Earnings Release • Nov 25, 2016
Earnings Release
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9M16 Highlights 4
Management Report 7
Business Review 7 Consolidated Financial Review 13
| 9M16 Highlights | 9M15 | 9M16 | 9M16 / 9M15 |
|---|---|---|---|
| Financial Highlights | |||
| Operating Revenues | 1,067.9 | 1,124.1 | 5.3% |
| Telco Revenues | 1,013.6 | 1,070.9 | 5.6% |
| EBITDA | 409.8 | 431.8 | 5.3% |
| EBITDA Margin | 38.4% | 38.4% | 0.0 pp |
| Net Income Before Associates & Non-Controlling Interests | 68.4 | 86.5 | 26.4% |
| Net Income | 73.5 | 78.4 | 6.6% |
| Operational Highlights | |||
| Total RGUs | 8,276.7 | 8,941.5 | 8.0% |
| Mobile | 4,025.1 | 4,395.6 | 9.2% |
| Pay TV | 1,522.0 | 1,586.1 | 4.2% |
| IRIS & UMA Subscribers | 825.1 | 955.1 | 15.8% |
| Convergent RGUs | 2,665.0 | 3,271.0 | 22.7% |
| Convergent Customers | 555.6 | 661.4 | 19.0% |
| Convergent Customers as % of Fixed Access Customers | 40.2% | 45.2% | 4.9pp |
| Residential ARPU / Unique Subscriber With Fixed Access (Euros) | 43.2 | 3.4% |
Mobile RGUs recorded net adds of 272.6 thousand in 9M16;
Convergent customers grew to 661.4 thousand, with convergence as a percentage of the fixed customer base representing 45.2% by the end of 9M16, an increase of 4.9 pp from 40.2% in 9M15;
Revenue growth was well ahead of the market accompanied by solid performance in EBITDA, despite the impact of higher sports content costs in 3Q16. Audiovisuals and Cinemas business performed ahead of expectations led by a stronger cinema movie slate over the summer months.
As at the date of this report, 7 November 2016, NOS' Governing Bodies had the following composition:
| Board of Directors | |
|---|---|
| Chairman of the Board of Directors | Jorge de Brito Pereira |
| Chairman of the Executive Committee | Miguel Almeida |
| Members of the Executive Committee Members |
José Pedro Pereira da Costa, Vice-Presidente, CFO Ana Paula Marques André Almeida Manuel Ramalho Eanes Jorge Graça Ângelo Paupério 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 |
| Alternate | Patrícia Teixeira Lopes 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 Ricardo Filipe de Frias Pinheiro (ROC number 739); |
| Alternate | Paulo Jorge Luís da Silva (ROC number 1334) |
NOS presented solid growth in all core telco services in 9M16, with total RGUs up by 476.6 thousand to 8.941 million services yoy.
The expansion of NOS' fixed footprint is supporting continued net growth in the Pay TV base which increased by 42.3 thousand subscribers in 9M16, 35.4 thousand of which with fixed access services. Fixed Broadband and Voice services are progressively closing the gap to Pay TV services and in 9M16, NOS added 92.1 thousand Broadband and 68.8 thousand fixed voice susbcribers, bringing broadband and voice penetration over the fixed TV base to 74% and 85% respectively.
The number of households subscribing to convergent services grew by 70.6 thousand in 9M16, bringing total convergent RGUs to 3.271 million by the end of the quarter, 661.4 thousand customers. The average number of RGUs per convergent household is 4.9, translating into a total of 1.318 million mobile RGUs included in convergent bundles. Penetration of fixed access households with convergent bundles reached 45.2% in 9M16, compared with 40.2% in 9M15. Total convergent penetration as a percentage of the entire Pay TV base, including fixed access and satellite customers, amounted to 41.7% in 9M16, up 5.2pp from 36.5% in 9M15.
For 9M16 Mobile RGUs posted growth of 272.6 thousand to 4.396 million. Mobile data usage is a core part of consumer behaviour with mobile data traffic growing on the back of increased smartphone penetration already representing 68% of total voice handsets, up from 58% in 9M15. Of the smartphones active on the network, 42% are 4G enabled and in terms of data usage, the monthly average on smartphones has grown by 88% to 1,116 MB and by 71% to 1,461 MB for 4G enabled devices.
Latest market share data posted by the regulator for end 2Q16 continues to show NOS reinforcing leadership in Pay TV with a share of 43.7% and growing share yoy in fixed broadband and voice by 1.5pp and 1.6pp respectively. In mobile services, NOS' market share now stands at 25.9%, an additional 2.0 pp versus 2Q15.
NOS' successful operational performance is supported by strong marketing initiatives and innovation. In June NOS launched "UMA", a new generation of TV with a whole new customer interface and cutting edge features such as Ultra HD 4K viewing, content personalization with each user's preferences mapped in individual profile settings, voice remote control, multi device/screen viewing and launch of a new NOS TV online app, allowing a seamless viewing experience over any device. The UMA platform was further enhanced with the launch of "NOS Share" in 3Q16, an application which allows UMA TV customers to store content in the cloud and share it over any screen. The distinguishing element between "NOS Share" and other cloud based sharing platforms in the market is the ability for customers to share content such as photos, films and live content directly on their own TV screen or on that of their friends and families. Other key features include the possibility to create live events which can be shared in real time using TV livestreaming and to activate automatic upload of photos and videos from smartphones and tablets, to sincronize shared content with other clouds and to share storage space with other members of the family.
Average revenues per fixed access residential household continue to demonstrate solid performance led by additional RGU take-up. ARPU in 9M16 reached 43.2 euros, up by 3.4% over 9M15. In the B2B market, Average Revenue per RGU declined by 9.3% to 16.4 euros, due to continued backbook deflation and lower marginal revenues per new RGU. Although still negative yoy, quarterly progression has been improving, growing from negative 11.1% in 1Q16 to negative 7.8% in 3Q16.
NOS has become a reference player in the Mass Business and Corporate segment in Portugal, providing integrated and innovative solutions to support businesses large and small. RGU growth continues strong with 97.2 thousand net adds in 9M16 to 1.382 million. In the large corporate space, NOS has won a number of important new accounts albeit the pace of growth in 2016 is slowing over the previous year given that the relative size of accounts won is lower than that of the corporate accounts won in 2014 and 2015.
NOS' objective for the Corporate segment is to continue to win its fair share of new accounts and new business in current customers tendering in the market albeit at a slower pace than before and protecting as much as possible the legacy value of the customer base and market. NOS' ambition is to be the preferred provider of integrated telco and IT services, maximizing share of wallet within its existing customer base.
In terms of customer satisfaction, NOS continues to excel having been voted best in class yet again by ECSI Portugal 2016 – National Customer Satisfaction Index for Pay TV (6th year running) and fixed voice services (4th year running). Earlier in the year NOS had already received recognition as the "most trusted brand" in the Portuguese telecom sector by consumers in 1Q16. In June 2016, at the 2016 Contact Center World Awards for Europe, Africa and the Middle East, NOS received 3 gold medals for "Best Customer Service", "Best Service to Sales", and "Best Social Network Support" becoming the first company to receive the "Best Customer Service" award four times.
The network rollout plan is now almost complete with an additional 140.7 thousand households covered with FttH, bringing total network coverage to 3.741 million. Since the new build first started, penetration of new households covered now stands at 20% and is the main driver of continued growth in Pay TV subscribers. Also on the technological front, at the start of October, NOS entered into an important strategic partnership with Huawei to develop joint network and technological projects. This partnership will focus in particular on development of communication, data-centre and video infrastructures, including narrowband IoT, next generation Broadband and video networks, software defined networks (SDN), network functions virtualization (NFN) and integrated business solutions. The two companies have a long track record of working together with the first joint project dating back to 2005 when Huawei was chosen to develop the first 3G pilot in Portugal on the island of Madeira.
| Operating Indicators ('000) | 9M15 | 9M16 | 9M16 / 9M15 |
|---|---|---|---|
| Telco (1) | |||
| Aggregate Indicators | |||
| Homes Passed | 3,543.5 | 3,740.8 | 5.6% |
| Total RGUs | 8,276.7 | 8,941.5 | 8.0% |
| Mobile | 4,025.1 | 4,395.6 | 9.2% |
| Pre-Paid | 2,065.7 | 2,089.3 | 1.1% |
| Post-Paid | 1,959.4 | 2,306.3 | 17.7% |
| ARPU / Mobile Subscriber (Euros) | 8.9 | 8.6 | (3.7%) |
| Pay TV | 1,522.0 | 1,586.1 | 4.2% |
| Fixed Access (2) | 1,198.1 | 1,250.8 | 4.4% |
| DTH | 323.9 | 335.4 | 3.6% |
| Fixed Voice | 1,594.7 | 1,692.1 | 6.1% |
| Broadband | 1,105.7 | 1,236.8 | 11.9% |
| Others and Data | 29.2 | 30.8 | 5.6% |
| 3,4&5P Subscribers (Fixed Access) | 936.7 | 1,040.0 | 11.0% |
| % 3,4&5P (Fixed Access) | 78.2% | 83.1% | 5.0 pp |
| Convergent RGUs | 2,665.0 | 3,271.0 | 22.7% |
| Convergent Customers | 555.6 | 661.4 | 19.0% |
| Fixed Convergent Customers as % of Fixed Access Customers | 40.2% | 45.2% | 4.9 pp |
| % Convergent Customers | 36.5% | 41.7% | 5.2 pp |
| IRIS & UMA Subscribers | 825.1 | 955.1 | 15.8% |
| IRIS & UMA as % of 3,4&5P Subscribers (Fixed Access) | 88.1% | 91.8% | 3.8 pp |
| Net Adds | |||
| Homes Passed | 217.8 | 140.7 | (35.4%) |
| Total RGUs | 651.1 | 476.6 | (26.8%) |
| Mobile | 381.9 | 272.6 | (28.6%) |
| Pre-Paid | 4.5 | 13.8 | 208.1% |
| Post-Paid | 377.4 | 258.8 | (31.4%) |
| Pay TV | 45.2 | 42.3 | (6.4%) |
| Fixed Access (2) | 31.5 | 35.4 | 12.3% |
| DTH | 13.7 | 6.9 | (49.5%) |
| Fixed Voice | 102.0 | 68.8 | (32.6%) |
| Broadband | 112.8 | 92.1 | (18.3%) |
| Others and Data | 9.2 | 0.9 | (90.5%) |
| 3,4&5P Subscribers (Fixed Access) | 85.1 | 71.5 | $(15.9\%)$ |
| Convergent RGUs | 811.7 | 417.3 | (48.6%) |
| Convergent Customers | 171.0 | 70.6 | (58.7%) |
| IRIS & UMA Subscribers | 131.6 | 90.1 | (31.5%) |
(1) Portuguese Operations (2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| Operating Indicators ('000) | 9M15 | 9M16 | 9M16 / 9M15 |
|---|---|---|---|
| Telco (1) | |||
| Indicators per Segment | |||
| Consumer | |||
| Total RGUs | 7,032.9 | 7,560.0 | 7.5% |
| Pay TV | 1,418.5 | 1,466.3 | 3.4% |
| Fixed Access | 1,121.4 | 1,160.0 | 3.4% |
| DTH | 297.2 | 306.2 | $3.0\%$ |
| IRIS & UMA Subscribers | 791.9 | 908.6 | 14.7% |
| Broadband | 1,004.8 | 1,119.3 | 11.4% |
| Fixed Voice | 1,318.5 | 1,381.4 | 4.8% |
| Mobile | 3,291.0 | 3,593.0 | 9.2% |
| % 1P (Fixed Access) | 8.3% | 5.8% | (2.5pp) |
| % 2P (Fixed Access) | 14.2% | 11.8% | (2.5pp) |
| % 3,4&5P (Fixed Access) | 77.5% | 82.5% | 5.0 pp |
| ARPU / Unique Subscriber With Fixed Access (Euros) | 41.8 | 43.2 | 3.4% |
| Net Adds | |||
| Total RGUs | 486.9 | 379.4 | (22.1%) |
| Pay TV | 27.2 | 30.7 | 12.9% |
| Fixed Access | 18.8 | 25.7 | 36.9% |
| DTH | 8.4 | 5.0 | (40.6%) |
| IRIS & UMA Subscribers | 123.5 | 80.1 | (35.1%) |
| Broadband | 101.0 | 80.2 | (20.7%) |
| Fixed Voice | 41.9 | 44.5 | 6.3% |
| Mobile | 316.8 | 224.0 | (29.3%) |
| Business | |||
| Total RGUs | 1,243.8 | 1,381.5 | 11.1% |
| Pay TV | 103.4 | 119.9 | 15.9% |
| IRIS & UMA Subscribers | 33.3 | 46.6 | 39.9% |
| Broadband | 130.1 | 148.3 | 14.0% |
| Fixed Voice | 276.2 | 310.7 | 12.5% |
| Mobile | 734.1 | 802.7 | 9.3% |
| ARPU per RGU (Euros) | 18.1 | 16.4 | (9.3%) |
| Net Adds | |||
| Total RGUs | 164.1 | 97.2 | $(40.8\%)$ |
| Pay TV | 18.0 | 11.6 | (35.5%) |
| IRIS & UMA Subscribers | 8.1 | 10.0 | 23.7% |
| Broadband | 20.9 | 12.8 | (38.9%) |
| Fixed Voice | 60.1 | 24.3 | (59.6%) |
| Mobile | 65.1 | 48.5 | (25.5%) |
(1) Portuguese Operations
(2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| Operating Indicators ('000) | 9M15 | 9M 16 | 9M16 / 9M1 |
|---|---|---|---|
| $C$ inema $(1)$ | |||
| Revenue per Ticket (Euros) | 1 h | ጋ በ% | |
| Tickets Sold | 6,661.7 | 6.779.2 | 1.8% |
| Screens (units) | 21 S | ⊘י∩ ה |
NOS' Cinema ticket sales posted a yoy increase of 1.8% to 6.779 million tickets in 9M16, slightly better than the performance of the market as a whole, which improved by 1.1%1.
(1) Portuguese Operations
The most successful films shown in 9M16 were "The Secret Life of Pets", "Suicide Squad", "Finding Dory", "Deadpool" and "Zootopia".
Average revenue per ticket posted a yoy improvement of 2.0% to 4.7 euros in 9M16.
NOS' gross box-office revenues improved by 1.9% in 9M16, which compares with an increase of 1.1% for the market as a whole, as NOS continues to maintain its leading market position, with a market share of 62.8% in terms of gross revenues in 9M16. For 9M16, NOS' total Cinema Exhibition revenues increased by 2.5% to 44.7 million euros.
Revenues in the Audiovisuals division declined marginally by 0.5% yoy to 52.6 million euros in 9M16. This decline in revenues was driven primarily by the performance in Cinema Distribution and Homevideo, partially offset by an improvement in the rights and television management area. Of the top 10 cinema box-office hits in 9M16, NOS distributed 7, "The Secret Life of Pets", "Suicide Squad", "Finding Dory", "Zootopia", "Batman v Superman: Dawn of Justice", "Now you see Me 2", and "Captain America: Civil War", therefore maintaining its leading position, albeit with a smaller market share yoy.
1 Source: ICA – Portuguese Institute For Cinema and Audiovisuals
The following Consolidated Financial Statements have been subject to limited review.
| (1) Includes operations in M ozambique. |
|||
|---|---|---|---|
(2) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold. (3) EBIT = Income Before Financials and Income Taxes.
Consolidated Operating Revenues grew by 5.3% yoy in 9M16.
Growth in core telco revenues was 5.6% in 9M16, reflecting a combination of 4.5% growth in the Consumer segment and 3.8% in the Business and Wholesale division. Other smaller contributors to revenues, "Equipment Sales" and "Other revenues" posted strong yoy growth of 19.5% and 24.1% respectively. Adjusted for the impact of MTR cuts, Telco Revenues would have grown 6.8% and Consumer Revenues would have grown by 6.1% an additional 1.2pp and 1.6pp respectively. The impact of the MTR cut on Business and Wholesale Revenues is less significant – adjusted revenues would have grown 4.5%, an additional 0.7pp.
Within the Consumer division, revenues from the residential segment posted a yoy increase of 6.9% to 568.2 million euros. Within the residential customer base, revenues from convergent services already represent 50%, compared with 42% in 9M15. Reinforcing positive revenue trends of previous quarters, the yoy pace of decline in the personal segment continues to slow, having registered a decline of 4.8% in 3Q16 compared with 14% in 3Q15 and with 9.9% in 2Q16 and thus posing less of a drag on overall consumer revenues. For 9M16, the personal segment revenues declined by 7.2%. Contribution of operator revenues in the residential segment is negative yoy due to the cut in MTRs. Voice MTRs declined in mid-August 2015 from 1.27 cents to 0.83 cents per minute, with a further MTR decline in July 2016 to 0.81 cents and another slight decline expected for 2017. In April 2016 SMS MTRs declined, from 1.27 cents to 0.83 cents per SMS.
Business and Wholesale (B&W) revenues overall posted yoy growth of 3.8% in 9M16. The significantly lower pace of growth yoy in 3Q16 of 0.1% is explained by a 4.6% reduction in wholesale revenues which represented 37% of B&W revenues in 3Q16. Customer revenues within this division grew by 4.3% yoy in 9M16, and importantly both the large corporate and mass business sub-segments are posting customer revenue growth of 7.2% and 1.7% respectively. In the case of the mass business segment, market repricing of previous periods has reduced significantly and volume growth is now driving positive revenue performance. The decline in revenues from the wholesale division is the result of a lower market share of mass calling services in 3Q16 and also to the fact that some gameshows are no longer being broadcast thus reducing the overall volume of MCS in the market.
The Audiovisuals and Cinema division posted surprisingly positive yoy performance with revenues in 9M16 relatively stable with negative 0.5% growth in the case of Audiovisuals and 2.5% growth in Cinema Exhibition. The previous year had been an exceptionally strong year worldwide for the movie industry and trends in 2016 were set to revert to more normal level, although still better than in 2014. However the movie slate in 3Q16 recorded better box-office results than anticipated and has thus brought accumulated 9M16 revenue trends almost in line with 9M15. The stronger performance in comparison with 2015 is also supported by higher levels of consumer confidence in Portugal.
Consolidated EBITDA grew 5.3% yoy in 9M16 to 431.8 million euros and core Telco EBITDA grew at a similar pace of 5.1% to 394.8 million euros, representing an EBITDA margin of 38.4% and 36.9%, respectively. Audiovisuals and Cinemas posted a yoy increase in EBITDA of 8.0% to 36.9 million euros in 9M16, representing an EBITDA margin of 42.5%.
Consolidated Operating Costs increased by 5.2% yoy to 692.3 million euros.
Wages and Salaries in 9M16 posted a 5.2% yoy increase to 68.7 million euros reflecting increased average headcount to support the growth momentum of the telecom operation, a yearly increase in salaries and costs related with employee share plans.
Direct Costs grew by 4.7% in 9M16 to 334.9 million euros. The main driver of the increase is additional costs with programming resulting from the competitive bidding process for premium sports content that occurred in the last weeks of 2015 and into early 2016. In an effort to assure that all consumers were able to access all relevant sports content whichever operator platform they subscribe, all operators in the Portuguese market reached a sports content reciprocal sharing agreement for sports events broadcasting rights and distribution and broadcasting rights of sports and club channels with proportionate sharing of costs associated with this content.
NOS' programming costs increased by over 18% yoy in 9M16 in comparison with 9M15 as a result of the new content costs related with club contracts that came into effect with the start of the new football season. The increased content costs are also related with a change in the cost structure of the Sport TV distribution model for all operators in the market and that resulted from the need to introduce a more financially sustainable model.
Commercial Costs increased 7.1% yoy to 73.5 million euros primarily as a result of higher cost of goods sold on the back of increased handset sales within convergent and personal mobile commercial offers. This increase was partially offset by a small decline in non customer acquisition related commissions.
Other Operating Costs increased 5.3% yoy to 215.3 million euros with the increase resulting primarily from more costs with supplies and external services to support the strong operating activity.
Net Income increased by 6.6% yoy to 78.4 million euros.
Depreciation and Amortization was 9.3% higher in 9M16 at 292.5 million euros. The yoy increase is essentially due to the higher level of investment in both network assets and customer related costs.
NOS' Share of Associates and Joint Ventures was negative by 8.2 million euros in 9M16, with the negative contributions of ZAP and SportTV of 4.4 and 4.6 million euros, respectively, slightly offset by the positive performance of the Dreamia joint venture. However, NOS' Share of Associates and Joint Ventures was positive by 1.4 million euros in 3Q16, which compares with negative contributions throughout all of 2016. The improved result in 3Q16 is essentially due to a combination of the less negative performance of NOS' 30% stake in ZAP which posted marginally positive contribution to net results of 70 thousand euros in 3Q16 supported by a more stable exchange rate environment in Angola, and due to the improved economics of Sport TV as a result of the change in distribution model and shareholder structure. NOS has reduced its stake in Sport TV to 33% with the entrance of Vodafone in the share capital and is set to reduce to 25% with the announced entrance of PT in the share capital, a process which is currently under due diligence.
Other Expenses* of 11.5 million euros in 9M16 relate to non-recurrent costs, mainly explained by merger related integration costs of 8.2 million euros.
Net Financial Expenses were 36.8% lower yoy at 18.8 million euros in 9M16, reflecting the significantly improved average cost of debt after a number of lines were refinanced during 2015 and 1H16. Further details on financing are presented in the capital structure section below.
Income Tax provision amounted to 22.5 million euros in 9M16 representing 22% as a percentage of Income before Income Taxes, compared with 27% in 9M15.
operations, namely restructuring costs resulting from the merger (including curtailment costs) as well as one-off non-cash items that result from alignment of estimates between the two companies.
* In accordance with IAS 1, the caption "Other expenses" reflects material and unusual expenses that should be disclosed separately from usual line items, to avoid distortion of the financial information from regular
| CAPEX (Millions of Euros) | 9M15 | 9M16 | 9M 16 / 9M 15 |
|---|---|---|---|
| Telco | 265 8 | 264.7 | $(0.4\%)$ |
| Baseline Telco | 88.2 | 92.7 | 50% |
| Customer Related | 1464 | 134.2 | $(8.4\%)$ |
| Network Expansion / Substitution and Integration Projects and Others |
31.2 | 37.8 | 21.3% |
| Audiovisuals and Cinema Exhibition | 28 S | -27.9 | (2.8%) |
| Total Group | 294.6 | 292 K |
Total Group CAPEX declined marginally by 0.7% yoy to 292.6 million euros in 9M16, representing 26.0% of Consolidated Revenues, down yoy from 27.6% in 9M15.
Telco CAPEX was 264.7 million euros in 9M16, in line with the previous year. Baseline Telco CAPEX posted an increase of 5.0% yoy to 92.7 million euros, representing 8.7% as a percentage of Telco Revenues and Total Telco CAPEX was 24.7% of Telco Revenues, down from 26.2% in 9M15. The level of network expansion and substitution CAPEX will start to taper away to residual levels over coming months as the network rollout programme is completed.
Investment in customer success based CAPEX continues to decline and in 9M16 was 8.4% lower yoy at 134.2 million euros. This decline is consistent with the progressive slowdown in RGU growth which was to be expected given the relatively high levels of service penetration in the market and in NOS' customer base.
Audiovisuals and Cinema Exhibition CAPEX was 27.9 million euros, 2.8% below the investment recorded in 9M15, reflecting the capitalization of certain movie rights.
| Cash Flow (Millions of Euros) | 9M15 | 9M16 | 9M16 / 9M15 |
|---|---|---|---|
| EBITDA | 409.8 | 431.8 | 5.3% |
| Total CAPEX | (294.6) | (292.6) | (0.7%) |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(42.9) | (39.7) | $(7.4\%)$ |
| Operating Cash Flow | 72.4 | 99.4 | 37.4% |
| Long Term Contracts | (13.8) | (13.0) | $(6.2\%)$ |
| Cash Restructuring Payments | (14.6) | (11.8) | (19.1%) |
| Interest Paid | (21.6) | (15.5) | $(28.0\%)$ |
| Income Taxes Paid | (2.8) | (14.9) | n.a. |
| Disposals | 2.2 | 3.7 | 66.9% |
| FCM Receivables | 6.5 | 0.0 | $(100.0\%)$ |
| Other Cash Movements | (0.3) | 0.2 | n.a. |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
28.1 | 48.2 | 71.2% |
| Acquisition of Own Shares | (4.5) | (20.7) | n.a. |
| Foreign Currency Debt Exchange Effect | (0.0) | 0.0 | n.a. |
| Dividends | (72.2) | (82.1) | 13.7% |
| Free Cash Flow | (48.6) | (54.6) | 12.5% |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
(16.6) | (11.2) | (32.2%) |
| Change in Net Financial Debt | (65.1) | (65.9) | 1.2% |
Operating Cash Flow was 99.4 million euros in 9M16, up by 37.4% in comparison with 9M15, due to the aforementioned 5.3% growth in EBITDA and the 7.4% less negative impact from Non-Cash Items included in EBITDA-CAPEX and Change in Working Capital.
