A. | 25 | 1 | 24 | - | - | 50.00% | - |
| East Star** | - | - | - | - | - | 30.00% | - |
| Big Picture 2 Films | 3,314 | 2,742 | 572 | 3,036 | 72 | 20.00% | 14 |
| 631,817 | 556,419 | 75,398 | 381,426 | (21,282) | (6,426) |
* The equity is adjusted, against liabilities, totalling 10.2 million euros resulting from supplementary payments rendered by others of the shareholders which are above the held percentage.
** Company dissolved on December 27, 2017.
Consolidated adjustments are reflected in the indicators presented in the table above.
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 | 31-03-2018 | |||
|---|---|---|---|---|
| RESTATED | ||||
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Accounts receivables | 7,284 | 7,013 | 6,376 | |
| Advances of suppliers | 3,752 | - | - | |
| Unbilled revenues | 2 | - | - | - |
| 11,038 | 7,013 | 11,800 | 6,376 | |
| (672) Impairment of other receivable |
(828) | (677) | (828) | |
| 10,366 | 6,185 | 11,123 | 5,548 |
The summary of movements in impairment of other accounts receivable is as follows:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| AS AT JANUARY 1 | 1,676 | 1,500 |
| Increases (Note 32) | (14) | 152 |
| Utilizations / Others | (86) | (147) |
| AS AT MARCH 31 | 1,576 | 1,505 |
At 31 December 2017 and 31 March 2018, these items were composed as follows:
| 31-12-2017 RESTATED PAYABLE |
31-03-2018 | |||
|---|---|---|---|---|
| RECEIVABLE | PAYABLE | |||
| NON CURRENT | RECEIVABLE | |||
| Debt regularization | 149 | - | 149 | - |
| 149 | - | 149 | - | |
| CURRENT | ||||
| Value-added tax | 943 | 13,739 | 803 | 19,432 |
| Income taxes (i) | 13,583 | 1,293 | - | 2,282 |
| Personnel income tax witholdings | - | 2,140 | - | 5,759 |
| Social Security contributions | - | 1,878 | - | 1,852 |
| Others | 419 | 172 | 420 | 75 |
| 14,945 | 19,222 | 1,223 | 29,400 | |
| 15,094 | 19,222 | 1,372 | 29,400 |
(i) At 31 December 2017 and 31 March 2018, the credit amounts correspond to the amount to be paid in optional regime of revaluation of fixed tangible assets and investment property in 2016.
At 31 December 2017 and 31 March 2018, the amounts of IRC (Corporate Income Tax) receivable and payable were composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Estimated current tax on income | (12,504) | (23,685) |
| Payments on account | 19,680 | 19,753 |
| Withholding income taxes | 4,383 | 920 |
| Others | 731 | 730 |
| 12,290 | (2,282) |
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 3% and will be
taxable profit between 1.5 million euros and 7.5 million euros, by 5% to the million euros.
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 31 March 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 March 2017 and 2018 were as follows:
| 31-12-2016 | DEFERRED TAXES OF THE PERIOD |
31-03-2017 | ||
|---|---|---|---|---|
| RESTATED | INCOME (NOTE B) |
EQUITY (NOTE 17) |
RESTATED | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7,380 | 1,267 | - | 8,647 |
| Inventories | 2,482 | 29 | - | 2,511 |
| Other provision and adjustments | 84,371 | (2,190) | - | 82,181 |
| Intragroup gains | 23,034 | 1,692 | - | 24,726 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
7,801 | (175) | - | 7,626 |
| Derivatives | 901 | 32 | (171) | 762 |
| 125,969 | 655 | (171) | 126,453 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
7,879 | (743) | - | 7,136 |
| Derivatives | 10 | (1) | (8) | 1 |
| Assets recognised under application of IFRS 15 (Note 2) | 19,898 | 142 | - | 20,040 |
| Others | 2,317 | 11 | - | 2,328 |
| 30,104 | (591) | (8) | 29,505 | |
| NET DEFERRED TAX | 95,865 | 1,246 | (163) | 96,948 |
| 31-12-2017 | DEFERRED TAXES OF THE PERIOD |
31-03-2018 | ||
|---|---|---|---|---|
| RESTATED | INCOME (NOTE B) |
EQUITY (NOTE 17) |
||
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 4,981 | 5 | - | 4,986 |
| Inventories | 2,340 | (190) | - | 2,150 |
| Other provision and adjustments | 71.500 | (17,480) | - | 54,020 |
| Intragroup gains | 20,926 | 4,050 | - | 24,976 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
7,396 | (43) | - | 7,353 |
| Derivatives | 557 | (20) | 43 | 580 |
| 107,700 | (13,678) | 43 | 94,065 | |
| DEFERRED INCOME TAX LIABILITIES | ||||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
4,851 | (734) | - | 4,117 |
| Derivatives | - | 6 | - | 6 |
| Assets recognised under application of IFRS 15 (Note 2) | 18,383 | (18,383) | - | - |
| Others | 2,289 | (32) | - | 2,257 |
| 25,523 | (19,143) | - | 6,380 | |
| NET DEFERRED TAX | 82,177 | 5,465 | 43 | 87,685 |
At 31 March 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 39.5 million euros (31 December 2017: 50.3 million euros; and ii) Other provisions amounted to 14.5 million euros (31 December 2017: 13.0 million euros).
At 31 March 2018, the deferred tax liability is related to the revaluation of assets relates mainly to the companies.
At 31 March 2018, deferred tax assets were not recognised for an amount of 3.7 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 business plans of are regularly revised and updated.
At 31 March 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 2018, the carryover is over a five-year period up to the limit of 70% of the taxable profit.