Total FCF before dividends, financial investments and own shares acquisitions was 48.2 million euros, up 71.2% yoy thanks to the improvement in
Operating Cash Flow and Interest Paid, which were partially offset by the higher level of Income Taxes Paid due to higher advance tax payments made in 2016 based on 2015 taxable income and to the fact that taxable income in 2015 was higher than advance payments made in 2015. Total FCF amounted to negative 54.6 million euros, a decline of 12.5% due to the acquisition of own shares in the amount of 20.7 million euros and the dividend payment which took place in 2Q16 in the amount of 82.1 million euros.
| Balance Sheet (Millions of Euros) | 2015 | 9M16 |
|---|---|---|
| Non-current Assets | 2,510.1 | 2,452.1 |
| Current Assets | 466.4 | 567.0 |
| Total Assets | 2,976.5 | 3,019.2 |
| Total Shareholders' Equity | 1,063.5 | 1,039.4 |
| Non-current Liabilities | 1,150.7 | 1,276.1 |
| Current Liabilities | 762.2 | 703.7 |
| Total Liabilities | 1,913.0 | 1,979.8 |
| Total Liabilities and Shareholders' Equity | 2,976.5 | 3,019.2 |
At the end of 9M16, Net Financial Debt stood at 1,114.2 million euros.
Total financial debt was 1,115.8 million euros, which was offset with a cash and short-term investment position on the balance sheet of 1.5 million euros. At the end of 9M16, NOS also had 190 million euros of unissued commercial paper programmes. The all-in average cost of NOS' Net Financial Debt stood at 2.17% for 3Q16, down from 2.43% in 3Q15 and from 2.30% in 2Q16. For 9M16, the all-in average cost of NOS' Net Financial Debt amounted to 2.28%.
Net Financial Gearing was 49.7% at the end of 9M16 and Net Financial Debt / EBITDA (last 4 quarters) now stands at 2.0x. The average maturity of NOS' Net Financial Debt at the end of 9M16 was 3.3 years.
Taking into account the loans issued at a fixed rate, the interest rate hedging operations in place, and the negative interest rate environment, as at 30th of September 2016, the proportion of NOS' issued debt paying interest at a fixed rate is approximately 69%.
NOS is fully financed until the second half of 2017.
| Net Financial Debt (Millions of Euros) | 2015 | 9M16 | 9M 16 / 2015 |
|---|---|---|---|
| Short Term | 160.0 | 116.3 | (27.3%) |
| Bank and Other Loans | 141.7 | 98.5 | (30.5%) |
| Financial Leases | 18.3 | 17.8 | $(2.5\%)$ |
| Medium and Long Term | 898.3 | 999.4 | 11.3% |
| Bank and Other Loans | 862.6 | 968.7 | 12.3% |
| Financial Leases | 35.8 | 30.7 | $(14.1\%)$ |
| Total Debt | 1,058.3 | 1,115.8 | $5.4\%$ |
| Cash and Short Term Investments | 9.9 | 1.5. | $(84.8\%)$ |
| Net Financial Debt | 1,048.4 | 1,114.2 | 6.3% |
| Net Financial Gearing (1) | 49.6% | 49.7% | 0.1 pp |
| Net Financial Debt / EBITDA | 2.0x | 2.0x | n.a. |
(1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).
| NOTES | 31-12-2015 | 30-09-2016 | |
|---|---|---|---|
| ASSETS | |||
| NON - CURRENT ASSETS | |||
| Tangible assets | 7 | 1.167.538 | 1.147.359 |
| Investment property | 698 | 684 | |
| Intangible assets | 8 | 1.178.559 | 1.169.889 |
| Investments in jointly controlled companies and associated companies | 9 | 29.922 | 5.219 |
| Accounts receivable - other | 10 | 7.182 | 6.622 |
| Tax receivable | 11 | 3.617 | 3.617 |
| Available-for-sale financial assets | 77 | 77 | |
| Deferred income tax assets | 12 | 122.539 | 118.541 |
| Derivative financial instruments | 17 | - | 106 |
| TOTAL NON - CURRENT ASSETS | 2.510.132 | 2.452.114 | |
| CURRENT ASSETS: | |||
| Inventories | 13 | 30.540 | 63.291 |
| Accounts receivable - trade | 14 | 347.837 | 357.851 |
| Accounts receivable - other | 10 | 11.135 | 21.371 |
| Tax receivable | 11 | 2.242 | 1.682 |
| Prepaid expenses | 15 | 64.660 | 97.021 |
| Non-current assets held-for-sale | 16 | - | 24.237 |
| Derivative financial instruments | 17 | - | 85 |
| Cash and cash equivalents | 18 | 9.948 | 1.510 |
| TOTAL CURRENT ASSETS | 466.362 | 567.048 | |
| TOTAL ASSETS | 2.976.494 | 3.019.162 | |
| SHAREHOLDER'S EQUITY | |||
| Share capital | 19.1 | 5.152 | 5.152 |
| Capital issued premium | 19.2 | 854.219 | 854.219 |
| Own shares | 19.3 | (10.559) | (18.848) |
| Legal reserve | 19.4 | 3.556 | 1.030 |
| Other reserves and accumulated earnings | 19.4 | 119.004 | 110.180 |
| Net income | 82.720 | 78.387 | |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1.054.092 | 1.030.120 | |
| Non-controlling interests | 20 | 9.430 | 9.270 |
| TOTAL EQUITY | 1.063.522 | 1.039.390 | |
| LIABILITIES | |||
| NON - CURRENT LIABILITIES | |||
| Borrowings | 21 | 979.422 | 1.073.085 |
| Provisions | 22 | 139.484 | 146.756 |
| Accounts payable | 26 | - | 25.650 |
| Accrued expenses Deferred income |
23 24 |
9.470 5.259 |
9.358 4.649 |
| Derivative financial instruments | 17 | 3.369 | 5.382 |
| Deferred income tax liabilities | 12 | 13.739 | 11.176 |
| TOTAL NON - CURRENT LIABILITIES | 1.150.743 | 1.276.056 | |
| CURRENT LIABILITIES: | |||
| Borrowings | 21 | 178.022 | 128.591 |
| Accounts payable - trade | 25 | 327.485 | 274.478 |
| Accounts payable - other | 26 | 28.706 | 61.974 |
| Tax payable | 11 | 23.296 | 27.184 |
| Accrued expenses | 23 | 175.871 | 182.368 |
| Deferred income | 24 | 28.802 | 29.121 |
| Derivative financial instruments | 17 | 47 | - |
| TOTAL CURRENT LIABILITIES | 762.229 | 703.716 | |
| TOTAL LIABILITIES | 1.912.972 | 1.979.772 | |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2.976.494 | 3.019.162 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as at 30 September 2016.
(Amounts stated in thousands of euros)
| NOTES | rd QUARTER 15 3 |
9M 15 | rd QUARTER 16 3 |
9M 16 | |
|---|---|---|---|---|---|
| REVENUES: | |||||
| Services rendered | 345.450 | 1.012.138 | 357.815 | 1.060.685 | |
| Sales | 18.274 | 45.321 | 19.149 | 50.235 | |
| Other operating revenues | 4.226 | 10.438 | 4.016 | 13.174 | |
| 27 | 367.950 | 1.067.897 | 380.980 | 1.124.094 | |
| COSTS, LOSSES AND GAINS: | |||||
| Wages and salaries | 28 | 23.427 | 65.329 | 22.997 | 68.718 |
| Direct costs | 29 | 107.775 | 319.719 | 115.697 | 334.901 |
| Costs of products sold | 30 | 13.998 | 35.218 | 16.155 | 41.071 |
| Marketing and advertising | 10.046 | 21.656 | 9.845 | 23.371 | |
| Support services | 31 | 21.431 | 69.053 | 21.945 | 67.607 |
| Supplies and external services | 31 | 46.383 | 135.417 | 48.239 | 139.131 |
| Other operating losses / (gains) | 226 | 533 | 128 | 398 | |
| Taxes | 6.376 | 19.673 | 7.474 | 21.816 | |
| Provisions and adjustments | 32 | (5.163) | (8.550) | (6.732) | (4.682) |
| Depreciation, amortisation and impairment losses | 7, 8 and 33 | 89.265 | 267.649 | 98.674 | 292.503 |
| Reestructuring costs | 4.417 | 12.188 | 5.365 | 10.709 | |
| Losses / (gains) on sale of assets, net | (507) | (355) | 105 | 20 | |
| Other losses / (gains) non recurrent net | 968 | 4.499 | 29 | 777 | |
| 318.642 | 942.029 | 339.921 | 996.340 | ||
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 49.308 | 125.868 | 41.059 | 127.754 | |
| Net losses / (gains) of affiliated companies | 9 and 34 | 2.926 | (4.957) | (1.408) | 8.245 |
| Financial costs | 35 | 4.651 | 19.651 | 4.429 | 12.566 |
| Net foreign exchange losses / (gains) | 289 | 1.190 | 316 | 729 | |
| Net losses / (gains) on financial assets | - | 249 | - | - | |
| Net other financial expenses / (income) | 35 | 2.141 | 8.607 | 1.796 | 5.480 |
| 10.007 | 24.740 | 5.133 | 27.020 | ||
| INCOME BEFORE TAXES | 39.301 | 101.128 | 35.926 | 100.734 | |
| Income taxes | 12 | 13.075 | 27.735 | 8.600 | 22.499 |
| NET CONSOLIDATED INCOME | 26.226 | 73.393 | 27.326 | 78.235 | |
| ATTRIBUTABLE TO: | |||||
| NOS Group Shareholders | 26.219 | 73.529 | 27.491 | 78.387 | |
| Non-controlling interests | 20 | 7 | (136) | (165) | (152) |
| EARNINGS PER SHARES | |||||
| Basic - euros | 36 | 0,05 | 0,14 | 0,05 | 0,15 |
| Diluted - euros | 36 | 0,05 | 0,14 | 0,05 | 0,15 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of income by nature for the nine months ended on 30 September 2016.
(Amounts stated in thousands of euros)
| NOTES | rd QUARTER 15 3 |
9M 15 | rd 3 QUARTER 16 |
9M 16 | |
|---|---|---|---|---|---|
| NET CONSOLIDATED INCOME | 26.226 | 73.393 | 27.326 | 78.235 | |
| OTHER INCOME | |||||
| ITENS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT: | |||||
| Accounting for equity method | 9 | (315) | (941) | 111 | (867) |
| Fair value of interest rate swap | 17 | (1.370) | (830) | 494 | (2.013) |
| Deferred income tax - interest rate swap | 17 | 319 | 197 | (111) | 453 |
| Fair value of equity swaps | 17 | - | - | 90 | 90 |
| Deferred income tax - equity swap | 17 | - | - | (21) | (21) |
| Fair value of exchange rate forward | 17 | (11) | (532) | (9) | 57 |
| Deferred income tax - exchange rate forward | 17 | (8) | 174 | 3 | (16) |
| Currency translation differences and others | (393) | (1.176) | 78 | (604) | |
| INCOME RECOGNISED DIRECTLY IN EQUITY | (1.778) | (3.108) | 635 | (2.921) | |
| TOTAL COMPREHENSIVE INCOME | 24.448 | 70.285 | 27.961 | 75.314 | |
| ATTRIBUTABLE TO: | |||||
| NOS Group Shareholders | 24.441 | 70.421 | 27.796 | 75.162 | |
| Non-controlling interests | 7 | (136) | 165 | 152 | |
| 24.448 | 70.285 | 27.961 | 75.314 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the nine months ended on 30 September 2016.
(Amounts stated in thousands of euros)
| NOTES | PITAL ARE 풊 |
ISSUED PREMIUM APITAL Ő |
£ OWN SHARES, DISCOUNTS AND PREMIUMS |
RESERVE ₹ g |
gNA CCUMULATED EARNINGS RESERVES DTHER Q |
NET INCOME | NON - CONTROLLING INTERESTS ū |
TOTAL | |
|---|---|---|---|---|---|---|---|---|---|
| BALANCE AS AT 1 JANUARY 2015 | 5,152 | 854,219 | (11,791) | 3,556 | 124,464 | 74,711 | 9,818 | 1,060,129 | |
| Result appropriation | |||||||||
| Transfers to reserves | ٠ | $\sim$ | $\overline{\phantom{a}}$ | 74.711 | (74, 711) | ||||
| Dividends paid | $\sim$ | $\sim$ | ٠ | $\sim$ | (72, 043) | $\sim$ | (173) | [72, 216] | |
| Aquisition of own shares | 19.3 | $\overline{a}$ | $\overline{\phantom{a}}$ | (4.451) | $\sim$ | (4.451) | |||
| Distribution of own shares - share incentive scheme | 19.3 | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | 8,980 | $\sim$ | (9.961) | $\sim$ | $\overline{\phantom{a}}$ | (981) |
| Distribuition of own shares - other remunerations | 19.3 | $\sim$ | $\sim$ | 275 | $\,$ | 141 | $\sim$ | 416 | |
| Share Plan - costs incurred in the period and others | 40 | ٠ | ٠ | ٠ | 3,891 | 8 | 3,899 | ||
| Comprehensive Income | $\sim$ | $\sim$ | $\sim$ | $\sim$ | (3.108) | 73,529 | (136) | 70,285 | |
| Other | ٠ | $\sim$ | ٠ | ٠ | (119) | $\overline{2}$ | (117) | ||
| BALANCE AS AT 30 SEPTEMBER 2015 | 5.152 | 854.219 | (6,987) | 3.556 | 117.976 | 73,529 | 9.519 | 1,056,964 | |
| BALANCE AS AT 1 JANUARY 2016 | 5.152 | 854,219 | (10.559) | 3.556 | 119,004 | 82,720 | 9,430 | 1.063.522 | |
| Result appropriation | |||||||||
| Transfers to reserves | $\overline{\phantom{a}}$ | $\sim$ | $\sim$ | (2.526) | 85,246 | (82, 720) | |||
| Dividends paid | ٠ | ٠ | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | (82.121) | $\overline{\phantom{a}}$ | $\sim$ | (82, 121) | |
| Aquisition of own shares | 19.3 | ٠ | ٠ | (20.676) | ٠ | ٠ | ٠ | (20.676) | |
| Distribution of own shares - share incentive scheme | 19.3 | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | 9,640 | $\sim$ | (10, 401) | $\sim$ | $\sim$ | (761) |
| Distribuition of own shares - other remunerations | 19.3 | ÷ | $\sim$ | 2.747 | ٠ | (213) | 2.534 | ||
| Share Plan - costs incurred in the period and others | 40 | $\sim$ | $\sim$ | × | $\sim$ | 1,586 | $\sim$ | (8) | 1,578 |
| Comprehensive Income | ۰ | $\sim$ | $\overline{\phantom{a}}$ | (2.921) | 78,387 | (152) | 75,314 | ||
| BALANCE AS AT 30 SEPTEMBER 2016 | 5,152 | 854,219 | (18, 848) | 1,030 | 110,180 | 78,387 | 9,270 | 1,039,390 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity for the nine months ended on 30 September 2016.
(Amounts stated in thousands of euros)
| NOTES | 9M 15 | 9M 16 | |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Collections from clients | 1,256,589 | 1,341,248 | |
| Payments to suppliers | (765, 151) | (862, 563) | |
| Payments to employees | (83, 808) | (86, 911) | |
| Receipts / (Payments) relating to income taxes | (1,617) | (15, 101) | |
| Other cash receipts / (payments) related with operating | |||
| activities | (2,066) | 45,338 | |
| CASH FLOW FROM OPERATING ACTIVITIES (1) | 403,947 | 422,011 | |
| INVESTING ACTIVITIES | |||
| CASH RECEIPTS RESULTING FROM | |||
| Financial investments | 5 and 9 | 25,347 | |
| Tangible assets | 1,254 | 4,359 | |
| Intangible assets | 6 | 40 | |
| Interest and related income | 5,686 | 6,890 | |
| Other | 1,376 | ||
| 8,322 | 36,636 | ||
| PAYMENTS RESULTING FROM | |||
| Financial investments | 5 and 9 | (25, 347) | |
| Tangible assets | (219, 556) | (209, 659) | |
| Intangible assets | (125, 928) | (151, 276) | |
| (345, 484) | (386, 282) | ||
| CASH FLOW FROM INVESTING ACTIVITIES (2) | (337, 162) | (349, 646) | |
| FINANCING ACTIVITIES | |||
| CASH RECEIPTS RESULTING FROM | |||
| Borrowings | 935,516 | 335,998 | |
| 935,516 | 335,998 | ||
| PAYMENTS RESULTING FROM | |||
| Borrowings | (881,559) | (255,000) | |
| Lease rentals (principal) | (17,099) | (15, 585) | |
| Interest and related expenses | (33,787) | (25, 112) | |
| Dividends | 19.4 | (72, 216) | (82, 121) |
| Aquisition of own shares | 19.3 | (4, 313) | (20,676) |
| (1,008,974) | (398, 494) | ||
| CASH FLOW FROM FINANCING ACTIVITIES (3) | (73, 458) | (62, 496) | |
| Change in cash and cash equivalents $(4)=(1)+(2)+(3)$ | (6, 673) | 9,869 | |
| Effect of exchange differences | (123) | (309) | |
| Cash and cash equivalents at the beginning of the period | 19,591 | (29, 348) | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 12,795 | (19, 788) | |
| Cash and cash equivalents | 18 | 13,011 | 1,510 |
| Bank overdrafts | 21 | (216) | (21, 298) |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 12,795 | (19, 788) |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of cash flows for the nine months ended on 30 September 2016.
(Amounts stated in thousands of euros, unless otherwise stated)
NOS, SGPS, S.A. ("NOS", "NOS SGPS" or "Company"), formerly named ZON OPTIMUS, SGPS, S.A. ("ZON OPTIMUS") and until 27 august 2013 named ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. ("ZON"), with Company headquarters registered at Rua Actor António Silva, no. 9, Campo Grande, was established by Portugal Telecom, SGPS, S.A. ("Portugal Telecom") on July 15, 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..
On 20 June 2014, as a result of the launch of the new brand "NOS" on 16 May 2014, the General Meeting of Shareholders approved the change of the Company's name to NOS, 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 data centers and consulting services in IT.
NOS shares are listed on the Euronext Lisbon market. The Group's shareholder's structure as at 30 September 2016 is shown in Note 19.
Cable and satellite television in Portugal is mainly provided by NOS Comunicações, S.A. ("NOS SA") and its subsidiaries, NOS Açores and NOS Madeira. These companies carry out: a) cable and satellite television distribution; b) the operation of the latest generation mobile communication network, GSM/UMTS/LTE; c) the operation of electronic communications services, including data and multimedia communication services in general; d) IP voice services ("VOIP" - Voice over Internet Protocol); e) Mobile Virtual Network Operator ("MVNO"), and f) the 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 data center management and consulting services in IT.
A listing of the other Group companies and their respective business is included in the annexes to this report.
These Notes to the Consolidated Financial Statements follow the order in which the items are shown in the consolidated financial statements.
The consolidated financial statements for the nine months ended on 30 September 2016 were approved by the Board of Directors and their disclosure authorized on 7 November 2016.
The Board of Directors believes that the financial statements give a true and fair view of the Company's operations, financial performance and 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 indicated.
The consolidated financial statements of NOS were prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), and Interpretations issued by the International Financial Reporting Committee ("IFRIC") or the previous Standing Interpretations Committee ("SIC"), adopted by the European Union, in force as at 1 January 2016.
These consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34"). Accordingly, these financial statements do not include all the information required by IFRS and should be read in conjunction with the consolidated financial statements for the year ended on 31 December 2015.
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 where necessary for the valuation of financial assets and liabilities (including derivatives) at their fair value.
In preparing the consolidated financial statements in accordance with IFRS, the Board used estimates, assumptions and critical judgments with impact on the value of assets and liabilities and the recognition of income and costs in each reporting period. Although these estimates were based on the best information available at the date of preparation of the consolidated financial statements, current and future results may differ from these estimates. The areas involving a higher element of judgment and estimates are described in Note 3.
In the preparation and presentation of the consolidated financial statements, the NOS Group declares that it complies explicitly and without reservation with IAS/IFRS reporting standards and related SIC/IFRIC interpretations as approved by the European Union.
The standards and interpretations that became effective as of 1 January 2016 are as follows:
These changes had no material impact on the consolidated financial statements.
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:
IFRS 4 (amendment), "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts" (effective for annual periods beginning on or after 1 January 2018). The amendments complement the current options in the standard that can be used to bridge the concern related with the temporary volatility of the results.
IFRS 9 (new), "Financial instruments classification and measurement" (effective for annual periods beginning on or after 1 January 2018). The initial phase of IFRS 9 forecasts two types of measurement: amortized cost and fair value. All equity instruments are measured at fair value. A financial instrument is measured at amortized cost only if the company has it to collect contractual cash flows and the cash flows represents principal and interest. Otherwise, financial instruments are measured at fair value through profit and loss.
The Group is calculating the impact of these changes and will apply these standards as soon as they become effective.
Controlled companies were consolidated by the full consolidation method. Control is deemed to exist when the Group is exposed or has rights, as a result 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 interest of third parties in the equity and net profit of such companies' income presented separately in the consolidated statement of financial position and in the consolidated statement, respectively, under the item "Non-controlling Interests".
The identifiable acquired assets and the liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date, irrespective of the existence of non-controlled interests. The excess of acquisition cost over the fair value of the Group's share of identifiable acquired assets and liabilities is stated in Goodwill. When the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the income statement in the period in which the acquisition occurs.
The interests of minority shareholders are initially recognised as their proportion of the fair value of the identifiable assets and liabilities.
On the acquisition of additional equity shares in companies already controlled by the Group, the difference between the share of capital acquired and the corresponding acquisition value is recognised directly in equity.
Where 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 acquisition 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.
Where 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 companies, as a contra entry in "Net Losses / (gains) of affiliated companies" in the income statement. 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. Where 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 where 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.
In the nine months ended on 30 September 2016, the Group changed the presentation of the income resulting from the application of the equity method earnings from income before interest and income taxes to income before taxes.
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. Where the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the statement of comprehensive income in the period in which the acquisition occurs.
Financial investments in the majority of associated companies (Annex B)) are stated by the equity method. Under this method, financial investments are adjusted periodically by an amount corresponding to the share in the net profits of associated companies, as a contra entry in "Net Losses / (gains) of affiliated companies" in the 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 where 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.
In the nine months ended on 30 September 2016, the Group changed the presentation of the income resulting from the application of the equity method earnings from income before interest and income taxes to income before taxes.
Balances and transactions and 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 where 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, "Restructuring costs", "Losses / (gains) on disposal of assets" and "Other losses / (gains)" reflect unusual expenses that should be disclosed separately from the usual lines items, to avoid distortion of the financial information from regular operations.
Tangible assets are stated at acquisition cost, less accumulated depreciation and impairment losses, where 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).
Estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence are recognised by a deduction from the corresponding asset as a contra entry in profit and loss. The costs of current maintenance and repairs are recognised as a cost when they are incurred. Significant costs incurred on renovations or improvements to the asset are capitalised and depreciated over the corresponding estimated payback period when it is probable that there will be future economic benefits associated with the asset and when these can be measured reliably.
Non-current assets (or discontinued operations), are classified as held for sale if their value is realisable through a sale transaction rather than through their continued use.
This situation is deemed to arise only where: (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, noncurrent 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 deemed as "held for sale", the depreciation of such assets ceases and they are classified as non-current assets held for sale. Gains and losses on disposals of tangible assets, corresponding to the difference between the sale price and the net book value, are recognised in results in "Losses/gains on disposals of assets".
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:
| 2015 | 2016 | |
|---|---|---|
| (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 telecommunication equipment | $3 - 10$ | $3 - 10$ |
| 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, where applicable. Intangible assets are recognised only where they generate future economic benefits for the Group and where they can be measured reliably.
Intangible assets consist mainly of goodwill, satellite and distribution network capacity utilisation rights, customer portfolios, costs incurred in raising customers' loyalty contracts, telecom and software 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.
Goodwill is recorded as an asset and included in "Intangible Assets" in the case of a controlled company, and in "Investments in jointly controlled companies and associated companies" in the case of jointly controlled company or an associated company.
Goodwill is not amortised and is subject to impairment tests at least once a year, on a specified date, and whenever there are changes in the test's underlying assumptions 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 income statement in "Impairment losses" and is not liable to subsequent reversal.
For the purposes of impairment tests, goodwill is attributed to the cash-generating units to which it is related, which may correspond to the business segments in which the Group operates, or a lower level.
Internally generated intangible assets, including research costs, are expensed when they are incurred. Development costs are only recognised as assets where the technical capability to complete the intangible asset is demonstrated and where 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 signing of contracts related with sports content originate rights that are, initially, classified as contractual commitments.
The content exploration rights are recorded in the consolidated statement of financial position, as intangible assets, where 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.
In the specific case of broadcasting rights of sports competitions, these are recognized as assets where the necessary conditions to organize each sports competition are present, which occurs in the homologation date of the participating teams in the competition that is being held in the sports season to be initiated, by the organizing entity, taking into consideration that it is from that date that the conditions for the recognition of an asset are present, namely, the unequivocal attainment of the exploration rights of the games of the stated season. In this situation, the stated rights are recognized in the income statement in "Depreciation, amortization and impairment losses", by the linear method, by twelfths, starting from the beginning of the month in which they are available for use.
Group companies periodically carry out an impairment assessment of intangible assets inprogress. 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. Where 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:
| 2015 | 2016 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Rights of using capacities | Period of the | Period of the |
| 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 incurred in raising costumers loyalty contracts | Loyalty contract | Loyalty contract |
| period | period | |
| Content utilization rights | Period of the | Period of the |
| contract | contract | |
| Other | 1 to 8 | l 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. Where 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 cashgenerating unit to which the asset belongs. Each of the Group's businesses is a cashgenerating 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. Where 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.
Initially, financial assets are recognised at their fair value plus directly attributable transaction costs, except for assets at fair value through profit or loss where transaction costs are recognised immediately in profit or loss. These assets are derecognised when: (i) the Group's contractual rights to receive their cash flows expire; (ii) the Group has substantially transferred all the risks and benefits associated with their ownership; or (iii) although it retains part but not substantially all of the risks and benefits associated with their ownership, the Group has transferred control of the assets.
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 investments at fair value through profit or loss, financial assets available for sale, investments held to maturity and borrowings and receivables. The classification depends on management's intention at the time of their acquisition.
This category includes non-derivative financial assets acquired with the intention of selling them in the short term. This category also includes derivatives that do not qualify for hedge accounting purposes. Gains and losses resulting from changes in the fair value of assets measured at fair value through profit or loss are recognised in results in the year in which they occur under "Losses/gains on financial assets", including the income from interest and dividends.
Financial assets available for sale are non-derivative financial assets which: (i) are designated as available for sale at the time of their initial recognition; or (ii) do not fit into the other categories of financial assets above. They are recognised as non-current assets except where there is an intention to sell them within 12 months following the date of the statement of financial position.
Shareholdings other than shares in Group companies, jointly controlled companies or associated companies are classified as financial investments available for sale and are recognised in the statement of financial position as non-current assets.
Investments are initially recognised at their acquisition cost. After initial recognition, investments available for sale are revalued at their fair value by reference to their market value at the date of the statement of financial position, without any deduction for transaction costs that may occur until their sale. In situations where investments are equity instruments not listed on regulated markets and for which it is not possible to reliably estimate their fair value, they are maintained at acquisition cost less any impairment losses.
The potential resulting capital gains and losses are recognised directly in reserves until the financial investment is sold, received or otherwise disposed of, at which time the accumulated gain or loss previously recognised in equity is included in the income statement.
Dividends on equity instruments classified as available for sale are recognised in results for the year under "Losses /(gains) on financial assets", where the right to receive the payment is established.
Investments held to maturity are classified as non-current investments except where they mature in less than 12 months from the date of the statement of financial position. This item includes investments with defined maturities which the Group has the intention and ability to keep until that date. Investments held to maturity are valued at amortised cost, less any impairment losses.
The assets classified in this category are non-derivative financial assets with fixed or determinable payments not listed on an active market.
Accounts receivable are initially recognised at fair value and subsequently valued at amortised cost, less adjustments for impairment, where applicable. Impairment losses on customers and accounts receivable are recorded where there is objective evidence that they are not recoverable under the initial terms of the transaction. The identified impairment losses are recorded in the income statement under "Provisions and adjustments", and subsequently reversed by results, when the impairment indicators reduce or cease to exist.
The amounts included in "Cash and cash equivalents" correspond to the amounts 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.
For the purposes of the statement of cash flows, "Cash and cash equivalents" also includes bank overdrafts included in the statement of financial position under "Borrowings" (where applicable).
Financial liabilities and equity instruments are classified according to their contractual substance irrespective of their legal form. Equity instruments are contracts that show a residual interest in the Group's assets after 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 and equity instruments are unrecognised only when extinguished, i.e. when the obligation is settled, cancelled or extinguished.
Loans are stated as liabilities at their nominal value, net of the issuance costs of the loans. Financial charges, calculated in accordance with the effective rate of interest, including premiums payable, are recognised in accordance with the accruals principle.
Accounts payable are recognised initially at their fair value and subsequently at amortised cost in accordance with the effective interest rate method. Accounts payable are recognised as current liabilities unless they are expected to be settled within 12 months from the date of the statement of financial position.
See accounting policy 2.3.9.
At the date of each statement of financial position, the Group examines whether there is objective evidence that a financial asset or group of financial assets is impaired.
In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of the instrument below its cost is considered as an indicator that the instrument is impaired. If any similar evidence exists for financial assets classified as available for sale, the accumulated loss – measured as the difference between the acquisition cost and the current fair value, less any impairment of the financial asset that has already been recognised in results – is removed from equity and recognised in the income statement.
Impairment losses on equity instruments recognised in results are not reversed through the income statement.
Adjustments are made for impairment losses when there are objective indications that the Group will not receive all the amounts to which it is entitled under the original terms of the contracts. Various indicators are used to identify impairment situations, such as default analysis, financial difficulties of the debtor, including probability of insolvency of the debtor.
The adjustment for impairment losses is calculated as the difference between the recoverable value of the financial asset and its value in the statement of financial position and is stated in profit and loss for the year. The value of these assets in the statement of financial position is reduced to the recoverable amount by means of an adjustments account. When an amount receivable from customers and other debtors is considered non recoverable, it is written off using the adjustments account for impairment losses. The subsequent recovery of amounts that have been written off is recognised in profit and loss.
When there are receivables from customers or other debtors that are overdue, and these are subject to renegotiation of their terms, these are no longer regarded as overdue and become treated as new receivables.
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 with the Group's risk management policies, do not meet all the requirements of IAS 39 – Financial Instruments: recognition and measurement 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 financial instrument as a hedging instrument meets the requirements of IAS 39 - Financial instruments: recognition and measurement.
Derivative financial instruments used for hedging purposes can be classified as hedges for accounting purposes where they cumulatively meet the following conditions:
a) At the start date of the transaction, the hedge relationship is identified and formally documented, including the identification of the hedged item, the hedging instrument and the evaluation of effectiveness of the hedge;
Where 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, where they are considered to be 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.
Where 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 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, where this is less than the cost, are recorded as operating costs in "Cost of goods sold".
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 originate 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, where programmatic content has been received and is available for exhibition or use, according to contractual conditions, 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 recognized in the income statement in "Direct costs: Exhibition costs", on a systematic basis given the pattern of economic benefits obtained through their commercial exploration.
Due to the agreement between the three national operators of reciprocal availability, for several sports seasons, of sports content (national and international) owned by them (Note 37), 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 where 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 where: (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. Where 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 where the Group has a detailed, formal plan identifying 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 which 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 substantially all risks and rewards incident to ownership of those assets have not been transferred.
The classification of leases as finance or operating leases is made on the basis of substance rather than contractual form.
The assets acquired under finance leases and 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 fixed assets are recognised in the statement of comprehensive income 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 on the basis of 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 on the basis of 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 where there is reasonable assurance that these may be used to reduce future taxable profit, or where 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 follow:
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 caption "Wages and salaries" in the income statement, with the corresponding increase in others reserves in 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 on the basis of shares but paid in cash lead to the recognition of a liability valued at fair value at the date of the statement of financial position.
Portuguese commercial legislation requires that at least 5% of annual net profit must be appropriated to a legal reserve until it represents at least 20% of the share capital. This reserve is not distributable, except in case of liquidation, but can be used to absorb losses, after having exhausted all other reserves and to increase share capital.
Issue of shares corresponds to premiums from the issuance or capital increases. According to Portuguese law, share premiums follow the treatment given to the "Legal Reserve", that is, the values are not distributable, except in case of liquidation, but can be used to absorb losses after having exhausted all other reserves and to increase share capital.
According to IFRS 2 - "Share-based Payments", the responsibility with the medium-term incentive plans settled by delivery of own shares is recorded as credit under "Reservations for mid-term incentive plans "and such reserve is not likely to be distributed or used to absorb losses.
Hedging reserve reflects the changes in fair value of derivative financial instruments as cash flow hedges that are considered effective, and they are not likely to be distributed or be used to absorb losses.
The "own shares reserves" reflect the value of the shares acquired and follows the same legal regime as the legal reserve. Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IFRS. In addition, the increases resulting from the application of fair value through equity components, including its application through the net profit can only be distributed when the elements that originated them are sold, exercised liquidated or when the end their use, in the case of tangible fixed 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's 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 (for example: 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.
Revenue from telecommunications services is counted from the time at which those services are provided. 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 imaterial, are recorded in the next financial year.
Discounts granted to clients within fidelization programs are allocated to the entire contract for which the client is fidelized. Therefore, the discount is recognised as the goods and services are made available to the client.
Profits made 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.
Until 31 December 2014, revenue from penalties, due to the inherent uncertainties, was recorded only at the moment when it was received, and the amount was disclosed as a contingent asset. From 1 January 2015, Revenue from penalties is recognised taking into account an estimated collectability rate taking into account the Group's collection history.
Interest revenue is recognised using the effective interest method, only where they generate future economic benefits for the Group and where they can be measured reliably.
Group's revenues and costs are recognised in accordance with the accruals principle, under which they are recognised as they are generated or incurred, irrespective 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 periods are registered under "Accounts receivable – trade", "Accounts receivable – other", "Prepaid expenses", "Accrued expenses" and "Deferred income", as well as the expenses and income that have already occurred that relate to future periods, which will be recognised in each of those periods, for the corresponding amount.
The costs related to the current period and whose expenses will only occur in future periods are registered under "Accrued expenses" when it's possible to estimate with certainty the related amount, as well as the timing of the expense's materialization. If uncertainty exists related to any of these aspects, the value is classified as Provisions (Note 2.3.12).
Transactions in foreign currencies are converted into the functional currency at the exchange rate on the transactions dates. On each accounting date, outstanding balances (monetary items) are updated by applying the exchange rate prevailing on that date. The exchange rate differences in this update are recognised in the income statement for the year in which they were calculated. Exchange rate variations generated on monetary items which constitute enlargement of the investment denominated in the functional currency of the Group or of the subsidiary in question are recognised in equity. Exchange rate differences on non-monetary items are classified in "Other reserves" in equity.
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 "Other reserves".
At 31 December 2015 and 30 September 2016, 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:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| US Dollar | 1.0887 | 1.1161 |
| Angolan Kwanza | 147.8315 | 185.3680 |
| British Pound | 0.7340 | 0.8610 |
| Mozambican Metical | 49,2900 | 87.9300 |
| Canadian Dollar | 1.5116 | 1.4690 |
| Swiss Franc | 1.0835 | 1.0876 |
| Real | 4.3117 | 3.6210 |
In the nine months ended at 30 September 2015 and 2016, the income statements of subsidiaries expressed in foreign currencies were converted to euros at the average exchange rates of the currencies of their countries of origin against the euro, which are as follows:
| 9M 15 | 9M16 | |
|---|---|---|
| Angolan Kwanza | 128,8018 | 181.4076 |
| Mozambican Metical | 40.9400 | 66.7544 |
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 measure 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 maximizes the amount that would be received to selling asset or minimizes the amount that would be paid to transfer the liability, after considering transaction costs and transport costs.
Because different entities and businesses within a single entity can have access to different markets, the main or most advantageous market for the same asset or liability can vary from one entity to another, or even between businesses within the same entity, but it is assumed that they are accessible to the Group.
The fair value measurement uses assumptions that market participants use in defining price of the asset or liability, assuming that market participants would use the asset to maximize its value and use.
The group uses valuation techniques appropriate to the circumstances whenever there is information to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or of which disclosure is mandatory, are rated on a fair value hierarchy, which ranks data in three levels to be used in the measurement at fair value, and detailed below:
Level 1 – Listed and unadjusted market prices, in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 – valuation techniques using inputs that aren't quoted, but which 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:
a) Termination of employment. The benefits for termination of employment are due for payment when there is cessation of employment before the normal retirement date or when an employee accepts leaving voluntarily in exchange for these benefits. The Group recognizes these benefits when it can be shown to be committed to a termination of current employees according to a detailed formal plan for termination and there is no realistic possibility of withdrawal or these benefits are granted to encourage voluntary redundancy. Where the benefits of cessation of employment are due more than 12 months after the balance sheet date, they are updated to their present value.
b) Holiday, holiday allowances and bonuses. According to the labor law, employees are entitled to 22 days annual leave, as well as one month of holiday allowances, rights acquired in the year preceding payment. These liabilities of the Group are recorded when incurred, independently of the moment of payment, and are reflected under the item "Accounts payable and other".
c) Labor Compensation Fund (FCT) and the Labour Compensation Guarantee Fund (FGCT). Based on the publication of Law No. 70/2013 and subsequent regulation by Order No. 294-A / 2013, entered into force on 1 October the Labor 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 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 "Cash and cash equivalents" the assets with maturities of less than three months and for which the risk of change in value is negligible. For purposes of the statement of cash flows, the balance of cash and cash equivalents also include bank overdrafts included in the statement of financial position under "Borrowings".
The statement of cash flows is divided into operating, investment and financing activities.
Operating activities include cash received from customers and payments to suppliers, staff and others related to operating activities. Under "other receipts / (payments) relating to
operating activity" includes the amount received through credit 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 investment 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 the Group's management to make judgments and estimates that affect the statement of financial position and the reported results. These estimates are based on the best information and knowledge about past and/or present events, and on the operations that the Company considers may it may implement in the future. However, at the date of completion of such operations, their results may differ from these estimates.
Changes to these estimates that occur after the date of approval of the consolidated financial statements will be corrected in the income statement in a prospective manner, in accordance with IAS 8 - "Accounting Policies, Changes in Accounting Estimates and Errors".
The estimates and assumptions that imply a greater risk of giving rise to a material adjustment in assets and liabilities are described below:
To determine the entities to be included in the consolidation perimeter, the Group assesses the extent to which it is exposed, or has rights, to variability in returns from its involvement with that entity and can take possession of them through the power it holds over this entity.
The decision that an entity must be consolidated by the Group requires the use of judgment, estimates and assumptions to determine the extent to which the Group is exposed to return variability and the ability to take possession of them through its power.
Other assumptions and estimates could lead to the Group's consolidation perimeter being different, with direct impact on the consolidated financial statements.
The determination of a possible impairment loss can be triggered by the occurrence of various events, such as the availability of future financing, the cost of capital or other market, economic and legal changes or changes with an adverse effect on the technological environment, many of which are beyond the Group's 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 subjected to impairment tests annually 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 on the basis of 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.
These three parameters are defined using management's best estimates for the assets and businesses concerned, and taking account of the practices adopted by companies in the sectors in which the Group operates.
The capitalised costs with the audiovisual content distribution rights acquired for commercialisation in the various windows of exhibition are amortised over the period of exploration of the respective contracts. Additionally, these assets are subject to impairment tests whenever there are indications of changes in the pattern generation of future revenue underlying each contract.
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 where there is strong assurance that there will be future taxable income available to use the temporary differences or where 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 the customer's history and their risk profile. Accounts receivable are adjusted for the assessment made by management and the estimated collection risks at the date of the statement of financial position, which may differ from the effective risk incurred.
When the fair value of an asset or liabilities is calculated, on an active market, the respective market price is used. Where there is no active market, which is the case with some of the Group's financial assets and liabilities, valuation techniques generally accepted in the market, based on market assumptions, are used.
The Group uses valuation techniques for unlisted financial instruments such as derivatives, financial instruments at fair value through profit and loss, and assets available for sale. The valuation models that are used most frequently are discounted cash flow models and options models, incorporating, 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.
In the nine months ended at 30 September 2015 and 2016, no material errors relating to previous periods were recognised.