In the quarters ended on 31 March 2017 and 2018, the reconciliation between the nominal and effective rates of tax was as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| Income before taxes | 37,575 | 39,196 |
| Statutory tax rate | 22.5% | 22.5% |
| ESTIMATED TAX | 8,454 | 8,819 |
| Permanent differences i) | (1,122) | 1,102 |
| Differences in tax rate of group companies | (1,067) | (512) |
| Record of deferred taxes | (33) | (5,408) |
| Tax benefits ii) | (3,080) | (2,401) |
| State surcharge | 1,470 | 3,586 |
| Autonomous taxation | 205 | 207 |
| Provisions (Nota 22) | 59 | (89) |
| Others | (60) | 377 |
| INCOME TAXES | 4,826 | 5,681 |
| Effective Income tax rate | 12.8% | 14.5% |
| Income tax | 6,072 | 11,146 |
| Deferred tax | (1,246) | (5,465) |
| 4,826 | 5,681 |
i) At 31 March 2017 and 2018, the permanent differences were composed as follows:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| Equity method (Note 33) | (5,349) | 6,314 |
| Others | 363 | (1,417) |
| (4,986) | 4,897 | |
| 22.5% | 22.5% | |
| (1,122) | 1,102 |
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, RFAI (Investment Tax Incentive Regime) introduced by Law 10/2009 of 10 March and CFEI (Tax Credit for Extraordinary Investment) introduced by Law 49/2013 of 16 July. 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 31 March 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| INVENTORIES | ||
| Telco | 39,261 | 37,822 |
| Audiovisuals | 1,744 | 1,786 |
| 41,005 | 39,608 | |
| IMPAIRMENT OF INVENTORIES | ||
| Telco | (8,044) | (7,392) |
| Audiovisuals | (917) | (889) |
| (8,961) | (8,281) | |
| 32,044 | 31,327 |
The movements occurred in impairment adjustments were as follows:
| 3M 17 | 3M 18 | |
|---|---|---|
| RESTATED | ||
| AS AT JANUARY 1 | 9,523 | 8,961 |
| Increase and decrease - Cost of products sold (Note 30) | 17 | (700) |
| Utilizations / Others | 11 | 20 |
| AS AT MARCH 31 | 9,551 | 8,281 |
At 31 December 2017 and 31 March 2018, this item was as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Trade receivables | 351,400 | 360,513 |
| Doubtful accounts for trade receivables | 139,484 | 130,101 |
| Unbilled revenues i) | 102,928 | 104,293 |
| Default interests - offsetting of credits ii) | - | 27,164 |
| 593,812 | 622,071 | |
| Impairment of trade receivable | (139,484) | (130,101) |
| 454,328 | 491,971 |
The movements occurred in impairment adjustments were as follows:
| 3M 17 RESTATED |
3M 18 |
|---|---|
| AS AT JANUARY 1 157,753 |
139,484 |
| Increases and decreases (Note 32) 3,432 |
3,753 |
| Penalties - i) 4,310 |
3,139 |
| Utilizations / Others (2,425) |
(16,275) |
| AS AT MARCH 31 163,070 |
130,101 |
i) Penalties correspond to the estimated amount of uncollectible invoiced penalties recognised in the period, deducted from revenue, as described in Note 40.7.
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 | |||
|---|---|---|---|
| RESTATED | 31-03-2018 | ||
| Programming costs | 13,884 | 17,236 | |
| Costs of litigation procedure activity | 16,990 | 12,794 | |
| Rentals | 3,141 | 3,889 | |
| Advertising | 1,213 | 2,451 | |
| Others | 11,299 | 13,471 | |
| 46,527 | 49,841 |
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 380 thousand euros (31 December 2017: 3,141 thousand euros), the fair value amounts to a gain of about 15 thousand euros (2017: loss of about 33 thousand euros).
At 31 March 2018, NOS had contracted two interest rate swaps totalling 250 million euros (2017: 250 million euros) whose maturities expire in 2019. The fair value of interest rate swaps, in the negative amount of 2.3 mi equity.
At 31 March 2018, NOS had contracted three own shares derivatives, in the amount of 1,681 thousand euros (31 December 2017: 2,318 thousand euros), maturing in March 2019 and 2020, 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 | 19 | - | - | 9 |
| Exchange rate forward | 3,141 | - - |
33 | - | |
| 255,459 | 19 | - | 33 | 2,462 | |
| 31-03-2018 | |||||
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Interest rate swaps | 250,000 | - - |
- | 2,281 | |
| Equity swaps | 1,681 | - - |
64 | 224 | |
| Exchange rate forward | 380 | 24 | - | 9 | - |
| 252,061 | 2 4 | - | 73 | 2,505 |
| 31-12-2016 | 31-03-2017 | |||
|---|---|---|---|---|
| RESTATED | RESULT | EQUITY | RESTATED | |
| Fair value interest rate swaps | (4,027) | - | 760 | (3,268) |
| Fair value exchange rate forward | 37 | (35) | - | (2) |
| Fair value equity swaps | 23 | 122 | (33) | (112) |
| DERIVATIVES | (3,967) | 87 | 727 | (3,382) |
| Deferred income tax liabilities | (10) | 1 | 8 | (1) |
| Deferred income tax assets | 901 | 32 | (171) | 762 |
| DEFERRED INCOME TAX | 890 | 33 | (163) | 761 |
| (3,077) | 120 | 564 | (2,621) |
| 31-12-2017 RESTATED |
RESULT | EQUITY | 31-03-2018 | |
|---|---|---|---|---|
| Fair value interest rate swaps | (2,453) | - | 172 | (2,281) |
| Fair value exchange rate forward | (33) | 48 | - | 15 |
| Fair value equity swaps | 10 | 63 | (361) | (288) |
| DERIVATIVES | (2,476) | 111 | (189) | (2,554) |
| Deferred income tax liabilities | - | (6) | - | (6) |
| Deferred income tax assets | 557 | (20) | 43 | 580 |
| DEFERRED INCOME TAX | 557 | (26) | 43 | 574 |
| (1,919) | 85 | (146) | (1,980) |
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Cash | 2,002 | 1,525 |
| Other deposits i) | 579 | 592 |
| Deposits | 396 | 213 |
| 2,977 | 2,330 |
i) At 31 December 2017 and 31 March 2018, term deposits have short-term maturities and bear interest at normal market rates.
At 31 December 2017 and 31 March 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 31 March 2018 are:
| 31-12-2017 RESTATED |
31-03-2018 | ||||
|---|---|---|---|---|---|
| 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% |
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 31 March 2018 there were 2,091,618 own shares, representing 0.406% of share capital (31 December 2017: 2,040,234 own shares, representing 0.390% of the share capital)
Movements in the quarters ended on 31 March 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 | (660,706) | (4,107) |
| Distribution of own shares - other remunerations | (35,122) | (218) |
| BALANCE AS AT 31 MARCH 2017 | 2,321,775 | 14,431 |
| 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 | (580,966) | (3,411) |
| Distribution of own shares - other remunerations | (17,650) | (103) |
| BALANCE AS AT 31 MARCH 2018 | 2,091,618 | 12,263 |
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 31 March 2018, NOS had reserves, which by their nature are considered distributable for an amount of approximately 155.2 million euros, not including the net income.
The movements of the non-controlling interests occurred during the quarters ended on 31 March 2017 and 2018 and the results attributable to non-controlling interests for the year are as follows:
| 31-12-2016 | ATTRIBUTABLE | 31-03-2017 | ||
|---|---|---|---|---|
| RESTATED | PROFITS | OTHERS | RESTATED | |
| NOS Madeira | 5,544 | 50 | 2 | 5,596 |
| NOS Açores | 2,174 | (83) | - | 2,091 |
| Lusomundo SII | 23 | - | - | 23 |
| Empracine | - | - | - | - |
| Lusomundo Imobiliária 2 | 34 | - | - | 34 |
| 7,775 | (33) | 2 | 7,744 | |
| 31-12-2017 | ATTRIBUTABLE | |||
| RESTATED | PROFITS | OTHERS | 31-03-2018 | |
| NOS Madeira | 5,898 | (168) | (5) | 5,725 |
| NOS Açores | 1,924 | (95) | (3) | 1,826 |
| 7,822 | (263) | (8) | 7,551 |
At 31 December 2017 and 31 March 2018, the composition of borrowings was as follows:
| 31-12-2017 RESTATED |
31-03-2018 | |||
|---|---|---|---|---|
| CURRENT | NON-CURRENT | CURRENT | NON-CURRENT | |
| LOANS - NOMINAL VALUE | 182,987 | 873,333 | 99,359 | 923,333 |
| Debenture loan | - | 585,000 | - | 585,000 |
| Commercial paper | 122,901 | 215,000 | 265,000 | |
| Foreign loans | 18,333 | 73,333 | 18,333 | 73,333 |
| Bank overdrafts | 41,753 | - | 21,026 | - |
| LOANS - ACCRUALS AND DEFERRALS | 582 | (2,992) | (103) | (2,520) |
| LOANS - AMORTISED COST | 183,569 | 870,341 | 99,256 | 920,813 |
| FINANCIAL LEASES | 26,567 | 84,317 | 27,483 | 79,582 |
| Long Term Contracts | 12,858 | 63,475 | 13,446 | 60,982 |
| Other | 13,709 | 20,842 | 14,037 | 18,600 |
| 210,136 | 954,658 | 126,739 | 1,000,395 |
During the quarter ended on 31 March 2018, the average cost of debt of the used lines was approximately 2.0% (2017: 2.0%).
At 31 December 2017 and 31 March 2018, NOS has the following bonds issued, totalling 585 million euros, 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 semi-annually.
At 31 March 2018, an amount of 1,098 thousand euros, corresponding to interest and commissions, was -
At 31 March 2018, the Company has borrowings of 325 million euros in the form of commercial paper.The total amount contracted, under underwriting securities, is of 570 million euros, corresponding to 11 programmes, with five banks, which bear interest at market rates. Commercial paper programmes with maturities over 1 year totalling 265 million euros are classified as non-current, since the Company has the 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 31 March 2018 an amount of 236 thousand euros, corresponding to interest and commissions, was deducted to this amount, an -
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 June 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 18,300 thousand euros per year as of June 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 31 March 2018, an amount of 1,290 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 EIB loan of 91.7 million euros, bond loan in the amount 50 million euros 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 31 March 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".
Financial leases payments
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Between 1 and 5 years | 66,436 | 63,158 |
| Over 5 years | 30,208 | 27,794 |
| 127,899 | 123,720 | |
| Future financial costs (lease) | (17,015) | (16,655) |
| PRESENT VALUE OF FINANCE LEASE LIABILITIES | 110,884 | 107,065 |
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Until 1 year | 26,567 | 27,484 |
| Between 1 and 5 years | 56,525 | 53,867 |
| Over 5 years | 27,793 | 25,715 |
| 110,884 | 107,065 |
| Until 1 year | 31,255 | 32,768 | ||||
|---|---|---|---|---|---|---|
| Between 1 and 5 years | 66,436 | 63,158 | ||||
| Over 5 years | 30,208 | 27,794 | ||||
| 127,899 | 123,720 | |||||
| Future financial costs (lease) | (17,015) | (16,655) | ||||
| PRESENT VALUE OF FINANCE LEASE LIABILITIES | 110,884 | 107,065 | ||||
| Financial leases present value |
||||||
| 31-12-2017 | ||||||
| RESTATED | 31-03-2018 | |||||
| Until 1 year | 26,567 | 27,484 | ||||
| Between 1 and 5 years | 56,525 | 53,867 | ||||
| Over 5 years | 27,793 | 25,715 | ||||
| 110,884 | 107,065 | |||||
| The maturities of the loans obtained are as follows: | ||||||
| 31-12-2017 | 31-03-2018 | |||||
| RESTATED BETWEEN 1 |
BETWEEN 1 | |||||
| UNTIL 1 YEAR | AND 5 YEARS | OVER 5 YEARS | UNTIL 1 YEAR | AND 5 YEARS | OVER 5 YEARS | |
| Debenture loan | 1,431 | 523,130 | 59,970 | 583 | 523,335 | 59,985 |
| Commercial paper | 122,637 | 177,500 | 37,500 | 59,764 | 215,000 | 50,000 |
| Foreign loans | 17,748 | 72,241 | - | 17,883 | 72,493 | - |
| Bank overdrafts Financial leases |
41,753 26,567 |
- 56,525 |
- 27,793 |
21,026 27,483 |
- 53,867 |
- 25,715 |
| 210,136 | 829,396 | 125,262 | 126,739 | 864,695 | 135,700 | |
| 22. Provisions |
||||||
| At 31 December 2017 and 31 March 2018, the provisions were as follows: | ||||||
| 31-12-2017 | ||||||
| RESTATED | 31-03-2018 | |||||
| Litigation and other - i) | 52,261 | 59,225 | ||||
| Financial investments - ii) | 425 | 283 | ||||
| Dismantling and removal of assets - iii) | 31,651 | 32,190 | ||||
| Contingent liabilities - iv) | 32,490 | 32,490 | ||||
| Contingencies - other - v) | 16,435 | 17,384 | ||||
| 133,262 | 141,572 | |||||
| i) The amount under the item "Litigation and other" corresponds to provisions to cover the legal and tax claims of which stand out: |
| 31-12-2017 | 31-03-2018 | |
|---|---|---|
| RESTATED | ||
| Litigation and other - i) | 52,261 | 59,225 |
| Financial investments - ii) | 425 | 283 |
| Dismantling and removal of assets - iii) | 31,651 | 32,190 |
| Contingent liabilities - iv) | 32,490 | 32,490 |
| Contingencies - other - v) | 16,435 | 17,384 |
| 133,262 | 141,572 |
designation of the provider by tender, whenever, cumulatively (i) there are net costs, considered excessive, the amount of which is approved by ANACOM, following an audit to their preliminary calculation and support documents, which are provided by the universal service provider, and (ii) the universal service provider requester the Government compensation for the net costs approved under the terms previously mentioned.
Therefore:
In 2013, ANACOM deliberated to approve the final results of the CLSU audit presented by MEO, relative to the period from 2007 to 2009, in a total amount of 66.8 million euros, a decision that was contested by the Company. In January 2015, ANACOM issued the settlement notes in the amount of 18.6 million euros related to NOS, SA, NOS Madeira and NOS Açores which were contested by NOS and for which a bail was presented by NOS SGPS (Note 38) to avoid Tax Execution Proceedings. The guarantees have been accepted by ANACOM.