During the nine months ended on 30 September 2015, the changes in the consolidated perimeter were as follow:
During the nine months ended on 30 September 2016, the changes in the consolidated perimeter were as follow:
The business segments are as follows:
Assets and liabilities by segment at 31 December 2015 and 30 September 2016 are shown below:
| 31/12/2015 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tanaible assets | 1,153,518 | 14,020 | 1,167,538 | |
| Intangible assets | 1,080,120 | 98,439 | 1,178,559 | |
| Investments in jointly controlled companies and associated companies | 114,084 | 3,720 | (87, 882) | 29,922 |
| Accounts receivable - other | 56,325 | 19,856 | (68,999) | 7,182 |
| Deferred income tax assets | 110,742 | 11,797 | ٠ | 122,539 |
| Other non-current assets | 3,694 | 698 | 4,392 | |
| TOTAL NON - CURRENT ASSETS | 2,518,483 | 148,530 | (156, 881) | 2,510,132 |
| CURRENT ASSETS: | ||||
| Inventories | 29,562 | 978 | $\sim$ | 30,540 |
| Account receivables | 343,052 | 58,204 | (42, 284) | 358,972 |
| Prepaid expenses | 62.561 | 2.099 | 64.660 | |
| Other current assets | 1,774 | 534 | (66) | 2,242 |
| Cash and cash equivalents | 9,050 | 898 | 9,948 | |
| TOTAL CURRENT ASSETS | 445,999 | 62,713 | (42, 350) | 466,362 |
| TOTAL ASSETS | 2,964,482 | 211,243 | (199.231) | 2,976,494 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5,152 | 28,699 | (28,699) | 5,152 |
| Capital issued premium | 854,219 | ٠ | 854,219 | |
| Own shares | (10.559) | ÷. | ÷. | (10.559) |
| Legal reserve | 3,556 | 1.087 | (1.087) | 3.556 |
| Other reserves and accumulated earnings | 101,399 | 68,819 | (51,214) | 119,004 |
| Net income | 76,289 | 6,433 | (2) | 82,720 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,030,056 | 105,038 | (81,002) | 1,054,092 |
| Non-controlling interests | 9,372 | 21 | 37 | 9,430 |
| TOTAL EQUITY | 1,039,428 | 105,059 | (80, 965) | 1,063,522 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 1,002,215 | 52,932 | (75, 725) | 979,422 |
| Provisions | 133,215 | 6,269 | 139,484 | |
| Accrued expenses | 9,475 | 65 | (70) | 9,470 |
| Other non-current liabilities | 8,628 | 8,628 | ||
| Deferred income tax liabilities | 13,008 | 731 | 13,739 | |
| TOTAL NON - CURRENT LIABILITIES | 1,166,541 | 59,997 | (75, 795) | 1,150,743 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 203,516 | 965 | (26.459) | 178,022 |
| Accounts payable | 348,280 | 19,043 | (11, 132) | 356,191 |
| Tax payable | 20,851 | 2,511 | (66) | 23,296 |
| Accrued expenses | 157,134 | 23,551 | (4,814) | 175,871 |
| Other current liabilities | 28,732 | 117 | 28,849 | |
| TOTAL CURRENT LIABILITIES | 758,513 | 46,187 | (42, 471) | 762,229 |
| TOTAL LIABILITIES | 1,925,054 | 106,184 | (118, 266) | 1,912,972 |
| TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | 2,964,482 | 211,243 | (199, 231) | 2,976,494 |
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tangible assets | 1,134,922 | 12,437 | $\sim$ | 1,147,359 |
| Intangible assets | 1,071,218 | 98,671 | $\omega$ | 1,169,889 |
| Investments in jointly controlled companies and associated companies | 88.667 | 4.434 | (87,882) | 5.219 |
| Accounts receivable - other | 55,408 | 20,209 | (68.995) | 6,622 |
| Deferred income tax assets | 107,004 | 11,537 | 118,541 | |
| Other non-current assets | 3,800 | 684 | 4,484 | |
| TOTAL NON - CURRENT ASSETS | 2,461,019 | 147.972 | (156, 877) | 2,452,114 |
| CURRENT ASSETS: | ||||
| Inventories | 42,206 | 21,085 | 63,291 | |
| Account receivables | 364,968 | 57,029 | (42, 775) | 379,222 |
| Prepaid expenses | 93,447 | 2.156 | 1,418 | 97.021 |
| Other current assets | 25.079 | 1,382 | (457) | 26,004 |
| Cash and cash equivalents | 680 | 830 | 1,510 | |
| TOTAL CURRENT ASSETS | 526,380 | 82,482 | (41, 814) | 567,048 |
| TOTAL ASSETS | 2.987.399 | 230.454 | (198.691) | 3,019,162 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5.152 | 28.699 | (28.699) | 5.152 |
| Capital issued premium | 854,219 | ×. | ÷. | 854,219 |
| Own shares | (18, 848) | (18, 848) | ||
| Legal reserve | 1,030 | 1,087 | (1,087) | 1,030 |
| Other reserves and accumulated earnings | 81,552 | 69,642 | (41, 014) | 110,180 |
| Net income | 77,138 | 11,451 | (10.202) | 78,387 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,000,243 | 110,879 | (81,002) | 1,030,120 |
| Non-controlling interests | 9,212 | 22 | 36 | 9,270 |
| TOTAL EQUITY | 1.009,455 | 110,901 | (80,966) | 1,039,390 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 1,096,107 | 52,367 | (75.389) | 1,073,085 |
| Provisions | 140,237 | 6,519 | 146,756 | |
| Accrued expenses | 9,362 | 65 | (69) | 9,358 |
| Other non-current liabilities | 35,681 | ÷. | ٠ | 35,681 |
| Deferred income tax liabilities | 10.776 | 400 | 11,176 | |
| TOTAL NON - CURRENT LIABILITIES | 1.292.163 | 59,351 | (75.458) | 1.276.056 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 154,098 | 708 | (26, 215) | 128,591 |
| Accounts payable | 309,717 | 36,177 | (9, 442) | 336,452 |
| Tax payable | 26,912 | 728 | (456) | 27,184 |
| Accrued expenses | 166,262 | 22,217 | (6.111) | 182,368 |
| Other current liabilities | 28,792 | 372 | (43) | 29,121 |
| TOTAL CURRENT LIABILITIES | 685,781 | 60,202 | (42, 267) | 703,716 |
| TOTAL LIABILITIES | 1,977,944 | 119,553 | (117, 725) | 1,979,772 |
| TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | 2,987,399 | 230,454 | (198,691) | 3,019,162 |
The results by segment and investments in tangible and intangible fixed assets for the nine months ended on 30 September 2015 and 2016 are shown below:
| TELCO | ELIMINATIONS AUDIOVISUALS |
GROUP | ||||||
|---|---|---|---|---|---|---|---|---|
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 15 | 9M 15 | 3 rd QUARTER 15 | 9M15 | |
| REVENUES: | ||||||||
| Services rendered | 330.576 | 972.196 | 25.445 | 71.983 | (10.571) | [32.04] | 345,450 | 012,138 |
| Sales | 13.365 | 32.075 | 4.934 | 13,281 | (25) | (35) | 18.274 | 45,321 |
| Other operating revenues | 4.020 | 10.236 | 400 | 1.243 | (194) | (1.041) | 4.226 | 10.438 |
| 347,961 | 1,014,507 | 30,779 | 86,507 | (10, 790) | (33.117) | 367,950 | 1,067,897 | |
| COSTS. LOSSES AND GAINS: | ||||||||
| Wages and salaries | 20.992 | 58.147 | 2.435 | 7,193 | (11) | 23.427 | 65,329 | |
| Direct costs | 109,002 | 324.224 | 7.507 | 22,872 | (8.734) | (27.377) | 107.775 | 319,719 |
| Costs of products sold | 13.971 | 35.166 | 39 | 64 | (12) | (12) | 13.998 | 35,218 |
| Marketing and advertising | 9,934 | 20,968 | 1,539 | 4.822 | (1.427) | (4.134) | 10.046 | 21.656 |
| Support services | 21,323 | 68.775 | 395 | 1,136 | (287) | (858) | 21.431 | 69.053 |
| Supplies and external services | 41,592 | 121.179 | 5.119 | 14,962 | (328) | (724) | 46.383 | 135.41 |
| Other operating losses / (gains) | 212 | 481 | 14 | 52 | 226 | 533 | ||
| Taxes | 6.337 | 19,554 | 41 | 120 | (2) | $\mathbf{u}$ | 6.376 | 19,673 |
| Provisions and adjustments | (5.092) | (8.622) | (71) | 72 | (5.163) | (8.550) | ||
| 218.271 | 639.872 | 17,018 | 51,293 | (10, 790) | (33, 117) | 224,499 | 658,048 | |
| EBITDA | 129,690 | 374.635 | 13,761 | 35.214 | $\overline{a}$ | 143,451 | 409,849 | |
| Depreciation, amortisation and impairment losses | 79.603 | 239.098 | 9,662 | 28,551 | ٠ | $\sim$ | 89,265 | 267,649 |
| Other losses / (gains), net | 4.842 | 16.057 | 36 | 275 | $\sim$ | $\sim$ | 4.878 | 16,332 |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 45.245 | 119,480 | 4.063 | 6,388 | 49,308 | 125,868 | ||
| Net losses / (gains) of affiliated companies | 3,189 | (4, 175) | (263) | (782) | ٠ | $\sim$ | 2.926 | (4,957) |
| Financial costs | 4.322 | 18,805 | 329 | 846 | $\sim$ | 4.651 | 19,651 | |
| Net foreign exchange losses / (gains) | 304 | 466 | (15) | 724 | $\sim$ | $\sim$ | 289 | 1,190 |
| Net losses / (gains) on financial assets | 249 | $\sim$ | $\sim$ | $\sim$ | 249 | |||
| Net other financial expenses / lincome) | 2.131 | 8.562 | 10 | 45 | $\sim$ | $\sim$ | 2.141 | 8.607 |
| 9,946 | 23,907 | 61 | 833 | ٠ | ٠ | 10,007 | 24,740 | |
| INCOME BEFORE TAXES | 35.299 | 95,573 | 4.002 | 5,555 | ٠ | 39,301 | 101.128 | |
| Income taxes | 11,847 | 26.163 | 1,228 | 1,572 | $\sim$ | 13.075 | 27.735 | |
| NET INCOME | 23.452 | 69,410 | 2.774 | 3,983 | ٠ | $\mathbf{r}$ | 26.226 | 73,393 |
| CAPEX | 88.436 | 265,831 | 9,498 | 28,763 | $\mathbf{r}$ | $\sim$ | 97.934 | 294,594 |
| EBITDA - CAPEX | 41.254 | 108,804 | 4.263 | 6,451 | ٠ | 45,517 | 115,255 |
| TELCO | AUDIOVISUALS ELIMINATIONS |
GROUP | ||||||
|---|---|---|---|---|---|---|---|---|
| 3rd QUARTER 16 | 9M 16 | 3rd QUARTER 16 | 9M 16 | 3rd QUARTER 16 | 9M 16 | 3rd QUARTER 16 | 9M16 | |
| REVENUES: | ||||||||
| Services rendered | 342.662 | 1.021.442 | 27.287 | 75,381 | (12.134) | (36, 138) | 357,815 | 1.060.68 |
| Sales | 14.260 | 37,393 | 4.951 | 12.925 | (62) | (83) | 19.149 | 50.23 |
| Other operating revenues | 3.943 | 13.199 | 360 | 858 | (287) | (883) | 4.016 | 13.17 |
| 360.865 | 1,072,034 | 32,598 | 89,164 | (12, 483) | (37, 104) | 380.980 | 1,124,09 | |
| COSTS. LOSSES AND GAINS: | ||||||||
| Wages and salaries | 20,440 | 61.171 | 2.557 | 7.547 | 22.997 | 68.71 | ||
| Direct costs | 117,956 | 344,791 | 7.763 | 20,125 | (10.022) | (30.015) | 115.697 | 334,90 |
| Costs of products sold | 16.197 | 41.009 | (40) | 73 | (2) | (11) | 16.155 | 41.07 |
| Marketing and advertising | 9.134 | 23.195 | 2.454 | 5,270 | (1,743) | (5.094) | 9,845 | 23,37 |
| Support services | 21.837 | 67.351 | 491 | 1.386 | (383) | (1.130) | 21,945 | 67.60 |
| Supplies and external services | 42,961 | 123,962 | 5,613 | 16,024 | (335) | (855) | 48.239 | 139,13 |
| Other operating losses / (gains) | 128 | 357 | 41 | 128 | 39 | |||
| Taxes | 7.446 | 21,725 | 26 | 90 | $\overline{2}$ | 7.474 | 21.81 | |
| Provisions and adjustments | (6.472) | (5.254) | (260) | 572 | (6.732) | (4,682) | ||
| 229.627 | 678.307 | 18.604 | 51.128 | (12.483) | (37, 104) | 235.748 | 692,33 | |
| EBITDA | 131,238 | 393,727 | 13,994 | 38,036 | ٠ | 145.232 | 431,76 | |
| Depreciation, amortisation and impairment losses | 90.374 | 264.194 | 8,300 | 28,309 | $\sim$ | 98.674 | 292.50 | |
| Other losses / (gains), net | 5,497 | 11,402 | o | 104 | $\sim$ | $\sim$ | 5.499 | 11,50 |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 35.367 | 118,131 | 5.692 | 9,623 | ٠ | $\overline{\phantom{a}}$ | 41.059 | 127.75 |
| Net losses / (gains) of affiliated companies | (1.250) | 8.959 | (158) | (714) | ٠ | ÷ | (1.408) | 8.24 |
| Financial costs | 4.285 | 12.163 | 144 | 403 | $\sim$ | $\sim$ | 4.429 | 12,56 |
| Net foreign exchange losses / lagins) | $\sim$ | (A) | 316 | 733 | ٠ | 316 | 72 | |
| Net losses / (gains) on financial assets | (5.611) | ٠ | (4, 592) | $\sim$ | 10,203 | |||
| Net other financial expenses / lincomet | 1.782 | 5,430 | 14 | 50 | ٠ | 1.796 | 5,48 | |
| 4,817 | 20,937 | 316 | (4.120) | ٠ | 10,203 | 5,133 | 27.02 | |
| INCOME BEFORE TAXES | 30,550 | 97.194 | 5.376 | 13,743 | ٠ | (10.203) | 35.926 | 100.73 |
| Income taxes | 7,280 | 20.207 | 1,320 | 2,292 | $\overline{a}$ | 8.600 | 22.49 | |
| NET INCOME | 23.270 | 76.987 | 4.056 | 11,451 | ×, | (10.203) | 27.326 | 78,23 |
| CAPEX | 171,946 | 264,680 | 19,722 | 27,949 | ٠ | ٠ | 191.668 | 292.62 |
| EBITDA - CAPEX | (40, 708) | 129,047 | (5, 728) | 10,087 | ٠ | ٠ | (46, 436) | 139,13 |
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 IAS 39 for financial instruments were applied to the following items:
| 31/12/2015 | ||||
|---|---|---|---|---|
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE-FOR- SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO- MATURITY |
DERIVATIVES | |
| ASSETS | ||||
| Available-for-sale financial assets | 77 | |||
| Derivative financial instruments (Note 17) | ٠ | |||
| Accounts receivable - trade (Note 14) | 347,837 | |||
| Accounts receivable - other (Note 10) | 13,669 | |||
| Cash and cash equivalents (Note 18) | 9,948 | |||
| TOTAL FINANCIAL ASSETS | 371,454 | 77 | ||
| LIABILITIES | ||||
| Borrowings (Note 21) | ||||
| Derivative financial instruments (Note 17) | 3,416 | |||
| Accounts payable - trade (Note 25) | ||||
| Accounts payable - other (Note 26) | ||||
| Accrued expenses (Note 23) | - | ۰ | ||
| TOTAL FINANCIAL LIABILITIES | 3,416 |
| 31/12/2015 | ||||||
|---|---|---|---|---|---|---|
| OTHER FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |||
| ASSETS | ||||||
| Available-for-sale financial assets | 77 | 77 | ||||
| Derivative financial instruments (Note 17) | ||||||
| Accounts receivable - trade (Note 14) | 347,837 | 347,837 | ||||
| Accounts receivable - other (Note 10) | 13,669 | 4,648 | 18,317 | |||
| Cash and cash equivalents (Note 18) | 9,948 | 9,948 | ||||
| TOTAL FINANCIAL ASSETS | 371,531 | 4,648 | 376,179 | |||
| LIABILITIES | ||||||
| Borrowings (Note 21) | 1,157,444 | 1,157,444 | 1,157,444 | |||
| Derivative financial instruments (Note 17) | 3,416 | 3,416 | ||||
| Accounts payable - trade (Note 25) | 327,485 | 327,485 | 327,485 | |||
| Accounts payable - other (Note 26) | 28,625 | 28,625 | 81 | 28,706 | ||
| Accrued expenses (Note 23) | 185,341 | 185,341 | 185,341 | |||
| TOTAL FINANCIAL LIABILITIES | 1,698,895 | 1,702,311 | 81 | 1,702,392 |
| 30/09/2016 | |||||||
|---|---|---|---|---|---|---|---|
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE-FOR- SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO- MATURITY |
DERIVATIVES | ||||
| ASSETS | |||||||
| Available-for-sale financial assets | 77 | ||||||
| Derivative financial instruments (Note 17) | 191 | ||||||
| Accounts receivable - trade (Note 14) | 357,851 | ||||||
| Accounts receivable - other (Note 10) | 19,618 | ||||||
| Cash and cash equivalents (Note 18) | 1,510 | ||||||
| TOTAL FINANCIAL ASSETS | 378,979 | 77 | 191 | ||||
| LIABILITIES | |||||||
| Borrowings (Note 21) | |||||||
| Derivative financial instruments (Note 17) | 5,382 | ||||||
| Accounts payable - trade (Note 25) | |||||||
| Accounts payable - other (Note 26) | - | ||||||
| Accrued expenses (Note 23) | |||||||
| TOTAL FINANCIAL LIABILITIES | 5,382 |
| 30/09/2016 | ||||
|---|---|---|---|---|
| TOTAL NON OTHER FINANCIAL FINANCIAL FINANCIAL ASSETS AND ASSETS AND LIABILITIES LIABILITIES LIABILITIES |
TOTAL | |||
| ASSETS | ||||
| Available-for-sale financial assets | 77 | 77 | ||
| Derivative financial instruments (Note 17) | 191 | 191 | ||
| Accounts receivable - trade (Note 14) | 357,851 | 357,851 | ||
| Accounts receivable - other (Note 10) | - | 19,618 | 8,375 | 27,993 |
| Cash and cash equivalents (Note 18) | ۰ | 1,510 | 1,510 | |
| TOTAL FINANCIAL ASSETS | ٠ | 379,247 | 8,375 | 387,622 |
| LIABILITIES | ||||
| Borrowings (Note 21) | 1,201,676 | 1,201,676 | 1,201,676 | |
| Derivative financial instruments (Note 17) | 5,382 | - | 5,382 | |
| Accounts payable - trade (Note 25) | 274,478 | 274,478 | 274,478 | |
| Accounts payable - other (Note 26) | 87,600 | 87,600 | 24 | 87,624 |
| Accrued expenses (Note 23) | 191,726 | 191,726 | 191,726 | |
| TOTAL FINANCIAL LIABILITIES | 1.755.480 | 1.760.862 | 24 | 1.760.886 |
Considering its nature, the balances of the amounts to be paid and received to/from state and other public entities were considered outside the scope of IFRS 7. Also, the captions of "Prepaid expenses" and "Deferred Income" were not included in this note, as the nature 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.
The Group's activity is subject to a variety of financial risks, such as market risk, liquidity risk and economical and judicial risks, which are described in the Management Report.
At 30 September 2016, the movements in this item were as follows:
| 31/12/2015 | INCREASES | TRANSFER AND OTHERS |
30/09/2016 | |
|---|---|---|---|---|
| ACQUISITION COST | ||||
| Land | 919 | ٠ | 919 | |
| Buildings and other constructions | 325,185 | 5,352 | 34,487 | 365,024 |
| Basic equipment | 2.466.229 | 97,497 | (48,952) | 2,514,774 |
| Transportation equipment | 14.655 | (15) | (4,965) | 9.675 |
| Tools and dies | 1.266 | 72 | 1,338 | |
| Administrative equipment | 329,029 | 12,969 | (60.583) | 281,415 |
| Other tanaible assets | 42,251 | 134 | (654) | 41,731 |
| Tanaible assets in-progress | 43,271 | 60,215 | (74, 786) | 28,700 |
| 3.222.805 | 176,152 | (155, 380) | 3.243.577 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | ||||
| Land | 37 | ٠ | $\overline{\phantom{a}}$ | -37 |
| Buildings and other constructions | 168,657 | 9.294 | 17,674 | 195,625 |
| Basic eauipment | 1,534,237 | 131,615 | (67, 820) | 1,598,032 |
| Transportation equipment | 6.174 | 1.294 | (4, 182) | 3,286 |
| Tools and dies | 1.225 | 20 | $\overline{\phantom{a}}$ | 1.245 |
| Administrative equipment | 304,204 | 14.921 | (61.588) | 257,537 |
| Other tanaible assets | 40,733 | (588) | 312 | 40,457 |
| 2,055,267 | 156,555 | (115,603) | 2,096,218 | |
| 1.167.538 | 19,597 | (39, 776) | 1,147,359 |
At 30 September 2016, the tangible fixed assets net value is composed mainly by basic equipment, namely:
i) Network and telecommunications infrastructure (fiber optic network and cabling, network equipment, and other equipment) in the amount of 780.6 million euros (31 December 2015: 786.3 million euros);
ii) Terminal equipment installed on client premises, included under Basic equipment, amounts to 136.1 million euros (31 December 2015: 145.7 million euros).
The net amount of "Transfer and others" corresponds mainly to the reclassification to "Noncurrent assets held for sale" in the amount of 24.2 million euros (Note 16) and the transfer of assets for "intangible assets", in the amount of 10.8 million euros.
The acquisition cost of the "Tangible Assets" and "Intangible Assets" held by the Group under finance lease contracts at 31 December 2015 and 30 September 2016, amounted to 225.1 million euros and 228.9 million euros, and their net book value as of those dates amounted to 127.9 million euros and 117.8 million euros, respectively.
Tangible and intangible assets include interests and other financial expenses incurred directly related to the construction of certain tangible or intangible assets in progress. At 30 September 2016, total net value of these costs amounted to 15.3 million euros (31 December 2015: 15.4 million euros). The amount capitalised in the nine months ended on 30 September 2016 amounted to 0.9 million euros (31 December 2015: 2.2 million euros).
At 30 September 2016, the movements in this item were as follows:
| 31/12/2015 | INCREASES | TRANSFER AND OTHERS |
30/09/2016 | |
|---|---|---|---|---|
| ACQUISITION COST | ||||
| Industrial property and other rights | 1,489,997 | 61,310 | 100,646 | 1,651,953 |
| Goodwill | 641.599 | 641.599 | ||
| Intangible assets in-progress | 30.589 | 55.168 | (45, 443) | 40,314 |
| 2,162,185 | 116,478 | 55,203 | 2,333,866 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | ||||
| Industrial property and other rights | 979,470 | 135,936 | 44.132 | 1,159,538 |
| Intangible assets in-progress | 4.156 | 283 | 4,439 | |
| 983,626 | 135,936 | 44,415 | 1,163,977 | |
| 1,178,559 | (19, 458) | 10,788 | 1,169,889 |
At 30 September 2016, the item "Industrial property and other rights" includes mainly:
The net amount of "transfer and others" corresponds mainly to the transfer of assets, in the amount of 10.8 million euros from "Tangible fixed assets".
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Telco | 564,998 | 564,998 |
| Audiovisuals | 76,601 | 76,601 |
| 641,599 | 641,599 |
In 2015 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 forecast growth 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 SEGMENT | NOS | NOS | ||
| AUDIOVISUALS | CINEMAS | |||
| Discount rate (before taxes) | 7.2% | 7.2% | $7.2\%$ | |
| Assessment period | 5 years | 5 years | 5 years | |
| EBITDA* Growth | 4.7% | $1.0\%$ | 2.0% | |
| Perpetuity growth rate | .5% | 1.5% | 1.5% |
* 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 on the basis of the most appropriate criterion for the valuation of each cash-generating unit.
Sensitivity analyses were performed on variations in discount rates of approximately 10%, from which no impairments resulted.
Sensitivity analyses were also performed for a perpetuity growth rate of 0%, from which no impairments also resulted.
At 30 September 2016 it is understood that the assumptions made in impairment tests performed in 2015 did not have significant variations, so there is no risk of any impairment.
At 31 December 2015 and 30 September 2016, this item was composed as follows
| 31/12/2015 | ||
|---|---|---|
| INVESTMENTS - EQUITY METHOD | ||
| Sport TV | 21,617 | 824 |
| Dreamia | 2,938 | 3,629 |
| Finstar | 4,949 | 554 |
| Mstar | 230 | (609) |
| Upstar | 96 | 102 |
| Canal 20 TV, S.A. | 17 | 13 |
| East Star | 36 | 36 |
| Big Picture 2 Films | 39 | 6 1 |
| 29,922 | 4,610 | |
| ASSETS | 29,922 | 5,219 |
| LIABILITIES (NOTE 22) | $\blacksquare$ | (609) |
Movements in "Investments in jointly controlled companies and associated companies" in the nine months ended on 30 September 2015 and 2016 were as follows:
| 9M 15 | 9M16 |
|---|---|
| AS AT JANUARY 1 31,480 |
29,922 |
| Gains / (losses) for the nine months (Note 34) 4,957 |
(8,828) |
| Gains i) $\overline{\phantom{a}}$ |
583 |
| Dividends (4,100) |
|
| Capital increase $\overline{\phantom{0}}$ |
25,347 |
| Return of supplementary ii) - |
(41, 547) |
| Changes in equity iii) (941) |
(867) |
| AS AT SEPTEMBER 30 31,397 |
4,610 |
i) Gains generated by the entrance of Vodafone in the share capital of Sport TV (Note 4).
ii) During the first quarter of 2016, Sport TV returned supplementary payments in the amount of 41.5 million euros through the delivery of cash in the amount of 25.3 million euros and the assignment of credits in the amount of 16.2 million euros (Note 10).
iii) 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 other currencies than euro.
The Group's interest in the results and assets and liabilities of the jointly controlled companies and associated companies for the nine months ended on 30 September 2015 and 2016 is as follows:
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
| Sport TV | 145,031 | 98,393 | 46,638 | 87,732 | (6.905) | 50.00% | (3, 453) |
| Dreamia | 17,597 | 11,088 | 6,508 | 4,006 | 1,577 | 50.00% | 788 |
| Finstar | 123.472 | 108,989 | 14,483 | 179,018 | 24,552 | 30.00% | 7,365 |
| Mstar | 9.874 | 9.156 | 718 | 16.547 | 748 | 30.00% | 224 |
| Upstar | 118,044 | 117.757 | 287 | 59,297 | 65 | 30.00% | 20 |
| Distodo | 50 | 6 | 45 | $\Omega$ | 0 | 50.00% | |
| Canal 20 TV, S.A. | 36 | 35 | 56 | 37 | 50.00% | 19 | |
| East Star | 137 | 17 | 120 | ۰ | 30.00% | ||
| Big Picture 2 Films | 2.168 | 2.010 | 158 | 3.733 | (34) | 20.00% | (6) |
| 416,409 | 347,417 | 68.992 | 350.389 | 20.039 | 4,957 |
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
| Sport TV | 205,668 | 203,196 | 2,472 | 102,270 | (15.528) | 33.33% | (5, 176) |
| Dreamia | 14,829 | 7,571 | 7,258 | 3,827 | 1,383 | 50.00% | 692 |
| Finstar | 187.672 | 185.824 | 848. | 172.370 | (11, 112) | 30.00% | (3, 334) |
| Mstar | 7.322 | 9.351 | (2.029) | 15,947 | (3.447) | 30,00% | (1,034) |
| Upstar | 162,582 | 162.242 | 340 | 82,815 | 20 | 30,00% | |
| Canal 20 TV, S.A. | 27 | 26 | $\overline{\phantom{a}}$ | (9) | 50.00% | (5) | |
| East Star | 137 | 17 | 120 | ۰ | 30.00% | ||
| Big Picture 2 Films | 2.440 | 2,134 | 306 | 7.482 | 111 | 20,00% | 22 |
| 580.677 | 570.336 | 10.341 | 384.711 | (28, 582) | (8,828) |
At 31 December 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/2016 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Accounts receivables i) | 7.774 | 8,010 | 13,866 | 7,450 |
| Advances of suppliers | 4,648 | 8,375 | ||
| 12,422 | 8,010 | 22,241 | 7,450 | |
| Impairment of other receivable | 1,287 | (828) | (870) | (828) |
| 11,135 | 7,182 | 21,371 | 6,622 |
i) The increase in the nine months ended on 30 September 2016 results of transferred credits by Sport Tv in the amount f 16.2 million euros (Note 9), which on 30 September amounted to 9.7 million euros.
The summary of the movements in impairment of other receivables is as follows:
| 9M 15 | 9M16 | |
|---|---|---|
| AS AT JANUARY 1 | 1,246 | ,287 |
| Increases (Note 32) | 498 | 0' |
| Others | (733) | 427 |
| AS AT SEPTEMBER 30 | 1.011 | 870 |
At 31 December 2015 and 30 September 2016, these items were composed as follows:
| 31/12/2015 | 30/09/2016 | |||
|---|---|---|---|---|
| RECEIVABLE | PAYABLE | RECEIVABLE | PAYABLE | |
| NON CURRENT | ||||
| Value-added tax (Note 39) | 3,617 | 3,617 | ||
| 3,617 | 3,617 | |||
| CURRENT | ||||
| Value-added tax | 1,812 | 17,631 | 1,239 | 15,581 |
| Income taxes | $\overline{\phantom{a}}$ | 1,355 | 7,183 | |
| Personnel income tax witholdings | ۰ | 2.168 | 2,271 | |
| Social Security contributions | 2,003 | 3 | 2,088 | |
| Other | 430 | 139 | 430 | 61 |
| 2.242 | 23.296 | 1.682 | 27.184 | |
| 5.859 | 23.296 | 5.299 | 27.184 |
At 31 December 2015 and 30 September 2016 the amounts of IRC (Corporate Income Tax) receivable and payable were composed as follows:
| 31/12/2015 | 30/09/2016 |
|---|---|
| Estimated current tax on income (8.550) |
[22, 842] |
| 2.744 Payments on account |
10,290 |
| Withholding income taxes 3,760 |
4,355 |
| Other 691 |
1.014 |
| (1, 355) | (7, 183) |
NOS and its associated companies are subject to IRC - Corporate Income Tax at the rate of 21% on the taxable amount (taxable profit, except fiscal losses that can be deducted), plus IRC surcharge at the maximum rate of 1.5% on taxable profit, giving an aggregate rate of approximately 22.5%. Following the introduction of the austerity measures approved by Law 66-B/2012 of 31 December and respective amendments by law 2/2014 of 16 January, this rate was raised in 3% on the amount of a company's taxable profit between 1.5 million euros and 7.5 million euros, and in 5% on the amount of a company's taxable profit exceeding 7.5 million euros. Additionally, in the measures approving the IRC reform, published by Law 2/2014 of 16 January, a new level was added to the IRC surcharge where the rate is raised in 7% over the company's taxable profit above 35 million euros. In the calculation of taxable income, to which the above tax rates apply, amounts which are not fiscally allowable are added to and 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 taxation regime for groups of companies (RETGS), which covers the companies in which it directly or indirectly holds at least 75% of their share capital and which fulfill the requirements of Article 69º of the IRC Code.