In 2014, ANACOM deliberated to approve the final results of the CLSU audit by MEO, relative to the period from 2010 to 2011, in a total amount of 47.1 million euros, a decision also contested by NOS. In February 2016, ANACOM issued the settlement notes in the amount of 13 million euros, related to NOS, SA, NOS Madeira and NOS Açores which were also contested and for which it was before also presented bail by NOS SGPS in order to avoid the promotion of respective tax enforcement processes, guarantees that have been accepted by ANACOM.
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.
At October 2016, ANACOM approved the results of the audit to the CLSU presented by MEO related with the period between January and June 2014, for an amount of 7.7 million euros that was contested by NOS, in standard terms, in January 2017. In December 2017, NOS, SA, NOS Madeira and NOS Açores were notified the decision of ANACOM relating to the entities that are obliged to contribute for the compensation fund and the setting of contributions values corresponding to CLSU that have to be compensated and relating to 2014, which provide for all these companies a contribution totalling about 2.4 million euros.
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 pre-competitive 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 | 31-03-2017 RESTATED |
|
|---|---|---|---|---|---|
| Litigation and other | 57,697 | 4,855 | (8) | (2,588) | 59,957 |
| Financial investments | 825 | - | (63) | - | 762 |
| Dismantling and removal of assets | 29,694 | 93 | - | (52) | 29,735 |
| Contingent liabilities | 33,486 | - | (468) | - | 33,018 |
| Contingencies - other | 24,585 | 656 | (123) | 1,032 | 26,151 |
146,287 5,605 (661) (1,608) 149,623
During the quarter ended on 31 March 2017, movements in provisions were as follows:
During the quarter ended on 31 March 2017, increases of provisions mainly refer 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.
Additionally, the movement recorded under Others amounting to 2.6 million euros, under Litigation and others, was recorded by counterpart of the asset (Note 11).
In the quarter ended in 31 March 2018, the movements registered in the income statement under Provisions, were as follows:
| 31-12-2017 RESTATED |
INCREASES | DECREASES | OTHERS | 31-03-2018 | |
|---|---|---|---|---|---|
| Litigation and other | 52,261 | 7,550 | (586) | - | 59,225 |
| Financial investments | 425 | (142) | - | - | 283 |
| Dismantling and removal of assets | 31,651 | 207 | (7) | 339 | 32,190 |
| Contingent liabilities | 32,490 | - | - | - | 32,490 |
| Contingencies - other | 16,435 | 339 | (6) | 616 | 17,384 |
| 133,262 | 7,954 | (599) | 955 | 141,572 |
During the quarter ended on 31 March 2018, the increases refer mainly to provisions for legal claims plus interests and charges.
The movement recorded in "Others" in the amount of 0.6 million euros, under "Contingencies - other" refers mainly to the reclassification of cost estimates in respect of which it was not possible to estimate with great reliability the timing of the expenditure, in the meantime settled, in the amount of 1.4 million euros, less the use of provisions created for compensations to employees, in the amount of 0.8 million euros.
The net movements for the quarters ended on 31 March 2017 and 2018 reflected in the income statement under Provisions were as follows:
| 3M 17 RESTATED |
3M 18 |
|---|---|
| Provisions and adjustments (Note 32) 4,363 |
205 |
| Financial investments (Note 9) (63) |
(142) |
| Integration costs (compensations) 656 |
339 |
| Other losses / (gains) non-recurrent (Note 35) - |
6,652 |
| Interests - dismantling 93 |
201 |
| (164) Other interests |
189 |
| Income tax (Note 12) 59 |
(89) |
| INCREASES AND DECREASES IN PROVISIONS 4,944 |
7,355 |
At 31 December 2017 and 31 March 2018, these items were composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| NON-CURRENT | ||
| Contractual obligations i) | 8,139 | 7,979 |
| Others | 628 | 252 |
| 8,767 | 8,231 | |
| CURRENT | ||
| Invoices to be issued by operators ii) | 64,136 | 68,016 |
| Investments in tangible and intangible assets | 37,532 | 36,767 |
| Vacation pay and bonuses | 26,505 | 22,385 |
| Content and film rights | 16,892 | 16,392 |
| Advertising | 17,298 | 13,825 |
| Professional services | 14,628 | 13,345 |
| Programming services | 7,946 | 11,243 |
| Costs of litigation procedure activity | 5,078 | 7,957 |
| ANACOM taxes and Cinema Law | 111 | 7,587 |
| Comissions | 5,122 | 5,173 |
| Energy and water | 3,474 | 3,616 |
| Maintenance and repair | 2,303 | 2,504 |
| Rentals | 1,570 | 1,666 |
| Other accrued expenses | 10,970 | 12,385 |
| 213,564 | 222,862 |
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 RESTATED |
31-03-2018 | |||
|---|---|---|---|---|
| CURRENT | NON-CURRENT | CURRENT | NON-CURRENT | |
| Advanced billing i) | 26,415 | - | 28,037 | - |
| Investment subsidy ii) | 632 | 3,773 | 632 | 3,703 |
| 27,047 | 3,773 | 28,669 | 3,703 |
i) This item relates mainly to the billing of Pay TV services regarding the following month to the report phones and purchase of telecommunications minutes as of yet unused.
ii) Deferred income related to the implicit subsidy when the EIB loans were obtained at interest rates below market value (Note 21).
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Suppliers current account | 222,840 | 225,008 |
| Invoices in reception and conference | 2,024 | 3,641 |
| 224,864 | 228,649 |
At 31 December 2017 and 31 March 2018, this item was composed as follows:
| 31-12-2017 RESTATED |
31-03-2018 | |
|---|---|---|
| NON-CURRENT | ||
| Assignment of receivables without resources i) | 17,615 | 14,145 |
| 17,615 | 14,145 | |
| CURRENT | ||
| Fixed assets suppliers | 40,753 | 24,701 |
| Assignment of receivables without resources i) | 15,493 | 14,479 |
| Advances from customers | 179 | 191 |
| Others | 1,730 | 1,842 |
| 58,155 | 41,213 | |
| 75,770 | 55,358 |
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 quarter ended on 31 March 2018, the balance amounts to 28.6 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 quarters ended on 31 March 2017 and 2018, are distributed as follows:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| SERVICES RENDERED: | ||
| Telco i) | 336,810 | 339,191 |
| Audiovisuals and cinema exhibition ii) | 19,560 | 16,420 |
| 356,370 | 355,611 | |
| SALES: | ||
| Telco iii) | 14,861 | 15,989 |
| Audiovisuals and cinema exhibition iv) | 4,015 | 4,115 |
| 18,876 | 20,104 | |
| OTHER OPERATING REVENUES: | ||
| Telco | 4,891 | 7,047 |
| Audiovisuals and cinema exhibition | 199 | 241 |
| 5,090 | 7,288 | |
| 380,336 | 383,002 |
These operating revenues are shown net of inter-company eliminations.
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| Remuneration | 16,974 | 15,225 |
| Social taxes | 4,211 | 4,164 |
| Social benefits | 492 | 470 |
| Other | 513 | 119 |
| 22,190 | 19,978 |
In the quarters ended on 31 March 2017 and 2018, the average number of employees of the companies included in the consolidation was 2,479 and 2,520, respectively. At 31 March 2018, the number of employees of the companies included in the consolidation was 2,544 employees.
The costs of compensations paid to employees, since they are non-recurring costs, are recorded in the item
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 | |
|---|---|
| RESTATED | 3M 18 |
| Exhibition costs 51,180 |
51,401 |
| Traffic costs 45,962 |
52,193 |
| Capacity costs 12,044 |
11,069 |
| Shared advertising revenues 3,447 |
3,179 |
| Others 1,131 |
845 |
| 113,764 | 118,687 |
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| Costs of products sold | 14,214 | 14,196 |
| Increases / (decreases) in inventories impairments (Note 13) | 17 | (700) |
| 14,231 | 13,496 |
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| SUPPORT SERVICES: | ||
| Call centers and customer support | 8,544 | 8,194 |
| Information systems | 4,449 | 4,485 |
| Administrative support and others | 10,418 | 9,777 |
| 23,411 | 22,456 | |
| SUPPLIES AND EXTERNAL SERVICES: | ||
| Maintenance and repair | 11,789 | 10,944 |
| Rentals | 11,163 | 10,629 |
| Electricity | 4,756 | 5,604 |
| Installation and removal of terminal equipment | 2,726 | 4,480 |
| Professional services | 3,076 | 3,052 |
| Communications | 1,752 | 1,777 |
| Other supplies and external services | 6,898 | 6,218 |
| 42,160 | 42,704 |
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| Provisions (Note 22) | 4,363 | 205 |
| Impairment of account receivables - trade (Note 14) | 3,432 | 3,753 |
| Impairment of account receivables - others (Note 10) | (14) | 152 |
| Others | 4 | 32 |
| 7,785 | 4,142 |
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| EQUITY METHOD (NOTE 9) | ||
| Sport TV | (1,520) | (142) |
| Dreamia | (247) | 15 |
| Finstar | (3,478) | 6,703 |
| Mstar | (81) | (113) |
| Upstar | (9) | (23) |
| Others | (14) | (14) |
| (5,349) | 6,426 | |
| OTHERS | - | (112) |
| (5,349) | 6,314 |
During the first quarter of 2018, the Kwanza recorded an exceptional devaluation against the Euro of approximately 30%, which generated the recognition of exchange losses in the ZAP Group, losses that impact this item in approximately, 10 million.
In the quarters ended on 31 March 2017 and 2018, this item was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| TANGIBLE ASSETS | ||
| Buildings and other constructions | 2,896 | 2,667 |
| Basic equipment | 44,072 | 50,545 |
| Transportation equipment | 425 | 449 |
| Tools and dies | 8 | 9 |
| Administrative equipment | 166 | 1,420 |
| Other tangible assets | (81) | 45 |
| 47,486 | 55,135 | |
| INTANGIBLE ASSETS | ||
| Industrial property and other rights | 26,760 | 25,739 |
| Costs of obtaining and to fulfil a contract with a customer | 25,968 | 26,226 |
| 52,728 | 51,965 | |
| INVESTIMENT PROPERTY | ||
| Investment property | 1 | 1 |
| 1 | 1 | |
| 100,215 | 107,101 |
During the first quarter of 2018, following the modernisation project of the NOS mobile network, impairment losses were recognised on the current assets for an approximate amount of 17 million euros.
In the quarters that ended on 31 March 2017 and 2018, the other non-recurring costs / (gains) was composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| GAINS: | ||
| Default interests - offsetting of credits (Note 14) | - | (27,164) |
| - | (27,164) | |
| COSTS: | ||
| Provisions and costs with legal processes | - | 12,529 |
| Others | 1,783 | 1,245 |
| 1,783 | 13,774 | |
| TOTAL | 1,783 | (13,390) |
In the quarters ended on 31 March 2017 and 2018, financing costs and other financial expenses / (income) were composed as follows:
| 3M 17 RESTATED |
3M 18 | |
|---|---|---|
| FINANCING COSTS: | ||
| INTEREST EXPENSE: | ||
| Borrowings | 4,058 | 3,762 |
| Finance leases | 1,573 | 1,117 |
| Derivatives | 625 | 402 |
| Others | 248 | 546 |
| 6,504 | 5,827 | |
| INTEREST EARNED | (1,593) | (1,162) |
| 4,911 | 4,665 | |
| NET OTHER FINANCIAL EXPENSES / (INCOME): | ||
| Comissions and guarantees | 1,192 | 1,057 |
| Others | 503 | 335 |
| 1,695 | 1,392 |
Interest earned mainly corresponds to default interests charged to customers.
Earnings per share for the quarters ended on 31 March 2017 and 2018 were calculated as follow:
| 3M 17 | ||
|---|---|---|
| RESTATED | 3M 18 | |
| Consolidated net income attributable to shareholders | 32,782 | 33,778 |
| Number of ordinary shares outstanding during the period (weighted average) | 512,406,948 | 513,113,304 |
| Basic earnings per share - euros | 0.06 | 0.07 |
| Diluted earnings per share - euros | 0.06 | 0.07 |
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 31 March 2018, the Group had furnished sureties, guarantees, and comfort letters in favour of third parties corresponding to the following situations:
| 31-12-2017 | ||
|---|---|---|
| RESTATED | 31-03-2018 | |
| Financial instituitions i) | 91,843 | 91,843 |
| Tax authorities ii) | 13,112 | 13,112 |
| Others iii) | 11,479 | 11,815 |
| 116,434 | 116,770 |
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 2015, NOS issued a comfort letter to Caixa Geral de Depósitos as part of an issue of a bank guarantee to Sport TV amounting to 23.1 million euros. At 31 December 2017, the active amount of bank guarantees ascends to 2.1 million euros. This bank guarantee ended in January 2018, with the last payment made by Sport TV to UEFA.