The companies covered by the RETGS in 2016 are:
Under current legislation, tax declarations are subject to review and correction by the tax authorities for a period of four years, except where tax losses have occurred or tax benefits have been obtained or inspections, appeals or disputes are in progress, in which case, depending on the circumstances, the periods are extended or suspended.
The Board of Directors of NOS, based on information from its tax advisers, believes that these and any other revisions and corrections to these tax declarations, as well as other contingencies of a fiscal nature, will not have a significant effect on the consolidated financial statements as at 30 September 2016.
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 nine months ended on 30 September 2015 and 2016 were as follows:
| 31/12/2014 | DEFERRED TAXES OF THE PERIOD |
|||
|---|---|---|---|---|
| INCOME (NOTE B) |
EQUITY (NOTE 19) |
30/09/2015 | ||
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7,442 | (1, 422) | 6,020 | |
| Inventories | 3.784 | (996) | 2,788 | |
| Other provision and adjustments | 79.817 | (4,973) | 74.844 | |
| Intragroup gains | 19.973 | (1,082) | 18,891 | |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
9.744 | (1.053) | 8.691 | |
| Derivatives | 427 | 234 | 661 | |
| Tax incentives | 19,297 | (8,996) | 10,301 | |
| Tax losses carried forward | 631 | (631) | ||
| 141,115 | (19, 153) | 234 | 122,196 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Reavaluation of fixed assets | 3 | (1) | ||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
14,617 | (2,703) | 11,914 | |
| Derivatives | 137 | (137) | ||
| Other | 2,480 | 152 | 2,632 | |
| 17.237 | (2, 552) | (137) | 14,548 | |
| NET DEFERRED TAX | 123,878 | (16,601) | 371 | 107.648 |
| DEFERRED TAXES OF THE PERIOD |
||||
|---|---|---|---|---|
| 31/12/2015 | INCOME (NOTE B) |
EQUITY (NOTE 19) |
30/09/2016 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7.704 | 798 | ٠ | 8,502 |
| Inventories | 2,573 | 152 | 2,725 | |
| Other provision and adjustments | 71,616 | 997 | 72,613 | |
| Intragroup gains | 23,918 | 414 | ٠ | 24,332 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
8,638 | (580) | 8,058 | |
| Derivatives | 772 | (21) | 419 | 1,170 |
| Tax incentives | 7,318 | (6, 177) | 1,141 | |
| 122,539 | (4, 417) | 419 | 118,541 | |
| DEFERRED INCOME TAX LIABILITIES | ||||
| Reavaluation of fixed assets | $\overline{2}$ | 2 | ||
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
11,156 | (2, 287) | 8,869 | |
| Derivatives | 3 | З | ||
| Other | 2,581 | (279) | 2,302 | |
| 13,739 | (2,566) | 3 | 11,176 | |
| NET DEFERRED TAX | 108,800 | (1, 851) | 416 | 107,365 |
At 30 September 2016, 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 tangible and intangible assets, amounted to 56.6 million euros (2015: 56.9 million euros); ii) other provisions amounted to 16.0 million euros (2015: 14.7 million euros).
At 30 September 2016, the deferred tax liability related to the revaluation of assets relates mainly to the appreciation of customers' portfolio, telecommunications licenses and other assets of Optimus Group companies.
At 30 September 2016 deferred tax assets were not recognised in the amount of 1.8 million euros, corresponding mainly to tax incentives.
Deferred tax assets were recognised where 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 the Group's companies, which are regularly revised and updated.
At 30 September 2016, the tax rate used to calculate the deferred tax assets relating to tax losses carried forward was 21% (2015: 21%). In the case of temporary differences, the rate used was 22.5% (2015: 22.5%) increased to a maximum of 6.2% (2015: 6.2%) 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.
Under the terms of current legislation in Portugal, tax losses generated up to 2009 and from 2010 to 2011, and from 2012 to 2013 and from 2014 to 2016 onwards may be carried forward for a period of six years, four years, 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 in the following years.
For the nine months ended on 30 September 2015 and 2016, the reconciliation between the nominal and effective rates of tax was as follows:
| 3rd QUARTER 15 | 9M15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| Income before taxes | 39,301 | 101.128 | 35,926 | 100,734 |
| Statutory tax rate | 22.5% | 22.5% | 22.5% | 22.5% |
| ESTIMATED TAX | 8,843 | 22,754 | 8,083 | 22,665 |
| Permanent differences i) | 703 | (672) | (273) | 2,045 |
| Differences in tax rate of group companies | (321) | (752) | (636) | (2,063) |
| Income tax related to previous years | 951 | 368 | (687) | (4,698) |
| Tax benefits ii) | 1999 | (374) | (1,726) | |
| State surcharge | 2.164 | 4,921 | 1.826 | 5.459 |
| Autonomous taxation | 188 | 563 | 193 | 579 |
| Provisions (Note 22) | 3 | (87) | 109 | |
| Other | 544 | 1,014 | 92 | 129 |
| INCOME TAXES | 13,075 | 27,735 | 8.600 | 22,499 |
| Effective Income tax rate | 33.3% | 27.4% | 23.9% | 22.3% |
| Income tax | 6,996 | 11,134 | 7.955 | 20,648 |
| Deferred tax | 6.079 | 16,601 | 645 | 1,851 |
| 13.075 | 27.735 | 8.600 | 22.499 |
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| Equity method (Note 34) | 2.926 | (4,957) | (1,408) | 8,245 |
| Other | 198 | 1.971 | 192 | 843 |
| 3.124 | (2,986) | (1, 216) | 9,088 | |
| 22.5% | 22.5% | 22.5% | 22.5% | |
| 703 | (672) | (273) | 2,045 |
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, of the RFAI (Investment Tax Incentive Regime) introduced by Law 10/2009 of 10 March and of the 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 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| INVENTORIES | ||
| Telco | 37,985 | 51,222 |
| Audiovisuals | 2.195 | 22,249 |
| 40,180 | 73,471 | |
| IMPAIRMENT OF INVENTORIES | ||
| Telco | (8, 423) | (9,016) |
| Audiovisuals | (1,217) | 1,164 |
| (9,640) | (10, 180) | |
| 30,540 | 63,291 |
The increase in "Inventories – Audiovisuals" is justified, mainly, by the broadcasting rights acquired under the new contracts of sports content (Note 37.3), in the amount of 20.3 million euros.
The movements occurred in impairment adjustments were as follows:
| 9M 15 | 9M16 | |
|---|---|---|
| AS AT JANUARY 1 | 13.924 | 9.640 |
| Increase and decrease - Cost of products sold (Note 30) | 763 | 1.215 |
| Others | (4,252) | (675) |
| AS AT SEPTEMBER 30 | 10.435 | 10.180 |
At 31 December 2015 and 30 September 2016, this item was as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Trade receivables | 285,170 | 294,121 |
| Doubtful accounts for trade receivables | 194,497 | 202,553 |
| Unbilled revenues il | 62,667 | 63,730 |
| 542,334 | 560,404 | |
| Impairment of trade receivable | (194, 497) | (202, 553) |
| 347.837 | 357.851 |
i) Unbilled revenues mainly correspond to revenues related to services rendered that will only be invoiced in the month following the provision of the service.
The movements occurred in impairment adjustments were as follows:
| 9M15 | 9M16 | |
|---|---|---|
| AS AT JANUARY 1 | 175,789 | 194,497 |
| Increases and decreases (Note 32) | (8, 525) | (285) |
| Penalties - il | 16,616 | 10,646 |
| Receivables written off and others | (1,677) | (2,305) |
| AS AT SEPTEMBER 30 | 182.203 | 202,553 |
i) Penalties correspond to the estimated amount of uncollectible invoiced penalties recognised in the period, deducted from revenue, as described in note 39.6.
At 31 December 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/16 | |
|---|---|---|
| Costs of litigation procedure activity | 31,013 | 27,951 |
| Discounts i) | 19,228 | 26,120 |
| Programming costs ii) | 2.187 | 17,059 |
| Rentals | 3,275 | 3,824 |
| Taxes | - | 3,705 |
| Advertising | 551 | 2,999 |
| Insurance | 2,655 | 2,415 |
| Others | 5.751 | 12,948 |
| 64.660 | 97.021 |
i) Discounts correspond mainly to discounts to new customers under loyalty programs. These discounts are allocated to the whole loyatly period of the contract. The discounts are recognised as the goods and services are provide to the customer.
ii) The increase results from advanced payments made to Sport TV regarding the new distribution model, agreed between telecom operators.
On 30 September 2016, this item corresponds to NOS Comunicações S.A. FTTH network assets, located in the metropolitan areas of Lisbon and Porto, on which Vodafone has exercised its purchase option, on February 25, 2016, as per the statement of non-opposition decision by the Competition Authority to the operation of merger between ZON and Optimus of 26 August 2013. The amount corresponds to the book value, net of amortization, reclassified from tangible fixed assets (Note 7).
Exchange rate risk is mainly related to exposure resulting from payments made to certain producers of audiovisual content and equipment for the Pay TV, broadband and voice business. Business transactions between the Group and these suppliers are mainly denominated in US dollars.
Depending on the balance of accounts payable resulting from transactions denominated in a currency different from the Group's operating currency, the NOS Group may contract financial instruments, namely short-term foreign currency forwards, in order to hedge the risk associated with these balances. At the date of the statement of financial position there were foreign currency forwards open for 3,861 thousand Dollars (2015: 4,375 thousand Dollars), the fair value amounts to 10 thousand euros (2015: loss of about 47 thousand euros) which is stated in assets as a counterpart of shareholder's equity.
At 30 September 2016, NOS had contracted four interest rate swaps totaling of 375 million euros (2015: 375 million euros), whose maturities expire in 2017 (two swaps in the amount of 125 million euros) and 2019 (two swaps in the amount of 250 million euros). The fair value of interest rate swaps, in the negative amount of 5.4 million euros (2015: negative amount of 3.4 million euros) was recorded in liabilities, against shareholder's equity.
At 30 September 2016, NOS had contracted three own shares derivatives, which mature at March 2017, 2018 and 2019, respectively, in order to cover the share incentive scheme to be settled in cash.
| 31-12-2015 | |||||
|---|---|---|---|---|---|
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Interest rate swaps | 375.000 | - | - | - | 3.369 |
| Exchange rate forward | 4.018 | - | - | 47 | - |
| 379.018 | - | - | 47 | 3.369 | |
| 30-09-2016 | |||||
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Interest rate swaps | 375.000 | - | - | - | 5.382 |
| Equity swaps | 2.041 | 75 | 106 | - | - |
| Exchange rate forward | 3.861 | 10 | - | - | - |
| 380.902 | 85 | 106 | - | 5.382 |
Movements during the nine months ended on 30 September 2015 and 2016 were as follows:
| 31/12/2014 | RESULT | EQUITY | 30/09/2015 | |
|---|---|---|---|---|
| Fair value interest rate swaps | 1,899) | ٠ | (830) | (2,729) |
| Fair value exchange rate forward | 368 | (532) | (164) | |
| CASH FLOW HEDGE DERIVATIVES | (1.531) | (1, 362) | (2,893) | |
| Deferred income tax liabilities | 137 | 137 | ||
| Deferred income tax assets | 427 | 234 | $66^\circ$ | |
| DEFERRED INCOME TAX | 290 | 371 | 661 | |
| (1, 241) | (991) | (2, 232) | ||
| 31/12/2015 | RESULT | EQUITY | 30/09/2016 | |
| Fair value interest rate swaps | (3, 369) | (2.013) | (5, 382) | |
| Fair value exchange rate forward | $\overline{147}$ | 57 | 10 | |
| Fair value equity swaps | 91 | 90 | 18 ° | |
| CASH FLOW HEDGE DERIVATIVES | (3, 416) | 91 | (1,866) | (5, 191) |
| Deferred income tax liabilities | (3) | 3 | ||
| Deferred income tax assets | 772 | (21) | 419 | 1,170 |
| DEFERRED INCOME TAX | 772 | (21) | 416 | 1,167 |
| (2,644) | 70 | (1, 450) | (4,024) |
At 31 December 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Cash | 223 | 885 |
| Deposits | 9,190 | 270 |
| Other deposits il | 535 | 355 |
| 9.948 | 1.510 |
i) At 31 December 2015 and 30 September 2016, term deposits have short-term maturities and bear interest at normal market rates.
At 31 December 2015 and 30 September 2016 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 1euro cent per share.
The main shareholders as of 31 December 2015 and 30 September 2016 are:
| 31/12/2015 | 30/09/2016 | |||
|---|---|---|---|---|
| NUMBER OF | % SHARE | % SHARE | ||
| SHARES | CAPITAL | SHARES | CAPITAL | |
| ZOPT, SGPS, SA (1) | 257,632,005 | 50.01% | 268,644,537 | 52.15% |
| Banco BPI, SA (2) | 17,516,365 | 3.40% | 14,275,509 | 2.77% |
| Songecom, SGPS, SA | 11,012,532 | 2.14% | ||
| Norges Bank | 10,891,068 | 2.11% | 10,891,068 | 2.11% |
| Blackrock, Inc. | 10,349,515 | 2.01% | 10,349,515 | 2.01% |
| TOTAL | 307.401.485 | 59.67% | 304.160.629 | 59.04% |
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:
i) Share capital in the amount of 2,060,646 euros;
ii) Premium for issue of shares in the amount of 854,343,632 euros.
Additionally, the premium for issue of shares was deducted in the amount of 125 thousand euros related to costs with the respective capital increase.
The capital issued premium is subject to the same rules as for legal reserves and can only be used:
Company law regarding own shares requires the establishment of a non-distributable reserve of an amount equal to the purchase price of such shares, which becomes frozen until the shares are disposed of or distributed. In addition, the applicable accounting rules determine that gains or losses on the disposal of own shares are stated in reserves.
At 30 September 2016 there were 3,032,429 own shares, representing 0.5886% of the share capital (31 December 2015: 1,666,482 own shares, representing 0.3235% of the share capital).
Movements in the nine months ended on 30 September 2015 and 2016 were as follows:
| QUANTITY | VALUE | |
|---|---|---|
| BALANCE AS AT 1 JANUARY 2015 | 2,496,767 | 11,791 |
| Acquisition of own shares | 631,379 | 4,451 |
| Distribution of own shares - share incentive scheme | (1,901,179) | (8,980) |
| Distribution of own shares - other remunerations | (57, 770) | (275) |
| BALANCE AS AT 30 SEPTEMBER 2015 | 1,169,197 | 6,987 |
| BALANCE AS AT 1 JANUARY 2016 | 1,666,482 | 10,559 |
| Acquisition of own shares | 3,312,503 | 20,676 |
| Distribution of own shares - share incentive scheme | (1,517,016) | (9,640) |
| Distribution of own shares - other remunerations | (429, 540) | (2,747) |
| BALANCE AS AT 30 SEPTEMBER 2016 | 3.032.429 | 18.848 |
Company law and NOS's Articles of Association establish that at least 5% of the Company's annual net profit must be used to build up the legal reserve until it corresponds to 20% of the share capital. This reserve cannot be distributed except in the event of liquidation of the company, but it may be used to absorb losses after all other reserves have been exhausted, or for incorporation in the share capital.
The General Meeting, of Shareholders held on 26 April 2016 approved the proposal of the Board of Directors to allocate the amount of 2,526 thousand to reserves.
Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IAS / IFRS. Thus, on 30 September 2016, NOS had reserves which by their nature are considered distributable in the amount of approximately 68 million euros, not including the net profit of the period.
The General Meeting of Shareholders held on 6 May 2015 approved a proposal by the Board of Directors for payment of an ordinary dividend per share of 0.14 euros, totaling 72,123 thousand euros. The dividend attributable to own shares, totaling 80 thousand euros.
| . . | |
|---|---|
| Dividends | |
| Dividends of own shares |
$\sim$ w |
| 30.000 - 114 |
In the first semester of 2015, dividends totaling 173 thousand euros were paid to the minority shareholders of NOS Madeira.
The General Meeting of Shareholders held on 26 April 2016 approved a proposal by the Board of Directors for payment of an ordinary dividend per share of 0.16 euros, totaling 82,426 thousand euros. The dividend attributable to own shares, totaling 305 thousand euros.
The movements of the non-controlling interests occurred during the nine months ended on 30 September 2015 and 2016 and the results attributable to non-controlling interests for the period are as follows:
| 31/12/2014 | ATTRIBUTABLE PROFITS |
OTHER | 30/09/2015 | |
|---|---|---|---|---|
| NOS Madeira Comunicações | 6,978 | (49) | 176 | 6,753 |
| NOS Açores Comunicações | 2.796 | (87) | 2,708 | |
| Lusomundo SII | 23 | |||
| Empracine | ||||
| Lusomundo Imobiliária 2, SA | 37 | 35 | ||
| 9,818 | (136) | (163) | 9.519 |
| 31/12/2015 | ATTRIBUTABLE PROFITS |
OTHER | 30/09/2016 | |
|---|---|---|---|---|
| NOS Madeira Comunicações | 6,739 | (67) | (6) | 6,666 |
| NOS Acores Comunicações | 2.632 | (85) | 2,546 | |
| Lusomundo SII | 23 | $\overline{\phantom{a}}$ | $\overline{\phantom{0}}$ | 23 |
| Empracine | - | |||
| Lusomundo Imobiliária 2, SA | 36 | 35 | ||
| 9,430 | (152) | (8) | 9.270 |
At 31 December 2015 and 30 September 2016, the composition of borrowings was as follows:
| 31/12/2015 | 30/09/2016 | ||||
|---|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | ||
| LOANS - NOMINAL VALUE | 141.004 | 865.966 | 99,004 | 971,723 | |
| Debenture loan | 525,000 | 585,000 | |||
| Commercial paper | 100,000 | 235,000 | 75,000 | 280,000 | |
| Foreign loans | 1,708 | 105,966 | 2,706 | 106,723 | |
| Bank overdrafts | 39,296 | 21,298 | |||
| LOANS - ACCRUALS AND DEFERRALS | 709 | (3, 402) | (492) | (3,013) | |
| FINANCIAL LEASES | 36,309 | 116,858 | 30,079 | 104,375 | |
| Long Term Contracts | 18,275 | 80.847 | 12.256 | 73,662 | |
| Other | 18,034 | 36.011 | 17,823 | 30,713 | |
| 178.022 | 979,422 | 128,591 | 1.073.085 |
During the nine months ended on 30 September 2016, the average cost of debt of the used lines was approximately 2.19% (2015: 2.85%).
At 31 December 2015, the Company has the following bonds issued, totaling 525 million euros, with maturity after 31 December 2016:
At 30 September 2016, the Company has the above obligations have additionally contracted:
i) A bond issue in the amount of 60 million euros, signed in June 2016 and organized by ING, whose maturity occurs in June 2023. The issue bears interest at a variable rate indexed to Euribor and paid semiannually.
At 30 September 2016, an amount of 2,235 thousand euros, corresponding to interest and commissions, was deducted from this amount and recorded in the item "Loans - accruals and deferrals".
The Company has borrowings of 355 million euros, from a total contracted amount of 545 million euros, in the form of commercial paper contracted with six banks, corresponding to ten programs, earning interest at market rates. Commercial paper programmes with maturities over 1 year totaling 280 million euros are classified as non-current, since the Company has the ability to unilaterally renew the current issues on or before the programmes' maturity dates and because they are underwritten by the organizer. This amount, although it has current maturity, was classified as non-current for purposes of presentation in the statement of financial position.
At 30 September 2016, an amount of 1,270 thousand euros, corresponding to interest and commissions, was deducted to this amount and recorded in the item "Loans - accruals and deferrals".
In November 2013, NOS signed a Finance Contract with the European Investment Bank in the 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.
At 30 September 2016, an amount of 3,277 thousand euros was deducted from this amount, corresponding to the benefit associated with the fact that the loan is at a subsidized rate.
On 31 December 2015 and 30 September 2016, 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.
These 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 - Leases and IFRIC 4 - "Determining whether an arrangement contains a lease".
Financial leases – payments
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Until 1 year | 43,225 | 35,559 |
| Between 1 and 5 years | 97,275 | 88,827 |
| Over 5 years | 40,119 | 33,011 |
| 180,619 | 157,397 | |
| Future financial costs | (27, 452) | (22,943) |
| PRESENT VALUE OF FINANCE LEASE LIABILITIES | 153,167 | 134,454 |
Financial leases – present value
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Until 1 year | 36,309 | 30,079 |
| Between 1 and 5 years | 80,802 | 74,199 |
| Over 5 years | 36,056 | 30,176 |
| 153,167 | 134,454 |
All bank borrowings contracted (with the exception of EIB loan of 110 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.
The maturities of the loans obtained are as follows:
| 31/12/2015 | 30/09/2016 | ||||||
|---|---|---|---|---|---|---|---|
| UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | ||
| Debenture loan | .602 | 371,917 | 149,799 | 778 | 372,171 | 209,816 | |
| Commercial paper | 99.107 | 234,882 | 73,730 | 280,000 | |||
| Foreign loans | 1,708 | 69,635 | 36,331 | 2,706 | 88,516 | 18,207 | |
| Bank overdrafts | 39,296 | 21,298 | |||||
| Financial Leases | 36,309 | 80,802 | 36,056 | 30,079 | 74,199 | 30,176 | |
| 178,022 | 757,236 | 222,186 | 128,591 | 814,886 | 258,199 |
At 31 December 2015 and 30 September 2016, the provisions were as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Litigation and other - i) | 61.042 | 58,674 |
| Financial investments - ii) | $\overline{\phantom{a}}$ | 609 |
| Dismantling and removal of assets - iii) | 24,204 | 29,167 |
| Contingent liabilities - iv) | 34,673 | 33,171 |
| Contingencies - other - v) | 19,565 | 25,135 |
| 139,484 | 146,756 |
judgment of the Supreme Court became final, NOS Madeira having accepted it. It is pending only the presentation by the expense account of the Court.
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 which was contested by NOS. In January 2015, ANACOM issued the settlement notes in the amount of 18.6 million euros, 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, 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 for the year 2012, in the amount of 26 million euros, decision which was contested by NOS.
Still in 2015, ANACOM deliberated on the approval of the results of the audit to CLSU presented by MEO for the year 2013, in the amount of 20 million euros. This decision was contested by NOS.
It is the opinion of the Board of Directors of NOS that these extraordinary contributions to SU (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 to challenge judicially 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;
During the nine months ended on 30 September 2015, movements in provisions were as follows:
| 31/12/2014 | INCREASES | DECREASES | OTHER | 30/09/2015 | |
|---|---|---|---|---|---|
| Litigation and other | 50,129 | 6,135 | (2, 241) | 9.114 | 63,137 |
| Financial investments | 64 | $\sim$ | (64) | $\sim$ | |
| Dismantling and removal of assets | 18.131 | 206 | 3.633 | 21,970 | |
| Contingent liabilities | 34,673 | - | ۰ | 34,673 | |
| Contingencies - other | 24,224 | 533 | (291) | (6,041) | 18,425 |
| 127,221 | 6,874 | (2,596) | 6,706 | 138,205 |
During the nine months ended on 30 September 2015, increases of provisions mainly refer to the update of the value of contingencies and respective interest claims for which there was already provision. The decreases in provisions include the reduction of the fine, in the amount of 500 thousand euros, of the proceeding brought by CNPD, abovementioned.