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 31 March 2018, amounted to 10.2 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 | 31-03-2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 | 1,200 | 21,366 | 51,256 | 15,562 |
| Telecommunication towers and rooftops | 2,068 | 22,407 | 60,211 | 19,048 | 1,946 | 24,461 | 64,035 | 19,816 |
| Equipments | - | 8,922 | 18,229 | - | - | 5,300 | 19,892 | - |
| Vehicles | - | 2,253 | 2,577 | - | - | 2,208 | 2,514 | - |
| 3,105 | 55,623 | 131,050 | 36,695 | 3,146 | 53,335 | 137,697 | 35,378 |
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 80% to ownership clauses.
In addition, approximately 46% 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 and approximately 6% of the total loans obtained require that the consolidated net financial debt does not exceed 4 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, SA of 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:
1) TV broadcasting rights and multimedia home games of Sporting SAD;
2) The right to explore the static and virtual advertising at Stadium José Alvalade;
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:
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, 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 into force from the beginning of the sports season 16/17, assuring from the channel where 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 availability of Porto Canal 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.
The estimated cash flows are estimated as follows:
| Seasons | 2017/18 | 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 |
* Includes games and channels, broadcasting rights, advertising, and others.
Network sharing contract with Vodafone
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 technological solutions they might decide to implement, that 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 31 March 2018 and transactions in the quarters ended on 31 March 2017 and 2018 between NOS Group and its associated companies, joint ventures and other related parties are as follows:
Balances at 31 December 2017
| ACCOUNTS RECEIVABLES |
ACCOUNTS PAYABLE |
ACCRUED EXPENSES |
DEFERRED INCOME |
PREPAID 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 | - | 12 | - |
| 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 | 10 | 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 | 18 | 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 | 93 | 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 | 14 | 14,844 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS MARKETING AND ADVERTISING |
SUPPORT SERVICES |
OTHER NON RECURRING LOSSES / (GAINS) |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | ||
|---|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | ||||||||||
| Banco BPI | 1,301 | - | 293 | - | - - |
1 | - | (99) | - | |
| ASSOCIATED COMPANIES | ||||||||||
| Big Picture 2 Films | 11 | - | 1,144 | - | - - |
16 | - | - | - | |
| Sport TV | 6 7 | - | 19,542 | - | - - |
- | - | - | - | |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
||||||||||
| Dreamia Holding BV | 118 | - | - | - | - - |
- | - | 32 | - | |
| Dreamia SA | 624 | (2) | 14 | (1) | - - |
(2) | - | - | - | |
| Finstar | 213 | - | - | - | - - |
- | - | - | - | |
| Mstar | 8 | - | - | - | - - |
- | - | - | - | |
| Upstar | 4,249 | - | (79) | 9 | - - |
- | - | - | - | |
| ZAP Media | 6 6 | - | - | - | - - |
- | - | - | - | |
| OTHER RELATED PARTIES | ||||||||||
| Cascaishopping | 3 | - | - | 2 | - - |
123 | - | - | ||
| Centro Vasco da Gama | 3 | - | - | 1 | - - |
217 | - | - | ||
| Continente Hipermercados | 1,189 | - | 5 | (26) | - - |
(33) | - | - | 3 | |
| Digitmarket | 5 5 | - | 14 | 1 | 6 3 - |
41 | - | - | 860 | |
| MDS - Corretor de Seguros | 137 | - | - | - | - - |
43 | - | - | - | |
| Saphety Level - Trusted Services | 26 | - | - | - | 6 6 - |
- | - | - | 3 | |
| SC-Consultadoria | 342 | - | - | - | - - |
- | - | - | - | |
| Sonae Indústria PCDM | 106 | - | - | - | - - |
- | - | - | - | |
| Sierra Portugal | 925 | - | - | 6 8 | - - |
979 | - | - | ||
| Sonae Center II | 264 | - | - | - | - - |
- | - | - | - | |
| UNITEL | 613 | - | 434 | - | - - |
- | - | - | - | |
| We Do Consulting-Sist. de Informação | 8 0 | - | - | - | 760 | - | 1 | - | - | 995 |
| Worten - Equipamento para o Lar | 1,305 | - | - | (387) | - - |
114 | - | - | - | |
| Other related parties | 789 | - | 45 | 5 | 21 - |
30 | 40 | - | 6 4 | |
| 12,494 | (2) | 21,412 | (328) | 910 | - | 1,530 | 40 | (67) | 1,925 |
| ACCOUNTS | ACCOUNTS | ACCRUED | DEFERRED | PREPAID | |
|---|---|---|---|---|---|
| RECEIVABLES | PAYABLE | EXPENSES | INCOME | EXPENSES | |
| SHAREHOLDERS | |||||
| BPI | 2,125 | (119) | 61 | - | - |
| ASSOCIATED COMPANIES | |||||
| Big Picture 2 Films | 22 | 246 | 166 | - | - |
| Sport TV | 418 | 4,653 | 3,551 | (0) | 12,254 |
| JOINTLY CONTROLLED COMPANIES | |||||
| Dreamia Holding BV | 2,739 | - | - | - | - |
| Dreamia SA | 1,835 | 1,942 | 373 | - | - |
| Finstar | 9,781 | - | - | - | - |
| Mstar | 1 | - | - | - | - |
| Upstar | 37,185 | 58 | - | 297 | - |
| ZAP Cinemas | 371 | - | - | - | - |
| ZAP Media | 3,811 | - | - | - | - |
| OTHER RELATED PARTIES | |||||
| Centro Colombo | 4 | 2 | - | - | 135 |
| Digitmarket | 57 | 68 | - | 1 | 93 |
| Efacec Engenharia | 36 | 218 | - | - | - |
| Itrust - Cyber Security and Intellig. , S.A. | 6 | 199 | - | - | 65 |
| Maiashopping | 19 | 132 | - | - | 5 |
| Modelo Continente Hipermercados | 842 | 8 | (0) | - | 0 |
| MDS - Corretor de Seguros | 47 | - | (0) | - | 238 |
| Norteshopping | 5 | 19 | - | - | 112 |
| Sierra Portugal | 728 | (2) | 5 | (0) | 7 |
| Solinca HF | 160 | - | - | - | - |
| Sonae Center II | 676 | 63 | - | - | - |
| Sonaecom | 80 | - | 385 | - | - |
| UNITEL | 5,026 | 3,635 | 1,163 | - | - |
| We Do Consulting-Sist. de Informação | 93 | 762 | - | - | 163 |
| Worten - Equipamento para o Lar | 1,216 | 36 | 212 | - | - |
| Other related parties | 1,009 | 256 | 4 | - | 284 |
| 68,293 | 12,175 | 5,920 | 298 | 13,356 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS |
MARKETING AND ADVERTISING |
SUPPORT SERVICES |
OTHER NON RECURRING LOSSES / (GAINS) |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | ||||||||||
| Banco BPI | 1,382 | - | 14 | - | - | - | 4 | - | (65) | - |
| ASSOCIATED COMPANIES | ||||||||||
| Big Picture 2 Films | 17 | - | 1,463 | (2) | - | - | 20 | - | - | - |
| Sport TV | 396 | - | 19,306 | - | - | - | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES | ||||||||||
| Dreamia Holding BV | 13 | - | - | - | - | - | - | - | 33 | - |
| Dreamia SA | 951 | (4) | (46) | (1) | - | - | (16) | - | 0 | - |
| Finstar | 206 | - | - | - | - | - | - | - | - | - |
| Mstar | (8) | - | - | - | - | - | - | - | - | - |
| Upstar | 2,683 | - | (90) | - | - | - | - | - | - | - |
| ZAP Media | 6 6 | - | - | - | - | - | - | - | - | - |
| OTHER RELATED PARTIES | ||||||||||
| Cascaishopping | 3 | - | - | 2 | - | - | 235 | - | - | - |
| Centro Colombo | 5 | - | - | 3 | - | - | 475 | - | - | - |
| Digitmarket | 118 | - | - | - | 95 | - | 6 8 | 0 | - | 158 |
| Gaiashopping | 14 | - | - | 1 | - | - | 114 | - | - | - |
| Itrust - Cyber Security and Intellig | 7 | - | - | - | 100 | - | 32 | - | - | 248 |
| Maiashopping | 8 | - | - | 1 | - | - | 154 | - | - | - |
| Modelo continente hpermercados | 886 | - | (0) | 2 | - | - | (26) | - | - | - |
| Norteshopping | 4 | - | - | 2 | - | - | 352 | - | - | - |
| Saphety Level - Trusted Services | 25 | - | 27 | - | 6 6 | - | 0 | - | - | 1 |
| Sonae Indústria PCDM | 103 | - | - | - | - | - | - | - | - | - |
| Sierra Portugal | 975 | - | - | 13 | (0) | - | 5 0 | - | - | - |
| Solinca HF | 116 | - | - | - | - | - | - | - | - | - |
| Sonae Center II | 880 | 45 | - | - | - | - | - | - | - | - |
| UNITEL | 977 | - | 427 | - | - | - | - | - | - | - |
| Vasco da Gama | 3 | - | - | 1 | - | - | 252 | - | - | - |
| We Do Consulting-Sist. de Informação | 118 | - | - | 13 | 680 | - | 0 | - | - | 825 |
| Worten - Equipamento para o Lar | 865 | - | - | 188 | - | - | 187 | - | (0) | 0 |
| SFS - Serviços de Gestão e Marketing | - | - | 0 | 106 | - | - | - | - | - | - |
| Other related parties | 891 | 0 | (1) | 16 | 3 | 0 | 248 | 20 | - | 0 |
| 11,705 | 41 | 21,100 | 346 | 945 | 0 | 2,150 | 20 | (32) | 1,232 |
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.
"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 (for 2009, 2010, 2011, 2012, 2013, 2014, 2015,2016 and 2017) for carrying on the business of 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 are within the period of impugnation.
The settlement amounts are, respectively, as follows:
• NOS Madeira: 2009: 40 thousand euros, 2010: 83 thousand euros, 2011:130 thousand euros, 2012: 132 thousand euros, 2013: 149 thousand euros, 2014:165 thousand euros, 2015: 161 thousand euros, 2016: 177 thousand euros and 2017: 187 thousand euros.
This fee is a percentage decided annually by ANACOM (in 2009 it was 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.
Two sole sentences on the matter were given, i.e. on 18 December 2012 and on 29 September 2017, within the scope of the contestation of the 2009 and 2012 Annual Rates, respectively. 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 second judgment also, in turn, ruled in favour of the respective contestation, 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 decision was the subject of an appeal from ANACOM to the Tribunal Central Administrativo Sul (Central Administrative Court South), where it is 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 2017 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.
• In 2011, MEO brought against NOS SA, in the Judicial Court of Lisbon, a claim for the compensation of 10.3 million of Euros, as compensation for alleged unauthorized portability of NOS SA in the period between March 2009 and July 2011. NOS SA presented its defence and reply, and the Court ordered an expert opinion, which was, meanwhile, deemed without effect. The discussion and trial hearing took place at the end of April and beginning of May 2016, and a judgment was rendered in September
of the same year, which considered the action to be partially justified, based not on the occurrence of improper portability, which the Court has determined to restrict itself to those which do not correspond to the will of the proprietor, but of mere delay in sending the documentation by the Recipient Carrier (NOS) to the Holding Provider (MEO). In that regard, it sentenced NOS to the payment of approximately 5.3 million Euros to MEO, a decision of which only NOS appealed to the Lisbon Court of Appeal. This Court, in the first quarter of 2018, upheld the decision of the Court of First Instance, except for interests, in which gave reason to the claims of NOS, in the sense that they should be counted from the citation to the action and not from the due date of the invoices. NOS filed an extraordinary appeal with the Supreme Court of Justice.
• MEO made three court notices to NOS SA (April 2013, July 2015 and March 2016), three to NOS Açores (March and June 2013 and May 2016) and three to NOS Madeira (March and June 2013 and May 2016), in order to stop the prescription of alleged damages resulting from claims of undue portability, absence of response time to requests submitted to them by MEO and alleged illegal refusal of electronic portability requests.
realizing only part of these, in the case of NOS SA, in the amount of 26 million euros (from August 2011 to May 2014), in the case of NOS Açores, in the amount of 195 thousand euros and NOS Madeira, amounting to 817 thousand euros.
• 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, experts who will be tasked with the economic and financial expertise have been appointed which has already started and must be finished in the first semester of 2018.
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 2014, a NOS SGPS provider of marketing services has brought a civil lawsuit seeking a payment of about 1,243 thousand euros, by the alleged early termination of contract and for compensation.
This instance was acquitted due to passive illegitimacy of NOS SGPS, decision confirmed by superior Courts and that, meanwhile, was concluded.
Afterwards, the same company brought a new civil lawsuit based on the same facts, but this time, against NOS Comunicações. NOS appealed in September 2016. A prior hearing was held in May 2017 in which two exceptions pleaded by NOS were dismissed.
At the culmination of the final hearing scheduled for February 2018, the parties reached agreement on the termination of the litigation, due to the author's withdrawal, upon payment by the NOS of approximately 165 thousand euros. The agreement was final and has been fulfilled.