The amount recorded in the item "Litigation and other" under the heading "Other" in the amount of 9.1 million euros corresponds mainly to a reclassification from deferred tax assets, since they were reducing the deferred tax assets of tax losses (Note 12), in the amount of 9.9 million euros.
The movement recorded in "Other" in the amount of 3.6 million under the heading "Dismantling and removal of assets", was recorded by counterpart of "Tangible Assets" and results mainly from the increase in provisions for dismantling of assets result of the change of the rate used in the update for the present value of the liability.
Additionally, the movements recorded in "Other" in the amount of 6 million euros are related mainly to the use of provisions created for compensation to employees in the amount of 1 million euros and the reclassification of cost estimates which can not be estimated with high reliability by the time of implementation of the expenditure in the amount of 5 million euros.
During the nine months ended on 30 September 2016, movements in provisions were as follows:
| 31/12/2015 | INCREASES | DECREASES | OTHER | 30/09/2016 | |
|---|---|---|---|---|---|
| Litigation and other | 61,042 | 1.502 | (3,870) | - | 58,674 |
| Financial investments | $\overline{\phantom{a}}$ | 609 | - | $\overline{\phantom{a}}$ | 609 |
| Dismantling and removal of assets | 24,204 | 273 | (145) | 4,835 | 29,167 |
| Contingent liabilities | 34,673 | $\overline{\phantom{a}}$ | (1.502) | $\overline{\phantom{0}}$ | 33,171 |
| Contingencies - other | 19.565 | 1.191 | (11) | 4,390 | 25,135 |
| 139.484 | 3.575 | (5, 528) | 9,225 | 146,756 |
During the nine months ended on 30 September 2016, increases of provisions mainly refer to the update of the value of contingencies and respective interest claims, processes for which there was already provision. Reductions of provisions correspond to reductions of contingencies due to finalized proceedings and revaluation of the amounts of the current contingencies.
The movement recorded in "Other" in the amount of 4.8 million euros under "Dismantling and removal of assets", was recorded by counterpart of "Tangible Assets" and results mainly from the increase in provisions for dismantling of assets result of the change of the rate used in the update for the present value of the liability.
In addition, the movements recorded in "Other" in the amount of 4.4 million euros refers mainly to the use of provisions set aside for compensation to employees in the amount of 1.6 million euros and the reclassification of cost estimates in relation to which can not be estimated with high reliability the time of implementation of the expenditure in the amount of 6 million euros.
The net movements for the nine months ended on 30 September 2015 and 2016 reflected in the income statement under "Provisions and adjustments" were as follows:
| 9M 15 | 9M 16 |
|---|---|
| Provisions and adjustments (Note 32) (600) |
(4, 431) |
| Financial investments (Note 9) (64) |
609 |
| Other losses / (gains) non-recurrent 3,523 |
1,080 |
| Interests - dismantling 206 |
128 |
| Other interests 1,288 |
552 |
| (87) Income tax (Note 12) |
109 |
| Other 12 2 |
|
| INCREASES AND DECREASES IN PROVISIONS 4,278 |
(1, 953) |
At 31 December 2015 and 30 September 2016, these items were composed as follows:
| 31-12-2015 | 30-09-2016 | |
|---|---|---|
| NON CURRENT | ||
| Contractual obligations i) | 9.470 | 8.949 |
| Other | - | 409 |
| 9.470 | 9.358 | |
| CURRENT | ||
| Invoices to be issued by operators ii) | 43.309 | 48.234 |
| Vacation pay and bonuses | 26.236 | 24.778 |
| Investments in tangible and intangible assets | 16.808 | 14.509 |
| Content and film rights | 16.106 | 14.200 |
| Professional services | 16.272 | 12.659 |
| ANACOM taxes and Cinema Law iii) | 117 | 8.119 |
| Costs of litigation procedure activity | 10.452 | 10.095 |
| Advertising | 8.107 | 10.616 |
| Programming services | 10.377 | 8.995 |
| Comissions | 6.376 | 5.785 |
| Rentals | 4.608 | 5.583 |
| Energy and water | 3.528 | 3.437 |
| Maintenance and repair | 1.715 | 1.497 |
| Other accrued expenses | 11.860 | 13.861 |
| 175.871 | 182.368 |
i) Under the fair value allocation process of to the assets and liabilities of the Optimus group, contractual obligations were identified relating to long-term contracts whose prices are different from market prices. This amount relates to the medium and long-term portion of the fair value adjustment of these contracts.
ii) Invoices to be billed by operators, mainly international operators, regarding interconnection costs related with international traffic and roaming services.
iii) Invoices relating to the ANACOM license and other ICA taxes, which will be issued in the following periods.
At 31 December 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/2016 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Advanced billing i) | 28,467 | ۰ | ||
| Investment subsidy ii) | 335 | 5,259 | 540 | 4,649 |
| 28,802 | 5,259 | 29,121 | 4,649 |
i) This item relates mainly to the billing of Pay TV services related to the next month and amounts received from NOS Comunicações' customers, related with the recharges of mobile 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 2015 and 30 September 2016, this item was composed as follows:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Suppliers current account | 322.319 | 269,701 |
| Invoices in reception and conference | 5,166 | |
| 327,485 | 274,478 |
At 31 December 2015 and 30 September 2016, this item was composed as follows:
| 31-12-2015 | 30-09-2016 | |
|---|---|---|
| NON CURRENT | ||
| Assignment of receivables without resources i) | 25.650 | |
| - | 25.650 | |
| CURRENT | ||
| Fixed assets suppliers | 27.617 | 20.147 |
| Football games broadcasting rights ii) | - | 20.250 |
| Assignment of receivables without resources i) | - | 19.156 |
| Advances from customers | 81 | 24 |
| Other | 1.008 | 2.397 |
| 28.706 | 61.974 | |
| 28.706 | 87.624 |
i) In the nine months ended on 30 September 2016, NOS Comunicações, SA materialized a credit assignment transaction, that was coordinated by Banco Comercial Português and Caixa Geral de Depósitos, in the amount of 45 million euros (total agreed of 49.8 million euros), which it ceded future credits to be generated by a portfolio of Corporate customers. This does not imply any change in the accounting treatment of the receivables or in the relationship with their customers.
ii) The figures in "Football games broadcasting rights" are justified by the estimated amount payable for the acquisition of games broadcasting rights for the season 2016/2017 under the new contracts of sports content (Note 37.3) , in the amount of 20.3 million euros.
Consolidated operating revenues for the three and nine months ended on 30 September 2015 and 2016 are distributed as follows:
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| SERVICES RENDERED: | ||||
| Telco il | 325,357 | 956,143 | 337,434 | 1,005,688 |
| Audiovisuals and cinema exhibition ii) | 20,093 | 55,995 | 20,381 | 54,997 |
| 345,450 | 1.012.138 | 357,815 | 1.060.685 | |
| SALES: | ||||
| Telco iii) | 13,339 | 32,040 | 14,258 | 37,379 |
| Audiovisuals and cinema exhibition iv) | 4,935 | 13,281 | 4,891 | 12,856 |
| 18,274 | 45,321 | 19,149 | 50.235 | |
| OTHER OPERATING REVENUES: | ||||
| Telco | 3.791 | 9,547 | 3,660 | 12,351 |
| Audiovisuals and cinema exhibition | 435 | 891 | 356 | 823 |
| 4,226 | 10,438 | 4.016 | 13,174 | |
| 367,950 | 1.067.897 | 380,980 | 1.124.094 |
These operating revenues are shown net of inter-company eliminations.
i) This item mainly includes revenue relating to: (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 mobile and fixed voice termination; (f) service activation; (g) mobile broadband access and (h) other additional services (for example: firewall and antivirus) and services rendered related to datacenter management and consulting services in IT.
ii) This item mainly includes: (a) box office revenue and publicity at the cinemas of NOS Cinemas and (b) revenue relating to film distribution to other cinema exhibitors in Portugal and the production and sale of audiovisual content.
iii) Revenue relating to the sale of terminal equipment, telephones and mobile phones.
iv) This item mainly includes sales of bar products by NOS Cinemas and DVD sales.
In the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M16 | |
|---|---|---|---|---|
| Remuneration | 17,953 | 49,680 | 17.87 | 53,071 |
| Social taxes | 4,264 | 12,607 | 4,385 | 12,957 |
| Social benefits | 408 | 1.026 | 312 | 961 |
| Other | 802 | 2,016 | 423 | 1,729 |
| 23.427 | 65,329 | 22,997 | 68,718 |
In the nine months ended on 30 September 2015 and 2016, the average number of employees of the companies included in the consolidation was 2,509 and 2,517, respectively. At 30 September 2016, the number of employees of the companies included in the consolidation was 2,477 employees.
The costs of compensations paid to employees, since they are non-recurring costs, are recorded in the item "Integration Costs".
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3 rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M16 | |
|---|---|---|---|---|
| Exhibition costs | 39,126 | 120,402 | 50,403 | 134,868 |
| Traffic costs | 51.163 | 148,939 | 47,650 | 147,356 |
| Capacity costs | 12,986 | 37,462 | 12,322 | 36,952 |
| Shared advertising revenues | 2.924 | 9.292 | 3,389 | 10,471 |
| Other | 1,576 | 3,624 | 1,933 | 5,254 |
| 107.775 | 319.719 | 115.697 | 334.901 |
The increase in Exhibition costs is justified, mainly, by the new contracts of sports content (Note 37.3) and the revision of Sport TV's distribution rights model.
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| Costs of products sold | 13,520 | 34,455 | 5.035 | 39,856 |
| Inventories impairment | 478 | 763 | ,120 | .215 |
| 13,998 | 35.218 | 16.155 | 41.071 |
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| SUPPORT SERVICES: | ||||
| Call centers and customer support | 7.933 | 24,929 | 8,626 | 25,455 |
| Information systems | 4,111 | 12,817 | 3,995 | 13,846 |
| Administrative support and other | 9,387 | 31,307 | 9,324 | 28,306 |
| 21,431 | 69,053 | 21,945 | 67,607 | |
| SUPPLIES AND EXTERNAL SERVICES: | ||||
| Maintenance and repair | 11,452 | 32,973 | 11,517 | 33,331 |
| Rentals | 10,722 | 31,447 | 10.913 | 32,955 |
| Electricity | 5,523 | 15,933 | 5,689 | 16,174 |
| Commissions | 4,191 | 11,745 | 3,095 | 9,016 |
| Professional services | 3,463 | 10,407 | 3,466 | 9,353 |
| Communications | 2.126 | 6.199 | 2,043 | 6,034 |
| Installation and removal of terminal equipment | 1,238 | 4,389 | 2.762 | 6,682 |
| Other supplies and external services | 7,668 | 22,324 | 8,754 | 25,586 |
| 46,383 | 135,417 | 48,239 | 139,131 |
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| Provisions (Note 22) | (217) | (600) | 12, FF | (4, 431) |
| Impairment of account receivables - trade (Note 14) | (5,063) | (8, 525) | (4,619) | (285) |
| Impairment of account receivables - other (note 10) | 39 | 498 | ||
| Debts recovery | 78 | |||
| (5.163) | (8, 550) | (6, 732) | (4,682) |
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| rd QUARTER 15 3 |
9M 15 | rd QUARTER 16 3 |
9M 16 | |
|---|---|---|---|---|
| TANGIBLE ASSETS | ||||
| Buildings and other constructions | 2.832 | 8.411 | 3.073 | 9.294 |
| Basic equipment | 45.604 | 134.126 | 44.709 | 131.615 |
| Transportation equipment | 271 | 861 | 391 | 1.294 |
| Tools and dies | 4 | 9 | 8 | 20 |
| Administrative equipment | 5.083 | 17.566 | 5.525 | 14.921 |
| Other tangible assets | 238 | 680 | (455) | (588) |
| 54.032 | 161.653 | 53.250 | 156.555 | |
| INTANGIBLE ASSETS | ||||
| Industrial property and other rights | 35.223 | 105.965 | 45.424 | 135.936 |
| 35.223 | 105.965 | 45.424 | 135.936 | |
| INVESTIMENT PROPERTY | ||||
| Investment property | 10 | 31 | - | 13 |
| 10 | 31 | - | 13 | |
| 89.265 | 267.649 | 98.674 | 292.503 |
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| EQUITY METHOD (NOTE 9) | ||||
| Sport TV | 3,515 | 3,453 | (1, 184) | 4,593 |
| Dreamia | (259) | (788) | (184) | (692) |
| Finstar | 207 | (7, 365) | (706) | 3,334 |
| Mstar | (92) | (224) | 631 | 1,034 |
| Upstar | (8) | (20) | (6) | |
| Others | (23) | (13) | 30 | (18) |
| 2,926 | (4, 957) | (1,408) | 8,245 |
For the three and nine months ended on 30 September 2015 and 2016, this item was composed as follows:
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M16 | |
|---|---|---|---|---|
| FINANCING COSTS: | ||||
| INTEREST EXPENSE: | ||||
| Borrowings | 4.899 | 18.121 | 4,219 | 12,501 |
| Finance leases | 803 | 3,768 | 1,389 | 4,363 |
| Derivatives | 290 | 727 | 579 | 1,554 |
| Other | 787 | 2.536 | 250 | 986 |
| 6,779 | 25,152 | 6,437 | 19,404 | |
| INTEREST EARNED | (2.128) | (5,501) | (2.008) | (6,838) |
| 4,651 | 19,651 | 4,429 | 12,566 | |
| NET OTHER FINANCIAL EXPENSES /(INCOME): | ||||
| Comissions and guarantees | 1.566 | 6,250 | 1,354 | 3,934 |
| Other | 575 | 2.357 | 442 | 1,546 |
| 2.141 | 8.607 | 1,796 | 5,480 |
Interest earned mainly corresponds to default interests charged to customers.
Earnings per share for the three and nine months ended on 30 September 2015 and 2016, were calculated as follow:
| 3rd QUARTER 15 | 9M 15 | 3rd QUARTER 16 | 9M 16 | |
|---|---|---|---|---|
| Consolidated net income attributable to shareholders | 26.219 | 73,529 | 27,491 | 78,387 |
| Number of ordinary shares outstanding during the period (weighted average) | 514,286,864 | 514,062,172 | 512.117.078 | 512.824.415 |
| Basic earnings per share - euros | 0.05 | 0.14 | 0.05 | 0.15 |
| Diluted earnings per share - euros | 0.05 | 0.14 | 0.05 | 0.15 |
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 2015 and 30 September 2016, the Group had furnished sureties, guarantees and comfort letters in favor of third parties corresponding to the following situations:
| 31/12/2015 | 30/09/2016 | |
|---|---|---|
| Financial instituitions il | 110,264 | 10,264 |
| Tax authorities ii) | 12.161 | 14,658 |
| Other iii) | 13,446 | 12,664 |
| 135.871 | 137.586 |
In connection with the finance obtained by Upstar from Novo Banco, totaling 20 million euros, NOS signed a promissory note, proportional to the participation held, of 30% of the loan.
In connection with the finance obtained by Upstar from Banco Comercial Português, totaling 10 million euros, NOS signed a promissory note, proportional to the participation held, of 30% of the loan.
Additionally, during 2014, in connection with a contract between Upstar and a supplier of TV contents, NOS signed a personal guarantee, in the form of a partial endorsement, proportional to NOS's shareholder position of 30%, as a counter guarantee of a guarantee by Novo Banco in the amount of 30 million dollars, to pledge the fulfillment of the contract's obligations.
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.
During the first semester of 2015 and 2016 and following the settlement note to CLSU 2007- 2009 and 2010-2011, NOS constituted guarantees in favor of the Universal Service Compensation Fund in the amount of 23.6 million euros and 16.7 million euros, respectively, in order to prevent the introduction of tax enforcement proceedings in order to enforce recovery of the amounts paid (Note 22).
During the nine months ended on 30 September 2016, NOS constituted guarantees on behalf of Sport TV, to the The Football Association League Limited in the amount of 29.1 million euros.
In addition to the guarantees required by the Tax Authorities, sureties were set up for the current fiscal processes. NOS was a surety for NOS SA for the amount of 15.3 million euros.
The rentals due on operating leases of non-cancelable contracts or with renewal options have the following maturities:
| 31/12/2015 | 30/09/2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 | 723 | 19.325 | 43.869 | 25.007 | 973 | 17.674 | 43,407 | 21,316 |
| Telecommunication towers and rooftops | 6.748 | 18,874 | 43,933 | 4,264 | 674 | 25,423 | 53,188 | 21,335 |
| Equipment | 1,948 | 4,835 | $\overline{\phantom{a}}$ | 950 | 1.522 | |||
| Vehicles | 2,842 | 4,197 | $\sim$ | 3,482 | 6,057 | |||
| 7.471 | 42.989 | 96.833 | 29.271 | 1.647 | 47,528 | 104,173 | 42,651 |
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 clauses, Pari Passu clauses 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 12% of the total loans obtained require that the consolidated net financial debt does not exceed 4 times consolidated EBITDA.
The EIB loan amounting to 110 million euros, maturing in 2022, is intended exclusively to finance the investment project to support the development of mobile broadband network in Portugal. This amount shall not, under any circumstances, exceed 50% of the project cost.
Following the final decision of the Competition Authority not to oppose the merger between ZON and Optimus SGPS the following commitment were made to ensure that NOS SA negotiated with Vodafone, until 31 October 2015, a contract that gives the option of buying its fiber network, it was concluded within the prescribed period.
In December 2015, NOS signed a contract with Sport Lisboa e Benfica - Futebol SAD and Benfica TV, S.A. of television rights of home football games of football NOS' league, broadcasting rights and distribution of Benfica TV Channel. The contract will begin in 2016/2017 sports season and has an initial duration of three years and may be renewed by decision of either party 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 Comunicação e Plataformas, S.A. that includes the following rights:
The contract will last 10 years concerning the rights indicated in 1) and 2) above, starting in July 2018, 12 years in the case of the rights stated in 3) starting in July 2017 and 12 and a half seasons in the case of the rights mentioned in 4) beginning in January 2016, with the overall financial consideration amounting to 446 million euros, divided into progressive annual amounts.
Also in December 2015, NOS SA has signed contracts regarding the television rights of home senior team football games with the following sports clubs:
The contracts wil 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 wil begin in the 2019/2020 sports season and last up to 3 seasons.
The estimated cash-flows are as follows:
| Seasons | 2016/17 | following |
|---|---|---|
| Estimated contract Cash-flows * | 41 | 1.138 |
*Games and channels broadcasting rights, advertising and other are included.
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 2016/2017, assuring
access to Benfica's channel and Benfica's home football games to NOS' and Vodafone's clients, independent 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 in the NOS's channel grid, assuring that every pay-tv client can have access to every relevant sports content, regardless of which operator they use.
In August 2016, an agreement was achieved so that the shareholder structure of Sport TV can be owned in equal parts by NOS, Meo, Vodafone and Olivedesportos.