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. The deadline for filing a defence is in progress, which ends in May 2018. 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 31 March 2018, accounts receivable and accounts payable include 37,139,253 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 March 31, 2018, the amounts receivable by NOS SA, NOS Madeira and NOS Açores from these invoiced compensations amounted to 64,618 thousand euros. During the period ended on 31 March 2018, receipts in the amount of 424 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 31 March 2018, the unvested plans are:
| NUMBER OF | |
|---|---|
| SHARES | |
| NOS PLAN | |
| Plan 2015 | 878 |
| Plan 2016 | 737,844 |
| Plan 2017 | 840,589 |
| Plan 2018 | 808,284 |
During the quarter ended on 31 March 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 | - | 808,284 |
| Vested | (58,519) | (522,447) |
| Cancelled / elapsed / corrected (1) | (1,859) | (134,102) |
| BALANCE AS AT 31 MARCH 2018 | - | 2,387,595 |
(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 31 March 2018, the outstanding responsibility related to these plans is 3,568 thousand euros and is recorded in Reserves, for an amount of 2,905 thousand euros, for plans liquidated in shares and in Accrued expenses, for an amount of 665 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) | (3,506) | (4,006) |
| Costs incured in the period and others | (61) | 1,157 | 1,096 |
| TOTAL COST OF THE PLANS | 665 | 2,905 | 3,568 |
On 2 May 2018, NOS issued a 300 million euros debenture loan, admitted to trading on the Luxembourg Stock Exchange, with a maturity of 5 years, at a fixed annual coupon rate of 1.125%.
On April 2018, NOS announced the early repayment of the 175 million euros debenture loan, with variable rate and maturity in September 2020. On May 4th, 2018, NOS paid 175 million euros (principal) and interests in the amount of 449,409.72 euros.
As of the date of approval of this document, there have been no other relevant subsequent events that merit disclosure in the present report.
| SHARE | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | HOLDER | EFFECTIVE | DIRECT | EFFECTIVE |
| 31-12-2017 | 31-03-2018 | 31-03-2018 | ||||
| NOS, SGPS, S.A. (Holding) Empracine - Empresa Promotora de |
Lisbon | Management of investments | - Lusomundo |
- | - | - |
| Atividades Cinematográficas, Lda. | Lisbon | Movies exhibition | SII | 100% | 100% | 100% |
| Lusomundo - Sociedade de investimentos imobiliários SGPS, SA |
Lisbon | Management of Real Estate | NOS | 100% | 100% | 100% |
| Lusomundo Imobiliária 2, S.A. | Lisbon | Management of Real Estate | Lusomundo SII |
100% | 100% | 100% |
| Lusomundo Moçambique, Lda. | Maputo | Movies exhibition and commercialization of other public events | NOS Cinemas | 100% | 100% | 100% |
| NOS Sistemas, S.A. ('NOS Sistemas') | Lisbon | Rendering of consulting services in the area of information systems |
NOS SA | 100% | 100% | 100% |
| NOS Sistemas España, S.L. | Madrid | Rendering of consulting services in the area of information systems |
NOS SA | 100% | 100% | 100% |
| NOS Açores Comunicações, S.A. | Ponta Delgada | Distribution of television by cable and satellite and operation of telecommunications services in the Azores area |
NOS SA | 84% | 84% | 84% |
| NOS Audiovisuais, SGPS, S.A. | Lisbon | Management of social participations in other companies as an indirect form of economic activity |
NOS | 100% | 100% | 100% |
| NOS Communications S.à r.l | Luxembourg | Management of investments | NOS | 100% | 100% | 100% |
| NOS Comunicações, S.A. | Lisbon | Implementation, operation, exploitation and offer of networks and rendering services of electronic comunications and related resources; offer and commercialisation of products and equipments of electronic communications |
NOS | 100% | 100% | 100% |
| NOS Inovação, S.A. | Matosinhos | 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 information systems and fixed solutions and last generation mobile, television, internet, voice and data, and licensing and engineering services and consultancy |
NOS | 100% | 100% | 100% |
| NOS Internacional, SGPS, S.A. | Lisbon | Management of social participations in other companies as an indirect form of economic activity |
NOS | 100% | 100% | 100% |
| NOS Lusomundo Audiovisuais, S.A. | Lisbon | Import, distribution, commercialization and production of audiovisual products |
NOS | 100% | 100% | 100% |
| NOS Lusomundo Cinemas , S.A. | Lisbon | Movies exhibition and commercialization of other public events | NOS | 100% | 100% | 100% |
| NOS Lusomundo TV, Lda. | Lisbon | Movies distribution, editing, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
100% | 100% | 100% |
| NOS Madeira Comunicações, S.A. | Funchal | Distribution of television by cable and satellite and operation of telecommunications services in the Madeira area |
NOS SA | 78% | 78% | 78% |
| NOSPUB, Publicidade e Conteúdos, S.A. | Lisbon | Comercialization of cable tv contents | NOS SA | 100% | 100% | 100% |
| Construção e Gestão de Redes de Comunicações, S.A. ('Artis') |
Matosinhos | Design, construction, management and exploitation of electronic communications networks and their equipment and infrastructure, management of technologic assets and rendering of related services |
NOS | 100% | 100% | 100% |
| Lisbon | Implementation, installation and exploitation of towers and other sites for the instalment of telecommunications equipment |
NOS | 100% | 100% | 100% | |
| ('Per-Mar') | Lisbon | Purchase, sale, renting and operation of property and commercial establishments |
NOS | 100% | 100% | 100% |
| Sontária - Empreendimentos Imobiliários, S.A. ('Sontária') |
Lisbon | Realisation of urbanisation and building construction, planning, urban management, studies, construction and property management, buy and sale of properties and resale of purchased for that purpose |
NOS | 100% | 100% | 100% |
| Teliz Holding B.V. | Amsterdam | Management of group financing activities | NOS | 100% | 100% | 100% |
| PERCENTAGE OF OWNERSHIP | |||||||
|---|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE HOLDER |
EFFECTIVE | DIRECT | EFFECTIVE | |
| 31-12-2017 | 31-03-2018 | 31-03-2018 | |||||
| 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. | Madrid | Production and distribution of TV products rights | NOS | 50.00% | 50.00% | 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% |
| PERCENTAGE OF OWNERSHIP | |||||||
|---|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE | |
| HOLDER | 31-12-2017 | 31-03-2018 | 31-03-2018 | ||||
| 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.
| PERCENTAGE OF OWNERSHIP | ||||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE HOLDER |
EFFECTIVE | DIRECT | EFFECTIVE |
| 31-12-2017 | 31-03-2018 | 31-03-2018 | ||||
| Turismo da Samba (Tusal), SARL (c) | Luanda | n.a. | NOS | 30.00% | 30.00% | 30.00% |
| Filmes Mundáfrica, SARL (c) | Luanda | Movies exhibition | NOS | 23.91% | 23.91% | 23.91% |
| Companhia de Pesca e Comércio de Angola (Cosal), SARL (c) |
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.
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