Detailed summary of related parties as at 30 September 2016:
| RELATED PARTIES | ||
|---|---|---|
| 3shoppings - Holding, SGPS, S.A. | Capwatt Hectare - Heat Power, ACE | |
| 8ª Avenida Centro Comercial, SA | Capwatt II - Heat Power, S.A. | |
| Accive Insurance Cons. e Franchising, Lda | Capwatt III - Heat Power, S.A. | |
| Accive Insurance-Corretor de Seguros, SA | Capwatt Maia - Heat Power, S.A. | |
| Aduanas Caspe, S.L.U. | Capwatt Martim Longo - Solar Power, S.A. | |
| Aegean Park, S.A. | Capwatt Vale do Caima - Heat Power, S.A. | |
| Agepan Eiweiler Management GmbH | Capwatt Vale do Tejo - Heat Power, S.A. | |
| Agloma Imobiliaria y Servicios. S.L. | CAPWATT, SGPS, S.A. | |
| Agloma Investimentos, Sgps, S.A. | Carvemagere-Manut.e Energias Renov., Lda | |
| ALBCC Albufeirashopping C.Comercial SA | Casa da Ribeira-Sociedade Imobiliária, SA | |
| ALEXA Administration GmbH | Cascaishopping - Centro Comercial, S.A. | |
| ALEXA Holding GmbH | Cascaishopping Holding I, SGPS, S.A. | |
| ALEXA Shopping Centre GmbH | CCCB Caldas da Rainha - Centro Comercial, SA | |
| Algarveshopping - Centro Comercial, S.A. | Centro Colombo - Centro Comercial, S.A. | |
| Apor - Agência para a Modernização do Porto | Centro Residencial da Maia, Urban., S.A. | |
| Aqualuz - Turismo e Lazer, Lda | Centro Vasco da Gama - Centro Comercial, S.A. | |
| Aqualuz Tróia-Expl.Hoteleira e Imob., SA | Chão Verde - Soc. Gestora Imobiliária, S.A. | |
| Arat Inmuebles, S.A. | Ciminvest - Sociedade de Investimentos e Participações, S.A. | |
| ARP Alverca Retail Park, SA | Cinclus Imobiliária, S.A. | |
| Arrábidashopping - Centro Comercial, S.A. | Citic Capital Sierra Limited | |
| Aserraderos de Cuellar, S.A. | Citic Capital Sierra Prop. Man. Limited | |
| Atelgen-Produção Energia, ACE | Citorres - Sociedade Imobiliária, S.A. | |
| Atlantic Ferries - Tráf.Loc, Flu. e Marít, S.A. | Coimbrashopping - Centro Comercial, S.A. | |
| Avenida M - 40 B.V. | Colombo Towers Holding, BV | |
| Azulino Imobiliária, S.A. | Comercial Losan Polonia SP. Z.O.O. | |
| BA Business Angels, SGPS, SA | Comercial Losan, S.L.U. | |
| BA Capital, SGPS, SA | Companhia de Pesca e Comércio de Angola (Cosal), SARL | |
| Banco BPI, SA | Companhia Térmica do Serrado, ACE | |
| BB Food Service, S.A. | Companhia Térmica Tagol, Lda. | |
| Beeskow Holzwerkstoffe | Condis - Sociedade de distribuição, S.A. | |
| Beralands BV | Condis Limitada | |
| Bertimóvel - Sociedade Imobiliária, S.A. | Contacto Concessões, SGPS, S.A. | |
| Big Picture 2 Films, SA | Contimobe - Imobil.Castelo Paiva, S.A. | |
| Blackrock, Inc. | Continente Hipermercados, S.A. | |
| Bloco Q - Sociedade Imobiliária, S.A. | Contry Club da Maia-Imobiliaria, S.A. | |
| BOM MOMENTO - Comércio Retalhista, SA | Craiova Mall BV | |
| Bright Development Studio, S.A. | CTE-Central Termoeléct. do Estuário, Lda | |
| Bright Ventures Capital SCR | Cumulativa - Sociedade Imobiliária, S.A. | |
| Caixanet - Telecomunicações e Telemática, SA | Digitmarket - Sistemas de Informação, S.A. | |
| Canal 20 TV | Discovery Sports, SA | |
| Canasta - Empreendimentos Imobiliários, S.A. | DOC Malaga SITECO, S.L.U. | |
| Candotal Spain, S.L. | DOC Malaga SITECO, S.L.U. | |
| Cape Technologies Limited | Dortmund Tower GmbH | |
| CAPWATT - Brainpower, S.A. | Dos Mares - Shopping Centre B.V. | |
| Capwatt ACE, S.A. | Dos Mares - Shopping Centre, S.A. | |
| Capwatt Colombo - Heat Power, S.A. | Dreamia - Serviços de Televisão, S.A. | |
| Capwatt Engenho Novo - Heat Power, S.A. | Dreamia Holding B.V. |
| RELATED PARTIES | |||
|---|---|---|---|
| East Star Ltd | Igimo - Sociedade Imobiliária, S.A. | ||
| Ecociclo - Energia e Ambiente, S.A. | Iginha - Sociedade Imobiliária, S.A. | ||
| EFACEC Electric Mobility, S.A. | Imobeauty, SA | ||
| EFACEC ENERGIA - Máquinas e Equipamentos Eléctricos S.A. | Imoclub - Serviços Imobilários, S.A. | ||
| EFACEC Engenharia e Sistemas, S.A. | Imoconti - Soc. Imobiliária, S.A. | ||
| EFACEC Marketing Internacional, S.A. | Imodivor - Sociedade Imobiliária, S.A. | ||
| EFACEC Power Solutions, SGPS, S.A. | Imoestrutura - Soc.Imobiliária, S.A. | ||
| EFACEC Serviços Corporativos, S.A. | Imogamek, S.A. | ||
| Efanor Investimentos, SGPS, S.A. | Imohotel - Emp.Turist.Imobiliários, S.A. | ||
| Efanor Serviços de Apoio à Gestão, S.A. | Imoluanda, S.A. | ||
| Elergone Energias, Lda | Imomuro - Sociedade Imobiliária, S.A. | ||
| Empreend. Imob. Quinta da Azenha, S.A. | Imopenínsula - Sociedade Imobiliária, S.A. | ||
| Enerlousado-Recursos Energéticos, Lda. | Imoplamac Gestão de Imóveis, S.A. | ||
| Estação Viana - Centro Comercial, S.A. | Imoponte - Soc.Imobiliaria, S.A. | ||
| Euroresinas - Indústrias Quimicas, S.A. | Imoresort - Sociedade Imobiliária, S.A. | ||
| Farmácia Selecção, S.A. | Imoresultado - Soc.Imobiliaria, S.A. | ||
| Fashion Division Canárias, SL | Imosedas - Imobiliária e Seviços, S.A. | ||
| Fashion Division, S.A. | lmosistema - Sociedade Imobiliária, S.A. | ||
| Fidequity - Serviços de Gestão, S.A. | Impaper Europe GmbH | ||
| Filmes Mundáfrica, SARL | Implantação - Imobiliária, S.A. | ||
| Finisantoro Holding Limited | Infofield - Informática, S.A. | ||
| FINSTAR - Sociedade de Investimentos e Participações, SA | Inovretail, Lda. | ||
| Fozimo - Sociedade Imobiliária, S.A. | Inparvi SGPS, S.A. | ||
| Frases e Frações Imobiliária e Serv., SA | Interlog – SGPS, S.A. | ||
| Freccia Rossa - Shopping Centre S.r.l. | Ioannina Development of Shopping Centres, SA | ||
| Fundo de Invest. Imobiliário Imosede | Irmãos Vila Nova III - Imobiliária, SA | ||
| Fundo Esp. Inv. Imo. Fec. WTC | Irmãos Vila Nova, SA | ||
| Fundo I.I. Parque Dom Pedro Shop.Center | Isoroy SAS | ||
| Fundo Invest. Imobiliário Imosonae Dois | ITRUST - Cyber Security and Intellig., SA | ||
| Fundo Invest. Imob. Shopp. Parque D. Pedro | IVN - Serviços Partilhados, SA | ||
| Gaiashopping I - Centro Comercial, S.A. | IVN Asia Limited | ||
| Gaiashopping II - Centro Comercial, S.A. | Kento Holding Limited | ||
| GHP Gmbh | Land Retail B.V. | ||
| Gli Orsi Shopping Centre 1 Srl | Landscape - Promoções e Projectos Imobiliários, Lda | ||
| Global Usebti, S.L. | Larim Corretora de Resseguros Ltda | ||
| Glunz AG | Larissa Develop. Of Shopping Centers, S.A. | ||
| Glunz Service GmbH | Lazam - MDS Corretora e Administradora de Seguros, S.A. | ||
| Glunz UK Holdings Ltd | LCC LeiriaShopping Centro Comercial SA | ||
| Glunz Uka Gmbh | Le Terrazze - Shopping Centre 1 Srl | ||
| Golf Time - Golfe e Invest. Turísticos, S.A. | Libra Serviços, Lda. | ||
| Gots - Gestão, Organização, Desenvolvimento e Serviços, S.A. | Loop5 Shopping Centre GmbH | ||
| Guimarãeshopping - Centro Comercial, S.A. | Losan Colombia, S.A.S. | ||
| Harvey Dos Iberica, S.L. | Losan Overseas Textile, S.L. | ||
| Henderseon Group plc | Losan Tekstil Urun. V E Dis Ticaret, L.S. | ||
| Herco Consultoria de Risco, S.A. | Loureshopping - Centro Comercial, S.A. | ||
| Herco Consultoria de Riscos e Corretora de Seguros Ltda | Lusitânia - Companhia de Seguros, SA | ||
| HighDome PCC Limited | Lusitânia Vida - Companhia de Seguros, SA | ||
| HighDome PCC Limited (Cell Europe) | Luz del Tajo - Centro Comercial S.A. | ||
| Hipergest, S.A. | Luz del Tajo B.V. | ||
| Iberia Shop.C. Venture Coöperatief U.A. | MA02 - Sierra Maroc SARL | ||
| lberian Assets, S.A. | Madeirashopping - Centro Comercial, S.A. | ||
| Iberosegur-Soc. Ibérica Med. Seguros, Lda | Maiashopping - Centro Comercial, S.A. |
| RELATED PARTIES | |
|---|---|
| Maiequipa - Gestão Florestal, S.A. | PHARMACONTINENTE - Saúde e Higiene, S.A. |
| Marcas MC, ZRT | Plaza Éboli - Centro Comercial S.A. |
| Marina de Tróia S.A. | Plaza Mayor Parque de Ócio BV |
| Marmagno - Expl. Hoteleira Imob., S.A. | Plaza Mayor Parque de Ocio, SA |
| Marvero - Expl. Hoteleira Imob., S.A. | Plaza Mayor Shopping BV |
| MCCARE, Serviços de Saúde, S.A. | Plaza Mayor Shopping, SA |
| MDS Africa SGPS, SA | Plenerg Srl |
| MDS AUTO - Mediação de Seguros, SA | Poliface North America |
| MDS Corretor de Seguros, S.A. | Ponto de Chegada - Soc. Imobiliária, SA |
| MDS Malta Holding Limited | PORTCC - Portimãoshopping Centro Comercial, SA |
| MDS RE - Mediador de resseguros | Porturbe - Edificios e Urbanizações, S.A. |
| MDS, SGPS, SA | Praedium - Serviços, S.A. |
| Megantic BV | Praedium II - Imobiliária, S.A. |
| Microcom Doi Srl | Praesidium Services Limited |
| MJB-Design, Lda | Predicomercial - Promoção Imobiliária, S.A. |
| MJLF - Empreendimentos Imobiliários, S.A. | Predilugar - Sociedade Imobiliária, SA |
| Modalfa - Comércio e Serviços, S.A. | Prédios Privados Imobiliária, S.A. |
| MODALLOOP - Vestuário e Calçado, S.A. | Predisedas - Predial das Sedas, S.A. |
| Modelo - Dist. de Mat. de Construção, S.A. | Proj. Sierra Germany 4 (four) - Sh.C.GmbH |
| Modelo Continente Hipermercados, S.A. | Proj. Sierra Germany 2 (two) - Sh. C. GmbH |
| Modelo Continente Intenational Trade, SA | Project Guia, S.A. |
| Modelo Hiper Imobiliária, S.A. | Project SC 1 BV |
| Movelpartes - Comp.para Ind.Mobiliária, S.A. | Project Sierra 10 BV |
| Mstar, SA | Project Sierra 11 BV |
| Niara Holding, SGPS, Lda | Project Sierra 12 BV |
| Niara Power, Lda | Project Sierra 2 BV |
| Norges Bank | Project Sierra 8 BV |
| Norteshopping - Centro Comercial, S.A. | Project Sierra Cúcuta BV |
| Norteshopping Retail and Leisure Centre, BV | Project Sierra Four Srl |
| Nova Cimangola, S.A. | Project Sierra Four, SA |
| Novodecor (PTY), LTD | Project Sierra Spain 1 B.V. |
| OSB Deustchland Gmbh | Project Sierra Spain 2 - Centro Comer. S.A. |
| Overseas Investments SA | Project Sierra Two Srl |
| Panorama Equity Investments BV | Promessa Sociedade Imobiliária, S.A. |
| Pantheon Plaza BV | Proyecto Cúcuta S.A.S. |
| Paracentro - Gest.de Galerias Com., S.A. | Público - Comunicação Social, S.A. |
| Parcelas e Narrativas - Imobiliária SA | QCE-Desenv. e Fabrico de Equipamentos, SA |
| Pareuro, BV | Racionaliz. y Manufact. Florestales, S.A. |
| Park Avenue Develop. of Shop. Centers S.A. | Rio Sul - Centro Comercial, S.A. |
| Parklake Shopping, SA | River Plaza Mall, Srl |
| Parque Atlântico Shopping - C.C., S.A. | River Plaza, BV |
| Parque D. Pedro 1 B.V. | Ronfegen-Recursos Energéticos, Lda. |
| Parque de Famalicão - Empr. Imob., S.A. | S.C. Microcom Doi Srl |
| Pátio Boavista Shopping Ltda. | S21 Sec Brasil, Ltda |
| Pátio Campinas Shopping Ltda | S21 Sec Ciber Seguridad, S.A. de CV |
| Pátio Goiânia Shopping Ltda | S21 SEC Gestion, S.A. |
| Pátio Londrina Empreend. e Particip. Ltda | S21 Sec Information Security Labs, S.L. |
| Pátio São Bernardo Shopping Ltda | S21 Sec México, S.A. de CV |
| Pátio Sertório Shopping Ltda | S21 Sec, S.A. de CV |
| Pátio Uberlândia Shopping Ltda | Salsa DE GmbH |
| PCJ - Público, Comunicação e Jornalismo, S.A. | Salsa Distribution USA LLC |
| Pharmaconcept - Actividades em Saúde, S.A. | Salsa France, S.A.R.L. |
| RELATED PARTIES | |
|---|---|
| Salsa Luxembourg, Sàrl | Sierra Spain ShoppinG Centers Services S.A.U. |
| Santoro Finance - Prestação de Serviços, S.A. | Sierra Turkey Gayrim. Yön. P. Dan. An. Sirket |
| Santoro Financial Holding, SGPS, S.A. | Sierra VdG Holding BV |
| Saphety - Transacciones Electronicas SAS | Sierra Zenata Project BV |
| Saphety Brasil Transações Eletrônicas Ltda. | SII - Soberana Invest. Imobiliários, S.A. |
| Saphety Level - Trusted Services, S.A. | SIRS - Sociedade Independente de Radiodifusão Sonora, S.A. |
| SC - Consultadoria, S.A. | SISTAVAC, S.A. |
| SC - Eng. e promoção imobiliária, SGPS, S.A. | SISTAVAC, SGPS, S.A. |
| SC Aegean B.V. | SISTAVAC-Sistemas HVAC-R do Brasil, Ltda |
| SC Assets, SGPS, SA | SLS Salsa - Comércio e Difusão de Vestuário, S.A. |
| SC Finance BV | SLS Salsa España - Comercio y Difusión de Vestuario, S.A.U. |
| SC For-Serv.Form.e Desenv.R.H.,Unip.,Lda | Soc. Inic. Aproveit. Florest. - Energias, SA |
| SC Hospitality, SGPS, S.A. | Société de Tranchage Isoroy S.A.S. |
| SC, SGPS, SA | Socijofra - Sociedade Imobiliária, S.A. |
| SDSR - Sports Division SR, S.A. | Sociloures - Soc. Imobiliária, S.A. |
| Selifa - Empreendimentos Imobiliários, S.A. | Socip - Sociedade de Investimentos e Participações, S.A. |
| Sempre à Mão - Sociedade Imobiliária, S.A. | Sodiba Limitada |
| Sempre a Postos - Produtos Alimentares e Utilidades, Lda | Soflorin, BV |
| Serra Shopping - Centro Comercial, S.A. | Soira - Soc. Imobiliária de Ramalde, S.A. |
| Sesagest - Proj. Gestão Imobiliária, S.A. | Solinca - Health and Fitness, SA |
| Sete e Meio - Invest. Consultadoria, S.A. | Solinca - Investimentos Turísticos, S.A. |
| Sete e Meio Herdades - Inv. Agr. e Tur., S.A. | Solinfitness - Club Malaga, S.L. |
| SFS - Serviços de Gestão e Marketing, SA | Solingen Shopping Center GmbH |
| Shopping Centre Colombo Holding BV | Soltroia - Imob.de Urb.Turismo de Tróia, S.A. |
| Shopping Centre Parque Principado B.V. | Somit Imobiliária, SA |
| SIAL Participações Ltda | Sonae Arauco France SAS |
| Sierra Berlin Holding BV | Sonae Capital Brasil, Lda |
| Sierra Brazil 1 BV | Sonae Capital, SGPS, S.A. |
| Sierra Central S.A.S | Sonae Center Serviços II, SA |
| Sierra Cevital Shopping Center, Spa | Sonae Financial Services, S.A. |
| Sierra Core Assets Holdings, B.V. | Sonae Ind., Prod. e Com.Deriv.Madeira, S.A. |
| Sierra Corporate Services Holland, BV | Sonae Indústria - SGPS, S.A. |
| Sierra Developments Holding B.V. | Sonae Indústria (UK), Ltd |
| Sierra Developments, SGPS, S.A. | Sonae Indústria de Revestimentos, S.A. |
| Sierra European R.R.E. Assets Hold. B.V. | Sonae Investimentos, SGPS, SA |
| Sierra Germany GmbH | Sonae Investment Management-S.T., SGPS, SA |
| Sierra GP Limited | Sonae Investments BV |
| Sierra Greece, SA | Sonae MC - Modelo Continente, SGPS, SA |
| Sierra Investimentos Brasil Ltda | Sonae MC S2 Africa Limited |
| Sierra Investments (Holland) 1 B.V. | Sonae Novobord (PTY) Ltd |
| Sierra Investments (Holland) 2 B.V. | Sonae RE, S.A. |
| Sierra Investments Holding B.V. | Sonae Retalho Espana - Servicios Gen., S.A. |
| Sierra Investments SGPS, S.A. | Sonae SGPS, S.A. |
| Sierra Italy, Srl | Sonae Sierra Brasil S.A. |
| Sierra Management, SGPS, S.A. | Sonae Sierra Brazil, BV / SARL |
| Sierra Maroc Services, SARL | Sonae Sierra, SGPS, S.A. |
| Sierra Portugal, S.A. | Sonae SR Malta Holding Limited |
| Sierra Project Nürnberg BV | Sonae Tafibra Benelux, BV |
| Sierra Real Estate Greece BV | Sonaecenter Serviços, S.A. |
| Sierra Romania Sh. Centers Services Srl | Sonaecom - Serviços Partilhados, S.A. |
| Sierra Services Holland 2 BV | Sonaecom - Sistemas de Información España, S.L. |
| Sonaecom BV | |
| Sierra Solingen Holding GmbH |
| RELATED PARTIES | |||||||
|---|---|---|---|---|---|---|---|
| Sonaecom, SGPS, S.A. | Tróia Natura, S.A. | ||||||
| Sonaecom-Cyber Security and Int., SGPS, SA | Troiaresort - Investimentos Turísticos, S.A. | ||||||
| Sonaegest - Soc. Gest. Fundos Investimentos | Troiaresort, SGPS, S.A. | ||||||
| Sonaerp - Retail Properties, SA | Tulipamar - Expl.Hoteleira Imob., S.A. | ||||||
| SONAESR - Serviços e logistica, SA | Turismo da Samba (Tusal), SARL | ||||||
| Sonaetelecom BV | Unipress - Centro Gráfico, Lda | ||||||
| Sondis Imobiliária, S.A. | Unishopping Consultoria Imob. Ltda. | ||||||
| Sontel BV | Unitel International Holdings, B.V. | ||||||
| Sonvecap BV | Unitel STP | ||||||
| Sopair, S.A. | Unitel T+ | ||||||
| Sotáqua - Soc. de Empreendimentos Turist | UP INVEST, SGPS, S.A. | ||||||
| Soternix-Produção de Energia, ACE | Upstar Comunicações SA | ||||||
| Spanboard Products, Ltd | Urbinveste - Promoções e Projectos Imobiliários, S.A. | ||||||
| SPF - Sierra Portugal | Urbisedas - Imobiliária das Sedas, S.A. | ||||||
| SPF - Sociedade de Participações Financeiras, Lda | Usebti Textile México S.A. de C.V. | ||||||
| Spinarq - Engenharia, Energia e Ambiente, SA | Valor N, S.A. | ||||||
| Spinarq Moçambique, Lda | Via Catarina - Centro Comercial, S.A. | ||||||
| Spinveste - Gestão Imobiliária SGII, S.A. | Vidatel, Ltd | ||||||
| Spinveste - Promoção Imobiliária, S.A. | Vistas do Freixo-Emp. Tur. Imobiliários, SA | ||||||
| Sport TV Portugal, S.A. | Vuelta Omega, S.L. | ||||||
| Sport Zone Canárias, SL | WeDo Consulting - Sistemas de Informação, S.A. | ||||||
| Sport Zone España-Com. Art. de Deporte, SA | WeDo do Brasil - Soluções Informáticas, Ltda | ||||||
| Sport Zone spor malz.per.satis ith.ve ti | WeDo Technologies (UK) Limited | ||||||
| Spred, SGPS, SA | WeDo Technologies Americas, Inc. | ||||||
| SSI Angola, S.A. | WeDo Technologies Australia PTY Limited | ||||||
| STP Cabo SARL | WeDo Technologies BV | ||||||
| Tableros Tradema, S.L. | WeDo Technologies Egypt LLC | ||||||
| Tafiber, Tableros de Fibras Ibéricas, SL | WeDo Technologies Mexico, S de R.L. | ||||||
| Tafibra South Africa (PTY) Ltd. | Weiterstadt Shopping BV | ||||||
| Tafibra Suisse, SA | Winterfell 2 Limited | ||||||
| Tafisa - Tableros de Fibras, S.A. | Winterfell Industries Limited | ||||||
| Tafisa Canadá Societé en Commandite | Wise Intelligence Solutions Holding Limited | ||||||
| Tafisa France, S.A. | Wise Intelligence Solutions Limited | ||||||
| Tafisa UK, Ltd | Worten - Equipamento para o Lar, S.A. | ||||||
| Taiber, Tableros Aglomerados Ibéricos, SL | Worten Canárias, SL | ||||||
| Tecnológica Telecomunicações LTDA. | Worten España Distribución, SL | ||||||
| Teconologias del Medio Ambiente, SA | Yako - Retalho Alimentar, S.A. | ||||||
| Terra Peregin - Participações SGPS, S.A. | ZAP Cinemas, S.A. | ||||||
| Têxtil do Marco, S.A. | ZAP Media, S.A. | ||||||
| The Artist Porto Hot.&Bistrô-Act.Hot.,SA | ZAP Publishing, S.A. | ||||||
| The House Ribeira Hotel - Expl. Hot., SA | ZIPPY - Comércio e Distribuição, SA | ||||||
| TLANTIC B.V. | ZIPPY - Comercio y Distribución, S.A. | ||||||
| Tlantic Portugal - Sist. de Informação, S.A. | Zippy cocuk malz.dag.ith.ve tic.ltd.sti | ||||||
| Tlantic Sistemas de Informação Ltda | ZOPT, SGPS, S.A. | ||||||
| Tool Gmbh | ZYEVOLUTION-Invest.Desenv.,SA. | ||||||
| Troia Market-Supermercados, S.A. |
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 2015 and 30 September 2016 and transactions in the nine months ended on 30 September 2015 and 30 September 2016 between NOS Group and its associated companies, joint ventures and other related parties are as follows:
| ACCOUNTS RECEIVABLES |
ACCOUNTS PAYABLE |
ACCRUED EXPENSES |
DEFERRED INCOME |
PREPAID EXPENSES |
|
|---|---|---|---|---|---|
| SHAREHOLDERS | |||||
| Banco BPI | 1,994 | (19) | ÷, | ٠ | |
| Songecom | 118 | ||||
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||
| Big Picture 2 Films | 13 | 1,335 | 361 | ||
| Dreamia Holding BV | 2,579 | ٠ | |||
| Dreamia SA | 1,717 | 861 | 188 | $\overline{a}$ | |
| Finstar | 9,982 | ÷ | ۰ | ||
| Mstar | ٠ | à. | ٠ | ||
| Sport TV | 885 | 12,521 | 4,164 | ||
| Upstar | 13.617 | ٠ | |||
| ZAP Cinemas | 3,015 | $\overline{\phantom{a}}$ | |||
| ZAP Media | 465 | ÷, | ٠ | ||
| OTHER RELATED PARTIES | |||||
| Cascaishopping Centro Comercial | 3 | 59 | Ĭ. | ۰ | 57 |
| Digitmarket-Sistemas de Informação | 42 | 962 | 3 | 245 | |
| ITRUST - Cyber Security and Intellia. | 5 | 144 | 8 | ٠ | ۰ |
| Modelo Continente Hipermercados | 1,188 | 126 | (120) | ٠ | 3 |
| MDS - Corretor de Seguros | 40 | ÷ | ÷, | 107 | |
| SC-Consultadoria | 171 | $\overline{\phantom{a}}$ | $\overline{a}$ | 20 | $\overline{\phantom{a}}$ |
| Sonae Ind., Prod. e Com.Deriv.Madeira | 115 | $\overline{\phantom{a}}$ | ÷ | $\overline{2}$ | |
| Sierra Portugal | 637 | (25) | 58 | 5 | 383 |
| Sonae Center Serviços II | 701 | 8 | 49 | 149 | |
| Sonaecom - Servicos Partilhados | 41 | 86 | 5 | ٠ | ٠ |
| SDSR - Sports Division SR | 124 | ä, | |||
| Unitel | 1,709 | 968 | 969 | ٠ | |
| We Do Consulting-Sist. de Informação | 139 | 1,245 | $\overline{\phantom{a}}$ | ۰ | 44 |
| Worten - Equipamento para o Lar | 2,474 | (6) | 389 | ۰ | |
| Other related parties | 625 | 123 | 40 | $\overline{7}$ | 48 |
| 42,399 | 18.386 | 6.113 | 184 | 887 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS | MARKETING AND ADVERTISING |
SUPPORT SERVICES | SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | |||||||||
| Banco BPI | 3.146 | × | ٠ | ٠ | × | (573) | |||
| Songecom | $\overline{14}$ | $\overline{3}$ | $\sim$ | $\sim$ | (6) | (13) | 71 | $\sim$ | |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||||||
| Big Picture 2 Films | 55 | × | 2,143 | × | $\sim$ | 49 | ×. | ۰. | |
| Distodo | $\overline{\phantom{a}}$ | $\sim$ | ٠ | × | $\sim$ | $\overline{1}$ | $\sim$ | $\sim$ | |
| Dreamia Holding BV | 139 | ٠ | ٠ | ×. | $\sim$ | ×. | × | 197 | |
| Dreamia SA | 2,159 | (1) | (736) | 34 | × | $\sim$ | $\sim$ | ||
| Finstor | 885 | $\sim$ | ٠ | $\sim$ | $\sim$ | $\sim$ | |||
| Mstar | $\overline{21}$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | |
| Sport TV | 160 | $\sim$ | 33,100 | $\sim$ | $\sim$ | $\overline{A}$ | $\sim$ | $\overline{\phantom{a}}$ | |
| Upstar | 8,810 | ÷ | (686) | ٠ | 30 | 382 | (68) | ||
| ZAP Cinemas | 223 | ÷ | $\overline{a}$ | ÷ | $\sim$ | ÷ | $\sim$ | $\overline{a}$ | |
| ZAP Media | 379 | $\sim$ | $\sim$ | $\sim$ | ٠. | $\sim$ | |||
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping Centro Comercial | $\overline{11}$ | ×. | $\sim$ | 6 | ×. | 501 | ×. | ÷ | |
| Continente Hipermercados | 224 | $\sim$ | $\sim$ | $\mathbf{r}$ | 36 | $\sim$ | $\sim$ | ||
| Digitmarket-Sistemas de Informação | 173 | ÷ | 20 | ×. | 205 | 127 | ×. | ÷ | 2,782 |
| ITRUST - Cyber Security and Intellia | × | (1) | ٠ | $\sim$ | 91 | 24 | $\sim$ | $\sim$ | 185 |
| MDS - Corretor de Seguros | 366 | $\sim$ | $\sim$ | $\sim$ | $\overline{1}$ | $\sim$ | |||
| Modalfa - Comércio e Serviços | 177 | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | |
| Modelo - Dist.de Mat. de Construção | 155 | ÷ | ÷ | ٠ | $\overline{a}$ | ٠. | ×, | $\overline{\phantom{a}}$ | |
| Modelo Continente Hipermercados | 3,857 | 117 | 10 | 241 | $\sim$ | (71) | $\sim$ | ||
| Pharmacontinente - Saúde e Higiene | 128 | ٠ | ×. | $\sim$ | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | ÷ | $\overline{\phantom{a}}$ | |
| Público - Comunicação Social | 132 | $\sim$ | $\overline{7}$ | 18 | $\sim$ | ٠. | |||
| Raso - Viagens e Turismo | 288 | 64 | $\overline{\phantom{a}}$ | 203 | 29 | 1,582 | $\sim$ | $\sim$ | |
| Saphety Level - Trusted Services | 82 | $\sim$ | $\sim$ | $\sim$ | 440 | 116 | $\sim$ | $\sim$ | 30 |
| SC-Consultadoria | 795 | 22 | $\mathbf{r}$ | $\sim$ | $\sim$ | × | $\sim$ | $\sim$ | |
| SDSR - Sports Division SR | 346 | ÷ | ×. | ÷. | $\sim$ | и. | . . | ۰. | |
| Sierra Portugal | 2.871 | ٠ | ٠ | 218 | 3 | 3,701 | $\sim$ | $\sim$ | |
| SISTAVAC | 136 | ×. | ٠ | ×. | $\sim$ | 59 | ×. | ٠. | |
| Sonae Center Serviços II | 1,346 | 97 | 402 | $\sim$ | 21 | × | $\sim$ | $\sim$ | |
| Songe Ind., Prod. e Com.Deriv.Madeira | 688 | $\sim$ | $\sim$ | $\sim$ | $\sim$ | × | |||
| Sonaecom - Servicos Partilhados | 232 | $\sim$ | $\sim$ | $\sim$ | 12 | (13) | $\sim$ | $\sim$ | |
| Sonaecom-Sistemas Información España | 27 | ÷ | ä, | $\overline{\phantom{a}}$ | 189 | $\overline{0}$ | $\overline{a}$ | $\overline{\phantom{a}}$ | |
| Spinveste - Promoção Imobiliária | × | $\sim$ | ٠ | × | $\sim$ | 215 | $\sim$ | $\sim$ | |
| Troiaverde-Expl.Hoteleira Imob. | 111 | ×. | ÷ | и. | $\sim$ | з. | $\sim$ | $\overline{\phantom{a}}$ | |
| UNITEL | 1.069 | $\sim$ | 533 | ٠. | $\sim$ | $\sim$ | $\sim$ | $\sim$ | |
| We Do Consulting-Sist, de Informação | 387 | $\sim$ | $\sim$ | ۰. | 2,753 | 17 | $\sim$ | $\overline{\phantom{a}}$ | 3,023 |
| Worten - Equipamento para o Lar | 2.983 | $\sim$ | $\alpha$ | 411 | 588 | $\alpha$ | |||
| Outras partes relacionadas | 1.065 | $\overline{2}$ | $\sim$ | 23 | n, | 267 | $\sim$ | ||
| 33,639 | 304 | 34.793 | 1.155 | 3.743 | 7.224 | 453 | (444) | 6,021 |
| ACCOUNTS RECEIVABLES |
ACCOUNTS PAYABLE |
ACCRUED EXPENSES |
DEFERRED INCOME |
PREPAID EXPENSES |
|
|---|---|---|---|---|---|
| SHAREHOLDERS | |||||
| BPI | 2,201 | (9) | ۰ | ۰ | |
| JOINTLY CONTROLLED COMPANIES AND | |||||
| ASSOCIATED COMPANIES | |||||
| Big Picture 2 Films | 30 | 134 | 63 | ٠ | |
| Dreamia Holding BV | 2.970 | $\sim$ | |||
| Dreamia SA | 2.314 | 438 | 516 | ٠ | |
| Finstar | 9,241 | ٠ | ٠ | ۰ | |
| Mstar | ٠ | ||||
| Sport TV | 828 | 24,418 | (645) | ٠ | 19,540 |
| Upstar | 12,701 | 17 | ٠ | ||
| ZAP Cinemas | 417 | ٠ | ٠ | ٠ | |
| ZAP Media | 3,036 | ٠ | ٠ | ٠ | |
| OTHER RELATED PARTIES | |||||
| Digitmarket | 109 | 320 | ٠ | ٠ | 234 |
| Itrust - Cyber Security and Intellig., S.A. | $\overline{2}$ | 820 | (75) | $\sim$ | |
| MDS - Corretor de Seguros | 71 | ٠ | 143 | ||
| Modelo Continente Hipermercados | 845 | 165 | 174 | ٠ | |
| SC-Consultadoria | 111 | ٠ | 4 | ||
| Sierra Portugal | 503 | 26 | $\overline{2}$ | 367 | |
| Songe Center II | 410 | $\overline{7}$ | ٠ | 9 | |
| Sonae Ind., Prod. e Com.Deriv.Madeira | 125 | ۰ | ٠ | ٠ | |
| Songecom | 111 | ۰ | |||
| UNITEL | 2,734 | 1,473 | 928 | ٠ | |
| We Do Consulting-Sist, de Informação | 126 | 2,810 | $\overline{2}$ | 78 | |
| Worten - Equipamento para o Lar | 2,786 | $\overline{\phantom{a}}$ | 845 | ٠ | |
| Outras partes relacionadas | 937 | 199 | (38) | $\overline{2}$ | 121 |
| 42.609 | 30.820 | 1.769 | 19 | 20.483 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS | MARKETING AND ADVERTISING |
SUPPORT SERVICES | SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | |||||||||
| Banco BPI | 4.165 | $\sim$ | 104 | $\sim$ | $\sim$ | 4 | $\sim$ | (268) | |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||||||
| Big Picture 2 Films | 45 | $\sim$ | 4,048 | ×. | $\alpha$ | 44 | $\sim$ | $\sim$ | |
| Dreamia Holding BV | 207 | ٠ | $\sim$ | ٠ | $\overline{\phantom{a}}$ | ×. | ٠ | 184 | ٠. |
| Dreamia SA | 1.976 | [3] | (522) | 33 | × | (3) | 8 | $\sim$ | |
| Finstar | 670 | $\sim$ | ٠ | $\overline{\phantom{a}}$ | $\sim$ | $\sim$ | |||
| Mstar | 27 | $\sim$ | $\overline{a}$ | $\sim$ | $\overline{a}$ | - 1 | $\sim$ | $\sim$ | $\overline{\phantom{a}}$ |
| Sport TV | 183 | $\sim$ | 42.281 | ×. | $\sim$ | $\sim$ | $\sim$ | $\overline{a}$ | |
| Upstar | 10,341 | $\sim$ | (356) | 13 | $\alpha$ | л | $\sim$ | $\sim$ | $\overline{a}$ |
| ZAP Cinemas | (19) | ٠ | $\sim$ | ×, | $\sim$ | ٠ | ٠ | ||
| ZAP Media | 94 | $\sim$ | $\sim$ | $\sim$ | $\sim$ | . . | $\sim$ | $\sim$ | $\overline{a}$ |
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping | 25 | $\sim$ | $\sim$ | 6 | $\overline{a}$ | 520 | $\sim$ | $\sim$ | |
| Continente Hipermercados | 223 | × | $\sim$ | ×. | - | 37 | $\sim$ | $\sim$ | $\overline{2}$ |
| Digitmarket | 257 | $\sim$ | $\sim$ | $\mathbf{r}$ | 217 | 280 | $\sim$ | $\sim$ | 3,425 |
| Itrust - Cyber Security and Intellig | 6 | ٠ | ٠ | × | 51 | 283 | ٠ | ٠ | |
| MDS - Corretor de Seguros | 363 | × | $\sim$ | ×. | $\overline{a}$ | 302 | $\sim$ | $\sim$ | ٠ |
| Modalfa | 171 | ×. | $\sim$ | × | ×, | - 2 | ÷ | × | ÷. |
| Modelo - Distribuição Materias Construção | 152 | $\sim$ | $\sim$ | ×. | ٠ | $\sim$ | ٠ | $\overline{\phantom{a}}$ | |
| Modelo Continente Hipermercados | 3.519 | ٠ | (4) | 373 | $\overline{\phantom{a}}$ | (87) | $\sim$ | $\sim$ | $\overline{\phantom{a}}$ |
| Pharmacontinente | 119 | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\sim$ | $\ddot{\phantom{1}}$ |
| Público | 151 | $\sim$ | ٠ | 26 | $\overline{\phantom{a}}$ | . . | $\sim$ | $\sim$ | 147 |
| Saphety Level - Trusted Services | 88 | $\sim$ | $\sim$ | ٠ | 364 | $\overline{\mathbf{2}}$ | $\epsilon$ | $\sim$ | 36 |
| SC-Consultadoria | 902 | $\sim$ | ٠ | ٠ | $\overline{\phantom{a}}$ | ۰. | $\sim$ | $\sim$ | ×. |
| SDSR - Sports Division SR | 299 | $\sim$ | ٠ | $\overline{\phantom{a}}$ | ٠. | $\sim$ | $\sim$ | ٠ | |
| Sierra Portugal | 2.659 | ٠ | $\overline{\phantom{a}}$ | 226 | ٠ | 3,694 | ٠ | ٠ | ×, |
| Sistavac | 103 | × | $\sim$ | $\sim$ | $\sim$ | 5 | $\sim$ | $\alpha$ | 49 |
| Solinca - Health & Fitness, SA | 121 | $\sim$ | $\epsilon$ | ٠ | $\overline{\phantom{a}}$ | $\sim$ | $\epsilon$ | $\epsilon$ | $\overline{\phantom{a}}$ |
| Songe Center II | 1.708 | $\sim$ | $\sim$ | $\sim$ | (7) | $\sim$ | $\sim$ | $\ddot{\phantom{1}}$ | |
| Songe Indústrig PCDM | 666 | $\overline{\phantom{a}}$ | $\sim$ | ٠ | $\overline{a}$ | $\sim$ | $\sim$ | $\overline{\phantom{a}}$ | $\overline{4}$ |
| Sonaecom - Servicos Partilhados | 208 | $\alpha$ | ×. | $\overline{\phantom{a}}$ | $\overline{\mathbf{2}}$ | $\sim$ | $\sim$ | × | |
| Spinveste - Promoção Imobiliária | $\sim$ | J. | $\sim$ | $\overline{a}$ | 213 | ×. | ٠ | × | |
| UNITEL | 1,761 | $\sim$ | 1,017 | ×. | $\overline{\phantom{a}}$ | ٠. | $\alpha$ | $\alpha$ | |
| We Do Consulting-Sist, de Informação | 376 | $\sim$ | $\bar{a}$ | ÷ | 2.076 | 172 | $\sim$ | $\sim$ | 3,072 |
| Worten - Equipamento para o Lar | 4.426 | $\sim$ | $\sim$ | 447 | $\sim$ | 981 | $\sim$ | $\sim$ | ٠ |
| Other related parties | 1,516 | (52) | (1) | 73 | 35 | 316 | $\sim$ | 30 | |
| 37.508 | (55) | 46.567 | 1,197 | 2,744 | 6.759 | 8 | (84) | 6,766 |
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.
Due to the large number of low value related parties balances and transactions, it was grouped in the heading "Other related parties" the balances and transactions with entities whose amounts are less than 100 thousand euros.
NOS SA (i), NOS Açores (ii) and NOS Madeira (iii) brought actions for judicial review of ANACOM's decisions in respect of the payment of the Annual Fee (for 2009, 2010, 2011, 2012, 2013, 2014 and 2015) for carrying on the business of Electronic Communications Services Networks Supplier in the amounts, respectively, of (i) 1,861 thousand euros, 3,808 thousand euros, 6,049 thousand euros, 6,283 thousand euros, 7,270 thousand euros, 7,426 thousand euros and 7,253 thousand euros; (ii) 29 thousand euros, 60 thousand euros, 95 thousand euros, 95 thousand euros, 104 thousand euros, 107 thousand euros and 98 thousand euros; (iii) 40 thousand euros, 83 thousand euros, 130 thousand euros, 132 thousand euros, 149 thousand euros, 165 thousand euros and 161 thousand euros, and seeking reimbursement of the amounts meanwhile paid in connection with the enforcement proceedings. This fee is a percentage decided annually by ANACOM (in 2009 it was 0.5826%) of operators' electronic communications revenues. The scheme is being introduced gradually: ⅓ in the first year, ⅔ in the second year and 100% in the third year. NOS SA, NOS Açores and NOS Madeira claim, in addition to defects of unconstitutionality and illegality, 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.
On 18 December 2012 a ruling was passed on the proceedings instigated by NOS SA for the annual rate of 2009, for which the appeal was upheld, with no prior hearing, condemning ICP-ANACOM to pay the costs. ANACOM appealed and by decision of July 2013, this appeal was not upheld.
The remaining proceedings are awaiting trial and/or decision.
During the course of the 2003 to 2016 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, 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 24 million euros, plus 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 37.
At end of year 2013 and taking advantage of the extraordinary settlement scheme of tax debts, the Group settled 7.7 million euros. This amount was recorded as "taxes receivable" non-current net of the provision recorded (Note 11).
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 an action in Lisbon Judicial Court against NOS SA, claiming payment of 10.3 million euros, as compensation for alleged undue portability of NOS SA in the period between March 2009 and July 2011. NOS SA lodged a contest and reply, having started the expert evidence, that the Court however declared void. The hearing was held in late April and early May, having a ruling beendelivered last September, which judged the action partially founded, based not on the existence of undue portability, but on the mere delay of the documentation shipment. NOS was condemned to pay, approximately 5.3 million euros, a decision which NOS will appeal.
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.
MEO doesn't indicate in all notifications the amounts in which it wants to be financially compensated, specifying 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 the 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, which is currently underway, the expert report having been notified to the parties and the parties have submitted their requests for clarification to the experts. At the same time, experts who will be tasked with the economic and financial expertise have been appointed.
It is the understanding of the Board of Directors, supported by lawyers who monitor the process, that there is, in substance, a good possibility of NOS SA winning the action, due to the fact that MEO has already been convicted for the same offense, by ICP – ANACOM. However, it is impossible to determine the outcome of the action. In the event of action be judged totally unfounded, the court costs, which are the responsibility of NOS could amount to over 1 million euros.
In 2014, a NOS SGPS providers 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. The Court of First Instance acquitted the NOS SGPS instance, based on passive illegitimacy than the author appealed. The Court of Appeal upheld the appeal of Lisbon, but the author complained of it by maintaining that its appeal should be assessed not by the Court of Appeal but the Supreme Court. The Supreme Court, called to rule on the issue in March 2016, upheld the exception of passive illegitimacy of NOS SGPS and absolved the instance. It is belief of the Board of Directors that the arguments used are not correct, so the outcome of the proceeding will not result in significant impact on the financial statements of the group.
SPORT TV Portugal, S.A. was fined by the Competition Authority to the value of 3,730 thousand euros for the alleged abuse of its dominant position in the domestic market of subscription channels with premium sport content.
SPORT TV is not in agreement with the decision and has therefore challenged it in court, and in this context, the Court of Competition, Regulation and Supervision altered the value to 2,700 thousand euros. Meanwhile, Sport TV has appealed to the "Tribunal da Relação" (Court of Appeal) which has rejected said appeal as unfounded. Sport TV contested that decision to the Constitutional Court and, in a specific matter to the Supreme Court of Justice, appeals which were rejected.
Action brought by Cogeco Cable Inc., former shareholder of Cabovisão, against Sport TV, NOS SGPS and a third, requesting, among others: (i) joint condemnation of the three institutions to pay compensation for damages caused by anti-competitive conduct, guilty and illegal, between 3 August 2006 and 30 March 2011, specifically for the excess price paid for Sport TV channels by Cabovisão, in the amount of 9.1 million euros; (ii) condemnation for damages corresponding to the remuneration of capital unavailable, in the amount 2.4 million euros; and (iii) condemnation for damages corresponding to the loss of business from anti-competitive practices of Sport TV, in connection with the enforcement proceedings. NOS contested the action, awaiting for appointment.
It is the understanding of the Board of Directors, supported by lawyers who monitor the process, that, in particularly in formal motives, it is unlikely that NOS SA is responsible in this action.
Cabovisão brought an action against SPORT TV, in which it requests compensation from the latter for alleged losses resulting from abuse of a dominant position, amounting to 18 million euros, added capital and interests, that were paid in 31 December 2014, and lost profits. The Board of Directors of Sport TV and lawyers, who monitor the process, predict a favorable outcome, not estimating impacts in the accounts, in addition to those already registered.
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 immediately pay damages.
Until 31 December 2014, revenue from penalties, due to inherent uncertainties was recorded only at the moment when it was received, so at 30 September 2016, the receivables by NOS SA, NOS Madeira and NOS Açores amount to a total of 104,982 thousand euros. During the nine months ended on 30 September 2016 3,160 thousand euros related to 2014 receivables were received and recorded in the income statement.
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 amounts determined as uncollectible are recorded as impairment by deducting revenue recognized upon invoicing (Note 27).
At 30 September 2016, 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 indefinition of interconnection tariffs, recorded in the year ended at 31 December 2001. In the lower court, the decision was favorable to NOS SA. The Court of Appeal, on appeal, rejected the intentions of MEO. However, MEO again appealed to the Supreme Court, for final and permanent decision, who upheld the decision of the Court of Appeal, thus concluding that the interconnection prices for 2001 were not defined. The settlement of outstanding amounts will depend on the price that will be established.
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 Schemes ("NOS Plan"). This plan aimed at more senior employees with the vesting taking place three years being awarded, assuming that the employees are still with the company during that period.
In addition to the NOS Plan abovementioned, at 30 September 2016, are still unvested:
i) The Share Incentive Schemes approved by the General Meetings of Shareholders on 27 April 2008 ("Standard Plan"). The Standard Plan is aimed at eligible members selected by the responsible bodies, regardless of the roles they perform. In this plan the vesting period for the assigned shares is five years, starting twelve months after the period to which the respective assignment relates, at a rate of 20% a year, as long as the eligible member is with the company during each of those five periods.
ii) NOS Sistemas, formerly named Mainroad, had implemented a share incentive scheme for more senior employees based on Sonaecom shares ("Mainroad Plan"), subsequently converted into NOS shares in the acquisition date (30 September 2014). Mainroad Plan was aimed to employees above a certain function level. The vesting occurs three years after the award of each plan, assuming that the employees are still employed in the Group, during that period.
As at 30 September 2016, the unvested plans are:
| NUMBER OF | |
|---|---|
| SHARES | |
| STANDARD PLAN | |
| Plan 2011 | 2.929 |
| Plan 2012 | 63.054 |
| Plan 2013 | 126.469 |
| MAINROAD PLAN | |
| Plan 2014 | 41.959 |
| NOS PLAN | |
| Plan 2014 | 896.488 |
| Plan 2015 | 658.750 |
| Plan 2016 | 772.291 |
During the nine months ended on 30 September 2016, the movements that occurred in the plans, are detailed as follows:
| SENIOR PLAN |
STANDARD PLAN |
OPTIMUS PLAN | MAINROAD PLAN |
NOS PLAN | |
|---|---|---|---|---|---|
| BALANCE AS AT 31 DECEMBER 2015: | 163.909 | 376.269 | 1.171.594 | 132.606 | 1,537,786 |
| MOVEMENTS IN THE PERIOD: | |||||
| Awarded | 757,636 | ||||
| Vested | 116,823 | (184, 467) | (1.079.349) | (91, 766) | (43,940) |
| Cancelled / elapsed / corrected (1) | (47,086) | 650 | (92.245) | 1.119 | 76,047 |
| BALANCE AS AT 30 SEPTEMBER 2016: | 192.452 | 41.959 | 2.327.529 |
(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 or the closing date for plans settled in cash, however for the Optimus plan and Mainroad plan, the award date is the date of the merger and acquisition (the time of conversion of Sonaecom shares plans into NOS shares plans), respectively. As at 30 September 2016, the outstanding responsibility related to these plans is 6,011 thousand euros and is recorded in reserves, in the amount of 5,122 thousand euros, for plans settled in shares and cost accruals, in the amount of 889 thousand euros for plans settled in cash. The costs recognised in previous years and in the period, its liabilities are as follows:
| ACCRUED EXPENSES |
RESERVES | TOTAL | |
|---|---|---|---|
| Costs recognised in previous years related to plans as at 31 December 2015 | - | 10.111 | 10.111 |
| Costs of plans vested in the period | - | (6.156) | (6.156) |
| Costs recognised in the period and others | 247 | 2.467 | 2.714 |
| Reclassification to accrued expenses of plans to settle in cash | 889 | (889) | - |
| Costs of plans exceptionally settled in cash and others | - | (458) | (458) |
| TOTAL COST OF THE PLANS | 1.136 | 5.075 | 6.211 |
On 25 October 2016, a Long Position announcement was disclosed by Lancaster Investment Management LLP, concerning 2.08% of the voting rights of NOS, SGPS, S.A.
These financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards (IAS / IFRS) as adopted by the European Union and the format and disclosures required by those Standards, some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.
| PERCENTAGE OF OWNERSHIP SHARE |
||||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | HOLDER | EFFECTIVE | DIRECT | EFFECTIVE |
| 31/12/2015 | 30/09/2016 | 30/09/2016 | ||||
| NOS, SGPS, S.A. (Holding) | Lisbon | Management of investments | ÷ | |||
| Empracine - Empresa Promotora de Atividades Cinematográficas, Lda. |
Lisbon | Movies exhibition | Lusomundo 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 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 eauipments 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 aeneration mobile, television, internet, voice and data, and licensing and engineering services and consultancy |
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% |
| NOS TECHNOLOGY - Concepção, 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% |
| NOS TOWERING - Gestão de Torres de Telecomunicações, S.A. ('Be Towering') |
Lisbon | Implementation, installation and exploitation of towers and other sites for the instalment of telecommunications equipment |
NOS | 100% | 100% | 100% |
| Per-Mar - Sociedade de Construções, S.A. ('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% |
| ZON FINANCE B.V. (a) | Amsterdam | Management of group financing activities | NOS SA / NOS |
100% |
| COMPANY | SHARE HOLDER |
PERCENTAGE OF OWNERSHIP | ||||
|---|---|---|---|---|---|---|
| HEADQUARTERS | ACTIVITY | EFFECTIVE | DIRECT | EFFECTIVE | ||
| 31/12/2015 | 30/09/2016 | 30/09/2016 | ||||
| Big Picture 2 Films, S.A. | Oeiras | Import, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
20.00% | 20.00% | 20.00% |
| Canal 20 TV, S.A. | Madrid | Production, distribution and sale of contents rights for television films |
NOS | 50,00% | 50.00% | 50.00% |
| SHARE | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | HOLDER | EFFECTIVE | DIRECT | EFFECTIVE |
| 31/12/2015 | 30/09/2016 | 30/09/2016 | ||||
| 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% |
| East Star Ltd | Port Louis | Management of investments involved in the development. operation and marketing, through any technological means, of telecommunications, television and audiovisual products and services |
Teliz Holding B.V. |
30,00% | 30.00% | 30.00% |
| 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% |
| 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 | 50.00% | 33.33% | 33.33% |
| 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% |
| 7AP 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.
| SHARE | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | HOLDER | EFFECTIVE | DIRECT | EFFECTIVE |
| 31/12/2015 | 30/09/2016 | 30/09/2016 | ||||
| Turismo da Samba (Tusal), SARL (a) | Luanda | n.a. | NOS | 30,00% | 30,00% | 30,00% |
| Filmes Mundáfrica, SARL (a) | Luanda | Movies exhibition | NOS | 23.91% | 23.91% | 23.91% |
| Companhia de Pesca e Comércio de Angola (Cosal), SARL (a) |
Luanda | n.a. | NOS | 15.76% | 15.76% | 15.76% |
| Caixanet - Telecomunicacões e 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 Seauros, S.A. l''Lusitânia Seauros'') |
Lisbon | Insurance services | NOS | 0.04% | 0.04% | 0.04% |
a) The financial investments in these companies are fully provisioned.
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